In this essay we will discuss about the growth of modern industry in India:- 1. Independent Industry 2. Rural India 3. Urban Industry 4. Decline of Indian Industry 5. India’s Contribution towards Industrial Revolution in Britain 6. Evolution of Modern Industry 7. Indigo 8. Tea and Coffee 9. Jute Industry 10. Local Manufacture 11. Capital Investment 12. Swadeshi Movement and Other Details.
Essay Contents:
- Independent Industry
- Rural India
- Urban Industry
- Decline of Indian Industry
- India’s Contribution towards Industrial Revolution in Britain
- Evolution of Modern Industry
- Indigo
- Tea and Coffee
- Jute Industry
- Local Manufacture
- Capital Investment
- Swadeshi Movement
- First World War and Development of Industry
- Impact of Second World War
1. Independent Industry:
Industrial growth in India corresponds with the ups and down in the Indian polity. The emergence of a strong polity either under the Mauryas or the Greater Mughals also brought about accelerated growth; but the disintegration and political instability after the fall of the Mauryas or the Greater Mughals, industries ‘also suffered a setback. The industrial structure before the British imperial rule was, however, not destroyed.
On the contrary, the British Imperial Government of India deliberately destroyed that infrastructure for the benefit of their metropolitan industry and from 1880s onward it was necessary to evolve modern industrial infrastructure rather to complement the growth, of their metropolitan industry by creating, on the one hand, a demand for the machinery, and on the other hand, to fill up the gap in the volume of foreign trade which occurred due to disappearance of manufactures from the export from India. Therefore the Indian industry from immemorial times continued to grow in spite of the stagnation in the times of political instability.
We know from the Greek writers who admired that “India has many huge mountains which abound in fruit trees of every kind and many vast plains of great fertility—more or less beautiful, but all alike intersected by a multitude of rivers… And while the soil bears on its surface all kinds of fruits, it has also underground numerous veins of all sorts of metals, for it contains much gold and silver and copper and iron in no small quantity and even tin and other metals. India again possesses many rivers both large and navigable.”
They also praised that “the inhabitants are found to be well skilled in the arts.” The Indian industry was famous since ancient times in the textiles, wood work, ivory, stone-cutting, leather, fragrant woods, metals and jewellery.
Their high standard of arts and crafts had secured a better market for their products throughout the known world, and it continued to be so even when the British colonial rule was imposed upon the country. It was richer than Europe in its arts and handicrafts. The Industrial Commission itself conceded this fact.
Its report states:
“At a time when the west of Europe, a birth place of modern industrial system, was inhabited by uncivilized tribes, India was famous for the wealth of her rulers and for high artistic skill of her craftsmen. And, even at a much later period, when the merchant adventures of the West made their first appearance in India, industrial advancement of this country was at any rate, not inferior to those of the more advanced European nationsâ€.
Therefore, at that time India was the “workshop of the world”.
2. Rural India:
On the eve of the British occupation, the Indian industries comprised of almost two distinct sectors viz., rural and urban industries. The same set of artisans such as the carpenter, the potter, the blacksmith, the stonesman, the weaver, the dyer, the tailor, the shoemaker, the drug seller, etc., existed almost in every village community. Their arts and manufactures were hereditary and they were recognized by the caste of their arts and manufactures. They lacked economic organisation and specialisation.
Their goods were of the most primitive and crude character. Therefore, their goods were consumed by and served the needs of the poor within the village. With the increasing poverty during the period of British rule their goods became rather essential for the village community.
Since their industry did not pose any danger, if not helped, in furthering British industrial interests, that village or rural industry continued to exist unabated and preserved the self-reliance of Indian villages.
3. Urban Industry:
The urban industry of higher crafts were carried in the vicinity of administrative centres under the patronage of Courts. In these urban centres, industries were organised in the guilds or by middlemen who made advances to the craftsmen. Their manufactures flourished and attained great artistic skill in the reign of Mughal Emperors who loved the Persian culture and like them made an ostentatious display of wealth splendour.
