Classification of Industries

CLASSIFICATION OF INDUSTRIES

• INTRODUCTION
A leading, industrially advanced developing country, India has large, medium and small
industrial units of production in almost all branches of the industry. Since the time of the
independence in 1947, a significant feature of the Indian economy has been the rapid growth of
the small industry sector. The small industry sector is considered to have a major role in the
Indian economy due to its 40 percent share in the national industrial output along with an 80
percent share in industrial employment and nearly 35 percent share in exports. The small scale
industries sector has been assigned an important role in the industrialization of the country by the
previous and current governments of India.

There are no clear official definitions of small scale industry. Small scale industries are
usually distinguished from the large-scale and medium-scale industries on the basis of size,
capital resources and labor force in the units. At one time the government of India had grouped
small-scale industrial undertakings into two categories - those using power but employing less
than 50 persons and those not using power and employing less than 100 persons. However,
capital investment on plant and machinery by units is considered as main criteria for
distinguishing between the large and small industries. An industrial unit can be classified as a
small-scale unit only if it meets the capital investment limits set by the government of India
(GoI)

• CLASSIFICATION OF INDUSTRIES BASED ON

 USE based

 Process on product

 Capital investment

 Input

 Ownership
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 Classification of Industries

 Pollution control board of India

• Use Based Classification

• Basic industries
• Capital Goods industries
• Intermediate Goods industries
• Consumer Goods industries

 BASIC INDUSTRIES:

Basic industries are those industries which provide essential inputs for the
development of other industries and the economy. In other words, these are industries
which provide bases for development of other industries. For example, the iron and steel
industry forms a basis for the development of the engineering industry. Fertilizer is
regarded as basic input for the agriculture. Coal, oil and electricity are also regarded as
basic industries because growth of modern industry depends on the supply of these vital
inputs.

 CAPITAL GOODS INDUSTRIES:

Capital goods industries are those industries which produce machinery, equipment
or tools. A capital good is one which is instrumental in producing other goods or services.
The capital goods do not directly serve any consumption requirement. They are used to
produce consumer goods (and other goods) and services. The capital goods industries are
capital intensive in nature, i.e., they require heavy capital investment

E.g. Hand tools and machine tools, specialized equipments, Electric Motors, Heavy
Vehicles etc.

 INTERMEDIATE GOODS INDUSTRIES:

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 Classification of Industries

Intermediate goods are goods which have already undergone manufacturing

process but which form inputs for other industries as material for further processing, part
or component.

E.g. Cotton Spinning, Tyers & Tubes, Manmade fibers, Bolts, nuts, screws, spring Metal
etc

 CONSUMER GOODS INDUSTRIES:

The consumer goods industries are those industries the output of which serve the
final consumption requirements. The consumer goods may be broadly classified into
Consumer Durables and Consumer Non-durables. Consumer non-durables are those
goods which are used up at once or within a relatively short period, like food stuffs,
cigarette, soap, electric bulb, elc. Consumer durables, on the other hand, serve the
consumers over a relatively long period, like car, bicycle, electric fan, television, re-
frigerator, etc. A distinguishing characteristic of the consumer durables is that their life or
service may be extended by repairs.

• Consumer Durable
Serve the consumer over relatively long periods.

• Consumer Non-durable
Goods which are used up at once or within a relatively short periods.

• Classification Based On Process On Product

• Primary;
• Secondary;
• Tertiary;
• Quaternary
 PRIMARY INDUSTRY:

These extract raw materials, which are natural products untreated by people, from
the land or sea. Mining, quarrying, forestry, farming and fishing.

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 Classification of Industries

 SECONDARY INDUSTRY :

These manufacture or process raw materials into something different.

 TERTIARY INDUSTRY :

Provide services for people, e.g. education, office, banking, shops. These
industries increase as countries and people become wealthier.

 QUATERNARY INDUSTRY:

These are high tech; R & D industries now found in Science Parks
Some companies, e.g. Shell are involved in all four.

• Classification Based On Capital Investment

• Tiny - 25 lakh
• Small - 25-100 lakh
• Medium - 1 –10 Crore
• Large - 10 – 100 Crore
• Very Large - Over 100 Crore

Flow
Home industry → Cottage Industry → Tiny industry → Small scale industry → Medium scale
industry → Large scale industry → Very large scale industry.

