Chapters :

Industry & Infrastructure – 01

Indian Economy Before and After Independence

The evolution of Indian industry will be analysed right from the colonial period. The current industries and its system was a result of British colonization and went through phases such as Disappearance of Indian cottage and handicraft industry, Industrial revolution, raise of Indigenous capitalists, emergence of heavy industries, until the present importance given to MSMEs and Atma nirbhar Bharat. In this chapter we will examine all the aspects in Industry sector.

India was a colony for long. Colonialism refers to a system of political and social relations between two countries, of which one is the ruler and the other is its colony. The ruling country not only has political control over the colony, but it also determines the economic policies of the subjugated country. Thus, the people living in a colony cannot take independent decisions in respect of utilisation of the country’s resources and important economic activities. India had the bitter experience of colonialism.

Indian Economy during the British Period:

Indian’s sea route trade to Europe started only after the arrival of Vasco da Gama in Calicut, India on May 20, 1498. The Portuguese had traded in Goa as early as 1510. In 1601 the East India Company was chartered, and the English began their first inroads into the Indian Ocean. In 1614 Sir Thomas Roe was successful in getting permission from Jahangir for setting up factories and slowly moved all parts of India.

Hundred years after Battle of Plessey, the rule of the East India Company finally did come to an end. In 1858, British Parliament passed a law through which the power for governance of India was transferred from the East India Company (EIC) to the British crown. Even the transfer of power from the East India Company to the British Crown did not materially alter the situation.

Britain had exploited India over a period of two centuries of its colonial rule. On the basis of the form of colonial exploitation, economic historians have divided the whole period into three phases: namely the period of merchant capital, the period of industrial capital, and the period of finance capital.

Period of Merchant Capital:

  • The period of merchant capital was from 1757 to 1813.
  • The only aim of the East India Company was to earn profit by establishing monopoly trade in the goods with India and the East India’s.
  • During this period, India had been considered as the best hunting ground for capital by the East Indian Company to develop industrial capitalism is Britain.
  • When Bengal and South India came under political shake of the East India Company in 1750s and 1760s, the objective of monopoly trade was fulfilled.
  • The company administration succeeded in generating huge surpluses which were repatriated to England, and the Indian leaders linked this problem of land revenue with that of the drain. Above all, the officers of the company were unscrupulous and corrupt.

Period of Industrial Capital:

  • The period of Industrial capital was from 1813 to 1858. During this period, India had become a market for British textiles.
  • India’s raw materials were exported to England at low price and imported finished textile commodities to India at high price. In this way, Indians were exploited. India’s traditional handicrafts were thrown out of gear.

Period of Finance Capital:

  • The third phase was the period of finance capital starting from the closing years of the 19th century and continuing till independence. During this period, finance imperialism began to entrench itself through the managing agency firms, export – import firms, exchange banks and some export of capital.
  • Britain decided to make massive investments in various fields (rail, road, postal system irrigation, European banking system, and a limited field of education etc) in India by plundering Indian capital.
  • Railway construction policy of the British led to unimaginable as well as uneconomic. The poor Indian taxpayers had been compelled to finance for the construction of railways.
  • The political power was handed over to the British Government by the East India Company in 1858.

Decline of Indian Handicrafts:

  • The Indian handicrafts products had a worldwide market. Indian exports consisted chiefly of hand weaved cotton and silk fabrics, calicoes, artistic wares, wood carving etc.
  • Through discriminatory tariff policy, the British Government purposefully destroyed the handicrafts.
  • With the disappearance of nawabs and kings, there was no one to protect Indian handicrafts. Indian handicraft products could not compete with machine-made products. The introduction of railways in India increased the domestic market for the British goods.

Process of Industrial Transition and Colonial Capitalism:

This process of industrial transition in India during the British period can be
broadly classified into two as given below:

  1. Industrial growth during the 19th century
  • During the 19th century, British investors started to pioneer industrial enterprises in India as they had experiences of running industries at home. British enterprises also received maximum state support.
  • Although the Britishers initiated industrialisation process in the 19th century, they were primarily interested in making profit and not in accelerating the economic growth in India.
  • At the end of 19th century, there were about 36 jute mills, 194 cotton mills and a good number of plantation industries. The production of coal had risen to over 6 million tonnes per annum.
  1. Industrial progress during the 20th century
  • During the first part of 20th century, Swadeshi movement stimulated the industrialisation process in India. The existing industries and new industries had maintained a slow but steady growth till the outbreak of the First World War in 1914.
  • By this time more than 70 cotton mills and 30 jute mills were set up. Coal production was doubled. The foundation of iron and steel industry was laid. Railway network was extended.
  • During the period 1924-39, various major industries like iron and steel, cotton textiles, jute, matches, sugar, paper and pulp industry etc. were brought under protection scheme. This led to rapid expansion of protected industries in India. These protected industries captured the entire Indian market and eliminated foreign competition totally.
  • Thus in the early part, British rule tried to transform the Indian economy as the producer of industrial raw materials and tried to capture Indian market for their industrial finished goods and thus started exploiting Indian economy in a different way.
  • Later on, British capitalists gradually developed various industries like, jute, tea, coffee, cotton and textiles, paper and paper pulp, sugar etc, in India for locational advantages and exploited Indian labourers extensively.
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