CAPF-AC (Assistant Commandant) Exam Study Material :
Indian Economy - INDUSTRY
Post-liberalisation, the Indian private sector, which was
usually run by oligopolies of old family firms and required political
connections to prosper was faced with foreign competition, including the threat
of cheaper Chinese imports. It has since handled the change by squeezing costs,
revamping management, focusing on designing new products and relying on low
labour costs and technology.
Role of the State in Industrial Development
In the Indian economy (after independence), process of
industrialisation was spearheaded by the state. Planners and politicians of the
country left that the growth and development of industry could not be left to
the market forces of supply and demand. Also, it could not be left to the
prudence of private entrepreneurs. Direct intervention of the state was
considered essential in view of the following factors:
Lack of Capital with the Private Entrepreneurs:
Industrial development in India needed a big push. Implying a large amount
of capital. At the time of independence, the well known private
entrepreneurs in India were mainly Tatas and Birlas. The requirement of
capital for diversified industrial growth far exceeded its availability in
the private sector. Accordingly, the sate (or the government) was to
undertake industrial investment through public sector undertakings.
Lack of Incentive among the Private Entrepreneurs:
The private investors lacked incentive as well. Owing to limited size of the
market, there was no inducement to invest. Limited size of the market refers
to low level of demand for the industrial goods in the market. Low level of
demand was because of low level of income.
Thus, there was sort of vicious circle operating like
this: low inducement to invest because of low level of demand, low level of
demand because of low level of income, low level of income because of low level
of investment, and low level of investment because of low inducement to invest.