 VILLAGE INDUSTRIES:

A village industry means any industry which forms the normal occupation,
whether, whole-time, of any class of the rural population. According to the Planning
Commission, village industries are those small industries which are, in the main, an
integral part of the village economy. The small-scale industries located in village areas,
thus, come under the village industries category. The employment provided by the

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 Classification of Industries

village industries is mainly seasonal, and the seasons vary from industry to industry as
well as from area to area.

The first effort in the direction of developing village industries and of reviving the
old industries started with the Swadeshi movement launched by Mahatma Gandhi.

E.g. Handloom Weaving, Leather and Hides Tanning,Shoes and Leather Goods
Manufactures, Kohlu(Village Oil Presses ), Ban and Rope Making, Gur and
Khandsari, Handicrafts .

 COTTAGE INDUSTRY:

A cottage industry (also called the Domestic system) is an industry – primarily

manufacturing – which includes many producers, working from their homes, typically
part time. The term originally referred to home workers who were engaged in a task such
as sewing, lace-making or household manufacturing.

The business operators would travel around, buying raw materials, delivering it to
people who would work on them, and then collecting the finished goods to sell, or
typically to ship to another market.

Cottage industries were very common in the time when a large proportion of the
population was engaged in agriculture, because the farmers (and their families) often had
both the time and the desire to earn additional income during the part of the year (Winter)
when there was little farming work to do.

 TINY INDUSTRIES:

Government have already announced increase in the investment limits in plant

and machinery of small scale industries, ancillary units and export – oriented units to Rs
6 million, Rs 7.5 million, and Rs 200 thousand respectively. Such limits in respect of
"TINY" ENTERPRISES would now be increased from the present Rs 200 thousand to
Rs. 500 thousand, irrespective of location of the unit. Limit in plant and machinery for
determining the status of SSI/Ancillary units as on date is Rs 10 million. For tiny it is Rs

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 Classification of Industries

2.5 million and for Small Scale Service and Business Enterprises(SSSBE) Rs 500
thousand.

 SMALL SCALE INDUSTRIES:

The small scale industries sector has progressively acquired a prominent place in
the development activities of the country. Consequent upon the revision of the definition
of the small-scale industry, the size and scope of the small scale industries sector has
been considerably widened, thus enabling a large number of industrial units to avail
themselves of increased assistance and facilities.

The socio-economic significance of the role of small-scale industries in relation to

the economic development of the country has been more fully realized in the post-
independence period. It is reflected in the two Industrial Policy Resolutions of the
Government of India adopted in 1948 and 1956 as well as in the progressive allocations
made for the development of this vital sector in the Five-Year Plans.

E.g. Agricultural Implement, Dyeing, Washing and Finishing, Calico Printing, Nuts
and Bolts, Electrical Goods, Cotton Ginning and Oilseed Crushing, Surgical
Instruments, Plastic Goods, Paints and Varnishes, Umbrella Ribs, Radio
Assembling

Advantages of Small scale industry:

• Provide employment opportunities

• Promoting local talent, resources and local self sufficiency

• Removes regional discrepancies

• Integration with large sector

 MEDIUM-SCALE INDUSTRIES:

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 Classification of Industries

Under the new definition, a medium-scale industry will be one with investment in
plant and machinery of Rs 1 crore to Rs 10 crore. The definition has to be notified by the
SSI Ministry for it to become operational

"The proposal for having a definition for medium industry has been accepted by
the SSI Ministry," a top Finance Ministry official said. The Finance Ministry had already
agreed to the SIDBI suggestion.

 LARGE-SCALE INDUSTRIES:

Large scale industries refers to those industries which require huge infrastructure,
man power and a have influx of capital assets. The term ‘large scale industries’ is a
generic one including various types of industries in its purview. All the heavy industries
of India like the Iron and steel industry, textile industry, automobile manufacturing
industry fall under the large scale industrial arena. However in recent years due to the IT
boom and the huge amount of revenue generated by it the IT industry can also be
included within the jurisdiction of the large scale industrial sector. Last but not the least
the telecoms industry also forms and indispensable component of the large scale
industrial sector of India. Indian economy is heavily dependent on these large industries
for its economic growth, generation of foreign currency and for providing job
opportunities to millions of Indians.

