Structure of industries PPT MBA INDUSTRIAL MANAGEMENT

STRUCTURE OF
INDUSTRIES
4/11/2013 Babasabpatilfreepptmba.com

Industries- one the eve of independence
India was economically & industrially
backward.
1951-52: even when first five year plan was
initiated.
Primary sector : 58.9% GDP at factor cost
Secondary sector: 13.6% of GDP at factor
cost

Industries- one the eve of independence
Why Strategy for long term plan for development of
industries spelt – under various five year plans?
Country was industrially backward
Productivity of labour is the highest in mfrg. Industries
Pressure of population on land is excessive
Inustralisation induces development in other sectors.
Industry create demand for agriculture goods
Ex: cotton, fertilizers, insecticides & farm implements

“Industrialization produces steel, it produces
power. They are the base, Once you have got
the base, it is easy to build.
The strategy governing planning in India is to
industrialize and that means the basic industries
being given the first place”
-------------------Jawaharalal Nehru

INDUSTRIAL STRUCTURE
Industries can be structured on the following basis:
1. Structure in terms of Use based classification –
(a) Consumer goods- cotton textiles, leather goods, salt sugar & paper
(b) Intermediate goods- Coal, cement steel, power alcohol, chemicals etc.,
(c ) Basic industries - Capital goods- heavy engineering & machine building
industries
2. Structure by type of ownership: PS,JS, PS
3. Structure by size of the employment: depending upon the no. of employees
factories were divided & their contribution towards national economy was
derived.
4. Structure by size of the capital: Large, small, Ancillary & Tiny sector.
5. Structure by type enterprises of organization of industries:
6. (a) Public Ltd & Pvt. Ltd
(b) Govt. & non-govt. companies

STRUCTURE OF INDUSTRIES
• Universal agreement – importance of industrialization.
• Debate –regarding the proper structure of industrial
development.
• Historically, industrial development - proceeded with 3 stages.
• First stage: Industries concerned with the processing of primary
products
• Milling Grain, extracting oil, tanning leather, spinning, preparing
timber and smelting ores.

STRUCTURE OF INDUSTRIES
• Second stage: comprises the transformation of
material making.
• Bread & confectionary, foot wear, metal goods,
cloth, furniture & paper.
• Third stage: consists of manufacture of
machines and other capital equipments not for
direct consumption – facilitate future process of
production.

INDUSTRIAL STRUCTURE ON THE EVE OF
INDEPENDENCE
1. Lop sided structure of industry: unevenly balanced
because of colonial nature & lack of medium sized
entrepreneurs in our economy.
high concentration of employment either in small factories or
household enterprises.
2. Low capital intensity: general level of wages was low, small size
of the home market in view of low percapita income

INDUSTRIAL STRUCTURE ON THE EVE
OF INDEPENDENCE
3. Composition of manufacturing output: structural imbalance in
the industrial structure. Incase of consumer goods, domestic
supply was more than the demand. But in case of capital goods
(producer goods) fell short of domestic demand.
In short, industrial structure in India on the eve of planning was
marked by low capital intensity, limited development of
medium sized factory & imbalance between consumer goods
and capital goods.

“
Planning is, not a once-for all exercise for a
five year period, it requires a continual watch
on current or incipient trends, systematic
observation of technical, economic and social
data and adjustments of
Programmes in the light of new requirements”
- Planning Commission

INDUSTRIAL DEVELOPMENT UNDER - FIVE YEAR PLANS
GOI launched the process of industrialization as conscious
& deliberate policy of economic growth in early fifties.
Industries & the First Five year Plan (1951-56) – no big
effort to industrialize the economy.
Emphasis to build basic services like power & irrigation so
that the process of industrialization is facilitated.
total investment planned for industry 800 crores. 94 cr
investment in the public sector.
Actual public sector outlay – 57 cr on new projects,
replacement and modernization – actually spent Rs. 340 cr.
Thus – shortfalls in investment programmes.

What changes have taken place in the industrial
structure during the period of Planning?
First Five Plan: Total Exp. Rs. 1,960 crore –
Ind. 55 crore (2.8%).
“If industrialization is to be rapid enough country must
aim of developing industries which makes machines to
make the machines needed for further development.
Heavy engineering & machine building industries.