Therefore, the textiles and other arts attained more artistic touch. Though majority of the industrial units’ output was small, it had all essential features of evolving itself into modern industry. This fact is borne not by any indigenous record but rather from the report of Bernier, a French traveller. Bernier found that karkhanas (industries) were in full swing in all the parts of the country. About one such karkhana he informs;
In one hall embroiderers are busily employed, super-intended by a master. In another you see the goldsmith; in third painters; in fourth, varnishers in bacquer-work; in a fifth, joiners, turners, tailors, and shoe-makers; in a sixth, manufacturers of silk, brocade and fine muslins.
As he himself informs us that the artisans were busy on a day long work.
He mentions:
The artisans repair every morning to their respective kar-kanays (karkhanas), where they remain employed the whole day; and in in the evening return to their homes. In this quiet and regular manner their times glides away; no one aspiring after any improvement in the conditions of life wherein he happens to be born. The embroiderer brings up his son as an embroiderer, the son of goldsmith becomes a goldsmith, and the physician in the city educates his son for a physician.
These disciplined activities had made tremendous achievement in the manufacturing. India was a hub of world commerce and the magnet of the world precious metals. These goods enjoyed a good market in the island of the East Indies, on the African coasts and in England as well.
Their textiles flooded these markets and these were treated as “plague” especially in the British markets by the British manufacturers. Indian muslin and fine cotton fabrics were described “as light as women and as slight as cobwebs.” It was this urban industry of India which restricting the industrial growth of Britain.
Secondly, flourishing Indian urban industry also deprived them of raw material needed by the expanding British industry. Therefore, British policy pursued a policy which sealed the fate of industrial growth in India, especially before the First World War.
4. Decline of Indian Industry:
The British war upon Indian industry had already been waged in Britain itself. The British Government passed law in 1701 and 1720 against the use of printed Indian calicos in England to accelerate the growth of British woolen and silk industries.
The British industrial interests hecticly agitated the East India Company for ‘inflicting an enjoy on the British nation’ by exporting out bullion to India. Their agitations in juxtaposition of the political domination by the East India Company, after 1767 accelerated, on the one hand, industrial Revolution in England, and, on the other hand, led to the decay of Indian urban industry.
5. India’s Contribution towards Industrial Revolution in Britain:
It is necessary here to refer to the illusion among certain sections that the Industrial Revolution in Britain was an independent factor and it would have taken place even without political domination. It is not true. The political domination was the basic factor in bringing Industrial Revolution in Britain.
The protective legislation passed in the first quarter of the seventeenth century against the import of Indian goods stimulated the mechanical inventions and discoveries, firstly, in the British textile industry.
Parallel to it, the East India Company had utilized the opportunity offered by the declining Mughal Empire to establish their commercial and accumulate wealth by fair and foul means. It was this wealth accumulated by the East India Company which provided the main base for building on industrial infrastructure in England. R.K. Gopalkrishnan, therefore, rightly says that “Before the influx of Indian treasure and the expansion of credit which followed (the commercial and political hegemony of the East India Company), no force sufficient for (bringing) Industrial Revolution in England existed; and had watt lived fifty years earlier, he and his invention must have perished together.”
This development, on the one hand, moved the wheel of prosperity of the British industry and, on the other hand, put the Indian history in the vicious circle of poverty. This could be possible because of the policy pursued by the East India Company.
The Company got an opportunity to establish its commercial hegemoay, first in Bengal, Bihar and Orissa. The weak Mughal Emperor granted the Company a firman in 1713 exempting the British trade from all duties to weaken the recalcitrant Nawab Ali Wardi Khan.
