Here is a compilation of essays on ‘Rationalisation in an Industry’ for class 9, 10, 11 and 12. Find paragraphs, long and short essays on ‘Rationalisation in an Industry’ especially written for school and college students.

Essay on Rationalisation in an Industry

Essay Contents:

  1. Essay on the Definition of Rationalisation
  2. Essay on the Aims of Rationalisation
  3. Essay on the Stages in Rationalisation
  4. Essay on the Elements of Rationalisation
  5. Essay on the Need for Rationalisation
  6. Essay on the Benefits of Rationalisation
  7. Essay on the Criticisms of Rationalisation

Essay # 1. Definition of Rationalisation:

The World Economic Conference held at Geneva (1927) defined rationalisation as the “methods and techniques of organisation designed to secure the minimum waste of either effort or materials. It includes the scientific organisation of labour, simplification of processes and improvements in the system of transport and marketing.”


The conference laid greater emphasis to the elimination of wastes for greater efficiency.

Thus, “rationalisation, in general, is any reform tending to replace habitual, antiquated practices by means and methods based on systematic reasoning.”

According to Sargant Florence, “Rationalisation is a movement to eliminate waste and inefficiency scientifically and logically by some sort of joint action between all the firms within one industry.” This definition lays more emphasis on elimination of waste and inefficiency through the use of scientific techniques in every unit of an industry.

The Kanpur Textile Mills Rationalisation Enquiry Committee, 1956 gave a more explicit meaning to the term ‘rationalisation’. It defined the term as “the reform on rational and scientific basis in all its facets – men, material, machine, management and money – with a view to having the optimum output with the minimum cost and effort, but without intensification.”


In nutshell, the common features of rationalisation may be summed up as follows:

i. Rationalisation means a fundamental change in the purpose, structure and control of the units in an industry.

ii. Rationalisation aims at elimination of wastes of all kinds through scientific methods.

iii. Rationalisation increases the efficiency of the industry.


iv. Rationalisation maximises production with the minimum of expenditure.

Essay # 2. Aims of Rationalisation:

According to the resolution passed at the World Economic Conference at Geneva in 1927, rationalisation aims at:-

i. Securing the maximum efficiency of labour with minimum effort;


ii. Eliminating waste of raw materials and power;

iii. Simplifying distribution of commodities by:

(a) Eliminating unnecessary transport, excessive financial burden and useless multiplication of middlemen,

(b) Reducing varieties of pattern,


(c) Facilitating research in the methods of manufacture, and

(d) Using standardised parts;

iv. Greater stability and higher standard of life;

v. Lower prices of goods to customers; and


vi. Large and more certain remuneration to be fairly distributed among the various categories of products.

The Bombay Textile Labour Enquiry Committee (1941) set the following three aims of rationalisation:

i. To bring about an increase in production per man and machine and its relation to wages.

ii. To improve the efficiency of workers and their working conditions.


iii. To bring about financial and industrial re-organisation.

Essay # 3. Stages in Rationalisation:

The stages in rationalisation in any industry are discussed below:

i. Planning:

Planning involves a careful research of the market to ascertain the present and potential demand for the product and to determine the industrial units which would produce and distribute the product.

This research would help in deciding what to produce and what price should be charged and what channels of distribution should be used. If answers to these questions have been found properly, the planning of production in the rationalised units should present no problem.


The requirement of labour, raw materials, power, capital, etc. should also be determined and reduced into a common denominator of finance in order to check and compare the performance.

ii. Re-Organisation:

This stage is concerned with the rearrangement of production facilities including plant and equipment. As far as possible, product, tools and equipment, plant and machinery should be standardised for the sake of uniformity in the whole industry.

The reduction in the number of products will increase the efficiency of the industry. The production process should also be simplified and standardised. This will enable mass production of goods and services and less locking up of capital in materials and inventories.

iii. Development:

At this stage, schemes are developed to extended specialisation in the industrial units. An attempt is made for greater mechanisation under which machines are used even for the smallest operations. The machines increase the speed of work and efficiency. This increases the return on capital employed. The quality of products is also improved.


