ECONOMICS-III project

On
INDUSTRIALISATION AND ITS ROLE

NAME:
MANISH TYAGI
ENROLLMENT No.: A3211113217
PROGRAM
ME: B.A.LLB (Hons.)
SEMESTER
:5
BATCH: 2014-2019
AMITY LAW SCHOOL, NOIDA
AMITY UNIVERSITY, UTTAR
PRADESH, SECTOR- 125

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ACKNOWLEDGEMENT
I take this opportunity to express
my profound gratitude and deep
regards to my guide Ms. TULIKA
SINGH (Faculty Name) for her
exemplary guidance, monitoring
and constant encouragement
throughout the course of this
thesis. The blessing, help and
guidance given by him time to time
shall carry me a long way in the
journey of life on which I am about
to embark.
I am really thankful to them.
Secondly i would also like to thank
my parents and friends who helped
me a lot in finishing this project
within the limited time.
I am making this project not only
for marks but to also increase my
knowledge .

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THANKS AGAIN TO ALL WHO

HELPED ME.

INDUSTRIALIZATION

Industrialization (or Industrialisation) is a process that happens in countries when they

start to use machines to do work that was once done by people. Industrialization changes the
society as it happens. During the industrialisation of a country people leave farming work to
take higher paid jobs in factories in towns.
Industrialization is part of a process where people adopt easier and cheaper ways to make
things. Using better technology, it becomes possible to produce more goods in a shorter
amount of time. A single person can produce more things.
After industrialization people also do more specialized jobs. For example before
industrialization, a cobbler made the whole shoe. He worked on one pair of shoes, finished
that, and then did the next pair of shoes. With industrialization, there are many people
involved in making shoes. An individual shoemaker has a smaller task, however. There is one
person that cuts the sole of the shoe. Another person stitches it on. In short there is division of
labour. The machines to make the shoes cost a lot of money so the factory will be owned by a
rich person who can afford the machines.
Industrialization started in England with the industrial revolution in the 18th century. It
spread first to parts of Europe, and to North America. In the 20th century industrialization
spread to most other countries.

HISTORY
The phrase industrial revolution has long been used to identify the period roughly from
1750 to 1825, during which the accelerated application of mechanical principles, including
steam power, to manufacturing in Great Britain produced an identifiable change in economic
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structure and growth. Workers were grouped together in factories using concentrations of
capital equipment greater in cost and more efficient in operation than the capital equipment
known in Britain earlier. These factories utilized a few mechanical innovations, primarily in
textiles and iron manufacturing, which, with the application of the steam engine, made
factory-sized scale the most economic size for the production unit. The proximity of others
engaged in such manufacturing activities became a further cost-reducing factor of great
importance, resulting in external economies that encouraged the grouping together of
manufacturing enterprises and, hence, the growth of new urban aggregations. [SeeExternal
Economies and Diseconomies.] The result was that Britain rapidly became the first urbanized
industrial state.
There is now little agreement among scholars about the origins of the industrial revolution in
Britain. Recent work even questions the uniqueness of the classical period of the industrial
revolution in the long-term evolution of the industrial structure of the British economy
(Deane & Cole 1962). The older view that the agricultural improvements of the late
seventeenth century and early eighteenth century, together with the rise of foreign trade,
made a manufacturing sector with a rapidly increasing population possible in Britain has also
been questioned. These ultimate problems of economic historiography concerning the
industrial revolution in Britain cannot be resolved here.
The pattern of industrialization in other countries after 1800 has been broadly similar in many
respects to that experienced by Britain, although, of course, the permutations were never the
same in any two countries (Maizels 1963). Textiles first (along with food processing) has
been almost the rule in industrialization, followed by transportation development, heavy
industry, and more sophisticated enterprises, such as metalworking, chemicals, and
electronics. In most cases, substantial advances in agricultural output, or increased foreign
trade, or both, have been concomitants of industrial development. These have been essential
since, as in eighteenth-century Britain, industrialization has been accompanied by two
ubiquitous demographic phenomena: a rapid increase in the size of the total population and
its aggregation in urban areas.
There has been some confusion concerning the lessons of this history. Since World War II,
certain economists interested in promoting the development of industrially backward nations
have urged the adoption of balanced growth planning. According to this proposal, the
developing economy should supply its own market outlets and production inputs, with all
sectors growing simultaneously (Lewis 1955, p. 283). The history of successful industrial
growth shows no evidence of such growth in the past (Hughes 1958). Instead,
industrialization has been the product of certain industries or groups of industries"leading
sectors and dominant industries (Rostow 1952; Hoffmann 1931) pushing ahead of
others as technological breakthroughs occurred and new markets opened. Retardation in the
rate of growth and even absolute decline of particular industries have also characterized
industrial development, the lag in over-all growth being compensated for by new industrial
ventures that come into existence and push toward their maximum growth rates, thus carrying
the economy with them (Kuznets [1953] 1954, pp. 253-277; Burns 1934). No given set of
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industries making up a given industrial structure in any country has been responsible for
industrial development, because change has been continuous