This commercial charter helped the Company, especially after the death of the Nawab, in ousting the Indian as well as European traders from the internal and foreign markets. Thus obtaining the economic strength the “superior to all other European powers in the sea, and supported by the Government at home,” R.K. Mookerjee rightly notes, “the English within half a century after the death of Aurangzeb acquired Bengal where riches and geographical position proved of invaluable aid to them to obtain mastery of the hinterland and then gradually over the whole country.”
Strengthened with the political authority, the East India Company pursued its policy in tune with the interest of the manufacturers of Britain. The British cotton industry was the first to get revolutionized by the invention of spinning jenny and the steam engine.
This development, as already stated, got an added strength from the policy of oppression of the weavers pursued by the East India Company. Indian weavers could produce the finest textiles and had a great demand for their goods. Their British market could be closed only through law.
Therefore, the Company officials followed a policy of ruining of the Indian weavers. The Company gumashtas forced the weavers to supply cloth at a very arbitrarily fixed low price. They also prohibited them from entertaining orders from purchasers other than the Company.
The weavers were also treated harshly in the event of disobedience of the commands. Besides, the Company and its servants used their monopoly rights against the interests of Indian industry. The Company servants monopolised the internal trade in more important commodities like raw cotton. They sold these raw materials to the Indian manufacturers only at higher rates.
Thus the increased cost of raw materials and arbitrarily low fixation of prices of finished goods ruined the weavers and other artisans. William Bolts describes this “one continued scene of oppression; the baneful effects of which are severely felt by every weaver and manufacturers in the country.”
He further tells us that “the roughly practiced (by the Commerce Department) is beyond imagination, but all terminates in the defrauding of the poor weaver, for the price which the Company’s gumashtas, and in confederacy with them, the fachendars fix upon the goods, are in all places, at least fifteen per cent and in some, forty per cent less than the goods manufactured would sell for in the public bazar or market upon a free sale.” It was sufficient for the disaster of Indian textile industries.
Murshidabad “which flourished under the most despotic and arbitrary Government”, a report said in 1769, “is verging towards its ruin”. Other centres also met the same fate. But perhaps this was not to the satisfaction of the Company Government.
The Indian producers were also crushed through the policy of duties. The Company increased the inland duties, toll and tariff barriers. The number of taxable goods was increased. In this the aggregate duty on the cotton piece goods manufactured in India was increased by 1813 to 67 per cent ad valorem. Correspondingly the import duty on the British cloth by the Charter Act of 1813 was fixed only at 2-1/2 per cent.
Export of cotton goods to Britain was already prohibited; and ad valorem duty of over 71 per cent was imposed on these goods imported in Britain for re-export to the European markets. It may be noted tore that foreign export of India was already monopolized by the British East India Company and, therefore, the Indian products were being exported only through the English merchants. It was all done in the British industrial interests.
It is clear from the remarks of British historian Wilson says:
“It was stated in evidence (before the Select Committee in 1813) that the cotton and silk goods of India could be sold for a profit in British market at price from 50 to 60 per cent lower than those fabricated in England. It consequently became necessary to protect the latter by duties of 70 to 80 per cent on their value or by positive prohibition. Had this been not the case, had not such prohibitory duties and decrees existed, the mills of Paisley and Manchester would have been stopped at the outset and could not have again been set in motion, by the power of steam. They were created by the sacrifice of the Indian manufacturers. Had India been independent, she would have retaliated, would have imposed prohibitive duties upon British goods, and would have thus preserved her own productive industry from annihilation. This act of self-defence was not permitted to her; she was at the mercy of the stranger. British goods were forced upon her without paying duty and the foreign manufacturers employed the arm of political injustice to keep down and ultimately strangle a competitor with whom he could not have contended on equal term.”
This policy was successfully carried out in ruining other industries as well. In 1800, for example the Court of Directors of the Company accomplished the ruin of the prosperous ship-building industry of India by prohibiting the employment of Indian ships in the trade between England and India one of the reasons they adduced in support of their unjust decision was as follows.
