The following are the economic factors affecting the location of industries.
1. Neatness to market : Transport cost is one of the important costs included in production cost of goods. If industries locate near the market there is saving on transport cost and goods reach to the consumers as early as possible. Some industries whose finished products are perishable or bulky or heavy, locate near the market.
For example, ice cream making, furniture making or air craft making industries.
2. Availability of capital : Capital is required for land, construction, equipment, labour, transport etc. Therefore, industries are located in areas where banking and financial facilities are available. Generally, these facilities are available in big cities, therefore in India many industries are located in big cities like Mumbai, Chennai, Bengaluru, Ahmedabad, Kolkata etc.
The following are the political factors affecting the location of industries.
Government policies : The government policy of encouragement or discouragement directly affects location of industry.
Sometimes government gives encouragement for development of industries in economically backward areas or to reduce the overcrowding in nearby cities by providing land, water, power at cheaper rate.
For example, to reduce the overcrowding in Mumbai city, the government provided land, water, electricity at a cheaper rate in Navi Mumbai.
The government policy regarding import, export, taxes, subsidies, etc., also affect location of industries.
For example, liberal policy for industries in the State of Gujarat attracted many industrialists to set up industries.
Development of SEZ : Due to the development of Special Economic Zone (SEZ) many industries are attracted in SEZ area. SEZ are developed to set up public sector or private sector industries, specially to increase export quality production in the country.