However, rationalisation should not be equated with mechanisation. Sometimes, rationalisation is achieved by employing more men than machines. Mechanisation is only a means to achieve rationalisation.

The next stage of mechanisation is automation which involves the application of automatic control to mechanisation with an element of self-regulation. Automation may be considered as an aspect of technology which covers electronic computers, transfer devices, etc.

The term automation’ applies only to an industrial process which provides data from its own operation and feeds them back to its own controls which fully govern the production process.

Essay # 4. Elements of Rationalisation:

The elements of rationalisation are listed as follows:

i. Combination:


Rationalisation is concerned with the entire industry. So it calls for the combination of weak units with the efficient units. The main objective of rationalisation, i.e., to achieve economies of large scale operation, can be achieved only by the joint action of different units in the industry. Combination will help in planned utilisation of scarce resources, mechanisation of industry and removal of over-capacity.

ii. Standardisation:

Rationalisation requires the standardisation of products and elimination of too many varieties of the product. Under rationalisation, many units can in an industry join together to reduce the varieties of the product so that they are able to produce standardised products only and reap economies of large scale production.

iii. Specialisation:

This element is introduced when standardisation of products takes place. Since standardised varieties are to be produced on large scale, it is feasible to introduce specialisation at various levels in the industry. Specialisation helps in the economical use of man-power and material resources.

iv. Simplification:


The production processes are simplified under rationalisation because only, a limited number of products are to be produced and there is specialisation at various levels.

v. Mechanisation:

Mechanisation is introduced to replace human labour with the machines. This increases the speed of work. The next stage of mechanisation is automation which involves the application of automatic control of machines.

vi. Modernisation:

The worn out and obsolete machines and equipment are replaced by the modern machines and equipment to eliminate wastages of resources and increase efficiency.

vii. Research:


Rationalisation involves marketing research to determine the demands of products, and the steps necessary to satisfy the demands of the people. After the demands of the people are known, steps are taken to modify the old production processes and invent new production processes to carry out production on a large scale.

Essay # 5. Need for Rationalisation:

The various factors that explain the need for rationalisation are discussed as follows:

i. To Conserve Scarce Resources:

It is necessary to take steps to ensure the best possible utilisation of the available resources. In a developing country like India, there are certain resources which are in short supply. In such a case, there is competition among the industrial units to procure the scarce resources.

The efficient use can be made possible through a scheme of rationalisation under which there will be a joint and planned utilisation of the resources which are available to an industry.

ii. To Eliminate Unnecessary Varieties of Products:

Before rationalization there is unnecessary competition among the existing firms. As a result, there are a large number of unnecessary varieties of the same product. Rationalisation is an attempt to eliminate the unnecessary varieties by a joint action of the competing firms. The products are standardised in terms of quality, design and other characteristics.

iii. To Eliminate Idle Capacity:

During boom period, a large number of firms may be floated and they will not find adequate demand of their products during the period of depression. Hence, the plant and equipment is worked much below the installed capacity. Small units cannot survive in the market. It is rationalisation which calls for the merger or amalgamation of weak units with the strong ones in order to scrap idle plant capacity.

iv. To Replace Obsolete Machines and Equipment:

The firms using obsolete machinery are rendered inefficient as compared to the units employing modern machinery. The need for rationalisation arises in order to replace obsolete machinery by the up-to-date machinery so that efficient operations can be achieved. This will have far reaching implication in the development of the industrial economy of the country.

Essay # 6. Benefits of Rationalisation:

The benefits of rationalisation are discussed as follows:

Benefits to Manufacturers:

i. Rationalisation reduces the cost of production because redundant types of products are eliminated and the processes of manufacture are standardised and simplified.

ii. The productivity is increased because of the improvement in the techniques of production and introduction of new machines. The benefits of industrial research are passed on to the industrial units cheaply.

iii. Unhealthy competition is avoided. The supply of goods is matched with their demand so as to mitigate the problem of unsold stock.

iv. The weaker units are either closed or amalgamated with the efficient units. The creditworthiness of the efficient units is enhanced.

v. Rationalisation introduces stability in the industry by avoiding unhealthy competition for the procurement of raw materials and for the marketing of products.