“The native sailors of India are…on their arrival here (i.e., in England) led into scenes which soon divest them of the respect and awe they had entertained in India for the European character. The contemptuous reports which they disseminate on their return cannot fail to have a very unfavourable influence upon the minds of our Asiatic subjects, whose reverence for our character which has hitherto continued to maintain our supremacy in the East, will be gradually changed and the effects of it may prove extremely detrimental….”
The British policy was successful. The export of Indian goods declined to the benefit of British goods. For example, the export of Indian cotton piece-goods to Britain fell from about twelve million metres in 1814 to only about 3 lakh metres only in 1835. The import of British cotton goods increased from only about seven and a half lakh metres in 1814 to more than forty-seven millions metres in 1835.
Thus ruined by the unremunerative prices, oppressed by the gumashtas, and restricted in the market by the import-export duties, the Indian weavers deserted their profession in large numbers and brought further pressure on the only available agricultural sector. Professor P.N. Chopra has rightly said that “from a manufacturing country India has been reduced to the position of an importer of foreign manufactures for the consumption of her people.”
Instead India became the exporter of raw materials needed by the British Industry In this way India Industry was ruined and Indian economy was converted into a colonial economy—a market for her manufactures and a source for the supply of raw materials to her industries. This was boastfully conceded while advocating for the extension to the right of administration of India by the Company.
It was stated before the Select Committee appointed to inquire into the claims of the Company:
“this company has in various ways; encouraged and assisted by our great manufacturing ingenuity and skill, succeeded in converting India from a manufacturing country into a country exporting raw produce…. The peculiar state of the relation between this country (Britain) and India and the necessity of extracting from the later three millions of money for Home Charges…and the altered state of Indian industry in its being converted from a manufacturing country into a country exporting raw produce….â€
6. Evolution of Modern Industry:
Evolution of modern Indian industry can be dated to the year 1833 when the Charter Act, 1833 was passed. This Act divested the Company of its commercial charter. The European settlers and other British capitalists were permitted to invest capital for the expansion of trade.
The Company had also accumulated surplus capital. Until 1857, the capital investment, however, remained insignificant. It, as Leyland Jenks says “represented simply portions of Indian spoils and revenue” accumulated by the British officers in India.
Though construction of irrigation works and railways—which was basically undertaken to administer the country efficiently and facilitated the growth of trade—afforded almost an unlimited field for profitable investment of capital in India, it could not attract the Company which was interested mainly “in exploiting and not improving the resources of the country”. Therefore, there were only about 440 kms. of railway line when the resurgence of 1857 brought an end to the Company rule.
Resurgence in 1857 brought a new landmark in the evolution of modern industry in India. This resurgence focussed the world attention, in general, and the British, in particular, upon India. The British Government was not prepared India to go the American way.
The root cause for the peoples’ support to the native rulers’ leadership was their economic hardship and increasing unemployment with the ruining of industry and withering away the only other avenue of joining civil and military administration of the indigenous rulers.
Therefore, the British Government terminated the right of administration by the Company and transferred the Government of India to the Crown. It was necessary for the Crown Government to take economic steps, along-with the political concession, to ameliorate the economic conditions to win the confidence of the people.
The policy inaugurated by the Charter Act, 1813 was, therefore, re-emphasized for the industrial development in India.
New industrial activities took two forms:
(i) plantation; and
(ii) factory industry.
The plantation industry was the first to attract the Europeans. The plantation industry could provide jobs at a large scale, but in reality it could meet the increasing demands for tea and coffee and indigo by the prosperous British society. Therefore, the plantation industry was the first to attract the Europeans. It was for this reason that plantation industry had started emerging much earlier.
7. Indigo:
After the export of Indian calicos was prohibited to Britain and its export to other markets was curtailed, the East India Company faced the problem of finding a substitute to fill up the vacuum as also to invest the surplus capital is a result of huge profits to the Company as well as its servants.
The French had already started the indigo factories in Bengal and Bihar. They took extraordinary interests after the French revolution had created obstacles in the way of capitalists of France. It suffered a great set-back in 1801-02.
