Locational Factors of Industries

Imagine for a moment that you are the head of a large industrial firm, and you want to set up a new factory. The first and most fundamental question you’ll ask is: Where should I build it?

Now, this might seem like a simple question at first, but in reality, it’s a layered decision involving a number of considerations. And this is where the concept of locational factors comes in.

What Are Locational Factors?

The term locational factors refer to all those elements—both natural and human-made—that influence why an industry is located at a particular place.

To put it more simply:

“Location of an industry is not random, it is a carefully calculated outcome of multiple decisions taken at various levels—local, regional, national—even global sometimes.”

Think of it like planning a marriage. You don’t look at just one thing—you look at family background (historical factors), compatibility (geographical factors), career prospects (economic factors), and even societal opinions (political or policy factors). Similarly, industries too are “settled” only after evaluating a whole set of conditions.

Why is Location So Important?

Location directly affects the cost of production, availability of resources, and access to market. In a competitive world, even a slight advantage in location can decide whether an industry will flourish or fail.

But here’s the twist:

What was a good location in the past may not remain ideal in the future.
This is because the importance of each locational factor changes over time and space.

Two Broad Categories of Locational Factors

For the sake of clarity and academic understanding, these factors are usually divided into two categories:

1. Geographical Factors

These are the factors that arise from the natural or spatial characteristics of a place.
Examples include:

• Raw materials (e.g., iron ore for steel industry)
• Power resources (coal, hydroelectricity)
• Water availability
• Labour (both skilled and unskilled)
• Climate
• Transport facilities
• Proximity to markets

These are the classical factors studied by geographers to understand why an industry comes up in a specific region.

2. Non-Geographical Factors

These include the human, historical, political, and economic aspects that also play a role, often decisively in modern times.
Examples:

• Government policies and subsidies
• Availability of capital
• Industrial inertia (where industries remain in old locations despite better alternatives)
• Political stability
• Entrepreneurial initiatives

Today, with the rise of globalization and liberalization, these non-geographical factors are often becoming more dominant than the traditional geographical ones.

Now let’s discuss these Geographical and Non-Geographical factors in a greater detail in the upcoming section.

Geographical Factors Influencing Industrial Location

Now that we’ve understood what locational factors are, let’s explore the first major category—Geographical Factors. These are the natural and spatial characteristics of a place that directly influence the siting of industries.

We’ll go through these key geographical factors one by one.

Raw Materials – The Fuel for Industry

In industrial terms, where there is raw material, industries often follow. Why? Because manufacturing is impossible without inputs.

Now, if the raw material is:

• Heavy (like iron ore),
• Bulky (like sugarcane), or
• Perishable (like jute or milk),

then industries need to be close to the source, else transportation becomes costly or even impractical.

Examples:

• Jute mills in West Bengal (close to jute fields)
• Sugar mills in UP (near sugarcane-producing areas)
• Iron and steel plants near coal and iron ore belts

On the other hand, some industries use a wide range of light inputs, like watchmaking or electronics. Since no single input is dominant, these are called footloose industries. They can be set up almost anywhere with basic facilities.

Power – The Lifeline of Industry

Industries cannot function without energy, just as we can’t work without food.

Initially, industries were located next to coal fields, because power transmission was limited. So, iron and steel plants mushroomed near coal belts—like Jamshedpur.

However, today, electricity can travel long distances. As a result:

• Hydropower allowed industries to grow in southern states
• Petroleum is piped, and power is wired—location choices have widened.

Yet, power remains a vital concern, especially for energy-intensive industries like electrochemical or metal processing units.

Labour – The Hands That Build

Even in today’s mechanised age, labour is still essential—both:

• In quantity (unskilled or semi-skilled workers), and
• In quality (technicians, engineers, designers)

In today’s globalized economy, labour-intensive industries like textiles, garments, food processing, and even certain services (like logistics and warehousing) continue to thrive in regions with a large, affordable, and trainable workforce.

These industries are often strategically located near urban clusters or densely populated rural areas, where human capital is both accessible and cost-effective.

