Q.Explain the meaning and causes of industrial sickness in India.

Industrial sickness refers to units unable to meet costs or service debt from their operating revenue, arising from poor management, obsolete technology and demand shortfalls.

Industrial sickness refers to a condition in which an industrial unit is unable to generate sufficient revenue from its own operations to cover its costs and service its outstanding debts over a sustained period, rendering it financially unviable without external support or restructuring. Several factors commonly cause industrial sickness in India. Poor management — weak planning, inefficient use of resources, or a failure to adapt to changing market conditions — is a frequent underlying cause. Obsolete technology and outdated machinery can leave a unit unable to compete on cost or quality with more modern rivals, gradually eroding its market position. Demand shortfalls, whether from a general economic slowdown, changing consumer preferences, or the entry of stronger competitors, can leave a unit with output it cannot sell at viable prices. Over-leveraged expansion — where a firm borrows heavily to expand capacity based on overly optimistic demand projections — can leave it unable to service its debt once actual demand falls short. Industrial sickness is a significant problem because sick units tie up bank credit that could otherwise be productively deployed elsewhere, and because large sick units, in particular, raise difficult employment and regional-development con …

Students sometimes define sickness only as 'a unit making losses' without the fuller and more precise idea of sustained inability to service debt/cover costs, and often forg …