Entrepreneurship Development and Communication Skills

1.1.6 Pattern of Industrialisation

While there is now universal agreement on the importance of industrialization there is still much debate left for the proper pattern of industrial development. Historically, it has proceeded in three stages. In the first stage, industry is concerned with the processing of primary products, milling grain, extracting oil, tanning leather, spinning vegetable fibres, preparing timber and smelting ores.

The second stage in the evolution of industry comprises the transformation of materials, making bread and confectionery, foot-wears, metal goods cloth, furniture and paper.

The third stage consists of the manufacture of machine and other capital equipment to be used not for the direct satisfaction of any immediate want but in order to facilitate the future process of production.

In India, imported supplies of consumer manufacture are generally a marginal element in total consumption and, therefore, the scope for further reduction is small. Thus the import substitution of the type becomes very important. India is facing a problem of a choice between expansion of export-oriented or of import substitution industries. The capital available for investment being limited in underdeveloped countries, the allocation of funds to an export project reduces the scope of investment-oriented towards import substitution.

Now coming to the practical side, if export-oriented industries are successful in stimulating exports, it will result in increase in the supply of foreign exchange and if import-substitution is effective, it reduces foreign exchange reserve. So the effect of these alternatives on the supply of foreign exchange is identical. Which should be preferred out of the above two? Import-substitution industry strengthens the economic independence of the country, while export-oriented project, on the contrary, increases its dependence on the fluctuations of prices and volume of trade in foreign markets. Therefore, it is very safe, in general, that import substitution project should be preferred to an export-oriented project.