ECONOMIC ASPECTS
Industrialization is the system of production that has arisen from the steady development,
study, and use of scientific knowledge. It is based on the division of labor and on
specialization and uses mechanical, chemical, and power-driven, as well as organizational
and intellectual, aids in production. The primary objective of this method of organizing
economic life, which had its genesis in the mideighteenth century, has been to reduce the real
cost, per unit, of producing goods and services. The resulting increases in output per manhour
have been so large as to stagger the imagination. The average American worker today
produces as much in half an hour as his British counterpart did in a whole working day a
century ago, and that American worker has ten times as much industrial capital behind him as
he would have had a century ago (Slichter 1961).
This revolutionary rise in available output and supply of economic resources has been
associated primarily with the development of industrial economies in, for the most part, a
limited number of countries (League of Nations 1945; Kuznets 1959; Maizels 1963). By
far the larger part of the dramatic rise in man-hour productivity is fairly recentmost of it
occuring since the turn of the twentieth centuryand apparently is still continuing
powerfully in those economically advanced countries where the application of modern
science to output continues to develop. Even so, the origins of modern industrialism can be
found in the distant past. Industrialization is the outcome of a long and complex historical
development, and it obviously has not yet run its full course as a long-range historical
phenomenon. Judging from the record of the past, modern industry may be only a crude
beginning of what is to come. It is not just the volume of output that measures the general
economic impact of industrial development. The phrase industrial society has come to
encompass a whole way of economic organization in which the social structure, from
industrial management to the fine arts, utilizes the economies of standardization and
specialization in basic human activities to produce, paradoxically, an ever more varied set of
final products. Change in the structure of final output is ceaseless.
The history of economic change in the two hundred-odd years since the classical industrial
revolution in England is varied and would have been difficult to predict. The ever-changing
tides of technology, and the society that produces technical change, are manifestations of
continuing growth of complexity in human specialization in all matters relating to economic
life. Hence, by the 1960s two-thirds of the labor force in the United States worked in
areas notconcerned directly with the production of food and manufactured goods, compared
with only 16 per cent of the labor force thus employed in 1820. European and Japanese
industrial growth shows the same result in the occupational distribution of the labor force
over time. Occupational diversity in nonmanufacturing life seems to be a product of
industrialization wherever human society is free to respond to its own potentials as efficiency
in economic life permits labor to go beyond direct production. What begins as mastery of
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basic mechanical technique ends by creating both the demands and the resources for a
revolution in mass education and in sciencea change in the quality of the labor force.
Historical support for these general observations may be seen in the development and general
characteristics of industrial society.

