Question

Explain the causes of industrial sickness in india

Answer 1

The various external and internal causes of Internal Sickness in India have been discussed below:

1. External causes

Recession in the Market: Sometimes recession hits the whole industry as a result of which individual units are unable to sell their products. The availability of credit is also restricted during such times which jeopardize the production activities of such units. Hence, the work of these units comes to a standstill.

Decline in Market Demand for the product: A product may reach a stage of maturity and ultimately a stage of decline. This happens when new better products invade the market and make the old product redundant.

Excessive competition in the Market: Excessive competition in the market will justify the survival of only the fittest firm. The high cost units over time will become weak and fall sick.

Erratic supply of Inputs: Erratic and insufficient supply of inputs like raw-materials, power, skilled man­power, finance, credit and transport at reasonable prices could cause disturbance in the production schedule and ultimately result in sickness of the firm.

Government Policy: Excessive govt., control and restrictions on capacity utilisation, location, product mix, product quality, prices, distribution etc. come in the way of smooth functioning of the firms and often result in sickness of the firm. Further, frequent changes in government policy relating to industrial licensing, import, exports, taxation, credit can make healthy units sick overnight.

Unforeseen circumstances: Natural calamities such as droughts, floods earthquakes, accidents and wars etc. may turn some units sick and enviable.

2. Internal Causes

Faulty planning: At the planning stage itself, weak foundations may be laid, which may ultimately result in downfall of the unit.

Incompetent Entrepreneurs: Many persons starting new business lack technical knowledge of the product they want to manufacture. It is the normal case with small scale entrepreneurs. They sometimes plough into production activity, without bothering to find out the marketing potential of their product or sometimes they start production without properly calculating the ultimate cost. Poor maintenance of plant and machinery, constant technical problems with maintenance of production volume, quality, time schedule and cost limits may ultimately spell doom for the firm.

Labor unrest: Labor unrest for a long period may ultimately spell doom for the firm.

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