Indian Industry : An introduction
Industry accounts for 26% of GDP and employs 22% of the total workforce. According to the World Bank, India’s industrial manufacturing GDP output in 2015 was 6th largest in the world on current US dollar basis ($559 billion), and 9th largest on inflation-adjusted constant 2005 US dollar basis ($197.1 billion). The industrial sector underwent significant changes due to the 1991 economic reforms, which removed import restrictions, brought in foreign competition, led to the privatisation of certain government-owned public-sector industries, liberalised the foreign direct investment (FDI) regime, improved infrastructure and led to an expansion in the production of fast-moving consumer goods. Post-liberalisation, the Indian private sector was faced with increasing domestic and foreign competition, including the threat of cheaper Chinese imports. It has since handled the change by squeezing costs, revamping management, and relying on cheap labour and new technology. However, this has also reduced employment generation, even among smaller manufacturers who previously relied on labour-intensive processes.
Electricity sector
Primary energy consumption of India is the third-largest after China and the US with 5.3% global share in the year 2015. Coal and crude oil together account for 85% of the primary energy consumption of India. India’s oil reserves meet 25% of the country’s domestic oil demand. As of April 2015, India’s total proven crude oil reserves are 763.476 million metric tons, while gas reserves stood at 1,490 billion cubic metres (53 trillion cubic feet). Oil and natural gas fields are located offshore at Bombay High, Krishna Godavari Basin and the Cauvery Delta, and onshore mainly in the states of Assam, Gujarat and Rajasthan. India is the fourth-largest consumer of oil and net oil imports were nearly ₹820,000 crore (US$110 billion) in 2014–15, which had an adverse effect on the country’s current account deficit. The petroleum industry in India mostly consists of public sector companies such as Oil and Natural Gas Corporation (ONGC), Hindustan Petroleum Corporation Limited (HPCL), Bharat Petroleum Corporation Limited (BPCL) and Indian Oil Corporation Limited (IOCL). There are some major private Indian companies in the oil sector such as Reliance Industries Limited (RIL) which operates the world’s largest oil refining complex.
Engineering
Engineering is the largest sub-sector of India’s industrial sector, by GDP, and the third-largest by exports. It includes transport equipment, machine tools, capital goods, transformers, switchgears, furnaces, and cast and forged parts for turbines, automobiles and railways. The industry employs about four million workers. On a value-added basis, India’s engineering subsector exported $67 billion worth of engineering goods in the 2013–14 fiscal year, and served part of the domestic demand for engineering goods.
The engineering industry of India includes its growing car, motorcycle and scooters industry, and productivity machinery such as tractors. India manufactured and assembled about 18 million passenger and utility vehicles in 2011, of which 2.3 million were exported. India is the largest producer and the largest market for tractors, accounting for 29% of global tractor production in 2013 India is the 12th-largest producer and 7th-largest consumer of machine tools.
Defence industry
The Defence industry of India is a strategically important sector in India. With strength of over 1.39 million active personnel, it is world’s 2nd largest military force and has the world’s largest volunteer army. The total budget sanctioned for the Indian military for the financial year 2018 is $62.8 billion, about five times what it spends on education and welfare. 
Despite having a modest internal defence industry, India is the largest arms importer in the world, with most of its arms purchases coming in from Russia. 12% of worldwide arms exports (by value) reach India.
Gems and jewellery
India is one of the largest centres for polishing diamonds and gems and manufacturing jewellery; it is also one of the two largest consumers of gold. After crude oil and petroleum products, the export and import of gold, precious metals, precious stones, gems and jewellery accounts for the largest portion of India’s global trade. The industry contributes about 7% of India’s GDP, employs millions, and is a major source of its foreign-exchange earnings. The gems and jewellery industry created $60 billion in economic output on value-added basis in 2017, and is projected to grow to $110 billion by 2022.
The gems and jewellery industry has been economically active in India for several thousand years. Until the 18th century, India was the only major reliable source of diamonds. Now, South Africa and Australia are the major sources of diamonds and precious metals, but along with Antwerp, New York, and Ramat Gan, Indian cities such as Surat and Mumbai are the hubs of world’s jewellery polishing, cutting, precision finishing, supply and trade. Unlike other centres, the gems and jewellery industry in India is primarily artisan-driven; the sector is manual, highly fragmented, and almost entirely served by family-owned operations.
