The economic de-industrialisation of India refers to a period of supposed reduction in industrial based activities within the Indian economy from 1757 to 1947.
The supposed deindustrialisation of India started when the Indian economy was colonised under the British Empire. The Indian economy was controlled under the British East Indian Company Rule from 1757 to 1858. This period mainly involved British protectionist policies, restricting sales of Indian goods and services within Britain while flooding Indian markets with low cost British goods and services, including the introduction of machine-made goods, without tariffs and quotas. By the 19th century, the British empire had replaced the Indian economy as the world's largest textile manufacturer. From 1858, the Indian economy was controlled directly under British imperial rule, also known as the British Raj. India continued to be occupied by the British until India gained independence in 1947.
Amiya Bagchi claimed, on the basis of controversial calculations that were later criticized by other scholars, [1] that the de-industrialisation processes observed in India were a product of colonial rule intentionally aimed at benefiting the British economy. The Industrial Revolution in Europe was dependent on a significant rebalancing of the artisan and manufacturing activities in several European colonies in Asia including India. [2]
Prior to the colonisation of India, the country had become a global leader in the production of luxury products in the form of handicrafts. These luxury goods consisted of cotton, silk, and ivory which had gained a significant market in Europe. [3] Before mercantilism, these products were transferred to the European market through Arab traders and these products were considered very significant in bringing gold, silver and other valuable exchange items into the Arab countries. During the period of Mercantilism, the link between European markets and Indian subcontinent became more direct and trade became easier. The rising import of Indian cotton into Europe created significant competition for and a decline in the British wool industry. [4]
The GDP per capita of India, as a percent of the British level, declined during the seventeenth and eighteenth century period from over 60% of the British level to 15% by 1871. [5] The period from 1600 to 1871 saw an annual population growth rate of 0.22%. In comparison to other nations, industry and commerce grew rapidly during the same phase, driven by exports to Europe. The production of Mughal India was around 25% of the global industry output in the early phase of 18th century. The major products exported to Europe included indigo, cotton textiles, spices, silks and peppers. The wealthiest province of Bengal Subah which generated 50% of the GDP and 12% world GDP was prominent in textile manufacturing, especially Muslin trade. [5] The major exports in the manufacturing industry included steel, shipbuilding and textiles. This led to the steady reduction in GDP per capita during this period before stabilizing a bit in the 19th century.[ citation needed ]
With the introduction of British East India Company and after collection of right to revenue rights, it stopped importing gold and silver earlier used in payment for exports from India. The period from 1780 to 1860 saw a dynamic shift in India's economy from a world leading processed goods exporter to the extraction and export of raw materials to Britain and buyer of manufactured goods from Britain. The leading export of fine cotton silk was shifted to colonially extracted raw materials including opium, indigo and raw cotton. The British cotton mill industries began to lobby their government for an import tax to India. The colonial infrastructure created by the British government, including legal systems, railways and telegraphs were mobilized towards resource exploitation, leaving industrial growth static and agriculture unable to keep up with natural population growth.[ citation needed ] The industry output from India declined rapidly to 2% of the world's output in 1900. Britain then replaced India as the largest textile manufacturer in the world.