Transport – The Arteries of Industry

“If raw materials are the blood of industry, then transport is its vein.”

Industries require two-way movement:

• Input: Raw materials must arrive.
• Output: Finished goods must reach markets.

In colonial India, the railway network connecting ports to interiors determined early industrial locations—Kolkata, Mumbai, and Chennai flourished this way.

While good transport can lead to industry, it’s equally true that industry can lead to better transport, making cause and effect a bit blurred.

Market – No Market, No Industry

What’s the point of producing something if no one buys it?

Hence, industries prefer to be close to their markets, especially when:

• Goods are heavy or bulky (e.g., furniture)
• Goods are perishable (e.g., food processing)
• Or fragile (e.g., glassware)

In such cases, market-oriented location becomes necessary. This is increasingly true today, with consumer preferences changing rapidly and urban markets growing.

Water

Many industries are like fish—they need water to survive.

• Iron and steel
• Textiles
• Chemicals
• Paper

All of these require water—for cooling, washing, dyeing, and other processes.

Hence, you’ll often see industries growing near rivers, canals, or lakes, even if other conditions are met elsewhere.

Site – The Physical Plot

This refers to the actual land characteristics.

A good industrial site should be:

• Flat
• Spacious
• Well-connected

In today’s world, with rising land prices in cities, many industries are shifting to rural or peri-urban areas. These offer cheaper land, less congestion, and government incentives too.

Climate

“Climate quietly decides what will grow and what will be made.”

Extremely hot, cold, or dry climates are unsuitable for most industrial activities, especially those requiring constant temperature or humidity.

For instance:

• The cotton textile industry prefers humid conditions (as dry air breaks the thread).
  That’s why cities like Mumbai and Ahmedabad became textile hubs.
  Yes, artificial humidifiers exist now, but they increase costs.

The moderate climate of India’s west coast, especially Maharashtra and Gujarat, is one reason why nearly a quarter of India’s modern industries are located there.

In Summary

The decision to locate an industry is like choosing where to plant a tree—it depends on sunlight, water, soil, and the gardener’s plans.

Geographical factors—raw materials, power, labour, water, transport, markets, site, and climate—are the natural and spatial roots of this decision.

In the next part, we’ll explore how non-geographical factors—like government policy, historical developments, and capital availability—can override these natural advantages.

Non-Geographical Factors Influencing Industrial Location

In today’s world, geography doesn’t always have the last word. Science and technology have allowed us to transport power, raw materials, and even labour across long distances.

So now, the real drivers of industrial location are often non-geographical in nature—rooted not in physical geography but in the realities of economy, policy, and society.

These are like the invisible hands that shape the industrial map of a country—sometimes more powerful than physical geography itself.

Let’s understand the major non-geographical factors:

Capital

“Koi bhi udyog paise ke bina nahi chal sakta.”

Every industry—especially modern, large-scale industries—requires huge investment. This is known as capital.

Where is capital most easily available? In big cities where financial institutions, industrial houses, and private investors are located.

That’s why we see industrial development around cities like:

• Mumbai – home to many businesses’ houses
• Delhi, Kolkata, and Chennai – with strong financial infrastructure

If geography decides where you can set up an industry, capital decides whether you can.

Government Policies

In India, the government is not a silent observer—it is an active planner of where industries go.

There are three major policy directions:

• Reducing regional disparities – Encouraging industries in backward areas
• Decongesting cities – Avoiding overconcentration in metros
• Sustainable development – Ensuring industries don’t pollute beyond limits

This has led to:

• Industrial estates across the country
• Public sector undertakings (PSUs) in backward regions
• Location of industries in non-traditional places:
  • Mathura oil refinery (not near oil wells)
  • Kapurthala coach factory
  • Jagdishpur fertilizer plant

So, in modern India, “policy” is often more powerful than “place.”

Industrial Inertia – Habit Is a Powerful Thing

Now this is an interesting psychological-economic phenomenon.

Even when the original advantage of a location is lost, some industries just don’t move. This is known as industrial inertia.

Why?

