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Industrialization and Economic Development

Saif has written about inflation, deflation, laws of supply and demand, and other important economics-related topics for over eight years.

What are the links between industrialization and economic development?

What are the links between industrialization and economic development?

The Importance of Industrialization

Industrialization plays a vital role in the economic development of underdeveloped countries. As the historical record shows, the developed countries of the world broke the vicious cycle of poverty by industrializing, rather than focusing on agricultural or the production of national resources.

Currently, Pakistan, as a developing country, wants to achieve a higher standard of living for its people. For this reason, it is pursuing policies that support privatization and deregulation of the economy.

Industry plays a complex role in economic development, but these are some of its most important effects.

1. Increase in National Income

Industrialization allows countries to make optimal use of their scarce resources. It increases the quantity and quality of goods manufactured in that company, which makes a larger contribution to gross national product (GNP).

2. Higher Standard of Living

In an industrialized society, workers' labor is worth more. In addition, because of higher productivity, individual income increases. This rise in income raises the standard of living for ordinary people.

3. Economic Stability

A nation that depends on the production and export of raw material alone cannot achieve a rapid rate of economic growth. The restricted and fluctuating demand for agricultural products and raw materials—along with the uncertainties of nature itself—hampers economic progress and leads to an unstable economy. Industrialization is the best way of providing economic stability.

4. Improvement in Balance of Payments

Industrialization changes the pattern of foreign trade in the country. It increases the export of manufactured goods, which are more profitable in foreign exchange. But at the same time, processing the raw material at home curtails the import of goods, thereby helping to conserve foreign exchange. The export-orientation and import-substitution effects of industrialization help to improve the balance of payments. In Pakistan, in particular, the exports of semi-manufactured and manufactured goods resulted in favorable trends.

5. Stimulated Progress in Other Sectors

Industrialization stimulates progress in other sectors of the economy. A development in one industry leads to the development and expansion of related industries. For instance, the construction of a transistor radio plant will develop the small-battery industry (this is an example of backward linkage.) In another case, the construction of milk processing plants adds to the production of ice cream as well (this is forward linkage).

6. Increased Employment Opportunities

Industrialization provides increased employment opportunities in small- and large-scale industries. In an industrial economy, industry absorbs underemployed and unemployed workers from the agricultural sector, thereby increasing the income of the community.

7. Greater Specialization of Labor

Industrialization promotes specialized labor. This division of work increases the marginal value product of labor. In other words, specialized labor is more profitable. The income of a worker in the industrial sector will be higher on average than that of a worker in the agricultural sector.

8. Rise in Agricultural Production

Industrialization provides machinery to the farm sectors, including technologies like tractors, thrashers, harvesters, bulldozers, transport, and aerial spray. The increased use of modern technologies has increased the yield of crops per hectare. The increase in farmers' income boosts economic development more generally.

9. Greater Control of Economic Activity

Industrial activity is easier to control and regulate than agricultural activity. Industrial production can be expanded—or cut down—to respond to the price and cost of, and demand for, a product.

10. Larger Scope for Technological Progress

Industrialization provides greater potential for on-the-job training and technological progress. The use of advanced technology increases the scale of production, reduces costs, improves the quality of the product, and ultimately helps to widen the market.

11. Reduction in the Rate of Population Growth

In a somewhat roundabout way, industrialization leads to smaller families. Surplus workers migrate from the farm sector to industries, which are mostly situated in urban centers. Cities have better sanitation facilities, and health care is more widely available there. Through the adoption of family-planning measures, people reduce the rate of population growth overall.

12. Increased Savings and Investments

Because industrialization increases workers' income, it also enhances their capacity to save. These voluntary savings stimulate economic growth. By cumulative effect, they eventually lead to the further expansion of industry.

13. Provision for Defense

If a country is industrialized, it can manufacture arms and ammunition that are necessary for its own self-defense. A country that depends on other nations for its arms supply will eventually suffer, and may face a serious defeat. Pakistan's two wars with India should open its people's eyes to the importance of this issue.

14. Less Pressure on Land

The establishment and expansion of industries lessons excessive pressure on land, which is caused by the agricultural sector's labor force.

15. Development of Markets

With the development of industry, the market for raw materials and finished goods widens even within the country.

16. Increase in Government Revenue

Industrialization increases the supply of goods for both external and internal markets. The exports of goods provides foreign exchange, as we know. In addition, the customs excise duties and other taxes levied on goods increase the revenue of the country's government. The income tax received from industrialists also adds to the revenue stream of the government, and is eventually spent for the welfare of the country as a whole.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.


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Kindly help me out in finding role industrialisation in regional development in less developed countries.

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Thank you. Natural resources rich african countries would benefit from this. By industrializing their economies, they could counteract large mining multinationals' predatory tendancies and in the process tackle the endemic inflation that is ruining the lives of many Africans. They can achieve this by implement a sound a pragmatic import substitution industrialization program that would reduce their dependency on foreign goods. Positive externalities will leverage the economies of the entire continent.

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China and India have the two largest populations of the world. For many parts of both countries, there is a concentration of industrial activities, or industrialization. Has industrialization really helped in population control in these countries?

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ganesh on February 04, 2013:

industries are built by cutting forests,but if there are no industries we cannot survive comment is to cut forests but also plant trees as much as possible

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great piece of work there. i entreat every underdeveloped country to consider this

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oladipo emmanuel on June 01, 2012:

i appreciate your effort towards this write up-roles of industrialization in economic development.i wish you elaborate the topic to contain the project that can be used as a yard stick to measure if a country is industrialize or not.on what project will you advise a country to embark on for the country to be recognize as an industrialize nation.

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