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

Detail

1. What deindustrialisation means

• Deindustrialisation means industry's share in an economy's output and jobs goes down.
• In rich countries this can be normal. Workers move from factories into services.

• In colonial India it was harmful. Artisans lost their work and went back to farming. No modern factory sector came up to take their place.

• How to measure it:

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

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

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

• Year 1: 100 workers in total, 20 of them artisans. Industrial share = 20%.
• Year 2: 12 artisans lose their work and turn to farming. Only 8 remain in industry. Industrial share = 8%.

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

• The outcome in India: famous handicraft industries (goods made by hand in homes and small workshops, such as Dhaka muslin and Bengal silk) were ruined, and no modern industrial base took their place. India became an exporter of raw materials.

• Indian cloth had a name in Europe long before the Industrial era. Writers in the 17th century praised the quality of Indian dyed and painted fabrics [5].
• As Indian cloth became popular in Europe, European producers tried to copy it at home. These attempts grew in the 19th century, after industrialisation [5].

2. The two-fold colonial motive (NCERT)

• Motive 1: make India an exporter of raw materials (raw cotton, jute, indigo) for Britain's new factories.

• 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 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 reduced to supplying raw materials and buying the finished imports [5].
• The East India Company cared mainly about trade and revenue. Its policies drained wealth, first from Bengal and then from much of the subcontinent [5].

3. Mechanisms: how the crafts were ruined

• One-way free trade after the Charter Act of 1813
• The Charter Act of 1813 ended the Company's trade monopoly in India (its sole right to trade there). This opened India to all British traders.
• Machine-made Lancashire cloth came into India almost free of duty.
• Indian goods paid heavy duties when they entered Britain.
• So "free trade" was free only in one direction.

• Example (made-up numbers): a piece of cloth costs ₹10 to make in both India and Britain. A 50% duty in Britain makes the Indian cloth cost ₹15 there. A near-zero duty in India lets British cloth sell there 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 took cheap British goods deep into the country's interior.

• Village artisans who had been protected by distance now had to compete with factory goods.

• The British Indian Government gave Indian mills no support. Its aim was to protect the interests of British manufacturers [5].

4. Consequences

• Massive unemployment of artisans.
• A new demand for goods in Indian markets, which cheap British imports met at a good profit.
• Ruralisation (people moving from towns and crafts back to villages and farming)
• Artisans who lost their work fell back on land.
• This raised pressure on agriculture.

• It created disguised unemployment.

• Nationalist response: the Swadeshi Movement (a movement to use Indian-made goods), a reaction against the Partition of Bengal (1905).

• Bengalis boycotted British goods and burned Lancashire cloth in huge bonfires [9].
• Handloom and traditional crafts revived during the Swadeshi period [5][9].

5. Modern industry: late, slow and narrow

• Modern factory industry took root in the second half of the 19th century, but it grew very slowly.

Industry	Where and who	First unit or milestone
Cotton textiles	Maharashtra and Gujarat; mainly Indian-owned	Bombay Spinning and Weaving Co., 1854 (C.N. Davar)
Jute	Bengal; mainly foreign-owned	Rishra (near Calcutta), 1855
Iron and steel	Early 20th century	TISCO incorporated 1907, at Jamshedpur (now Jharkhand)
Sugar, cement, paper	NCERT: "after the Second World War"	They actually grew mainly in the 1920s-30s under discriminating protection (from 1923), e.g. sugar protection from 1932
Aviation	Tata Airlines	1932

• Cotton textiles (Indian-owned)
• One official source dates Cowasjee Nanabhoy Davar's Bombay Spinning and Weaving Mill to 1851 [5] (NCERT: 1854). For the exam, use 1854, the NCERT or standard date.

• The mill set off India's modern textile industry. More mills followed, mostly with Parsi capital and effort. Parsi traders were already exporting raw cotton to Britain and importing finished goods from there [5].

• Jute (foreign-owned)

• The first jute-spinning machinery was set up at Rishra, near Serampore in Bengal, by George Acland and Babu Bysumber Sen [5].

• Iron and steel: TISCO

• Jamsetji Tata began planning India's first large-scale ironworks from 1901 [4].
• The Tata Iron and Steel Company (now Tata Steel) was incorporated in 1907, three years after Jamsetji died. Work began at the village of Sakchi, in present-day Jharkhand [4].
• Production started only in 1911, and this launched India's modern steel industry [2].
• In 1919, Viceroy Lord Chelmsford renamed Sakchi "Jamshedpur" after the founder. He was recognising the company's help to Britain in World War I. The railway station became "Tatanagar" [3].

