Government policy and location of Industry:
The government can encourage industrial
development of a particular region through various incentives, for example:
after independence heavy industries of steel and coal were promoted in backward
areas of Madhya Pradesh and Orissa.
Government influences location in various ways such as:
• Tax
sops: such as decreasing corporate taxes, excise duties or other taxes to
incentivize investors.
• Establishing
enabling infrastructure: such as mega food parks development of which would
promote food processing industries in those areas.
• Facilitating
investment: by establishing Special Economic Zones or industrial corporations
such as
Gujarat Industrial Development Corporation
(GIDC), Gujarat State Finance Corporation (GSFC) etc. in Gujarat.
• Restricting
permissions to certain locations: The state may restrict the development of
industries in certain locations due to ecological considerations. For example,
in areas near Western Ghats, or Coastal Zones etc.
• Conditional
permissions: For example, while giving banking license, a certain percentage of
units are to be mandatorily set up in rural areas to ensure the objective of
regional balance in development of banking industry.
• Adopting
new policy: such as adoption of liberalization helped in development of various
industries including the automobile and telecom sector. The policy may favour
imports/exports and thus altering the market conditions.
• Clearance
norms: Land, being one of the crucial factors of production, is made available
by the states on concessional rates with faster clearances to promote certain
types of industries. For example, TATAs announced the TATA Nano plant in Sanand
due to the land made available by Gujarat Government, similarly IT industry is
developing in Chennai due to the availability of abundant space at relatively
lower rates.
This influence is used by governments to
develop backward areas. Indian Government has also taken various steps in this
regard:
• Backward
Region Development Fund: It was established to redress regional imbalances by
providing financial resources for supplementing and converging existing
developmental inflows into identified backward districts.
• Special
plans for backward regions – such as for special plan for Bihar, West Bengal,
Bundelkhand and KBK (Kalahandi Balangir Koraput) region for Orissa, special
package scheme for Himachal Pradesh and Uttarakhand etc.
• North
East Industrial and Investment Promotion
Policy 2007: which envisaged incentives
such as 100% Income Tax exemption, Excise duty exemption on
Value Addition, Central Capital Investment
Subsidy Scheme etc. to the 8 north‐eastern states
• Freight
Subsidy Schemes for selected States like Himachal Pradesh, Uttarakhand,
Darjeeling district of West Bengal, North East etc. to encourage freight
movement.
Thus, the state plays a crucial role in
determining the development and flourishing of an industry in a particular area
as envisaged from the above mentioned factors.
Heavy industries: Factors of Location
Industries, which use heavy and bulky raw
materials and produce products of the same category, are called heavy
industries. Heavy industries include Oil, mining, shipbuilding, steel,
chemicals, machinery manufacturing and others.
They are very capital‐intensive and often sell
their products to other industries rather than to end users and consumers.
Locational pattern factors:
Geographical: availability of raw materials,
power resources, water, labour, markets and the transport facilities.
Non‐Geographical: Government Policies,
Industrial Inertia, presence of facilities like Banking and Insurance.
Examples:
a)Iron and steel industries:
The iron and steel industry uses large
quantity of heavy and weight‐losing raw materials, such as iron ore, coking
coal and limestone. On the basis of the minimum cost of transportation, the
steel plants can be located at three possible places, viz.,
•
Near the coalfields
•
Near iron‐ore mining areas and
•
At places between coal and iron ore producing
areas. Taking these factors into account, most of the steel plants in
India are located in Jharkhand, West Bengal,
Orissa and Madhya Pradesh. All these states are rich in coal and iron ore
reserves. Ex: TISCO, Durgapur steel plant.
The other raw materials like manganese,
limestone, dolomite, chromite, silica, scrap iron, are needed in small
quantities and can be transported easily from other places.
b) Ship building industry:
Availability of steel and coastal land play
important role in the location of ship building industry. In India, Four major
ship building centres are located at Vishakhapatnam, Kolkata, Kochi and Mumbai.
• Vishakhapatnam
itself has steel industry and Kolkata is well connected with steel industries
of Jharkhand
and WB.
• flat/level
coastal land is available.
