This is the second post on the Indian Economy on the Eve of Independence series. In this we will be focusing on Indian Industrial Sector on the Eve of Independence.
Industrial Sector on the Eve of Independence
“Systematic de-industrialization” is the term that describes the status of Indian industrial sector during the British rule. It consists of two things:
- Decay of world famous traditional handicraft industry
- Bleak growth of modern industry.
Decay of Handicrafts:
Prior to British rule, handicraft in India enjoyed the worldwide reputation of excellence and quality. But the British Raj contributed to their decay as a matter of political and economic policies which included:
- Discriminatory Tariff Policy of the State: The British rule in India coincided with industrial revolution in Britain. The British needed raw material for their expanding industry, as well as market for their final product. They found India to be a lucrative source of raw material and a promising market for their industrial products. To take advantage of India and benefit Britain, a discriminatory tariff policy was introduced. It allowed tariff-free export of raw material from India and tariff free import of British industrial products into India but there was a heavy tariff induced on exports of Indian Handicraft products. As a consequence, while the British products flourished in Indian markets, the Indian Handicraft products started losing its demand.
- Disappearance of Princely States: Prior to the British rule, Nawabs, Rajas, Princes and Emperors ruled different parts of the country. They used to patronise the handicrafts, enabling to acquire international reputation. The beginning of British rule implied the end of princely courts, and therefore, the end of state patronage to the handicrafts. Consequently, the handicrafts started decaying.
- Competition from Machine-made products: Machine-made products from Britain were low-cost products and gave a stiff competition to the handicraft products in India. Also, machine-made products out excelled Indian handicraft products in precision and quality. Competition forced the Indian craftsmen to shut-down their enterprises forever.
- New Patterns of Demand: Owing to the impact of British culture, a new class emerged in India which was keen to adopt the western lifestyle. This changed the pattern of demand against the Indian product and in favour of the British products. In the process, the Indian industry tended to perish.
- Introduction of Railways in India: Guided by self-interest, the British government introduced railways in India. This was to facilitate transportation of the British products across different parts of the country. Consequently, size of the market for the low-cost British products tended to expand while it started shrinking for the high cost Indian products. This hastened the process of decay of Indian handicrafts.
Briefly, the British Government converted the Indian economy into a colonial market for the British industrial goods.
Bleak growth of Modern Industry
Under the British raj, modern industry showed only a bleak growth. It was only in second hal of the 19th century that the modern industry showed its emergence. But its growth was slow and tardy because no initiative was ever taken by the British Government to industrialize the Indian economy.
A few textile mills sprang up followed by some iron and steel enterprises. Subsequently, a few sugar, cement and paper mills were established. It was not owing to any state initiative but the changing economic scenario in the wake of World Wars I and II. These wars created a worldwide scarcity of industrial goods. The investors in India exploited the situation by establishing iron and steel, cement and paper industries. The state participation in the process of modern industrialization was vert limited and confined only to the areas which would enlarge the size of the market for the British products in India. These areas included: Railways, Power Generation, Development of ports and means of communication.
Do note that there was no capital goods industry, which produce goods like machines and industry plants that are used for further industrialization, worth the name. It was because these industries require huge investments which were beyond the means of the Indian investors.
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