Question.
What are the causes of industrial sickness in India? Give suitable suggestions to overcome the problem.
( UPPSC, UP PCS Mains General Studies-III/GS-3 2019)
Answer.
When the industrial units faced financial distress or failure of functioning, which is commonly known as Industrial sickness.
As per the Reserve Bank of India, those industrial units will be known as sick when they are declared a loss in the past year and present year and also will be losses in the coming year.
Many industries like Sugar industries and fertilizer industries in India come under Industrial sickness. Here are some common causes of Industrial sickness in India-
Inadequate financial management; Poor financial management like inadequate budgeting, improper cash flow management, and debt burden can lead to industrial sickness. Inefficient utilization of funds and lack of financial planning can create financial instability for industrial units.
Failure to adapt the technological upgradation; Lack of innovative and outdated machinery can lead industrial units uncompetitive and unproductive.
Inefficient management and governance; Weak leadership, mismanagement, and weak governance structure may lead to industrial sickness. Lack of accountability and weak corporate governance practices can hinder industrial growth and sustainability.
Global factors: As we know, the Indian economy is now more globalized as these are dependent on the import of raw materials and also dependent on the global market demand. A recession in the global market leads to a decline in demand, so it negatively impacts our industry's profit. Disturbance in the global supply chain due to various reasons like war and epidemics, may also hamper the reachability of input raw materials to India, which may lead to industrial sickness in India. For example, the Indian steel industry is highly dependent on coal import, if the cost of coking coal increases or the supply of coking coal is disturbed it leads to an increase in the cost of production of the Steel sector in India. Dumping of steel in the Indian market by China also causes sickness in the Steel sector in India.
The following are suitable suggestions to overcome the problems of Industrial sickness in India;
Strengthen financial management; Industries should focus on effective budgeting, cash flow management, and debt restructuring if required.
Promote technological innovation and degradation; Encouraging industries to invest in research and development, adopting new technologies, and upgrading machinery and process can enhance competitiveness and productivity.
Enhancing Managerial skills; Some time management lacks professionalism, so training and educating them may increase their management capacity and efficiency, and it could improve decision-making and accountability, and ensure efficient operations.
Ease of doing business; Streamlining regulatory processes, reducing bureaucratic red tape, and ensuring a business-friendly environment can reduce the likelihood of industrial sickness.
In conclusion, overcoming industrial sickness requires a multi-faceted approach involving the government, industry associations, financial institutions, and other stakeholders. Regular monitoring and early identification of sickness may help to timely intervene to prevent industrial sickness and promote a healthy industrial ecosystem.
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