Important factors affecting the location of industries in India
In 2013, India had a nominal GDP of $1.87 trillion and was ranked 10th largest economy in the world. 26% of India’s GDP comes from its vibrant industrial sector. The main industries which have contributed to India’s rapid economic growth in the past decade include:
- Textile industry
- Petroleum and chemical production
Many investors, both local and foreign are rushing to India to set up industrial firms. There are several factors that affect the location of industries in India and these are what the investors look at before setting up their businesses.
- Availability of raw materials. Different industries require diverse raw materials. The availability of certain raw materials in some parts of India has led to the influx of industries that use these raw materials in these areas. For instance, sugar production industries have been set up in areas where there is large production of sugarcane. Additionally, the leather industry has thrived more in areas known for cattle, buffalo, goat and sheep farming. The raw materials therefore determine industrial locations. Textile industries are also located in areas that produce most cotton.
- Supply of labour. Whilst a few of the industrial firms may be capital intensive, most are labour intensive. In India the supply of cheap labour has been a huge influence in the location of industries. Most of the industries require many workers to run efficiently. Even though it has been argued that setting up firms can attract laborers from outside a location, many firms prefer to start industries in areas with constant supply of cost effective labor. Some provinces in India have fewer industries because of poor supply of labor and unproductive workforces.
- Market access. The proximity of the industries to the required markets has also influenced the location of industries. Most of the industries have been set up nearer the markets so as to ease distribution of goods and products. This is why some of the industries are closer to the cities because this is where the consumers are.
- Transport and distribution facilities. The availability of good road, rail and air networks has been a major factor in the location of industries in India. Most investors prefer to set shop in areas that are well connected. This makes it easier for them to distribute the manufactured products to their clients and markets.
- Power supply. Power supply greatly influences the location of industries in India because production is heavily dependent on power. Areas where power supply is erratic have fewer industries because this affects the cost of production and also slows down production rates. Most investors in India therefore tend to choose areas that have reliable supply of power.
- Financial factors. Areas with easy access to financial help in India tend to have more industries. Cities such as Bombay developed economically and industrially because many rich people were lending out capital to those who had viable industrial and economic ventures. Furthermore, the government has given out tax incentives to the investors setting up industries in remote parts of India in order to encourage more industrial investment in such areas.
- Environmental and climatic factors. There are certain industries which rely on climatic and environmental conditions to thrive. Such is the textile industry in India. The textile industries are set up in humid climates where cotton grows well.
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