Petroleum products and Chemicals
Petroleum products and chemicals are a major contributor to India’s industrial GDP, and together they contribute over 34% of its export earnings. India hosts many oil refinery and petrochemical operations, including the world’s largest refinery complex in Jamnagar that processes 1.24 million barrels of crude per day. By volume, the Indian chemical industry was the third-largest producer in Asia, and contributed 5% of the country’s GDP. India is one of the five-largest producers of agrochemicals, polymers and plastics, dyes and various organic and inorganic chemicals. Despite being a large producer and exporter, India is a net importer of chemicals due to domestic demands. The chemicals manufacturing industry contributed $141 billion (6% of GDP) and employed 17.33 million people (4% of the workforce) in 2016.
Pharmaceuticals
The Indian pharmaceutical industry has grown in recent years to become a major manufacturer of health care products to the world. India produced about 8% of the global pharmaceutical supply in 2011 by value, including over 60,000 generic brands of medicines.The industry grew from $6 billion in 2005 to $36.7 billion in 2016, a compound annual growth rate (CAGR) of 17.46%. It is expected to grow at a CAGR of 15.92% to reach $55 billion in 2020. India is expected to become the sixth-largest pharmaceutical market in the world by 2020. It is one of the fastest-growing industrial sub-sectors and a significant contributor of India’s export earnings. The state of Gujarat has become a hub for the manufacture and export of pharmaceuticals and active pharmaceutical ingredients (APIs).
Textile
The textile and apparel market in India was estimated to be $108.5 billion in 2015. It is expected to reach a size of $226 billion by 2023. The industry employees over 35 million people. By value, the textile industry accounts for 7% of India’s industrial, 2% of GDP and 15% of the country’s export earnings. India exported $ 39.2 billion worth of textiles in the 2017-18 fiscal year. India’s textile industry has transformed in recent years from a declining sector to a rapidly developing one. After freeing the industry in 2004–2005 from a number of limitations, primarily financial, the government permitted massive investment inflows, both domestic and foreign. From 2004 to 2008, total investment into the textile sector increased by 27 billion dollars. Ludhiana produces 90% of woollens in India and is known as the Manchester of India. Tirupur has gained universal recognition as the leading source of hosiery, knitted garments, casual wear and sportswear. Expanding textile centres such as Ichalkaranji enjoy one of the highest per-capita incomes in the country. India’s cotton farms, fibre and textile industry provides employment to 45 million people in India, including some child labour (1%). The sector is estimated to employ around 400,000 children under the age of 18.
Based on the value addition and tangibility broadly we can have three types of industries – primary industries,secondary industries and tertiary industries.
- Primary industries are usually very simple industries involving processing of raw materials to give input goods for secondary industries.
Here value addition is usually minimal and they are
usually material oriented.Scale of operation may be small or may be very large.Examples are: coal mining and washing, oil-refining,flour milling, metal smelting, stone crushing, etc. - Secondary industries are very complex and diversified which took input from primary industries and add significant value to it in different processing stages.
The value additions are so significant that they may have a locational preference in favour of market.Secondary industries may again divided into heavy industries, light industries, footloose industries, etc.
- a) Heavy industries are identified by nature of their bulkyproduct or very high capital inputs or units which mayhave high capacity to influence environment adversely.Examples are: heavy chemical, heavy machinery,locomotive, shipbuilding, heavy electrical, etc.
- b) Light industries are less capital intensive and moreinclined to consumer products.
Products are usually lighter in weight, require lesspower, less polluting and can be established in small areas. - c) Footloose industries are those industries which nearly remain indifferent with locational aspects of plant.Their products are having very high value addition and smaller in size and so transportation cost is only a small fraction of total cost.These industries usually requires a very small production space, are usually less polluting and butrequires highly skilled workers.Examples are: watch, camera, diamond cutting,precision electronics, etc.
Tertiary industries are not related to production process.They are basically trade and services providing industries.The scale of operation is so large that it is regarded as an industry.Examples are: banking industry, insurance industry, consultancy industry, etc.
The factors affecting the location of industries are :-
- the availability of raw material,
- the availability of land,
- the availability of water,
- the availability of labour,
- the availability and consistency of power supply,
- the availability of capital,
- the availability of transport network and market.
- Sometimes, the government provides incentives like subsidised power, lower transport cost and other infrastructure so that industries may be located in backward areas.