PRECONDITIONS
Since industry cannot grow without markets and sources of capital, similarities in the
economic preconditions for industrial development have been identified. These bases for
the development of an industrial sector include an available labor force, markets for finished
production, access to raw materials (whether at home or through foreign trade), a source of
investment funds (whether from the wealth and savings of the private sector, from the
accumulations of the public sector, or from abroad), and, finally, access to technology. The
last has in every case necessitated the extensive development of mass education, because
access to technology on a large scale means, ultimately, access to science. In the long run,
successful industrialization has been achieved in those nations which not only realized the
preconditions but also were able to adapt to changes in technology which required extensive
organizational flexibility on all levels. Examples of such necessary flexibility are antitrust
laws, internal population migrations, and changes in representational balance due to shifts in
the franchise.
Although some countries, notably the United Kingdom and the United States, experienced
their industrial development under conditions of political and economic freedom that were
based upon rational and calculable law, the experiences of Germany, Russia, and Japan in the
nineteenth and twentieth centuries indicate that the basic economic preconditions for
industrialization are to some extent independent of political framework. The same can be said
of commercial policysuccessful industrial development has occurred under regimes
ranging all the way from free trade to state barter. It is true that the industrial nations with
highest income per capita are those which have Western-style political democracy and
basically free markets for labor, food, and commodities. But it is also clear that rising per
capita income, thesine qua non of economic development, comes primarily from
industry, however organized. There are few poor nations with extensive industry. There are
poor democracies as well as poor dictatorships of all varieties. The question of the political
preconditions for industrialization has no clear answer except for the evidence of the past,
and even this furnishes no clear lesson of history, since, in terms of rates of growth, the
communist dictatorships have ranked near the top in recent times.

CHARACTERISTICS
URBANIZATION
Another economic consequence of industrial development is urbanization. Cities have existed
since antiquity as trade, financial, and administrative centers. But until the industrial
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revolution urban size was characterized by substantial stabilityenough, for example, to

make the medieval city wall a practical undertaking. With the industrial revolution the
relatively stable relationship between town and country vanished, and the industrial
conurbation began to spread. Because of the internal economies of the division of work based
upon the prime mover and managerial centralization, the system of factories developed
rapidly after the introduction of steam engines as prime movers in the 1780s. Factories based
upon water power had existed earlier; but they were necessarily placed near fast-moving
water, as was the case with John Lombes spinning factory, which was operating as early as
1718. Factories brought people together, and the external economies of proximity brought
factories together; it paid to be near a labor force, skilled mechanics, sources of parts for
machinery, and so forth. Where transportation could bring raw materials together with
markets for the eventual products, new cities and factory districts grew up, changing the
demographic maps of each area to which industrial growth came.
In Britain new centersthe Midlands around Birmingham and Wolverhampton, the textile
districts from York and Leeds southwestward to Liverpool on the Irish Sea, and Newcastle
and Stockton in the northeastdisplaced older centers of population like Oxford, Norwich,
the old market towns of the south, and the home counties, except, of course, London itself.
For this change in the distribution of English population to have occurred in so short a time
was itself revolutionary. It created social problems and upheaval on a scale unknown in
Britain since Tudor times and resulted in fundamental changes in the English constitution.
In American development, there was roughly the same experience. Cincinnati, Pittsburgh,
Columbus, Indianapolis; such Great Lake ports as Chicago, Cleveland, and Toledo; and so
forth were cities of the American industrial revolution, not products of the earlier trade and
finance which underpinned the population centers on the East and the Gulf coasts.
From the north of France across the Rhine estuary, central Europe, Russia, then in Japan (and
now China), industrial conurbations grew rapidly in the nineteenth and twentieth centuries as
manufacturing techniques spread. In most respects, industrial society became urban society.
A few figures from American data underscore the point. In 1840 nonfarm population in the
United States was 10.5 per cent of the total; in 1960 it was 92.6 per cent of the total, of which
69.4 per cent lived in urban areas. In the United States, population classed as rural has
fallen some since the 1940s, while that classed as farm has fallen sharply, from 30.5 million
in 1940 to 14.3 million by 1962. The number of farms has also declined sharply. In Britain,
on the other hand, the agricultural population declined, but the decline represented more a
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reduction in the number of hired laborers than any reduction in the number of farmers. In
both countries, though, a decline of farm population reflected the growth of cities as the
population grew. The experience of other nations in industry has been similarurban
population Rowing while rural population shrinks; in recent times the Soviet Union has
provided an additional dramatic example.
POPULATION GROWTH