Second Five year Plan: based on industrial policy Resolution 1956,
Envisaged big expansion of public sector.
Major task – building up of 3 steel plants in public sector ;
1. Rourkela Steel Plant in Orissa
2. Bhilai Steel Plant in Madhya Pradesh
3. Durgapur Steel plant in West Bengal
Rapid expansion of Machine Building industries .
Modernization and re-equipment of important industries –Jute,
cotton textiles and sugar.
Second Plan: TE - 4,672 cr. Ind. 938 cr. (20.1%)

• Third Five year Plan (1961-66) : called for maximum rate of investment:
• 1. To set India as self reliant & self generating economy.
• 2. Top priority is for agriculture than for basic industries.
• Due to India’s conflict with China in 1962 & with Pakistan in
1965 the focus was shifted to defense.
• It was failure as along with conflict India had severe famines
• This held to postponement of plans i.e 4th plan by 3 years- Plan
holiday.
• Three annual Plans were adopted in 1966-1969

• Fourth Five year Plan (1969-74) : intended to complete
industrial projects undertaken in the third plan.
• ‘Growth with Justice’ or garibi hatao
• Aimed – to enlarge capacities in export promotion & import
substitution industries.
• First 2 years were promising with record food grains &
industrial production.
• Next 3 years were failure due monsoon failure- power
breakdowns, Influx of refugees from Bangladesh Indo Pak war
of 1972
• The growth rate was around 5% - much below targeted 8%
envisaged.

Fifth Five year Plan(1974-78) - formulated - objectives of
self-reliance and growth with social justice.
1. High priority to steel, non-ferrous metals, fertilizers, mineral oils ,
coal and machine building
2. Rapid diversification & growth of exports
3. Enlarging – production of industries supplying mass consumption
needs.
4. The Janatha party terminated this at the end of the 4th year plan
in 1978.
5. The emphasis shifted on the Prime minister 20 point program
6. Public sector outlay was revised from 37500 cr to 39430 cr.

Sixth Plan (1980-85) : In review of Indl. Development over the
30 yrs. Of planning.
6th plan noted that Indl. Production had increased – 5 times
during this period
Quantitative increase output was the fact.
Indl structure had been widely diversified- consumer,
intermediate and capital goods.
Emphasized optimum utilization of existing capacities.
Improvement of productivity,
enhancement of Mfrg., capacity,
special attention to the capital goods industry and electronics
industry, improvement in energy efficiency, etc.,
6th Plan, the share of the indl. Sector was Rs. 15,002 crore which comes
13.7 %

INDUSTRIAL DEVELOPMENT UNDER - FIVE YEAR
PLANS
7th Five year Plan (1985-1990) :
The country has a reasonable growth in 6th plan.
Total exp: 2,18,730 - 25,971 cr which is 11.9% .
Indl. Production targeted to grow at the rate of 5% per
annum.
Public sector was 19,663 crore.
It was successful and it recorded at 6% rate of
economic growth as against the targeted 5%.

PLANS
8th Five Year Plan (1992- 97) –
Narasimhan Rao Govt. initiated the process of fiscal
reforms & bought a new Industrial policy 1991
The highest annual growth rate of 6.8 was recorded.
No. of industries could not face external competition.
Dumping by foreigners also created problems for many
industries.
The Government was not able to gear up anti-dumping
machinery to Face the challenge.

PLANS
9th Plan (1997-2002) – The policies adopted were:
Encouraging infrastructure of industries in backward
areas
Development of small scale industries
Close down sick units
Slow down in world economy further decelerated the growth of
the Indian sector.
targeted growth rate 8% for industry
Achieved only 5% even lower then 7.3 % of 8th plan.
Ninth plan was failure.

PLANS
10th Plan (2002-2007) –
To give more space to private sector.
The private sector was expected to contribute towards
production, employment and income generation.
The target of 10% growth for industrial sector was set.
Achievement of target is in the hands of private people
as less role of public sector.