The economy of the Mughal Empire is well known for building the Mughal Road system, establishing the Rupee as a standardised currency, and the unification of the country. [6] Prior to deindustrialisation, India was one of the largest economies in the world, accounting for approximately one quarter of the global economy. Mughal India is considered to be one of the richest periods among early modern Islamic cultures. [7] The Indian economy specialised in industrialisation and manufacturing, accounting for at least one quarter of the world's manufacturing output before the 18th century. [8]
The downfall of the Mughal Empire led to problems of aggregate supply for Indian manufactured goods. Britain's preferential trade policies, the redirection of global supply chains led to significant productivity gains for the country, with the change from local cottage production to factory goods. This resulted in Britain initially gaining control over first the Indian export market and then the domestic market as well. [9] India's post-1810 deindustrialisation followed the pattern seen worldwide as a result of European colonial occupation.[ clarification needed ]
The Company Rule in India refers to areas in the Indian subcontinent which were under the rule of British East Indian Company. The East Indian Company began its rule over the Indian subcontinent starting with the Battle of Plessey, which ultimately led to the vanquishing of the Bengal Subah and the founding of the Bengal Presidency in 1765, one of the largest subdivisions of British India. [10]
Under Company rule, large Indian markets were exposed to British goods which were sold in India without any forms of protection while local Indian producers were heavily taxed. Protectionist policies were set up by the British empire to restrict the sale of Indian good and services overseas although raw materials used in textile manufacturing such as cotton were imported to Britain factories and worked. [11] [12]
Following the annexation of Oudh under British rule in 1856, all of the Indian subcontinent up to the Himalayas and most of Burma was ruled by the Company or local rulers which were allied with the Company at the tie. [13] During the Company rule period, the British East Indian Company had established four main headquarters across the Indian subcontinent. The major British territories across the Indian subcontinent included the Bengal Presidency, Bombay Presidency, Madras Presidency and the North-Western Provinces. [14]
The Company rule and the expansion of the British East India Company continued up until the Indian Rebellion of 1857. Ultimately, the Company rule ended with the Government of India Act 1858 following the events of the Indian Rebellion of 1857, [15] although the British East India Company was formally dissolved by Act of Parliament in 1874. [13]
In the period between 1775 and 1800, significant innovations occurred in the British cotton[ where? ] industry which increased their total output and the cost of the production declined. This created significant challenges for cotton producers in India where prices were high. During the same time period, the influence of the British empire increased in the eastern hemisphere as did their control over the Indian sub-continent. British colonial rulers of India considered the need for increasing the market for British produced cotton. [2] British cotton was often produced in surplus quantity by using sophisticated machinery and was exported to the British colonies where it faced competition from indigenous cotton producers. The prices of the British cotton industry were reduced to significantly increase the dominance of British cotton, and unfair taxes were imposed on local producers. [16] [17] This led to a decline in the indigenous cotton industry of the colonies and the domestic activities associated with the production of Indian cotton fell. The fall of the Indian cotton industry is one of the important factors behind the decline of Indian GDP under British rule. The standard of living in Britain increased from the middle of the seventeenth century and in the same period, the standard of living in India decreased significantly. During the 1700s, Indian GDP was 60 percent of British GDP and by the end of the 19th century it decreased to less than 15 percent in comparison. [18]
The fall in the hegemony of Mughals reduced the overall productivity of agriculture and reduced the supply of grains. [9] The grain was the primary consumption good for the Indian workers and was non-tradeable. The reduction in the supply of grain resulted in the rise of its prices. This rise in prices and negative supply shock led to a rise in the nominal wages in the cotton and weaving industry. The increased competition from British cotton and rising nominal wages reduced the profitability of the cotton industry of India. Thus, the negative supply shock in agricultural production is also an important reason behind the de-industrialisation of cotton–industries.
The short run as well as long run impact on living standards and growth rate of GDP providing agriculture sector competitive advantage with strengthening of the productivity advance on the land at home or increasing openness to world in turn increases GDP in the short run.[ clarification needed ] [9] The causes of de-industrialisation are region or country specific as in the case of India in the 19th and 20th century. The colonial rule under the British led to the decline of textile and handicrafts industries through their policies and introduction of machine made goods in to the Indian market. Some of the causes of de-industrialisation in India during that period were:
The rule of the Indian economy under the British Raj refers to the period of the British's direct imperial rule over India from 1858 to 1947, which mainly arose due to revolt against the Company rule by Indians. This marked the formal conquest of India by the British. [2]
