What is the role of industrialization in economic development?

Industrialization has a major role to play in the economic development of the underdeveloped countries. The gap in per capita incomes between the developed and underdeveloped countries is largely reflected in the disparity in the structure of their economics; the former are largely industrial economics, while in the latter production is confined predominantly to agriculture. Undoubtedly, some countries have achieved relatively high per capita incomes by virtue of their fortunate natural resources endowments. Petroleum exporting countries like Saudi-Arabia, Kuwait, and UAR have achieved higher per capita income by exploiting the strong advantage that they enjoy in international trade. But these countries are a rather special case.

In industry, the scope for internal as well as external economies is greater than in other sectors and certainly greater than in agriculture. as industrialization proceeds, economies of scale and inter- industrial linkages (complementarity) become more pronounced. It also leads to the creation of economic surplus in the hands of industrial producers for further investment.

The industrial sector which possesses a relatively high marginal propensity to save and invest contributes significantly to the eventual achievement of a self-sustaining economy with continues high levels of investment and rapid rate of increase in income and industrial employment. Besides, the process of industrialization is associated with the development of mechanical knowledge, attitudes and skills of industrial work, with experience of industrial management and with other attributes of a modern society which in turn, are beneficial to the growth of productivity in agriculture, trade, distribution and other related sectors of the economy. As a consequence of these factors, any successful transfer of labour from agriculture to industry contributes to economic development. Industrialization is thus inseparable from substantial, sustained economic development because it is both a consequence of higher incomes and a means of higher productivity.

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