E.g. Sewing-Machines and Parts, Machine-Tools, Automobile Parts, Diesel-Oil Engine

and Parts, Scooters, Nylon and Staple Spinning.

Advantages of Large scale industry:

• High bargaining power, low ordering cost, High Discount, bulk purchase

• Expertise knowledge back up

• Wide distribution channels

• Integration with Technical, financial, marketing and managerial economies

• Input Based Classification

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 Classification of Industries

• Agro based
• Forest based
• Marine based
• Metal based
• Chemical based

 AGRO-BASED:

An agro-industry is one which uses agricultural product as the major input, like
the sugar, jute textile and cotton textile industries.

 FOREST-BASED:

Forest-based industries are those which use forest products as their major inputs,
like the plywood industry, paper industry, etc

 MARINE-BASED:

Industries, which depend mostly on marine products like fish are generally
regarded as marine-based industries

 METAL-BASED:

Metal-based industries, as the name indicates, are those industries which are
based on metals, like the engineering industries.

 CHEMICAL-BASE:

Industries like fertilizers, pesticides, paints and varnishes, dye-stuffs, drugs and
medicines, aromatics, etc., are regarded as chemical-based industries as chemicals are
their major or basic inputs.

• Based On Ownership

• Central Government

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 Classification of Industries

• State Government
• Statutory Corporation
• Government departments
• Private Sector
• Joint Sector

 CENTRAL GOVERNMENT:

Central government industries are the industries which are controlled by central
government.

E.g. , Indian Railways , nuclear energy based power plant.

 STATE GOVERNMENT:

State government industries are the those industries which are controlled by State
government

E.g. GNFC, GSPC

 STATUTORY CORPORATIONS:

Statutory Corporation are public enterprises into existence by a Special Act of the
Parliament. The Act defines its powers and functions, rules and regulations governing its
employees and its relationship with government departments.

E.g., GSRTC (Gujarat State Road Transport Corporation),

GIDC (Gujarat Industrial Development Corporation)

 GOVERNMENT DEPARTMENTS:

A ministry (government department) is a department of a government, led by a

minister. Ministries are usually subordinate to the cabinet, and prime minister, president
or chancellor.

E.g. Income tax Departments

 PRIVATE SECTOR:

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 Classification of Industries

In economics, the private sector is that part of the economy which is both run for
profit and is not controlled by the state or government.

E.g., Reliance Industries, ABG shipyard

 JOINT SECTOR:

The principle of joint sector where in Government and private entrepreneurs join
hands to establish new enterprises is indeed an old one for India.

E.g., TISCO, AIR INDIA

• Classification Based On Pollution Control Board In India

• Red industries

• Orange industries

• Green industries

 RED INDUSTRIES:

Industries identified by Ministry of Environment & Forests, Government of India

as heavily polluting and covered under Central Action Plan consider as Red Industries.

E.g. Fertilizer, Pulp and Paper (Paper manufacturing with or without pulping), Chlor
alkali, Pharmaceuticals (Basic) (excluding formulation), Dyes and Dye-
intermediates, Pesticides (Technical) (excluding formulation)

 ORANGE INDUSTRIES:

According to pollution control board 'Orange' represents moderately polluting

industries.

E.g. Manufacture of mirror from sheet glass and photo framing, Cotton spinning and
weaving, Automobile servicing and repairs stations, Hotels and restaurants, Flour
mills (excluding Domestic Aatta Chakki), Malted food.

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 Classification of Industries

 GREEN INDUSTRIES:

Industries in Small Scale, Cottage/Village category suggested under notification

of the state government/union territory for issuance simplified NOC/Consent from
Pollution Control Board/Pollution control committee, as the case may be.

All those industries or processes which are not covered under the "Red" and/or
"Orange" category.

An illustrative list is provided.

Rice mullors, Steeping and processing of grains, Mineralised water, Dal mills,
Bakery products, biscuits, confectionery, Groundnut decorticating (dry), Supari
(Betel nut) and masala grinding, Chilling plants and cold storages.

BIBLIOGRAPHY:

1. www.wikipedia.org
2. www.dpcc.delhigovt.nic.in/classification.htm
3. www.gpcb.gov.in/Forms/rog.pdf
4. www.ask.com
5. Industrial Economics by Francis Cherunilam

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 Classification of Industries

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