Although iron and steel manufacturing activity in India is very old, modern iron and steel industry started with the establishment of ‘Bengal Iron and Steel Works’ at Kulti in West Bengal in 1817. Tata Iron and Steel company was established at Jamshedpur in 1907. This was followed by ‘Indian Iron and Steel plant’ at Burnpur in 1919. All the three plants were established in the private sector. The first public sector iron and steel plant, which is now known as ‘Visvesvarayya Iron and Steel works’, was established at Bhadrawati in 1923.
After independence a great focus was given for self dependence and investments were made in heavy industries. Three new integrated steel plants were established at Rourkela, Bhilai and Durgapur. Bokaro steel plant was established under public sector in 1964. Bokaro and Bhilai plants were set up with the collaboration of the former Soviet Union. Durgapur steel plant was set up in Collaboration with United Kingdom while Rourkela plant was established with the help of Germany.
The change in the spatial pattern of this industry is linked to the change in patterns of consumption, production and exchange of goods and services. This is dependent on the spatial organization and location of economic, transportation and communication systems that produce and facilitate the trade of the concerned commodities.
The industrial development in India began with the establishment of first successful modern cotton textile mill at Mumbai in 1854.Traditional cotton textile industry could not face the competition from the new textile mills of the West, which produced cheap and good quality fabrics through mechanized industrial units. Majority of cotton textile mills are still located in the cotton growing areas of the great plains and peninsular India.
The Muslins of Dhaka, Chintzes of Masulipatnam, Calicos of Calicut and Gold-wrought cotton of Burhanpur, Surat and Vadodara were known worldwide for their quality and design. But the production of hand woven cotton textile was expensive and time consuming. Hence, traditional cotton textile industry could not face the competition from the new textile mills of the West, which produced cheap and good quality fabrics through mechanized industrial units.
India is the second largest producer of sugar in the world after Brazil and is also the largest consumer. Today Indian sugar industry’s annual output is worth approximately Rs.80,000 crores.Most of the sugar mills are concentrated in six states, namely Uttar Pradesh, Bihar, Maharashtra, Tamil Nadu, Karnataka and Andhra Pradesh.
Over the period, sugarcane industry is gradually shifting from north Indian states to states in Peninsular India. Some of the important reasons are as follows:
1) The production of sugarcane per hectare is higher is Peninsular India. In fact, sugarcane crop grows well in the tropical climate of south India.
2) The sucrose contents is higher in the tropical variety of sugarcane grown in the south.
3) The crushing season in south India is longer than in north India.
4) In south India most of the mills have modern machinery.
5) Most of the mills in Peninsular India are in cooperative sector, where profit maximization is not the sole objective
Petro-chemicals are derived from petroleum or natural gas.Products such as Toothbrushes, toothpaste, combs, hairpins, soap cases, plastic mugs, garments, radiocaes, ball point pens, detergents, electric switches, lipstick, insecticides, bags, bed covers, and foam are some of the goods made from petro-chemicals. The share of offshore crude oil production was about 50.2%. The remaining crude oil production was from 6 States viz., Andhra Pradesh (0.7%), Arunachal Pradesh (0.2%), Assam (12.1%), Gujarat (12.5%), Rajasthan (23.7%) and Tamil Nadu (0.6%).
Besides Vadodara, Gandhar, and Hazira in Gujarat and Nagathone in Maharashtra are other important centres of petro-chemical industry. India is self sufficient in the production of petrochemicals.
Weber’s main point was that the cost of transport (another theory on this) determined the location of industry. Therefore, he uses Von Thunen’s idea (that the cost of transport determines crop selection) and applies it to industry. Similar to Von Thunen, the weight of the raw materials and the weight of the end product (this difference is known as the material index) will determine the site of production depending upon how much the industry is willing to pay to get its product to the market (connecting to Christaller’s ideas of market area). Weber’s theory rest primarily on four such sites, what he calls industrial orientations
- Material orientation
- Labor orientation
- Transport orientation
- Market orientation
He analyzed the factors that determine the location of industry and classified these factors into two divisions. These are:
(i) Primary causes of regional distribution of industry (regional factors)
(ii) Secondary causes (agglomerative and deglomerative factors) that are responsible for redistribution of industry.
The three locational factors explained by weber in his theory of industrial location are:-
- Transport cost
- labour cost
- agglomeration economies
Weber uses the location triangle within which the optimal is located based on the three locational factors.
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