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Role of Industrial Sector in Economic Development | CSS Pakistan Affairs Notes

Role of Industrial Sector in Economic Development
Written by CSS Times

Role of Industrial Sector in Economic Development

Increase in National Income:

Industrial sector also contributes in gross domestic product (GDP) of country According to year 2004-05 the contribution of industrial sector in GDP is 18.3 Percent. So in this ways this sector increases national GDP.

Development of industrial sector means more investment, employment and production. Increase in production will increase the national income. If we study the history of economic development we find that the growth in national income and per capita income has been accompanied by a relative decline in their dependence on agriculture. At present the share of industrial sector to GDP is 6.8%.

Higher standard of Living:

Industrialization helps in increasing the value of output per worker. The income of the labor, due to higher productivity increases. The rise in income raises the living standard of the people.

Economic Stability:

Industrial sector also helps government to stabilize price in country when goods are available in sufficient quantity. Industrialization is the best way to provide economic stability to the country. A nation which depends upon the production and export of raw material alone cannot compete the industrial nations.

Improvement in balance of payments:

Industrial sector earns a good amount of foreign exchange for the country which is used for repairing national debt and for imp0rtant of machinery etc. Industrialization brings structural changes in the pattern of foreign trade of the country. It helps in increasing the export of manufactured goods and thus earns 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.

Agricultural Development:

Industrial Sector is also important and helpful in agricultural development. Because it provides fertilizers pesticides, seeds, machinery etc., agricultural sector these things promotes agricultural development Industrialization provides machinery like tractors, thrashers, harvesters, bulldozers, aerial spray etc. to be used in the farm sector. The increased use of modem 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.

More Exports:

Industrial Sector plays very important role in increasing exports of country. Major exports of our industrial sector are textile items and sports goods etc.

Increase in Employment:

Industrial Sector provides employment to majority of population. This sector provides employment to both skilled and unskilled labor. According to one estimate more that 50% of total labor force is employed in industry.

Pakistan is a developing country and there population growth rate is 1.573% in 2011, but the rate of increase in G.N.P is relatively low, therefore, there is general unemployment (25 %) in 2009, and disguised unemployment is increase in agriculture sector. Developed industrial sector can absorb millions of unemployed which will increase not only the income level but also the standard of living.

Modern Defense:

Modem defense cannot be put on a sound footing unless its basic needs are met from within the country itself and these basic needs are mainly supplied by modem industry, in the present times it have become more important as we surrounded by enemies.

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Stimulates progress of other industries:

Development 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. The construction of milk processing plants adds to its line of production ice cream. Cone cream plants, etc…

Promotes Specialization:

Industrialization promotes specialization of labor. The division of work increases the marginal value product of labor. The income of worker in the industrial sector is therefore, higher than that of a worker in agricultural sector.

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.

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.

Increase in the Government Revenue:

Industrial sector increases revenue of Government because industrial sector pays different type of taxes to government like.

  • Excise Duty
  • Custom Duty
  • Corporate Tax
  • Sales Tax

Industrialization increases 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.

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.

Reduction in the Rate of population Growth:

Industrialization leads to migration of surplus labor 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.

Diversification of Economy:

Industrialization eliminates dependence on agriculture only. By exporting finished and industrial goods we can earn a lot of money as compared to exporting raw materials.

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Import Substitutes:

With developed industrial sector we cannot only produce substitute of imported goods but we can export them to other countries. Therefore dependence on other countries and deficit in balance of trade and balance of payments can be decreased and we may be able to save foreign exchange.

Extension of Market:

Extension of market depends on the quantity of demand. There is a demand of finished products within and outside the country. With increase in industrial production we can supply goods to far-off places and to other countries and extend market which may help in economic development.

Increase in Rate of Economic Development:

Agriculture, minerals, transport and communication trade and other sector of the economy mainly depend on industrial sector. Developed industrial sector means development and economic welfare of the individuals.

Change in people’s Attitude:

In an agrarian country people in general are illiterate. Customary traditional and backward in thinking industry puts them on the path of development.

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Political Stability:

In international market, those countries are enjoying higher living standards which we industrially developed. They not only receive higher prices for their exports and earn foreign exchange but their financial and political condition also become more stable.

Increase in social welfare:

Industrial sector is also plays great role in social welfare this sector meets different needs of society like food and fiber requirement of population. Industrial development increases the revenue of the government which is spent on the welfare of people. New roads, dams, buildings and parks are constructed.

Use of Raw Material:

Due to industrialization in Pakistan now cotton and sugarcane is used in the domestic industries. It has increased the income of the people and there is no need to export the raw material.

Reduces Imports:

Imports of country can be reduced by establishing industries of those goods that are being imported from other countries in this way national foreign exchange service can be saved.

Scale of Production:

Increased Production will expand the scale of production with the result cost of production will be decreased and the profit will be increased for the business people.

Efficiency of Labor:

Industries will make the people hardworking and will go a long way to increase their efficiency.

National Defense Requirement:

Industrial Sector also meets national Defense requirement. Defense is very important requirement of every country industrial sector provide modern arms and other equipment’s for defense.

From the above discussion, it is clear that no doubt Industrial sector has much importance for economic development without which no country can make progress in this modern world.


Following steps should be taken by government to boost up industrial development in Pakistan.

SME, s Promotion:

Our country is developing country and we should establish small and medium enterprises (SME) Instead of large scale industries because we have less finance to run large scale industry.

Optimum Diversification:

We should establish every type of industry in every line so that we will be able to produce every product in our country and in this way we can minimize imports.

Labor Intensive Industries:

Our Country should establish labor intensive industries instead of capital intensive industries because we have cheap labor and shortage of capital.

Use Foreign AID:

Government should obtain maximum foreign AID to compensate low rate of saving so that maximum investment will take place in country.

Check Also: Agriculture of Pakistan | CSS Pakistan Affairs Notes

Tax Concessions:

Governments should charge Minimum taxes from industrialists to attract them towards investment in industry.

Industrial Cities & Zones:

Government should establish maximum industrial cities and zones where every facility should be provided to industrialists easily and at low rates.

Offer Peaceful Environment:

Government should maintain law and order in country so that security of life and property will be given to business and they will feel comfortable and will be ready to invest in country.

National Saving Promotion:

Governments Should Promote saving Culture in the Country by introducing different attractive schemes to public of country.

Optimum Credit Facility:

Government should provide maximum credit facility to businessman so that they will be able to meet their all financial needs and carry on their business.

Foreign Investment promotion:

Governments should attract foreign investment by giving maximum facilities to foreign investors.

About the author

CSS Times

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