5.3 Structural Changes in The Indian Industry
5.3 Structural Changes in The Indian Industry
5.3 Structural Changes in The Indian Industry
One striking feature of the period of planning was that the structure of Indian industries had
changed in favour of basic and capital goods sector. The study of structural transformation
of the Indian industries reveals that there was a
clear shift in favour of basic and capital goods sector. This group accounted for about 50 per
cent of productive capital in 1959 but in 1991-92, its share in productive capital rose to nearly
79 per cent. In total employment, its share rose from 25 per cent to 52 per cent between
1959 and 1991-92. Similarly, the contribution in value added improved from 37 per cent to 56
per cent during this period. Basic industries which include iron and steel, fertilisers,
chemicals, cement, non-ferrous metals have thus improved their position significantly under the
impact of industrialisation. Several capital goods industries hitherto unknown have been
brought into to existence and developed. On the other hand, during the same period the share
of consumer goods industries such as textiles, sugar, paper, tobacco, etc., declined in terms of
productive capital, employment and value-added.
Size of Industrial Units – Another Structural Dimension
The size of an industrial unit can be measured using different criteria. Output, total assets,
fixed capital, and employment are some of the major criteria to measure size of the
industrial units. Changes in the average size of the industrial units represent an
important structural change of the industrial sector in an economy. We turn to this
structural dimension in this section.
As future managers you must know about this important dimension of the structure of
industry. We may list the circumstances under which a large firm or a small one would
be more efficient. Such synthesis provides guidance for making the proper choice of the
optimum size for the firm. A large firm would be more efficient in situations where:
a) the product is standardized and can be produced on mass scale with longer production
runs such as iron and steel, sugar, industrial chemicals and fertilizers;
b) the product and/or machines used in its production are large in size such as
automobiles, ships and electricity generation;
c) the economies of linked processes are significant as in the case of pulp and paper
industry and steel among others;
d) the markets for the product are concentrated and/or transport costs are
considerably low in comparison to the price of the product;
e) there are occasional indivisibilities in different units or operations of the plant which are
to be balanced; and
A small firm would be more efficient if all these above conditions are not satisfied, that is, where:
a) the production factors, e.g., men and machines, are “divisible” or adaptable;
b) the product is to be made an individual specification or where varieties or product
differentiation are required in the market for existence, i.e., standardization and mass
production is an economical. Examples are ornaments and clothing;
c) the raw materials and markets for the products are geographically dispersed and
transport costs are quite significant, e.g. bread and brick-making;
d) the demand conditions change frequently as a result of which quick adjustments are
needed to adapt to such changes, e.g., garment making;
e) the nature of work done changes frequently due to technical conditions e.g., agriculture
and allied industries; and
f) the supplies of the raw materials and potential market for the product are small.
Complete seperation of situations for large scale and small-scale units is not possible. There
are many industries where small scale and large scale production is carried on side by side.
Examples are engineering industries, cloth making, shoe making and several consumer
products. In fact, if we go through the industrial structure of a country, we will find such
situation in most of the industries. Small units in an industry exist along with larger ones
mainly because (i) they may be relatively new and it is normal to grow large from small
beginnings in due course of time, (ii) they may be supplying finished products to the
larger units under some type of sub-contracting, and
(iv) they may be producing a highly specific variety of products in a differentiated product
industry. All such small units may be equally efficient as the bigger units.