Industries can be located only at those places where the raw materials are easily available and goods can be manufactured at the lowest possible cost. Such locations are selected after careful consideration with respect to geographical, economic, historical, human and political factors. Some of them are as under:
A regular and assured supply of raw materials to be processed is essential for the location and growth of industries. Many industries are located with respect to the availability of raw materials.
The raw materials are generally of two types’ pure materials and weight-losing. When sugar cane is processed, sugar is only 10 per cent of the weight of sugar cane. When cotton or jute is processed, the finished goods are about 90 per cent of the weight of the raw materials.
Thus, cotton and jute are pure materials, while sugar cane is weight-losing. Therefore, cotton and jute industries can be located either near the source of raw materials or near the market, and sugar industry is located only near the sources of its raw materials. Some high value products, such as watches, computers, etc., are not dependent on raw materials.
Regular and sufficient supply of power is needed to run the industries efficiently. Coal, mineral oil and electricity are the main sources of power. Most of the industries tend to be located near the source of power. The power should also be available at cheap rates. The iron and steel industry is generally located near the coalfields, as about 5 tons of coking coal is needed to melt 1 ton of iron ore.
The successful working of an industrial unit depends on an adequate supply of labour at reasonable wages. Every factory needs skilled and unskilled labour force. The unskilled workers are readily available in densely populated areas.
Consumer goods and agro-based industries depend largely on local labour. There is no dearth of unskilled workers, if the industry is located in or near big urban centres.
Transport is needed for bringing in raw materials and for sending out finished goods to the market. An efficient system of transport is essential for the development of industries in any region. Railways, highways and seaports are considered suitable for locating industries. Many industries have developed in Kolkata, Mumbai and Chennai, as the railways and highways have linked these cities with their hinterlands.
Nearness to market is useful for the quick sale of manufactured goods. It reduces the cost of transporting goods and enables the consumers to get things at comparatively cheaper rates. The industries producing heavy and perishable goods should be located near the market.
Most of the industries like iron and steel, textiles, rayon, paper, etc., need plenty of water. For example, to produce 1 ton of steel we need about 300 tons of water and for 1 ton of rayon, 100 tons of water is needed. Thus such industries are located near rivers, canals or lakes.
Level flat land is always preferred over hilly areas for setting up industries. Large areas are needed not only for building factories initially, but also for their future expansion. Nowadays, big industrial units are developed far away from the big cities, due to the low cost of land.
Extreme climatic conditions, such as hot, cold and extremely wet, are not suitable for the development and growth of industries. Moderate climate, is quite helpful in the development of industries. Although scientific and technological progress has reduced the importance of climate, yet it is a significant factor in the location of industries.
Modern industries need huge investments. The finance from the individuals, companies, banks or government is easily available in big cities like Mumbai, Kolkata, Delhi and Chennai. The planning and management of industrial units is mostly concentrated in big cities.
In almost every country, the government policies play an important role in determining the location of industries. The government decides upon the distribution of industries for reducing regional disparities. Industrial estates are developed to avoid heavy concentration of industries in big cities.
Government concessions help in the growth of industries in backward areas. For example, the location of oil refinery at Mathura and the railway coach factory at Kapurthala are primarily due to government policies.
There are many other factors of local significance, which can also influence the location, development and growth of industries.