• Under his sons, Sir Dorabji Tata and Sir Ratanji Tata, TISCO became India's largest privately owned steelmaker [2][4].

• Why Jamshedpur (NCERT prompt):

• iron ore, coal and manganese close by in the Chota Nagpur belt
• water from the Subarnarekha and Kharkai rivers
• a rail link to Calcutta port

• cheap local labour

• Discriminating protection (tariff protection given only to chosen industries that met set conditions, not to all industries)

• The policy came from the Indian Fiscal Commission (1921-22) [6].
• It began in 1923. The Indian Tariff Board studied each industry that asked for protection, including sugar, ship-building, and wire and wire nails [7].
• Sugar got protection from 1932. Sugar, cement and paper then grew mainly in the 1920s-30s (NCERT: "after the Second World War").

• A debate in the Council of State (1937) shows a critic's view: the policy was "discriminating" only in name, and protection was being given without much discrimination [8].

• Tata Airlines began in 1932. It later became Air India.

6. Structural gaps at Independence

• Almost no capital goods industry
• Capital goods are goods used to make other goods, such as machine tools and machinery.
• Consumer goods (such as cloth and sugar) are bought for direct use.

• Chain of effect: no machine-making at home → every new factory needs imported machines → it needs foreign exchange (foreign currency to pay for imports) → India cannot industrialise on its own terms.

• Slow growth and a tiny share of GDP/GVA

• GDP (gross domestic product) is the total value of all final goods and services produced in a country in a year.
• GVA (gross value added) = value of output − value of inputs used up. It is output measured sector by sector.

• The new factory sector added very little to either.

• Lopsided pattern

• Industry sat in a few port and mineral regions (Bombay, Calcutta, Chota Nagpur).
• It was mostly light consumer industry (textiles, jute).

• Ownership was split: Indians mainly owned cotton mills, while foreigners mainly owned jute mills.

• A very small public sector (enterprises owned by the government)

• It covered only railways, power generation, communications, ports and some departmental undertakings (units run directly by a government department).
• This gap is part of why the Industrial Policy Resolution of 1948 and 1956 and the Five-Year Plans later gave the State a leading role in heavy industry.

Prelims Hooks

• Deindustrialisation = a fall in industry's share of output and jobs. In colonial India it went together 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.
• Cotton mills were mainly Indian-owned (Maharashtra and Gujarat). Jute mills were mainly foreign-owned (Bengal). Examiners often swap the two.
• First cotton mill: Bombay, 1854, C.N. Davar (Indian Culture portal: 1851). First jute mill: Rishra, 1855, set up by George Acland and Babu Bysumber Sen.
• TISCO: incorporated 1907, production 1911, at Sakchi, which was renamed Jamshedpur in 1919 by Lord Chelmsford. Station: Tatanagar.
• Jamshedpur's river inputs: Subarnarekha and Kharkai. Its mineral base: the Chota Nagpur plateau.
• Discriminating protection: recommended by the Fiscal Commission (1921-22), adopted from 1923, with each case examined by the Tariff Board. Sugar was protected from 1932.
• Trap: NCERT says sugar, cement and paper came "after the Second World War". They actually grew mainly in the 1920s-30s.
• Tata Airlines: 1932.
• The public sector at Independence was limited to railways, power, communications, ports and departmental undertakings.

Mains Points

• Deindustrialisation was a policy result, not a natural market result.
• One-way tariffs, coercion of weavers and railways built for exports all worked together.
• They turned the world's leading textile maker into an exporter of raw materials and a market for British goods.

• Use this in GS-III answers on the roots of India's low manufacturing share and farm distress.

• Lopsided industrialisation left lasting problems.

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

• This explains the Mahalanobis heavy-industry strategy, the 1948 and 1956 Industrial Policy Resolutions, and the leading role given to the public sector.

• Protection has trade-offs.

• Discriminating protection after 1923 helped sugar, cement and paper grow.
• But critics at the time said it was given too loosely.

• Link this to today's debates on tariffs, PLI schemes and "infant industry" protection.

• Indian enterprise can be read as economic nationalism.

• Parsi cotton mills, TISCO and the Swadeshi revival of handlooms all show Indian effort.
• This supports GS-I and GS-III answers on the links between the freedom struggle and economic self-reliance.