• Rich
hinterland with excellent railroad connectivity for transport of labor and
ancillary components
• Indigenous
demand from ONGC, for offshore platforms, drilling rigs and steel jackets and
from Indian Navy and Coast guards.
Petrochemical industries: are located at
coastal regions. Ports help in import of crude oil and export of end products.
• Mumbai
is the hub of the petrochemical industries.
• Jamnagar,
Gandhinagar and Hajira in Gujarat. Conclusion:
With most factors varying in time and space, industries are unevenly
distributed.
Cement Industry:
India is second largest cement producing
country in world, next only to China both in quality and technology. It
produces about 7 per cent of global production.
Location Factors:
• Availability
of Raw Material as industry requires heavy, low value and weight loosing
materials. It is primarily raw material oriented dependent on limestone,
silica, alumina and slag. It is the reason that industry is concentrated in
Madhya Pradesh, Rajasthan and Andhra Pradesh, rich in limestone deposits.
• Power
is used in raw material grinding, clinkerisation of limestone and clinker
grinding along with gypsum.
• Coal
forms 40 per cent of total cost. Coal is used as fuel and to burn limestone.
Availability of coal and power is one of the reasons for concentration of
industry on eastern coast.
• Availability
of road and railways to provide logistics support to industry.
• Distance
from exporting port. Cement from Gujarat is sent to Middle East, eastern coast
exports to southeast Asia.
• Location
near market reduces transportation cost. However, this is not very important
factor as cement is required in construction almost everywhere.
Although, industry has grown by leaps and bounds since its liberalisation
in 80s, it has been facing challenges in recent times:
• Contraction
of construction and as a result very low per capita consumption.
• Glut
situation due to mammoth mismatch between cement demand and supply. Excess
supply implies weak pricing power and weighs on margins of companies
• Acute
shortage of domestic coal and increasing cost of imported coal.
• Inadequate
availability of railway wagons.
• Highly
taxed (60 per cent of the ex‐factory price), even more than luxury goods. 28%
GST on cement.
• High
incidence of government levies, infrastructure constraints at ports and
regulatory policies to encourage import with nil custom duty resulted in export
of cement and clinker from India declining.
• Power
plants which had been earlier supplying fly ash to cement industry free of cost
have as per the order of the MoEF, started charging for fly ash.
• Demonetisation
also has made a dent in the demand due to slowdown in construction sector
Suggestions and government initiatives:
• Streamline
environmental clearance and land acquisition policy. Adhering to EIA so as to
avoid litigations and halt of projects later. Land Acquisition Bill is an
important step in this direction.
• Coal
supply and wagon availability need to be assured.
• Providing
tax incentive
• Ready
Mix Concrete (RMC) needs to be encouraged leading to bulk supply of cement and
consequent reduction in packaging cost.
• Government
has streamlined FDI rules to attract investment.
• assign
infrastructure status to affordable housing projects and facilitate higher
investments and better credit facilities, and Ministry of Road transport and
highways thurst on construction of cement concrete roads will boost cement
demand.
• Government
is planning to revive state‐run cement factories, to give a boost to road and
realty projects by bringing down their construction costs.
• Railways
should develop goods corridor to handle the huge cargo.
Pharmaceutical Industry:
Indian Pharmaceutical Industry is 4th in terms
of volume and
13th in terms of value
across the world. feasibility criteria on the basis of following factors:
•
Availability
of raw materials Ex: proximity to the petrochemical hubs Western Coast of
India.
•
Nearness
to the market/transportation networks: Western region, Kandla Export to
Africa
•
Availability
of both skilled and unskilled labour at cost effective rates.
•
Suitability
of land and climate: extremely hot, humid, dry or cold climate are not
suitable
•
Environmental
impact, waste disposal and safety requirements:
•
Easy availability of capital and favourable
state policies: Ex: Gujarat and haryana
•
Constant supply of power at cheap rates: Power
cuts in Himachal, Industries moved to Gujarat
•
Quality of water: Hilly states ‐ Good Quality water
is expected to grow over 15% per annum against
expected average global rate of 5% per annum between 2015 and 2020. The Indian
pharmaceutical exports are also expected to grow by 30% by 2020 as per the
Pharmaceuticals Export Promotion Council of India.