Benefits to Workers:

1. Rationalisation provides the workers with greater security and higher remuneration.

2. The efficiency of labour is increased. Workers are given suitable training and are placed at appropriate jobs. They get a chance to develop their faculties.

3. Rationalisation provides better working conditions to the workers. The industrial fatigue is also reduced with the systematic study of operations.

Benefits to Consumers:

i. Since rationalisation decreases the cost of production, the producers can offer goods to the consumers at the lower prices. In fact, providing cheaper goods to the consumers is one of the main aims of rationalisation.

ii. The consumers get standardised products of good quality because of improvements in the techniques of production.

iii. Since the products are standardised, the consumers are not required to waste their money on unnecessary varieties. They have to choose from a small variety of products. Their time is saved in purchasing. Rationalisation increases the standard of living of the people by providing them goods of higher quality at cheaper prices.

Benefits to Society:

Rationalisation also brings about following benefits to the society as a whole:

i. It facilitates proper allocation of scarce resources by avoiding wasteful competition.

ii. Since the cost of production is decreased, rationalisation also helps the industry in competing in the foreign markets. Moreover, productivity of the economy is increased resulting in higher national income leading to higher per capita income, enabling the people to raise their standard of living.

We can sum up the advantages of rationalisation in the words of Lord Melchett who claimed four types of advantages of rationalisation.

“That it allows scientific allocation of capital expenditure and the financing of new plant and uptodate equipment; that it encourages specialisation, closing of inefficient concerns, and the management of commercial propaganda; that it prevents waste and overlapping; that it provides insurance against fluctuations of markets and prices and by promoting an orderly system of purchasing raw materials and marketing commodities facilitates a world review of economic needs and supplies.”

Essay # 7. Criticisms of Rationalisation:

I. Employers’ Viewpoint:

Though employers get many benefits of rationalisation, they have certain objections against rationalisation which are as follows:

i. Huge Capital Expenditure:

Rationalisation involves huge capital expenditure without an assurance of adequate returns on the investments. Further, it is argued that rationalisation may not be able to check trade cycles. A big portion of their investment may be wiped out during a period of depression.

ii. Problem of Finance:

Some employers argue that it is very difficult to raise funds required for financing the scheme of rationalisation. They do not have sufficient capital and they have to raise funds from the external sources at a higher rate of interest.

iii. Fear of Obsolescence:

The possibility of further research and development in technology may make obsolete the various improvements made under rationalisation.

iv. Fear from Workers:

It is very difficult to determine the fair and equitable ratio of sharing the benefits of rationalisation between the employers and the employees. The employees may demand higher wages and this may create many problems.

v Fear of Nationalization:

Some industrialists argue that they will not get the benefits of rationalisation if the industry is nationalised after huge sums are spent on rationalisation.

II. Employees’ Viewpoint:

The process of rationalisation is criticised by the workers because of certain adverse impact on them.

The points of criticism forwarded by the trade union leaders are as follows:

i. Unemployment:

The greater use of mechanisation and automation reduces the quantum of work done by the human labour. This displaces the workers who are trained in the old methods and machines and they are not likely to be absorbed anywhere. This will add to the existing unemployed work-force in the country.

ii. Excess Workload:

The workers feel that workers who are retained in the industry after rationalisation would be required to handle heavier workload. Rationalisation is a device to get maximum output from the workers. This will cause excessive strain to the workers and will result in deterioration of both physical and mental health of the workers.

iii. Poor Working Conditions:

Workers fear that the manufacturers will spend money on modernisation programmes at the cost of providing good working conditions to the workers.

iv. Exploitation:

The workers also feel that the benefits of rationalisation will not be distributed equitably. The management may give them a nominal increase in the income even though they have to handle excessive workload.

v. Down-Gradation of Workers:

Extreme emphasis is given on scientific management under rationalisation. The workers are treated as machines and they lose all the initiative. The mechanisation of industry makes the repetitive work meaningless and creates the problem of monotony.