Page 110 - DECO303_INDIAN_ECONOMY_ENGLISH

Unit 7: Indian Industries

The pattern of ‘growth via trade’ in primary commodities was, however, understood in the Notes
nineteenth century when industrialisation was intimately connected with international trade,
because (a) countries earlier isolated by high transport costs and other barriers came to specialize,
and (b) economic development via trade was diffused in outlying regions because the pattern of
advance in the rising industrial countries occurred to be such as to cause a quickly growing
demand for crude products of the soils which those regions were well-fitted to supply. This
conventional pattern of growth through trade is out of place at present. As rising levels of per
capita consumption have slowly converted the composition of demand for goods and services
and as technological modifications have led to the more economic use of new materials or the
development of synthetic substitutes, the growth of import demand of the advanced countries
for majority primary products has lost the momentum of the previous period and, at present, it
lags behind the growth in their domestic incomes and output. The volume of exports from the
underdeveloped countries spread at a rate of 3.6 per cent per annum whereas the exports from
the developed countries increased at the rate of 6.2 per cent. This export lag is escorted by
deterioration in their terms of trade. Hence in view of unfavourable trends in world trade of
primary commodities, industrialisation is the just effective response to the issues of under-
developed countries. They can no longer rely upon trade for their development; they have to
activise dynamic elements within their economies.

Table 7.1: Percentage Industrial Distribution of Gross Domestic
Product and per Capita Income (2009)
Industrial origin of Domestic Per capita income in Agriculture Industry Services
Product at factor cost U.S. Dollar
(Percentages) (2008)
U.S.A.* 46,436 1.3* 20.8* 77.3*
Belgium 44,429 .8* 23.1 * 76.1 *
U.K.* 35,164 .7* 23.7* 75.1 *
Japan 39,726 1.4* 29.3* 69.3*
China 3,744 10.3 46.3 43.4
India 1,134 17.1 28.2 54.6

Source: Indian Economy, Datt and Sundharam, S. Chand
Also the limitation of ‘trade gap’, these countries are confronting a relentless increase of
population combined with a possibility of diminishing returns in agriculture which is
instrumental in developing the trap of poverty. The necessary precondition for development
(and to break this vicious circle) is an all-inclusive rise in low productivity occupations to high
productivity occupations. Generally, the net value of output per person is greater in industry
than in agriculture. In industry, the scope for internal as well as external economies is higher
than in other sectors and definitely greater than in agriculture. As industrialisation advances,
economies of scale and inter-industrial linkages (complementarity) become more pronounced.
It also results in the creation of economic surplus in the hands of industrial producers for
additional investment.
You must understand that the industrial sector which owns a comparatively high marginal
propensity to save and invest contributes considerably to the eventual attainment of a self-
sustaining economy with continued high levels of investment and quick rate of increase in
income and industrial employment. Also, the process of industrialisation is related to the
development of mechanical knowledge, attitudes as well as skills of industrial work, with
experience of industrial management and with other aspects of a modem society which in turn,
are advantageous to the growth of productivity in agriculture, trade, distribution and other

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