But it again took up after the Continental System imposed by Napoleon did not leave any alternative to the Company to increase its trade outside the continent. This industry got further fillip after the investment in opium plantation failed due to increasing resistance of China.
As a result indigo remained the sole source of private remittance. There was a great attraction to it after the Charter Act, 1833 gave the Europeans ownership of land and full freedom of contract. Its production increased to about 58,000 maunds in Bihar and to about 64,000 maunds in the Doab by 1877.
The invention of synthetic day in 1897 dealt a death blow to this industry. Its export, valued at 3.5 millions in 1895, fell to about 4 lacs only in 1905. Between 1904-05 and 1914-15 the area under indigo shrank to one-tenth of the area in 1894-95.
In spite of the peasants’ revolts to the policy ruining the indigo industry and Gandhi’s Champaran campaign, the industry could not survive. There remained only 65 plantations in Bihar and Orissa in 1921. Out of these 56 were owned by the Europeans. “Their baroque buildings stand today in ruins all over the country, the vanishing memory of the first British enterprise in India.”
8. Tea and Coffee:
The monopoly trade-rights of the Company were abolished in 1833. The Company thereafter gave a serious attention to the possibilities of tea in India. Andrew Charlton found the tea plant in Assam and William Bentick immediately realized its importance. He formed a Tea Committee in January 1834. After experiments, the Assam Company was founded in February 1839. Tea plantations proved very fruitful. The Assam Company could pay dividends at 12 per cent by 1860. It brought about a great rush.
Twenty companies got registered in between 1859 and 1865 in addition to many more unregistered private gardens. Barring the depression in the year 1866-67, the Companies made huge profits. Assam Company paid a dividend of 35 per cent in between 1871 and 1880, but retained an average of 13 percent in the following decades.
Railway construction in the area further boosted (this industry, and increased the dividends. Coffee plantation also started simultaneously. As the tea plantation was the most important industry of Eastern India, coffee plantation became the centre of activities in South India.
9. Jute Industry:
The third important plantation, which also gave birth to factory industry, was jute plantation. It was the greatest attraction of the British investment and also became a most significant item of export to the US, Penang and Singapore. It was this increasing demand and huge profit which encouraged the British to set jute industry in India.
However, all these plantation industries, from the beginning, were owned, managed and controlled by the ex-employees of the Company and other people connected with the Company. They were interested in huge profits. Indigo, tea and coffee, and jute offered them easy and high return on their investment.
But the plantation industries, except for jute, could not emerge in India and the products of the plantation remained mostly as raw-materials as the items of export. Therefore, plantation fall more in the agricultural economy than the industrial economy of India. Real and satisfactory progress in the factory industries began only from 1880s.
10. Local Manufacture:
The Famine Commission held that the import of goods from abroad had ruined the local industry. The artisans and other interests fell back upon the agriculture. The agriculture was dependent on the Monsoon. As the Monsoon fails the rural distress becomes more alarming since they did not have any other occupations. Therefore, the Famine Commission recommended a policy of encouragement to local manufacturers to decrease the burden on agricultural sector.
The British Administration in India, however, was not keen in industrial growth than aid to the merchant. “Investment in social over-heads, State guaranteed investment in railway and irrigation schemes, extraordinary measures to extend the cultivation of raw cotton, remodelling of land regulations to suit European settlement and investment, expenditure of public funds to encourage European entrepreneurship were the basic principles of the British Government in India.
They were rather against the encouragement to industries which was held in contravention to the principles of laissez faire. But the British policy had created two forces which helped the evolution of industries in India.
Firstly, the resurgence of 1857 alarmed the British government and businessmen alike. After the loss of American colonies, India had become the principle unit of the British Empire. Therefore, they accelerated their efforts in making India their secure possession. Railways were considered the touchstone of the consolidation of British rule. The railways also served the imperial interests most.
