Industrialization plays a vital role in the economic development of an underdeveloped country. The historical facts reveal that all the developed countries of the world broke the vicious circle of underdevelopment by industrialization. Pakistan being a developing country also wants to achieve higher standard of living for its masses. It has therefore, embarked upon various programmers of industrialization. The policies of privatization, deregulation and liberalization of the economy are being pursued. The role of industrialization in economic development is summed up as under.
1. Increase in national income.
Industrialization makes possible the optimum utilization of the scarce resources of the country. It helps in increasing the quantity and quality of various kinds of manufactured goods and thereby make a larger contribution to gross national product. (GNP).
2. Higher standard of living.
Industrialization helps in increasing the value of output per worker. The income of the labour due to higher productivity increases. The rise in income raises the living standard of the people.
3. Economic stability.
Industrialization is the best way of providing economic stability to the country. A nation which depends upon the production and export of raw material alone cannot achieve a rapid rate of economic growth. The uncertainties of Nature, the restricted and fluctuating demand of the agricultural raw material hampers economic progress and leads to an unstable economy.
4. Improvement in balance of payments.
Industrialization brings structural changes in the pattern of foreign trade of the country. It helps in increasing the export of manufactured goods and thus earn foreign exchange. On the other hand the processing of raw material at home curtails the import of goods and thereby helps in conserving foreign exchange. The export orientation and import substitution effects of industrialization help in the improvement of balance of payments. In Pakistan, the exports of semi manufactured and manufactured goods showed favorable trend.
5. Stimulates progress in other sectors.
Industrialization stimulates progress in other sectors of the economy. A developments of one industry leads to the development and expansion of other industries. For instance the construction of a transistor radio plant, develops the small battery industry (backward linkage). The construction of milk processing plants adds to its line of production ice cream. cone cream plants etc.. (forward linkage).
6. Increased employment opportunities.
Industrialization provides increased employment opportunities in small and large scale industries. In an agrarian economy, industry absorbs underemployed and unemployed workers of agricultural sector and thereby increases the income of the community.
7. Promotes specialization.
Industrialization promotes specialization of labour. The division of work increases the marginal value product of labour. The income of worker in the industrial sector is therefore higher than that of a worker in agricultural sector.
8. Rise in agricultural production.
Industrialization provides machinery like tractors thrashers harvesters, bulldozers, transport, aerial spray etc, to be used in the farm sector. The increased use of modern inputs has increased the yield of crops per hectare. The increase in the income of the farmers has given boost to economic development in the country.
9. Easy to control industrial activity.
The industrial activity compared to agricultural is easy to control. The industrial production can be expanded or cut down according to the price cost and demand of the product.
10. Large scope for technological progress.
Industrialization provides larger scope for on the job training and technological progress. The use of advanced technology increases the scale of production, reduces cost of production, improves quality of the product and helps in widening of the market.
11. Reduction in the rate of population growth.
Industrialization leads to migration of surplus labour from farm sector to the industries mostly situated in urban centers. In cities improved facilities of sanitation and health care are available. People through the adoption of family planning measures, reduce the rate of population growth.
12. Increased saving and investment.
Industrialization increases the income of the workers. It enhances their capacity to save. The voluntary savings, stimulate industrial growth and by cumulative effect lead to further expansion of industry.
13. Provision for defense.
If a country is industrialized, it can manufacture arms and ammunition necessary for the defense of the country. A nation which depends on other countries for the supply of ammunition will eventually suffer and may face defeat. The two wars with India should be an eye opener for Pakistan.
14. Lesser pressure on land.
The establishment and expansion of industries lessens the excessive pressure of labour force from the agriculture sector.
15. Development of markets.
With the development of industries the market for raw materials and finished goods widens in the country. 16. Increase in the Government revenue. Industrialization increase the supply of goods both for internal and external markets. The export of goods provides foreign exchange. The customs excise duties and other taxes levied on the production of goods increase the revenue of the State. The income tax received from the industrialists adds to the revenue stream of the Government which eventually is spent for the welfare of the people as a whole.