Industrialization and the promotional role of government

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Industrialization is the pre condition for the rapid economic development and with the growth in the economy measured in terms of rising per capita real income, a number of structural shifts have been observed apart from the typical of economic development. For example, in course of economic growth, a shift takes place from agriculture to industry and the proportion of industrial output as well as industrial employment increases gradually. The productivity of industrial worker also goes up instantaneously. Similarly, the structure of industry itself changes say, from consumer goods to capital goods. In some countries, in the initial stage, there is a great emphasis on heavy industries and basic infrastructural facilities like power and transport. Once the infrastructure is laid down strongly, the industrial growth accelerates without facing any physical bottleneck. 
 
The rate, pattern and structure of industries undergo significant changes in the course of economic growth and development. However, such industrialization cannot be autonomous and it has to be induced. This is where governmental promotional policies matter.
 
In almost all the developing economies of today, the industrialization program is minutely planned by the government and the government has to plan, initiate and engineer the process of industrialization; then it has to start and accelerate its growth and once a high level is reached and  the government has to maintain the tempo of industrial growth. At each and every stage of such industrialization, the promotional policies of the government matters.
 
Industrialization thus needs government patronage and promotion and as a part of planning, the government has to choose an appropriate industrial strategy and it is a difficult choice. It involves specific choices between the alternatives namely:
Agriculture (primary) vs industry (secondary);
Big industry vs small industry;
Consumer goods vs capital goods industry;
Export oriented industries vs import substitute industries;
Capital intensive vs laborer intensive industries/techniques;
Urban vs rural industries;
Indigenous vs imported technology;
Growth of healthy industry vs revival of sick industry and
Developed vs backward area
 
The list is illustrative and not exhaustive and the fact remains that planned industrialization program involves a lot of choices – choice of technique, choice of industrial location, choice of industrial project, choice of market etc. Government’s promotional policies are dictated by this set of choices. The choice of a particular strategy of industrialization by the government clearly defines the role of private and public sectors in a mixed economy. Initially, the government itself can act as an entrepreneur; however, eventually it may induce the private entrepreneurs to come forward and undertake the task of industrial development. Thus the government promotes entrepreneurship keeping in view the national objectives, priorities and constraints. 
 
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Industrialization and the promotional role of government

This article was published on 2012/03/26