They facilitated rapid movement of troops from one place to another in case of emergency. They also provided profitable investment for British capital, promoted export from British of locomotives, rolling stock, steel, machinery and other equipment, brought extension of market for British manufactures in the interior of India and facilitated collection of food grains, raw cotton and other agricultural produce from the markets of India for export to Britain. That is why there was a phenomenal growth in the construction of railways.
The length of railways increased from 2,573 km. in 1861 to 5,428 km in 1865, 8,170 km in 1871, 11,783 km. in 1877, 32,523 km. in 1896, 49,207 km. in 1908, and 55,773 km. in 1914. Opening of the Suez Canal also shortened the distance between Europe and India by about 4,830 kms.
This phenomenal growth in communications not only became the pioneer industry of India but also provided the means of further industrialisation.
Secondly, as Clow maintains, the Indian industries at that time “had flourished round the throne of the rulers and had looked to them for support”. These economic centres were responsible for the political instability. They helped centrifugal forces indulged in breaking political unity. The political disintegration thereafter brought about stagnant on in the industrial activity as well.
The British commercial policy ruined the industries and thus eliminated those autonomous economic vis-a-vis political centres. Instead, big mercantile towns viz., Calcutta, Bombay, Ahmedabad, Madras emerged. These mercantile towns helped in bringing economic unity to exploit the whole country.
The commercial fortunes accumulated in these mercantile towns contributed much in laying down the modern industrial foundations in a big way when the opportunity was offered by the American Civil War, the Crimean War and the two World Wars.
11. Capital Investment:
The above two factors created a good opportunity for investment. Plantation, banking, shipping and trade were the main fields of investment in the beginning. As a result Rs.225 crores were invested by 1870. This investment further increased economic activities.
Revitalization of the economy brought about increase in the investments at a faster rate thereafter. The investments increased to Rs.441 crores in 1896, and further rose to Rs.547 crores in 1910. It was this increased investment which helped in increasing the volume of trade as well.
The volume of foreign trade increased from Rs. 69.6 crores in 1859-60 to Rs.100.4 crores in 1869-70; Rs.122 crores in 1879-80; Rs. 195.7 crores in 1891-92; Rs.266.49 crores in 1891-92; Rs.266.49 crores in 1908-09; and to Rs.441 crores in 1913-14.
The investments and foreign trade gave a great stimulative forces to the inland trade which increased by 108 percent in between 1890 and 1909. The circulation of currency notes rose from Rs.127 crores in 1896 to Rs.181 crores in 1908.
The banks and joint stock companies also increased considerably. India had acquired a place among the most advanced commercial nations of the world before the First World War. Thus the improved transport and communications, growth of foreign trade and consequent accumulation of commercial fortunes had created an impetus for industrial development.
Railway building and its maintenance had their effects more far reaching than opening up of the interior and exposing agriculture to the winds of commerce. As Sunil Kumar Sen opines it were these circumstances which released some of the latent potentialities for industrial advance. It was only the British metropolitan that is in Britain, industrial interests which kept the industrial growth staggering.
Before 1900, the Indians could start 194 mills of cotton textiles with 5 million spindles and 40,000 looms. The jute industry, as stated earlier, was in the hands of the Europeans only.
There were 36 mills with over 16,000 looms. The coal production was only about 6 million tonnes, though India had the potentiality to increase its output at a faster rate. In conjunction with the availability of iron ore, India, free of British domination, could have still surpassed in the industrial growth many of the countries of the world.
12. Swadeshi Movement:
It was the Swadeshi Movement, started in the first decade of the twentieth century, which strived and encouraged the entrepreneurs to counteract against the foreign industrial interests. With the spread of English language, a middle class consisting of men of commerce, bankers, lawyers, doctors and other professionals had emerged more powerful than in any time in the past.
Taught the European literature, they bad also become as ambitious as were their counterparts in the European countries. The commercial activities had also forced the foreign concerns to train the Indian in technical subject to run their activities at junior level.
