Locational Factors for Industries in India

Locational Factors for Industries in India
Posted on 22-08-2023

Industrial Location Factors

The establishment of industries in specific areas is influenced by a variety of decisions made at different levels. Geographical and non-geographical factors play crucial roles in these decisions, with their importance varying over time and space.

Geographical Factors:

The location of industries is significantly influenced by various geographical factors. Some of the key factors include:

  1. Raw Materials: Raw materials hold immense importance for manufacturing industries. Sometimes, industries are situated based solely on the availability of raw materials. Complex modern industries require a diverse range of raw materials. Industries that use bulky and heavy raw materials tend to be located close to their sources, especially if the materials lose weight during manufacturing or are perishable. For example, jute mills in West Bengal and cotton textile mills in Maharashtra are located near raw material sources.

  2. Power: Industries require a consistent power supply. Industries such as iron and steel tend to be situated near sources of power, like coal fields. Hydroelectricity-dependent industries locate near areas with ample hydroelectric power.

  3. Labour: An available labor force is crucial for industries. Industries requiring both a large unskilled workforce and skilled personnel tend to be located where labor is accessible.

  4. Transport: Effective transportation is necessary for raw material procurement and product distribution. The development of railways in India led to industries clustering around port cities like Kolkata, Mumbai, and Chennai.

  5. Market: Proximity to the market is vital for efficient product distribution. Industries often seek locations close to their target markets to reduce transport costs and provide cost-effective goods.

  6. Water: Water availability influences the establishment of industries, particularly those needing substantial water resources like the iron and steel, textile, and chemical industries.

  7. Site: Industrial sites should be flat, well-connected, and spacious enough for factories. Urban land cost increases have led to industries moving to rural areas.

  8. Climate: Climate plays a role; extreme climates hinder industrial development, while moderate climates like in Maharashtra-Gujarat encourage it.

Non-Geographical Factors:

Apart from geographical factors, non-geographical factors impact industrial location decisions. Some crucial non-geographical factors include:

  1. Capital: Modern industries require significant capital investments. Urban centers with wealthy capitalists like Mumbai, Kolkata, Delhi, and Chennai become industrial hubs due to capital availability.

  2. Government Policies: Government policies play a role in reducing regional disparities and promoting specific industries in certain areas. Government-planned industrial estates and policies guide industry dispersal.

  3. Industrial Inertia: Industries tend to remain in their original locations due to the costs of relocation outweighing benefits. This industrial inertia affects decision-making.

  4. Efficient Organization: Effective management is essential for successful industrial operation, as poor management can lead to financial trouble, labor unrest, and closure.

  5. Banking Facilities and Insurance: Areas with robust banking facilities are favorable for industries due to the financial transactions involved. Insurance facilities are also important to secure against unforeseen circumstances.

Partition's Impact on Industries:

The partition of India and Pakistan affected industries through disruption of trade relationships and migration of skilled workers, leading to shifts in industry location and reduced competitiveness.

Industrial location is influenced by a blend of geographical factors such as raw materials, power, labor, transport, market, water, site, and climate, as well as non-geographical factors like capital, government policies, industrial inertia, efficient organization, banking facilities, and insurance. These factors collectively shape the distribution of industries and their development over time.

An industry refers to a grouping of businesses engaged in similar core activities. In modern economies, there are numerous industry classifications, often organized into broader sectors. Businesses are categorized based on their primary revenue sources. For instance, even if a car manufacturer derives a small portion of its income from financing, it is still classified as an automaker.

In essence, an industry comprises productive organizations that produce goods, services, or income. Economically, industries fall into four categories: primary, secondary, quaternary, and tertiary, with secondary industries further categorized as heavy or light.

Primary industries encompass farming, forestry, fisheries, mining, and mineral extraction. Such industries dominate economies of developing nations but shrink as secondary and tertiary sectors expand. Secondary industry involves manufacturing and can be heavy (large-scale) or light (small-scale).

Industrial location or industrial geography examines the uneven distribution of manufacturing activity and its impact on various locales. It focuses on the locations for new plants and the factors determining manufacturing distribution.

Human spatial behavior involves navigating physical and perceived stimuli, influencing decisions like commuting or choosing a residence. Environmental regulations have affected industrial placement, with early studies finding that managers didn't prioritize regulations in site selection. Later research empirically linked new plant location to factors like environmental regulations.

Crucial factors influencing industrial location include market access, capital availability, water and electricity supply, transportation, labor force, land availability, and raw materials. Industrialization often fuels urban growth and the formation of industrial clusters. Governments incentivize industries in underserved regions with improved infrastructure and reduced costs.

Key industrial regions include India's Mumbai-Pune cluster, China, Japan, Germany, and the U.S. in steel and iron production. Textile industries thrive in South Korea, Taiwan, India, Japan, and Hong Kong. Information technology hubs are prominent in India's Bangalore and California's Silicon Valley.

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