Deindustrialisation

Also called: Systematic deindustrialisation · Topic: Indian Economy on the Eve of Independence · NCERT: Class 11, Ch 1 "Indian Economy on the Eve of Independence"

Meaning

Deindustrialisation is a fall in the share of industry in a country's total output and total jobs.

• Share of industry in output = (Industrial output ÷ Total output) × 100
• Share of industry in jobs = (Industrial workers ÷ Total workers) × 100

It matters because the kind of fall is what counts. In rich countries, workers usually move from factories into services, and that can be normal. In colonial India, British policy ruined the famous handicraft industries. No modern factory sector came up to take their place. Jobless artisans went back to farming, and India became an exporter of raw materials.

Explanation

Two kinds of deindustrialisation

• Normal type (rich countries)
• Industry's share falls because services grow faster.
• Workers leave factories for better-paid service jobs.

• Income per person keeps rising.

• Harmful type (colonial India)

• Industry's share falls because crafts are destroyed.
• Artisans have nowhere to go except the land.

• Farm output hardly rises, so the whole economy becomes poorer.

• Handicraft industries are goods made by hand in homes and small workshops, such as Dhaka muslin and Bengal silk. These were the main losers in India.

Worked example (made-up numbers, only to show the idea)

• Year 1: 100 workers in total, 20 of them artisans.

• Industrial share of jobs = (20 ÷ 100) × 100 = 20%

• Year 2: 12 artisans lose their work and turn to farming. Only 8 remain in industry.

• Industrial share of jobs = (8 ÷ 100) × 100 = 8%

• What happens on the farm:

• Farm workers rise from 80 to 92, but there is no new land.
• The extra 12 people add almost nothing to farm output.
• This is disguised unemployment (people who look employed but whose removal would not reduce output).

The two-fold colonial motive (NCERT)

• The Industrial Revolution was the shift from making goods by hand to making them with machines in factories. It began in Britain in the late 18th century.
• Motive 1: make India an exporter of raw materials (raw cotton, jute, indigo) to feed Britain's new factories.
• Motive 2: make India a sprawling market (a huge market) for the finished goods of those factories.
• British trade policies and favours slowly destroyed Indian crafts such as textiles. India was left to supply raw materials and buy finished imports [4].
• The East India Company cared mainly about trade and revenue. Its policies drained wealth, first from Bengal and then from much of the subcontinent [4].

How the crafts were ruined

• One-way free trade after the Charter Act of 1813
• The Act ended the Company's trade monopoly in India (its sole right to trade there), so all British traders could now trade in India.
• Machine-made Lancashire cloth entered India almost free of duty.
• Indian goods paid heavy duties when they entered Britain.

• Example (made-up numbers): cloth costs ₹10 to make in both countries. A 50% duty in Britain raises the Indian cloth to ₹15 there. British cloth sells in India at about ₹10. The Indian weaver loses both markets.

• Loss of patronage (the regular buying and support of rich patrons)

• Princely courts and nobles declined under British rule.

• They had been the main buyers of luxury crafts, so demand for fine goods collapsed.

• Company coercion of weavers

• Weavers were forced to take advances (money paid ahead) and then sell only to the Company.

• The Company paid low prices that it fixed itself.

• Railways

• Railways carried cheap British goods deep into the interior.

• Village artisans had been protected by distance. Now they had to compete with factory goods.

• No state help for Indian mills. The British Indian Government's aim was to protect British manufacturers [4].

In India

• Past strength: Indian cloth was well known in Europe long before the industrial era. Writers in the 17th century praised Indian dyed and painted fabrics [4]. European producers tried to copy it, and these attempts grew in the 19th century, after industrialisation [4].
• Consequences:
• Artisans lost their jobs in very large numbers.
• Cheap British imports met the demand in Indian markets, at a good profit to Britain.

• Ruralisation (people moving from towns and crafts back to villages and farming) raised pressure on land and created disguised unemployment.

• Late and narrow modern industry (second half of the 19th century onwards):

• Cotton textiles: mainly Indian-owned, in Maharashtra and Gujarat. The first mill was the Bombay Spinning and Weaving Co., 1854, set up by C.N. Davar (one official source gives 1851 [4]). Mostly Parsi capital followed [4].
• Jute: mainly foreign-owned, in Bengal. The first mill was at Rishra in 1855, set up by George Acland and Babu Bysumber Sen [4].

• Iron and steel: TISCO was incorporated in 1907 at Sakchi [3], and production began in 1911 [2].

• Nationalist response: the Swadeshi Movement (a movement to use Indian-made goods) began as a reaction to the Partition of Bengal (1905). Bengalis burned Lancashire cloth in huge bonfires [5]. Handlooms and traditional crafts revived [4][5].

• Gaps at Independence:
• There was almost no capital goods industry (machines used to make other goods, such as machine tools).
• Industry was mostly light consumer industry, in a few regions (Bombay, Calcutta, Chota Nagpur).
• The public sector covered only railways, power generation, communications, ports and some departmental undertakings.

Don't confuse with

• Deindustrialisation in developed countries: workers move from industry to services and incomes rise. In colonial India, workers moved back to agriculture and got poorer.
• Ruralisation: this is the movement of people from towns and crafts back to villages. Deindustrialisation is the fall in industry's share. Ruralisation was a result of deindustrialisation.
• Disguised unemployment: workers who look employed on the farm but add almost nothing to output. It was a consequence of deindustrialisation, not the same thing.
• Discriminating protection (from 1923): tariff protection given only to chosen industries that met set conditions. It was a later policy that helped some industry grow. It is the opposite of the one-way free trade that caused deindustrialisation.

Prelims Hooks

• Deindustrialisation = a fall in industry's share of output and jobs. In colonial India it went with ruralisation and disguised unemployment.
• The Charter Act of 1813 ended the East India Company's trade monopoly in India. This opened the way to one-way free trade.
• NCERT's two-fold motive: make India (1) an exporter of raw materials and (2) a market for British factory goods.
• Trap: cotton mills were mainly Indian-owned (Maharashtra and Gujarat). Jute mills were mainly foreign-owned (Bengal). Examiners often swap the two.
• Mechanisms to remember: one-way tariffs, loss of patronage, forced advances to weavers, and railways carrying British goods inland.
• The Swadeshi Movement (after the 1905 Partition of Bengal) revived handloom and crafts [4][5].

Mains Points

• Deindustrialisation came from policy, not from the free working of markets.
• One-way tariffs, coercion of weavers and railways built for exports worked together.
• Together they turned the world's leading textile maker into a raw-material exporter and a market for British goods.

• Use this in GS-III answers on the roots of India's low manufacturing share and farm distress (too many people on too little land).

• Its legacy shaped planning after Independence.

• There was almost no capital goods base, industry sat in a few regions, and consumer goods dominated.

• This explains the heavy-industry focus of the Industrial Policy Resolutions of 1948 and 1956 and the Five-Year Plans, with the State taking the lead.

• Economic nationalism was a response to it.

• Parsi cotton mills, TISCO and the Swadeshi revival of handlooms show Indian effort against colonial deindustrialisation.
• Use this in GS-I and GS-III answers linking the freedom struggle with self-reliance, and today's debates on protecting young industries.

Related concepts

• Handicraft industries
• Industrial Revolution

Read more

• Industry: deindustrialisation and the late, lopsided start of modern industry