Ehrlich, is possible in manufacturing sector(3)Economies of scale

Ehrlich, 1995 on initial view there seems to be a
positive correlation between growth and industrialization there is data of
developing countries which does not show any direct relation. The increase in
output is driven by aggregate demand in developing counties and by export in
developed countries. Industrlisation is supposed to be important engine of
growth according Kaldor 1957, Marshall, Young. The importance of manufacturing
industry lies in the dissemination of technology that is related to
manufacturing industry. Time series data in this paper of U.S shows that as
time passes productivity increases in terms of labour productivity and
production skills.

Shapiro, 2007 explains the role of industrial policy
that will be as an instrument to expedite the process of industrlisation. The
importance of policy lies in the fact that there is an assumption of market failure.
  In perspective, it can be said that, if manufacturing industries
are “escalator industries” for economic development (Rodrik 2013; Szirmai and
Verspagen, 2015; Foster-McGregor and Verspagen, 2016; Marconi et al., 2016) and
the acquisition of production capabilities in an increasing range of goods ?
i.e. the opposite of the sectoral concentration here documented ? is crucial
for a sustainable growth to be achieved (Haussmann et al., 2011).

Adam Szirmai has analyzed the role
of manufacturing as a driver of growth in developing countries in the period
(1950-2005). The working hypothesis put forward to the test is an econometric
model is that correlation between levels of GDP per capita and shares of
manufacturing results from the causal relationship between industrialization
and growth. The main theoretical and empirical arguments supporting this
hypothesis are.(1)Productivity is higher in the manufacturing sector than in
agricultural sector(2)Special opportunities for capital accumulation is possible
in manufacturing sector(3)Economies of scale is offered by manufacturing
sector(4)The strong linkage and spillover effects in manufacturing than in
agricultural and mining. As per capita income rise the share of agricultural
expenditure declines and demand for manufactured goods increases (Engels law).
The main findings of the paper is that there is a moderate positive relation
impact of manufacturing on growth in line with the engine of growth hypothesis,
in case agriculture and services no such impact was found in same period.

Szirmai, 2009 measures the engine of growth hypothesis in
developing countries. Here it is supposed to be manufacturing industry. The
statistical evidence is not always supporting the theory hence we cannot
generalize the theory to practicality. The assumption on which Kaldor’s model
is based indicates that the intricate construct of developing countries is
different from developed countries. The share of manufacturing has increased
overall in 63 developing taken for analysis in this paper. The increase has
just been of 4 %. Again, when countries are considered in groups that are not
separately the unique policy that a country is following is not taken
separately. Assumption on which Kaldor’s model is based is that increase in
share of manufacturing sector leads to increase in per capita income which in
turn leads to increase in aggregate demand (Keynesian in nature).

 

Ashoka Parthasarathi (2005) highlights the role of
khadi and village industries in order to boost the rural industrialization
programme. Author has argued how Khadi and village industries commission in
India has failed to effectively linkup with research and development as well as
with technology supplies involved in India’s rural industrialization programme.
Author has made a comparison between Indian programme and Chinas Spark
programme approved by Chinese government in 1986 for the promotion of rural economic
development by relying on science and technology. A distinctive feature of the
spark programme was the close and deep involvement of the provincial research
and development council both as generators of technology and techniques
relevant to commercially utilization of wide variety of the natural resources
of province concerned. During the period 1986-2001, the spark programme has
conducted1,20,000  demonstration projects
of which 11,300 were at national level covering more than 85 percent of cities
and towns. The concept of townships in china was another big achievement after
the spark programme fulfilling the aim to development of rural
industrialization. There were 21 million townships enterprises with 127 million
employees, generating 2720 billion Yuan (US$ 328 billion) in 2000.Author
further laid stress to learn from the Chinese experience and implement similar
kind of policies in India. The role of bio-technology was also highlighted
which will not only boost agriculture but for high productivity growth of
medicinal and aromatic plants and for producing industrial products such as
high value chemicals. Lastly, author argues that the need of large network of
promotional agencies coordinated by department of small scale industries (SSI)
and Agro and Rural industries (ARI) supervised by high level Rural
industrialization development board (RIDB). The RDIB should encourage a large
number of the NGO,s covering all the parts of the country to initiate the
extension , demonstration  and training
functions on rural technology based growth.

Adam Szirmai has analyzed the role
of manufacturing as a driver of growth in developing countries in the period
(1950-2005). The working hypothesis put forward to the test is an econometric
model is that correlation between levels of GDP per capita and shares of
manufacturing results from the causal relationship between industrialization
and growth. The main theoretical and empirical arguments supporting this
hypothesis are.

(1)Productivity is higher in the
manufacturing sector than in agricultural sector(2)Special opportunities for
capital accumulation is possible in manufacturing sector(3)Economies of scale
is offered by manufacturing sector(4)The strong linkage and spillover effects
in manufacturing than in agricultural and mining. As per capita income rise the
share of agricultural expenditure declines and demand for manufactured goods
increases (Engels law). The main findings of the paper is that there is a
moderate positive relation impact of manufacturing on growth in line with the
engine of growth hypothesis, in case agriculture and services no such impact
was found in same period.

Dellas
and Koubi (2001) argue that the industrialization of labour is the main engine
of growth during the early stages of economic development. They emphasize the
effects of investment on the composition of the labour force; and unlike recent
claims pointing to industrialization via equipment investment, they suggest
that employment industrialization policies may hold the key to success in the
developing countries.