Five year
plan
Total outlay Industry % allocation
1st plan 1,960 cr. 55 cr. 2.8%
2nd Plan 4672 cr. 938cr. 20.1%
3rd plan 8577cr. 1726cr. 20.1%
4th plan 15,77cr. 2864cr. 18.2%
5th plan 39,426cr. 8989cr. 22.8%
6th plan 1,09,292cr. 15,002cr. 13.7%
7th plan 2,18,730cr. 25,979cr. 11.9%
8th plan 4,34,100cr. 40,588cr. 9.3%
9th plan 8,59,200cr. 65,148cr. 7.6%
10th plan 5,25,639cr. 58,939cr. 3.9%

Changes in Industrial structure during
the planning period
1. Increase in the share of industrial sector in
GDP – The share of GDP has slowly but
consistently increased over planning period.
1950-51 - It was 13.3%
2003-2004- 24.6%
2. Growth of infrastructure industries like
electricity , coal, steel cement crude
Petroleum etc have increased

the planning period
3. Building up of heavy and capital goods
industries : The second plan gave a pride place
to the development of heavy industries with a
view of strengthening the industrial base of the
economy.
4. A well diversified industrial structure: there is
good growth in different sectors of metallic.
Non metallic, chemical, heavy, industries etc.,

the planning period
3. Changes within the consumer goods sector:
this sector increase by more than 100% due to
the opening of the industrial economy.
4. Declining role of Public sector: with increasing
emphasis on liberalization and privatization,
the government of India is gradually
withdrawing from the industrial sector.

SMALL SCALE INDUSTRIES DURING
THE PALNS
Define SSI
Industrial undertaking in which the investment in fixed assets
in plant & machinery whether hold on ownership terms, or by
lease or by hire purchase, does not exceed Rs. 1 crore is
called as SSI
Small scale service business enterprise the investment
ceilling is 10 lakhs.

SMALL SCALE INDUSTRIES DURING THE PALNS
Define Ancillary Unit:
An industrial undertaking which is engaged in the manufacturing
of parts, components, sub –assemblies, tooling or intermediates
or rendering services to one or more industries whose
investment in plant & machinery whether hold on ownership
terms or by lease or by hire purchase, does not exceed Rs. 1
crore is called

SMALL SCALE INDUSTRIES DURING THE PALNS
Define Tiny unit
Industrial undertakings in which the investment in fixed
assets in P & M does not exceed Rs. 25 lakhs is called as
tiny unit.

SMALL SCALE INDUSTRIES
DURING THE PALNS
Important measures undertaken by the GOI to promote
small scale and cottage industries in the planning period.
1. No. of items reserved for SSI has been increased.
2. Procedures and conditions of financial assistance from
commercial banks and other institutions have been liberalized.
3. RBI advised schedules banks to ensure appropriate credit
facilities to SSI

SMALL SCALE INDUSTRIES DURING THE PLANS
4. Comprehensive range of consultancy services and technical,
managerial economic and marketing assistance is provided
to SSI by SIDO- Small Industries Development Organization
through its network of service and branch institutes.
5. The Small enterprise policy 1991 –Ceiling of investment in the
case of tiny enterprises was raised to Rs. 5 lakh from Rs. 2
lakh .
6. Vocational restrictions on setting up of these enterprises
were removed.
7. Modernization and technological up gradation were
encouraged.

Five year plan Allotment
First paln Rs. 42 crores allotted to SSI and village
industries
Second plan Rs. 187 Cr allotted to SSI and village
industries
Third plan Rs 241 Cr were spent on te SSI’s
Fourth plan Rs. 132 Cr. Were spent on the SSI’s
Fifth Plan Rs. 251 Crs allocated
Sixth Plan Rs. 1952 crores allocated
Seventh Plan Increase in production with very high annual
average growth rate achieved
Eighth Plan Provided growth impetus in infrastructure
facilities financial support measures etc.,
Ninth Plan Strengthening efforts to build self reliance
ALLOCATION OF RESOURCES FOR SSI UNDER PLAN PERIODS

PUBLIC SECTOR & INDIAN PLANNING
Prior to 1947 was virtually no public sector in the Indian economy. The
expansion of public sector is taken after independence.
Industrial Policy – 1956 gave public sector a strategic role in the Indian
economy.
Public sector – engine for self reliant economic growth.
OBJECTIVES
• Creation of infrastructure
• Generate financial resources for development
• Create employment opportunities
• Promote balanced regional growth
• Encourage the SSI and ancillary industries.
• To promote export on one side and import substitution on the other
• Strong industrial base