Therefore, encouraged by the Swadeshi Movement, these human forces contemplated development of industrial sector in India itself. As a result by 1914, the cotton mills increased from 194 to 273 with 68 lakhs spindles and 104,000 looms; jute mills from 36 to 64 with 36,000 looms; and coal output increased to sixteen million tonnes.
With the establishment of Tata Iron and Steel Company (TISCO) in 1907, Indian entrepreneurs entered the iron and steel industry too before 1914. These industries employed about one million labourers or about 3.15 per cent of the total population. Thus, the potentials for the emergence of industrial sector were present. It needed only loosening of the hostility of the government to get the ball moving.
13. First World War and Development of Industry:
The First World War provided this opportunity to the industrialists in India. The British Government appointed a Munitions Board to control and develop Indian resources, regulate contracts, limit and co-ordinate demands for articles not manufactured in India, and apply the manufacturing resources to India to war purpose to reduce especially demands on shipping. India was required to supply articles, medical stores and certain technical stores to the Allied Armies in the East.
It increased the demand of textiles to Rs.2 crores a month and hides and leather to Rs.one crore a month. Manufacturers were assisted and encouraged to produce goods earlier procured from Europe. This Board was also functioning as Industrial Commission to recommend the means and ways for Industrial development to meet the war demands.
Since the arrangements made by the Board were proved useful in meeting the emergency, the Commission hoped “that care will be taken to preserve such features” of the war times “as are properly adaptable to peace conditions”.
The Commission warned that until these industries are developed “on an adequate scale, Indian capitalists will, in times of peace, be deprived of a number of profitable enterprises whilst in the event of war which renders sea transport impossible, India’s all-important existing industries will be exposed to the risk of stoppage, her consumers to great hardships, and her armed forces to the gravest possible danger.”
The Commission was also not satisfied with the low scale of Import of machinery which was now being manufactured in Britain. Industrial development in India was bound, the Commission argued, to increase the demands of machinery which would help Britain to diversify its trade and help rejenuvate its economy devastated by the First World War.
The War had thus, on the one hand, weakened the imperial hold over India, and, on the other hand, considerably reduced the dominating status of Britain at international level. The Swadeshi Movement had also strained political atmosphere.
The Montagu-Chelmsford Report on constitutional Reforms held that the injury done to the Indo-British political relations was due to the widespread feeling in India that their country was subjected to the Lancashire and other British industrial interests.
Therefore, the Secretary of State had to grant, for political reasons, freedom in deciding its commercial polity. As it is popularly called, this ‘Fiscal Autonomy Convention’ brought an end to the policy of laissez faire. Instead, the ‘protection’ to Indian industries, recommended by the Fiscal Commission (1921), was granted to iron and steel, cotton textiles, paper, matches, sugar and heavy chemical industries.
The “protection” extended to Indian industries gave a great fillip and the industrial production increased phenomenally. On the eve of the Second World War, the production of steel ingots had increased from 1.32 lakhs to 10.49 lakhs tonnes (80%); cotton peace- goods from 1,567.3 million to 3,672.2 million metres (25 per cent); match boxes from 16 million gross to 22 million gross (38 per cent); paper and paper board from 24,384 to 60,075 tonnes (180 per cent); and cane sugar from 24,384 to 946,000 tonnes (3779 per cent).
(In 1913-14 the raw sugar of Rs.15 crores and the paper of the tune of Rs.1.60 crores was imported). With the expansion of the industrial sector number of industrial workers rose from 869,643 in 1912 to 15,55,387 in 1927 and 16,10,921 in 1935.
Thus, India figured among the first eight industrial nations of the world. Still the country was not industrialized to the extent of the availability of resources. Rather it was still an agricultural economy which provided livelihood to 70 per cent of the population.
