What are the Factors responsible for the Localization of Industries?


Manufacturing is the second largest type of production after primary production activity ‘of hunting, fishing, mining, lumbering, farming etc. Manufacturing has undergone a big change as a result of advancement of science and technology.

From the making of few simple items, like hand made cloth, khandsari, mustard oil, agricultural implements etc. manufacturing to-day involves highly technical and complex machines, equipments and tools for the assembly of automobiles, ships, aircrafts, space ships, agricultural machines, computers and so on.

For centuries, manufacturing had been a household work and items like agricultural implements; weapons etc. were produced on a small-scale. But with the increasing demand due to increase in population, it took the form of cottage industry and later, large scale manufacturing industries.


Manufacturing is related to processing and altering the raw materials of agriculture, forests and that of minerals into finished or partially finished products.

The agro raw materials which are transformed into finished products are cotton, wool, jute, sugarcane etc. and that of minerals are iron ore, copper, manganese, mica etc.

Presently, the most important manufacturing industries are those which bring together manufactured items of different industries to make complicated machines and equipments required in means of transportation, agriculture, mining, military warfare etc.

Development of industries is of utmost importance to man. In fact, their development is considered to be an index of a country’s economic prosperity and strength.


The location of manufacturing industries depends upon a number of geographical and economic factors. These factors are known as factors of localization of industries or agglomeration of industries. The most important factors are:

(i) Raw material.

(ii) Source of Power.

(iii) Labour.


(iv) Means of transportation.

(v) Market.

(vi) Other factors like climate, Government Policies, capital, water, land etc.

(i) Raw Material.


Among the factors influencing location of an industry, close proximity to raw material availability of regular supply of cheap raw material are of utmost significance.

Therefore, industries are set up close to or in the regions where raw material is available in plenty. This speaks for the localization of jute industry in West Bengal, Sugar industry in U.P and concentration of heavy industries in the states of Chattisgarh and West Bengal.

If the raw material is heavy and of small value, the industries are set up in the regions of raw material. Iron smelting, brick making, cement manufacturing are best examples.

Iron and Steel Plants at Jamshedpur (Jharkhand), Rourkela (Orissa), Bhilai (Chhattisgarh) and Durgapur (West Bengal) have been set up near the sources of raw material i.e., Iron ore.


(ii) Source of Power.

All types of manufacturing industries depend upon one or the other sources of power. It may be coal, oil, electricity, gas etc.

In the industries, especially those of ferrous metallurgy, coal is the main source of power; therefore, these heavy industries are closely tied down to coal fields. The iron and steel industry of India in the Damodar Valley of Chattisgarh at Jamshedpur is located near the coal fields of Raniganj and Jharia.

(iii) Labour.

Modern industry requires large labour force, both skilled and unskilled. The availability of cheap labour in a region is an important factor determining the localization of industries. Different types of industries require different types of labour force.

For example, watch-making, electronics, aeronautics, computers etc. require highly skilled labour, whereas, on the other hand, cotton textile manufacturing, sugar making, jute textile etc. employ more of unskilled labour.

The development of the plantations in Assam and cotton textiles in Maharashtra are attributed to the availability of cheap efficient labour.

In these regions it has also been seen that industrial centres tend to attract more industries, because plenty of labour is available in these centres, for example, Mumbai and Kolkata have become industrial cities of the country mainly because of availability of plenty of labour in and around these mega cities.

(iv) Means of Transportation.

Industries depend upon efficient and cheap transportation system, which is essential for the movement of raw material as well as the finished products. They may be rail, road or water.

Railway junctions are considered to be the most suitable sites for the localization of industries. These enjoy benefits of easy transportation from different directions. Similarly sea ports also develop as industrial centres because of availability of facilities of water transportation for export and import of products.

(v) Market.

Market is an important factor in determining localization of industries. Goods are manufactured to be sold in the market. Industries are generally set up close to urban centres.

Sometimes, dense population may not prove to be solid market for the disposal of the different industrial products. If the people are poor, the purchasing capacity also becomes poor.

In some of the Asian countries, where people are poor, industries which are engaged in the manufacturing of cheap and essential goods like coarse cloth find an adequate market. This explains why under-developed countries, though densely populated are poor in manufacturing industries.

(vi) Other Factors.

(a) Climate

Climate also plays a part in the location of industries. The stimulating cool temperate climate is more suitable for the development of industries because this type of climate adds to the work efficiency of the labour force.

This is one of the major reasons why temperate latitudes have well-developed manufacturing industries rather than the tropics or the desert or the Tundra regions.

Climate plays a significant role in location of cotton textile manufacturing industries. The cool and humid climate helps in spinning of yarn and weaving of cloth processes. Development of film industry at Mumbai is due to favourable climate.


Development of industries requires a large capital investment. It may come from any source, local or foreign. Banks and other financial institutions play an important role in the growth of industries from time to time.

(b) Government Policy.

In order to give boost to industries in the country, the government gives certain guidelines, tax exemptions, electricity at concessional rates, subsidies, rail link etc., if these are set up as per government plan.

Mohali, an industrial town near Chandigarh has come up on the industrial map of India because of Government policies. Thus Government Policy plays a significant role in determining place of location of an industry. If the Government bans import of foreign cars, the automobile industry is bound to flourish in that country.

(d)Early Start.

There is a tendency to set up new units in the area, where that industry is already much developed. It is because the area has been enjoying benefits of developed means of transport, financial institutions, banking facilities, availability of skilled labour and marketing ease.

Hosiery industry got concentrated at Ludhiana can be cited as one example of role of early start.

(e) Personal Preferences.

Personal whims, prejudices of an entrepreneur and preferences also matter sometimes in the setting up of an industry in an area, ignoring all the economic and commercial considerations.

In a democratic set up, sometimes political matters also initiate the establishment of certain heavy industries in certain regions.

The setting of a Railway Coach Factory at Kapurthala in Punjab has been set up due to political interests rather than economic considerations. Construction of oil refinery at Bhatinda is another example of a political decision.

Localization of industries at a place gives rise to a number of problems also. These are:

(i) High cost of living.

(ii) Shortage of living space.

(iii) Sky high land prices.

(iv) Traffic jams.

(v) Pollution.

(vi) Growth of slums.

Some of the industries are highly localized in the country. These are due to combination of a number of geographical and socio-economic factors already discussed above. The examples are:

1. Sugar Manufacturing: U.P. and Bihar.

2. Jute Textiles: West Bengal.

3. Cotton Textiles: Maharashtra and Gujarat.

4. Cement Industry : M.P. and Rajasthan.

5. Iron and Steel: Jharkhand and Orissa.

6. Cinematography Mumbai

7. Leather goods: Kanpur, Agra.

8. Hosiery: Ludhiana.

9. Sports goods: Jalandhar.

10. Computers: Bangalore, Hyderabad, Gurgao

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