Explain the major structural characteristics of India’s industrial sector.

Output, total assets, fixed capital and employment are some of the major criteria to measure size of the industrial units. An important structural change of the industrial sector in an economy is represented by the change in the average size of the industrial units. The efficiency of large firm became more efficient in the situations where:

  • The product is standardize and can be produced on mass scale.
  • The machines used in production are large in size.
  • The economies of linked processes are significant.
  • Transport costs are considerably low in comparison to the price of the product.
  • Occasional indivisibilities in different units of the plant.
  • Research activities should be competitive in the market.

whereas, a small firm is more efficient where the above conditions are not satisfied where:

  • Standardization and, mass production is economical.
  • The production factors i.e. men and machines are adaptable.
  • Transport costs are significant and raw materials for the products are geographically dispersed.
  • Demand conditions changed frequently.
  • Nature of work done changed frequently due to technical conditions.
  • The supplies of raw material are small.

Small units in an industry exist along with the large one mainly because they may be supplying finished products to the larger units under some type of sub-contracting, they may be relatively new and they may be producing a highly specific variety of products in a differentiated product industry. All the small units are equally efficient as the bigger units.

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