14. Impact of Second World War:
The Second World War exercised more profound influence on the development of Indian Industry. As the war intensified the communication and supply lines of the British and other European powers were cut-off and the Japanese pressure increased. Japanese success brought a heavy pressure upon the British and American defence of South and South East Asia as well as West Asia.
The British and its allies were, therefore, left with little option than to depend upon India for regular supply to meet their war needs. The British Government again directed the Government of India to gear the Indian economy to its war needs. The Allied Powers laid increasing demands upon Indian economy.
The War thus offered the long awaited opportunities to the Indian entrepreneurs to expand their industries. They were also assured by the Government that in case, in any form, encourage the development of industries for our war needs, those entrepreneurs who had come to the assistance of the State would not be left high and dry to take care of themselves” after the War was over.
But the Indian entrepreneurs also suffered from those very constraints which forced the British Government to encourage expansion of industries in India. The Indian entrepreneurs could not procure new plants from the British and other developed countries.
Therefore, they had to put up with mainly the existing plants only. The only benefit which they could get was to utilize their existing plants, for the first time, not only to the optimum level but also beyond the plant capacity.
In this way, the Indian “industries which were already in existence worked to full capacity and often in more shifts than one. New plants were added in some cases and some basic industries were established. A rapid expansion of small- scale industries all over the country created new source of supply.” As a result of this impetus, the index of the industrial production increased from 102.7 point in 1939 to 120 in 1945.
This War also resulted in the founding of many new industries which might not have come into existence otherwise.
These industries were:
(a) ferro-alloys like ferro-silicon and ferro-manganese;
(b) non-ferrous metals and metal fabricating industries like copper, copper sheets, wires and cables, etc.;
(c) mechanical industries like diesel engines, pumps, bicycles and sewing machines, machine tools and cutting tools;
(d) a few items of textiles, tea and oil processing machinery; and
(e) chemicals like caustic soda, chlorine, superphosphates etc.
The raw material for these industries was not generally within the country and it was imported from the foreign markets. In this way India started importing industrial raw-materials after a lapse of about 100 years. It also gave an added advantage to India in comparison to other British colonies and it could inherit comparatively an advanced industrial base and a source of import of industrial raw-material through the efforts of an imperial power.
By the end of the war the number of the companies rose from 11,114 companies with a total paid-up capital of Rs.290 crores in 1939 to 14,859 with a total paid-up capital of Rs.389 crores. Indian industry registered its name in the manufacture of hydrogenated oil, transport and electrical equipment’s, machine tools, basic chemicals, lower alcohol, synthetic resins and plastic etc.
It was also due to this increased production and manufacture of new items, that increased the surplus in the foreign trade and India could repay its all debts and on the eve of independence the country could have a reserve of foreign exchange.
This industrial growth was not, however, much advantageous to the long term interests. First of all, the over-use of the plants deteriorated the machinery and its life got shortened. Thus independent India inherited in these plants a burden of replacing it, which is still unsolved in many sectors. For example, sick textiles mills are the result of the over-use of its machinery during the Second World War period.
Secondly, after the cessation of war, the demand came down to an abnormally low level and the Indian economy went into red when the inflation was taking over in other sectors. Therefore, the Indian economy started with the much-regretful step of devaluing its rupee. Thirdly, it was also the result of this war- growth that it profited most the entrepreneurs and led to emergence of ‘ big industrial houses”.
They conserved so much power that the future social, political and economic growth of country was to be decided in their favour. It shall not be exaggerating if we say that this War gave birth to that powerful group of industrial interests in India which replaced the British industrial interests in independent India.
And they had to exert the pressure in the same way as the British industrial interests had been playing under the aegeis of imperial rule.
The latter were exploiting the Indian economy to their metropolitan interests whereas to the former was left for exploitation the non-industrial population. Fourthly, the emergence of industrial interests also tied the fate of those industrial interests with the developed nations. They had to depend upon them. It is not the place to describe in detail, but it was this factor which preserved the oft-quoted “neo-colonialism” in India.