JOINT SECTOR
Joint Sector – a form of partnership between the government and
the private sector.
After 1956 Industrial Policy Resolution in 1956, Govt started No. of
companies in collaboration with the private sector by sharing
their managements, control and ownership.
Ex: Cochin Refineries started in 1963
Madras Refineries
Gujarat State Fertilizer Company

JOINT SECTOR
Role of Joint sector
1. Social control over industries : effective way to control
monopoly and concentration of economic power and curb
business malpractices.
2. Better Industrial Growth
3. Broad –basing of industrial enterpreneurship-participation of
the government – can instill confidence in small and medium
entrepreneurs and they might come forward to set up new
industrial units.

Private sector
• Private sector is called as the corporate industrial sector. It is one
of the dominant sectors in India. The growth of SSI’s credit goes
to private sector as most of the SSI is started by private people.
• Role of public sector
• The dominant sector
• Importance for development
• Extensive modern industrial sector
• Potentalities due to personal incentive in small sector

Problems of Private sector
• Lack of positive role in economic development- profit generation
is the soul motive of the PS. This make them to invest in those
sectors which give them more profits & neglect those which are
basic for the development of the country.
• Monopoly & concentration: concentration of wealth & economic
power in a few hands has been further strengthened by
liberalization of the indl. Policy.
• Industrial disputes: regarding wages & bonus, retrenchment &
other issues frequently.

Problems of Private sector
Industrial sickness: small, medium & large units in PS.
substantial amount of loan able funds of financial institutions is
locked, which affects the healthy growth of In indl. Economy.
Threat from foreign competition: Process of liberalization in
1991 has opened up the gates to foreign investors & the
government .
The competition between giant MNC’s and dwarf Indian enterprises
have created an unequal competiton.

Public sector & Private sector
• Character of Indian economy – Mixed economy
• In India PS co-exists with PS- character of the economy as mixed.
• After independence area of Public sector expanded –rapid speed .
• Two indl. Policy resolution of 1948 & 1956 ensured that the private sector & its
activities will not be unduly curbed .
• These policy resolutions divided the industries into different categories.
• Entire field of consumer goods industries having high & early returns was left to the
private sector.
• Public sector: Banks, financial corporations, Railways, air transport.
• Agricultural sector –(largest sector) has been left for the private sector

• Character of Indian economy – Mixed
economy
• After independence area of Public sector
expanded –rapid speed .
• Two indl. Policy resolution of 1948 & 1956
ensured that the private sector & its activities
will not be unduly curbed
• In India PS co-exists with PS- character of the
economy as mixed.

• Govt. intervention in the form of expansion of
public sector was historical necessity.
• Economic planning as practiced in India over
the past decades and the development of the
public sector in this period were thus meant
to move a standstill economy.

MULTINATIONALS (MNC’S)
• A company which has gone global is called a multinational (MNC)
or transnational (TNC).
• MNC are huge industrial organisations which extends their
industrial & marketing operations through a network of their
branches or their majority owned Foreign Affiliates.
• MNC’s are also known as Transnational Corporations (TNSs).

• Reasons for growth in the MNC’s
• 1. Expansion of market territory
• 2. Marketing superiorities
• 3. Financial superiorities
• 4. Technological superiorities
• 5. Product innovations

Subject to legal requirement, international agreements and
commercial treaties, a multinational Co can organize its
operations in different countries thru either of the following five
alternatives.
• 1. Branches
• 2. Subsidiaries
• 3. Joint Venture Companies
• 4. Franchise holders

REASONS FOR THE GROWTH OF MNC’S
 Expansion of market
 Marketing superiorities
 Financial superiorities
 Technological superiorities
 Product innovation

Benefits of MNC
It helps is capital formation in the country
It promotes in the spread of modern technology
It encourage the establishment of ancilliary unit
It helps in faster growth of economy
It brings welfare to the people of host country
It provides employment opportunities
It increased National income an percapita income
It provides wide choice to the customers

Structure of industries PPT MBA INDUSTRIAL MANAGEMENT

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