Until recently it was generally accepted that the great expansion of total population which
accompanied the growth of industry and urbanization was a product of industrialization. The
effective agent was thought to have been reduction of the death rate, especially infant
mortality. The advances in real income, including more varied diets, better sanitation, heating,
and housing generally, had contributed to the elimination of plague, to the building of
resistance to communicable diseases of all sorts, and, generally, to a more healthful
population (a view condemned by those whose argument it is that, until 1848 at least,
industrialization impoverished and debilitated the population in spite of the explosive
increase in numbers). This plausible view seemed to account satisfactorily enough for the
prodigious increases in total population that came to the British Isles in the early nineteenth
century, spread across Europe eastward and southward with the proliferation of the
techniques and income effects of industrial development, and supplied millions of immigrants
to the New World and other areas of overseas European settlement by 1914 while, at the same
time, raising European population from 192 million to more than 450 million.
However, this view of population growth, which emphasizes a causal link with
industrialization, has recently been questioned to some extent by those scholars who, by
studying British records, have discerned an increase in birth rates in the United
Kingdombefore the industrial revolution took hold (before, say, 1780). The revisionist view
(Deane & Cole 1962) holds essentially that the process of industrialization, by contributing to
a fall in death rates, helped to accelerate a population growth already in process as a result of
rising birth rates. Even more recently the revisionist view itself has been questioned (Tucker
1963). It is noted that alternate estimates of population in the sixteenth century could
eliminate much of the forcefulness of the evidence of a dramatic rise in population growth in
Britain before the industrial revolution. At present these problems are not resolved. All parties
agree, of course, that industrialization and urbanization were associated with a gigantic
population increase. The line of causation is, however, not clear.
INTERNATIONAL TRADE