 

Dilipkumar (1988) argues that the pressing concern
for creation of productive employment opportunities in developing countries
requires an employment-oriented industrlisation strategy which involves
simultaneously both employment objective and industrial development objective
is an interrelated way. Onwards, merits of an employment-oriented development
with labor –intensive industrlisation contributes to decline of unemployment,
poverty alleviation and income inequality alongside economic growth through
generation of more productive and adequately enumerated jobs. Employment
opportunities will be both for skilled and unskilled unemployed labor force.
Both the industries and agriculture sectors are mutually interdependent and
complementary. Hence, the development should go hand in hand in both sectors.
Agriculture will provide unskilled labor force, raw materials to industries and
will create demand for industrial production likewise industry will help to
raise the production in agriculture through the supply of agricultural inputs
and implements. The contentious decline in the agricultural sector in
Bangladesh, landlessness, inequality in land ownership ultimately leads to more
and more attention for the development of industrlisation. Huge attention was
given to industrialization process through the employment oriented
industrialization strategy may bring economic growth. Two main hypotheses were
considered here subjected to empirical tests.

1.      Whether
relatively efficient labor intensive industries can increase both labour
absorption and output at same time.

2.      Whether
market demand for labor intensive manufactured products has an implication on
employment on both employment and output.

1.7   Theoretical Framework           

Every branch of knowledge is
constructed with well-built and powerful theoretical background. The subjects
without theoretical background will have to face much critics and its existence
will be more problematic. In Economics the theory is much important because to
explain, to predict, to frame policies, to judge economic performance, and as a
tool to measure economic phenomena the theories is using in large extend. In
research, the theoretical background will provide the existing knowledge on
selected field of study. Thus theoretical background will pave the way to
construct the idea based on the finding of the study, that whether the study is
actually supporting the existing theories or it brings new facts of knowledge
in the branch of subject. The vast theoretical
and empirical arguments in favor of industrlisation in economic development can
be summarized as follows:

Simon Kuznets (1973) has defined
economic growth as long term rise in capacity to supply increasingly diverse
economic goods and services to people. This growing capacity is based on
institutional, ideological adjustments and advancing technology. Kuznets has
highlighted six main characteristics for modern economic growth. These six
characteristics if fulfilled can lead a country towards development.

High per capita product and of
population in the developed countries, the rate of increase in productivity
e.g., output per unit of all inputs. The third and the most important
characteristics is the rate of structural transformation means shift away from
agricultural to non agricultural activities and from industry to services. This
shift will lead to corresponding change in the occupational status of labour.
The fourth one is urbanization and secularization. Fifth the economically
developed country with good roads and transport has the propensity to link with
the rest of world. Sixth and last characteristics are spread of modern economic
growth. Kuznets had also highlighted the role of science as a basis of
advancing technology. The main argument is that there is a significant
interrelationship between all six characteristics. The overall aim of the
author was to sketch the major characteristics of modern economic growth which
has been described by author through six major characteristics of economic
growth.

Lewis starts the theory with the argument that the
classical theory of perfectly elastic supply of labour at a subsistence wage
hold true in the case of number of underdeveloped countries. The subsistence
wage is determined by the minimum earning required for subsistence and the
capitalists wage will be 30% more than the subsistence wage. Lewis believes
that the capital formation depends upon capital surplus. The marginal
productivity of labour in the capitalist sector is higher than the capitalist
wage, this result in capitalist surplus. This surplus is reinvested in new
capital assets. There will be a transfer of labour from the subsistence sector
to capitalist sector. Capital formation takes place and as a consequence
employment and economic development takes place. This process continues till
the labour ratio rises and the supply of labour become inelastic and the
surplus labour disappears. Lewis believe that if technical progress is capital
saving, it may be considered as an increment in capital and if it is a labour
saving, it may be considered as an increment in the marginal productivity of
labour. He says that the capital is not only created from the profit but also
through the bank credit. In underdeveloped economy, rich in resource and lack
of capital the credit creation from banks also have the same effect of capital
formation from profit. Lewis accepts the role of state that it can accumulate
capital even faster than the capitalists and also can tax the subsistence
sector. Lewis also states that there will be an end to the growth process. As a
result of capital 74 accumulation, if there is no surplus labour is present or
higher increase in the real wage that decreases the profit of capitalists leads
to end the economic growth.

Gerschenkron (1962) explains that all nations were
once backward. He accepts that the industrialization is the base of economic
growth. To move from traditional to modern industrial economy Gerschenkron
suggest a great spurt is needed. But he criticizes Rostow’s view that the
existence of necessary pre condition for industrialization. To prove this he
says for a great spurt of industrialization, the advanced nations start first
stage of development with the factory in the organizational lead, moderately
backward country with banks and extreme backward with government. Here is no
pre condition for industrialization and one precondition may substitute by
other precondition. Pre condition may be even created during the course of
industrialization. To reduce foreign competition in backward countries, they
establish techniques, import substitution and use of capital intensive
techniques because of low level skilled laborers. Thus the borrowed technology
is one of the prime factors of high speed economic development in backward
economies. He says the great spurt of industrialization will take place only if
the five pre requisites were full filled and they are (1) old frame of
agriculture should be abolished or increase in production (2) an influential
modern elite should be created (3) provision for material social overhead
capital (4) value system in favor of economic change (5) an effective
entrepreneurship.