• The cost of shifting is too high.
• Existing infrastructure and labour make staying easier.
• There may be emotional, social, or logistical ties to the original place.

Example:

• Lock industry in Aligarh – Even if better locations exist today, it remains there due to historical roots.

This shows that history and habit can sometimes defeat economics and efficiency.

Efficient Organisation – The Brain Behind the Machine

An industry is not just brick and mortar. It needs:

• Strong leadership
• Clear vision
• Efficient labour management
• Financial discipline

Where such enterprising entrepreneurs and managers exist, industries thrive—regardless of geography.

“A weak leader can ruin a goldmine; a strong one can turn even a desert into a factory.”

If management fails, it leads to:

• Labour unrest
• Financial losses
• Eventual closure

Hence, organisational efficiency is an indispensable non-geographical factor.

Banking Facilities

Every day, crores of rupees move in and out of industries—for wages, raw materials, machinery, and sales.

Without efficient banking and credit systems, such movement is impossible.

That’s why industries cluster around cities or regions with strong banking networks, including:

• Commercial banks
• Cooperative banks
• Development finance institutions

No matter how rich the resources of a region are, without banks, capital can’t flow.

Insurance

Every industrial unit faces risks:

• Machine breakdowns
• Labour accidents
• Fire, theft, or natural disasters

These are uncertainties that cannot be fully prevented—but they can be protected against using insurance.

Hence, the presence of insurance companies, especially in urban industrial hubs, is another critical support factor.

It ensures that industries can recover from shocks and continue operating.

Technology

In the age of Industry 4.0, technology has become the backbone of industrial growth. It influences not just how goods are produced, but where they can be produced.

Today, thanks to advanced technology, even remote or previously unsuitable areas can host high-tech industries. Modern machines, automation, robotics, and digital tools reduce dependency on traditional factors like labour or proximity to raw materials.

Industries prefer locations with:
→ Access to R&D centres
→ Tech parks and innovation hubs
→ Availability of skilled tech professionals
→ Digital and communication infrastructure

Examples:
→ Bengaluru – the Silicon Valley of India, known for its IT and electronics industry
→ Hyderabad and Pune – emerging hubs due to their tech-friendly ecosystems

Technology doesn’t just support industry—it often leads it. A region with better tech infrastructure can outshine another with better geography.

Technology turns ideas into industrial reality.

In Summary

Let’s compare:

Geographical Factors	Non-Geographical Factors
Based on nature, location, and terrain	Based on economy, policy, and institutions
Influence was dominant earlier	Influence is stronger in modern context
Examples: Raw materials, power	Examples: Capital, government policy, banking

Question:

“Although India retained the bulk of industrial infrastructure after Partition, the event had significant repercussions on the industrial economy of the country.”

Answer:

The Partition of India in 1947 had a profound impact on Indian industries, despite India retaining 91% of industrial establishments and 93% of industrial workers.

Raw Material Disruption:

India and Pakistan previously shared a complementary industrial economy — India as the manufacturer and Pakistan as the supplier of raw materials. Post-Partition, India lost access to key inputs:

• Raw jute from East Pakistan for Calcutta’s mills,
• Cotton from Sind and West Punjab for Bombay and Ahmedabad,
• Bamboo from East Pakistan for Calcutta’s paper mills.
  Industries became dependent on costly imports, reducing competitiveness.

Market Fragmentation:

Partition led to the loss of Pakistan as a major market for Indian goods such as textiles, sugar, and iron and steel. This contraction in demand limited the expansion potential of Indian industries.

Loss of Skilled Labour:

The migration of Muslim artisans and craftsmen from North India impacted small-scale and cottage industries, especially in Punjab and Delhi. Displaced persons could not immediately compensate for this loss, leading to skill gaps.

Industrial Relocation:

Due to security concerns near the border, industries shifted from Calcutta and Punjab to interior regions. This reshaped the spatial pattern of industrial development.

Conclusion:

While the Partition left core industries intact, it caused disruptions in supply chains, labour availability, and market access. These shocks delayed growth but were gradually addressed through state-led industrial planning in the subsequent decades.