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Probably no part of the history of industrialization has been subject to more controversy than
that relating to international trade. Thanks to customs controls, a vast amount of national
information exists, but because of problems of valuation the information has been, and still is,
remarkably inconsistent. There is no doubt that industrialization has been a powerful stimulus
to the growth of international trade. What has been a subject of considerable controversy is
the extent to which the argument is reversible: To what extent has international trade been a
stimulus to industrialization?
Since rising productivity creates markets, and rising productivity has been the hallmark of
world industrialization, the connection between the great increase in world trade which
followed the industrial revolution (and the Napoleonic Wars) and the rise of industry has
never been doubted. The industrial nations not only became great importers of raw materials,
thus drawing the nonindustrial nations into the vortex of the international economy, but they
also became, by virtue of their high incomes, the primary importers of manufactured goods.
In 1959 the industrial countries accounted for 55 per cent of world imports of manufactured
goods, most of the worlds imports of primary commodities, and most of the growth of total
world imports since World War II (Maizels 1963). In every industrial country, however, the
pattern of exports and imports has changed considerably over time in continuous reaction to
domestic technological change, thus creating difficulties for primary producers whose
product flexibility is more narrowly limited.
Widening markets are a stimulus to industrial investment, but since exports of manufactures
are usually less than domestic sales, it is not at all clear to what extent exports have been a
necessary (although no doubt a helpful) ingredient of industrial growth. Those extractive
industries in the primary producing countries which have no important domestic markets
for example, Saudi Arabian oil are an exception. Indeed, it is believed by some economists
that no important manufacturing specialty in international trade can be developed where a
successful domestic market has not been achieved. (This is a matter of practical economics,
not of theoretical necessity.) In this qualitative sense, trade in manufactured goods has been
viewed as a product of industrial development, but the argument is not reversible.
In the cases where foreign investment has been complementary to exports, international trade
has been viewed by some as partly inimical to domestic industrial growth. Great Britain at the
beginning of the twentieth century is the major example; it is held by some that Britains
backwardness in industrial technique by 1913 was due to the lure of foreign investment. In
the previous half century foreign investment had grown more rapidly than domestic
investment. Indeed, by 1913 British foreign investment apparently was half as large as
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domestic investment, and by far the greater part of new issues in the London capital market
were for foreign accounts (Cairncross 1953). On the other hand, it has also been argued that
foreign investment, by stimulating growth of export industries which led the way in domestic
economic expansions, acted as a fillip to the growth of income generally at home and abroad
(Thomas 1954). Both views have been extensively developed, at least since the work of John
Hobson and Lenin, and the differences in conclusions cannot be reconciled here.
By 1914 a remarkable system of world trade and payments, centering on the industrial
nations, provided for total currency convertibilitythe gold standard. The system had
developed apace with the spread of industrialization, and it was adopted by country after
country as multilateralism in payments displaced various bilateral and triangular trading
systems. By 1900, when the United States adopted the gold standard, that system reached its
apex. The worlds payment system was still centered on London as late as the 1870s, but as
international financial power spread with industrial growth and the convertibility of
currencies, many centers of financial settlement appeared. By 1914 the now almost legendary
gold standard was the accepted system of trade and payments among the commercial nations.
By 1914 a large part of multilateral trade was based, not upon this series of disconnected
patterns mainly centered around Britain but upon a complex network of activity embracing
whole continents or subcontinents, derived from a new world-wide division of economic
functions. The rapidly industrializing countries of Europe and North America expanded
their purchases of raw materials and foodstuffs from the primary producers, and all, with the
significant exception of Britain, ran up heavy deficits in their balances with those countries.
(Saul 1960, pp. 44-45)
The connection that developed between industrialization and trade was striking. By 1913 the
United States produced 35.8 per cent of the worlds manufactured goods, and the United
States, Germany (15.7 percent), the United Kingdom (14 percent), France (6.4 per cent), and
Russia (5.5 per cent) between them produced 77.4 per cent of the worlds total manufactures
and occupied the center of world trade. By 1936-1938 the same five nations still carried on
75.1 per cent of world manufacturing and, with Japan, Sweden, Belgium, and a handful of
other nations, accounted for some 89 per cent of world imports and exports. Only 11 per cent
of world trade originated between the two-thirds of mankind that was bereft of industry. By
1959 the underdeveloped nations of Latin America, Africa, and Asia produced only 10 per
cent of world manufactures (excluding the Soviet bloc). By 1926-1929 two-thirds of the
earths population had a supply of manufactured goods equal to $7 per head, a third of
mankind averaged $104 per head, the United States averaged $254 per head, and the United
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Kingdom averaged $112 per head. Like the income statistics noted earlier for the 1960s,
manufacturing supplies were most unevenly available to mankind by the time
industrialization had reached fruition in the (primarily Western) countries of its origin. By
1959 the major industrial countries, containing 28 per cent of mankind, consumed 82 per cent
of the worlds manufactures. [SeeInternational Trade, article onPatterns of Trade.]
World War II and its aftermath of course added further disruptions to world industrial
development. The international flow of capital, so much a feature of the old gold standard
and choked off by the 1929 financial debacle, has only begun to make a comeback since the
mid-1950s. Currency convertibility was still incomplete by the early 1960s, after nearly two
decades of international cooperation in that area, and the worlds trade was badly split by the
cold war and by the inability of the underdeveloped nations to earn foreign exchange. In
1961, for example, three-fourths of the known supply of world monetary gold ($41,000
million) was held by the usual industrial nations: the United States, the members of the
European Economic Community, the United Kingdom, and Switzerland (a country which
attracts foreign exchange by unique inducementssecurity from taxes, wars, confiscations,
etc.). The wide inequalities of income resulting from success and failure in industrial growth
show no signs of being reduced. There are no logical reasons why these inequalities would be
reduced by international trade alone. Indeed, some economists have argued that trade has a
tendency to make matters worse in this regard-to result in the rich countries exploitation of
the poora view which has not been accepted on the basis of its formal merits

IMPORTANCE OF INDUSTRIALIZATION
In the interest of economy, rapid industrialization is important for generating employment
opportunities, utilization of all types of resources, promotion of education, training and
research, improving the productivity of labor and balanced regional development.

Industrial growth brings a rapid increase in the national income of the country.
In order to reduce the continued increasing pressure of exploding population on our
developing economy, rapid industrialization is a must.
Land is limited in area but industrialization has unlimited scope.
To set up large number of industrial units we can create more employment opportunities and
absorb a large number of unemployed youths.

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Agriculture cannot use all resources. So, industrialization is a must to make use of our
resources.
Industry can make use of waste materials.
Industrialization widens horizon of our understanding and enables us to go through education
and researches. Thus it will prove the quality of our manpower.

We can use more capital and technologies.

We can have division of work and specialization in the industry.

This will result in the improvement of productivity of labor.

Industrialization is capable of removing regional disparities because barren lands can be used
for this purpose.

No fertile land and means of irrigation are needed for industrialization.

Industrialization will raise the standard of living of our people.