Benefits of GST to pharmaceutical industry:
• Neutral
Intrastate transactions
• Efficient
supply change management
• Cascading
of taxes
• Provision
of tax credit.
Nuclear Power PLants
India's dependence on imported energy
resources poses a challenge to satisfying rising energy demand, with nuclear
power as a potential indigenous solution. The union cabinet recently approved
10 new nuclear power plants installation.
The pollution caused by nuclear power plants
and the everpresent danger of melt down (e.g. Fukushima) makes the plants
sensitive to location. The factors are:
• Remoteness
– away from densely populated areas.
• Availability
of large area of land for power plants and waste disposal.
• Proximity
to water source – as large quantities of water are required as coolant,
moderator etc.
• Disaster‐secure
areas – to minimize vulnerability of nuclear fall‐out.
• Non‐
location factors – Technology, skilled manpower, capital, adequate demand for power. India
has only 1% of the world’s uranium reserves, but is blessed with the largest
reserves of thorium.
The challenges to its utilization are:
• Thorium
cannot be used directly, as it’s not fissile. It needs to undergo transmutation
to convert to a fissile isotope Uranium – 233, in the presence of other fissile
materials. Therefore, India has a three stage nuclear power program where in,
the first two stages are critical to build up reserves of fissile materials
like plutonium to be used in the 3rd stage with thorium. Thus shortage of
uranium fuel that is needed to convert fertile fuel into fissile fuel that can
undergo sustained chain reaction is the biggest challenge.
• India’s
second stage of Fast Breeder reactors is still in its infancy, and India has
limited access to fissile material from other nations due to issues like
nonmembership of NSG. According to experts, India will need many more Fast
Breeder Reactors and at least another four decades to build up sufficient
fissile material inventory.
• The
development of reactor technology i.e. the Advanced Heavy Water Reactor (stage
III) poses another challenge.
The Indian growth story will see a
commensurate increase in power demand. The thorium reserves present a challenge
as well as an opportunity for the Indian nuclear program. But to harness this
potential reserve India needs to positively exploit its civil nuclear
agreements with foreign powers to get continuous supply of the fissile
material.
Hydropower Plant:
India has a renewable energy target of 175 GW
by 2022, of which 5 GW is from small hydropower. Although, India ranks fifth in
the world in terms of usable hydropower potential, around 67% of its
hydroelectric potential is untapped.
North‐ Eastern states, particularly in the
HimalayaBrahmaputra region, have abundant, untapped hydroelectricity potential
such as 50,000 MW in Arunachal and 4,500 MW in Mizoram, according to estimates.
However, over 93% of the total potential in the NE region remains
untapped.
Some of the reasons include:
• International
relations: The international nature of rivers on which these hydro power plants
will be based constrain their feasibility. There is always an uncertainity with
China restricting the flow of water in Brahmaputra. Similarly, Bangladesh also
raises objections on India’s plans to build dams, such as on Surma/Barak river.
• Financial
bottlenecks: Hydropower projects are expensive due to intricate and elaborate
civil construction for tunnelling. Moreover, some private companies involved in
production have stressed balance sheets. Further, difficult terrain of the
region adds to construction expenses.
• Land
acquisition: Land acquisition and consequent displacement and rehbailitations
of inhabitants is complex and the socio‐ political challenges in the North‐East
lead to delays and uncertainty.
• Transmission
bottlenecks: New transmission lines are required for evacuation of power, and
existing lines need to be upgraded.
• Logistics
issues: Transportation of heavy equipment through roads and bridges in the
region remains a challenge as infrastructure has not been adequately designed
for their transportation.
• Environmental
concerns: Hydropower projects are associated with ecological damage, changing
habitats and negative impact on native fauna and flora.
• Local
opposition: Some of the prospoective project sites are located in forest tracts
considered sacred by local communities.
Measures to be taken to overcome the bottlenecks are:
• Ensure
riparian rights to utilise waters from internaitonal rivers in an amicable
manner. Asserting of upper riparian rights vis‐à‐vis Bangladesh can have an
effect on our rights vis‐à‐vis China.
• Construction
of suitable road and rail connections for transportation of equipment and
materials and development of adequate transmission network to handle additional
electricity load.
• Increase
private participation and share costs, risks and rewards to encourage
investment.
• Administration
of RE projects – perhaps a need is there to relook the current classification
of Small
• Hydro
as RE and greater than that as non‐RE. Hydro power as a whole needs to brought
under MNRE.
• Focus
on micro and small projects as they have minimum impact on the environment and
river flow.
Industrial Interia:
Industrial inertia is a situation whereby a
business once established, would stay in its original location even if the main
alluring factors are gone, such as depletion of raw materials or emergence of
an energy crisis; the jute industry in
Bengal and lock industry at Aligarh being examples of the same.
Reasons for such a situation are:
•
The desire to stay put where the business has
established its roots.
•
That area develops a pool of experienced &
skilled workforce, and also specialised suppliers.
•
The costs associated with relocating fixed
capital assets and labour far outweigh the costs of adapting to the changing
conditions of an existing location.
Deindustrialisation:
• is
a decrease in the relative size and importance of the industrial sector in an
economy.
• However,
deindustrialization is not necessarily a symptom of the failure of a country’s
manufacturing sector, or, for that matter, of the economy as a whole.
• On
the contrary, deindustrialization is simply the natural outcome of successful
economic development and is generally associated with rising living standards.
For instance, in US, Europe, Japan, and recently in four tiger economies of
East (Hongkong, Singapore, South Korea and Taiwan), such a trend has been
seen.
• There
can be several reasons of deindustrialisation such as growth of service sector,
outsourcing to emerging economies for comparative advantage, increase in labour
productivity in manufacturing, short term crisis etc.
The regions undergoing de‐industrialisation
face several problems:
• Fall
in GDP & wastage of resources in areas which relied more on manufacturing
sectors.
• Hysteresis
i.e. high unemployment tend to increase the rate of unemployment below which
inflation begins to accelerate.
• Negative
regional multiplier effect. i.e. loss of jobs in other sectors dependent on
those industries.
• Inequality
may increase if vulnerable sections due to deindustrialisation are not taken
care of.
• High
Current Account Deficit as decline in export may not be compensated by growth
in retail and services
sector.
Way Forward
Development of technologically progressive
sector such as
Information Technology.
Product innovation in manufacturing.
Productivity of the service sector has to be
increased along with formation of Cooperatives to support existing services
impacted by de‐industrialisation.
Skill development in order to cope up with the
technological change and find new career opportunities. Tourism Industry:
key drivers of growth among the services
sector in India. sun rise industry, an employment generator, a significant
source of foreign exchange and helps local and host communities.
India continues to charm international
tourists with its vast cultural and natural resources, its price competitiveness
advantage. India continues to enrich its cultural resources, protecting more
cultural sites and intangible expressions through UNESCO World Heritage lists.
Stronger visa policies implementing both visas on arrival and e‐visas, has
enabled India to attract more tourists.
However, the sector is facing challenges such as
• Skill
development ‐ there is an immediate need for formal training, proper selection
of hotel management students, increased focus on grooming and communication
skills, on the job training, courses in foreign languages and standardization
and monitoring of curricula in private institutions.
• Safety
and security of tourists: India faces challenges reliability of police
services, insurgency, naxalism etc.
• Healthcare
for Tourists‐ low physician density, lack of medical facilities like hospital
beds, low access clean drinking water, sanitation facilities and prevalence of
disease like malaria etc. hamper tourist arrival.
• Infrastructure‐
unsatisfactory quality of roads, lack of tourist information centre, public
amenities, road signage, lack of budget hotels offering good quality services ,
low ATM density etc .
• Prioritization
of Travel & Tourism‐ more efforts are required to market and brand tourism
in India by both union and state level governments.
Information and communication technology (ICT)
readiness‐ low internet penetration, cyber security measures & mobile
broadband subscription.
• Absence
of integrated tourism‐Packaging tourism in a region with all its elements like
art and architecture, locals, culture, festivals, language, folk traditions etc
attract tourism and extend their stay. However, such methods are still nascent.
Importance
of promoting sustainable tourism: There are many ill effects of unplanned,
unregulated and unsustainable tourism such as
pollution of water sources (lake, pond, rivers etc.); reduction in
biological diversity; degradation of heritage sites; loss of employment and
community resources;
destruction of habitats for wildlife etc.
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