ROLE OF INDUSTRIALISATION IN INDIA

Industrialisation is the process of manufacturing consumer goods and capital goods and of building
infrastructure in order to provide goods and services to both individuals and businesses. As such
Industrialisation plays a major role in the economic development of underdeveloped countries like India with
vast manpower and varied resources. Let us discuss, in detail, the role of industrialization in the Indian
economy.
1. Raising Income: The first important role is that industrial development provide a secure basis for a rapid
growth of income. The empirical evidence suggests a close correspondence between the high level of income
and industrial development. In the industrially developed countries, for example, the GNP per capita income is
very high at around $ 28,000. Whereas for the industrially backward countries it is very low at around $ 400
only.
2. Changing the Structure of the Economy: In order to develop the economy underdeveloped countries need
structural change through industrialization. History shows that in the process of becoming developed economy
the share of the industrial sector should rise and that of the agricultural sector decline. This is only possible
through deliberate industrialization. As a result, the benefits of industrialization will trickle down to the other
sectors of the economy in the form of the development of agricultural and service sectors leading to the rise in
employment, output and income.
3. Meeting High-Income Demands: Beyond certain limits, the demands of the people are usually for industrial
products alone. After having met the needs of food, income of the people are spent mostly on manufactured
goods. This means the income-elasticity of demand for the manufactured goods is high and that of agricultural

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products is low. To meet these demands and increase the economys output underdeveloped countries need
industrialization.
4. Overcoming Deterioration in the Terms of Trade: Underdeveloped countries like India need
industrialization to free themselves from the adverse effects of fluctuations in the prices of primary products and
deterioration in their terms of trade. Such countries mainly export primary products and import manufactured
goods. The prices of primary products have been falling or are stable whereas the prices of manufactured
products have been rising. This led to deterioration in the terms of trade of the LDCs. For economic
development such countries must shake off their dependence on primary products. They should adopt import
substituting and export oriented industrialization.
5. Absorbing Surplus Labour (Employment Generation): Underdeveloped countries like India are
characterized by surplus labour and rapidly growing population. To absorb all the surplus labour it is essential to
industrialise the country rapidly. It is the establishment of industries alone that can generate employment
opportunities on an accelerated rate.
6. Bringing Technological Progress: Research and Development is associated with the process of
industrialization. The development of industries producing capital goods i.e., machines, equipment etc., enables
a country to produce a variety of goods in large quantities and at low costs, make for technological progress and
change in the outlook of the people. This results in bringing about an industrial civilization or environment for
rapid progress which is necessary for any healthy economy.
7. Strengthening the Economy: Industrialisation of the country can provide the necessary elements for
strengthening the economy. In this regard the following points may be noted.
(a) Industrialisation makes possible the production of goods like railways, dams, etc. which cannot be imported.
These economic infrastructures are essential for the future growth of the economy.
(b) It is through the establishment of industries that one can impart elasticity to the system and overcome the
historically given position of a primary producing country. Thus, with industrialization we can change the
comparative advantage of the country to suit its resources and potentialities of manpower.
(c) Through industrialization the requirements for the development of agriculture can be met. For example,
improved farm-implements, chemical fertilizers, storage and transport facilities, etc., appropriate to our own
conditions can be adequately provided only by our own industries.
(d) The industrial development imparts to an economy dynamic element in the form of rapid growth and a
diversified economic structure which make it a progressive economy.
(e) Providing for Security: Industrialisation is needed to provide for the countrys security. This consideration
becomes all the more critical when some international crisis develops. In such situation, dependence of foreign
sources for defence materials is a risky affair. It is only through industrial development in a big way that the
national objective of self-reliance in defence materials can be achieved.

CONCLUSION: The solution of our problems lies in the rapid industrialization of the
economy. Every region should be industrialized. Agriculture is over burdened with
population. In order to absorb the manpower rendered surplus by the agriculture, there should

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be industries in the rural areas. There is unlimited scope of industrialization due to continued
researches, introduction of new technologies and invention

BIBLIOGRAPHY
BOOKS

ECONOMICS- S.R MYENNI

INTERNET SITES
https://www.britannica.com/event/Industrial-Revolution
http://www.encyclopedia.com/topic/Industrialization.aspx

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