Under rule of the British Raj, the Indian economy was in a state of stagflation and further deindustrialisation while the British economy went through the Industrial Revolution. [19] Several economic policies implemented by the British Raj also caused a severe decrease in Indian handicraft (and handiloom) sectors of the economy, particularly resulting in a large decrease in demand for employees, goods and services. [20] Although the Raj did not provide capital to the British economy, due to Britain's declining position in the steel making industry in comparison to the US and Germany, the Raj had steel mills set up in India. [21] The Tata Iron and Steel Company (TISCO) first operated in Bihar in 1908 and later became the largest and leading steel producer in India in 1945. [22]
Large amounts of investments by the private and public British investors contributed to a revamped railway system in India, mainly being used for economic growth and military use. This led to the creation of the fourth largest railway system in the world. [23] At first however, the initial use of the railway system was by private British companies. In 1837, the first train used on the railway system for freight transport ran from Red Hills to Chintadripet bridge in Madras. [24] In 1853, the railway began to be used for passenger travel services from Bombay to Thane, eventually expanding throughout most of the Indian subcontinent. During the First World War, the trains were used to transport troops and grain to other countries such as Britain and South Africa, although by the end of the war, the railway system was largely deteriorated. [24]
During the Great Depression, the Indian economy was not significantly impacted and the government was mainly focused on the shipping of gold to Britain. [25] The most significant economic impact on the Indian economy was deflation, which directly impacted the debt of villagers, and overseas trading of jute in Bengal, a key trading element through the 1920s which had significantly decline during the early 1930s. Furthermore, declining prices of jute and other food crops severely impacted large scale farmers in India. In contrast, sugar became a largely traded crop and a successful industry in the early 1930s. [26]
The effect of de-industrialisation on the Indian subcontinent is difficult to observe before 1810. [9] The factory driven technologies for the production of cotton appeared between 1780 and 1820, but, India started to lose its dominant position as the exporter of cotton before this period due to low wages in the Indian cotton industry. It also acted as a catalyst in migrating work force from cotton industry to Indian grain industry. The production capacity of the Indian cotton industry started to decline due to the prevailing wage rate. Furthermore, Indian de-industrialisation is also hard to track due to its relatively low share of textile exports in the total textile production.
In India, by 1920, the trade to GDP ratio declined and international trade reshaped the domestic structure of the economy. [27] India became one of the major markets for the British made cotton yarns and cloths and became one of the large suppliers of Grain. The price of cotton decreased by more than a third in the 1900s as compared to the level in 1800. [27] The fall in prices of cotton significantly reduced the production of Indian hand spinning industry which is considered to be the most important specimen of de-industrialisation in India. The industrial revolution of the British cotton industry resulted in the globalization of its colonies as a mean to export excess production. This resulted in the fall the production of cotton in the indigenous industries of colonies due to low prices of British cotton and its derived products.
The large scale de-industrialisation brought far reaching impacts on the economy with loss to traditional economy, which was earlier considered as a blend of agriculture and handicrafts. Spinning and weaving functioned as subsidiary industries in the old economy resulted in differences to the interior equilibrium of the rural market. As an outcome, this led to manually skilled labourers shifting back to agricultural productivity and such overcrowding decreased the efficiency of agriculture sector as well. Land holding fragmentation, excessive cultivation and low-grade and infertile land utilization are the straight impacts of the same. It created a large base of underemployed and disguised rural unemployed. The number of workers engaged in agriculture sector increased from 7.17 crores to 10.02 crores in 1931 and industrial employed workers decreased from 2.11 crores to 1.29 crores during the same period. [28]
The de-industrialisation of India played an important role in the underdevelopment and increasing poverty in the country. The British-led globalisation of Colonial India led to the significant inflow of British cotton which led to falling in the output of the domestically produced cotton due to low prices. Consequently, the de-industrialisation process increased the unemployment of artisan and employees of indigenous cotton industry of India. The unemployed artisans and employees resorted to agriculture and it also contributed to the regression towards agriculture and resulted in the surplus labour of land. [27] The colonial policies associated with the land and taxation undermined ability of the peasant class to control and command the land. It pushed these peasants to take significant debt from non-cultivating moneylenders who charged significantly high interests and aided in the underdevelopment and poverty.[ citation needed ]
India became independent from the rule of the British Raj on 15 August 1947. [29]
India had undergone socialist reforms from the 1950s to 1990s. Prior to economic liberalisation, India experienced low rates of annual economic growth known as the "Nehruvian Socialist rate of growth" and low rates of per capita income growth. [30]
Numerous steel plants were set up in the 1950s by prime minister Nehru under the belief that India had needed to maximise steel production in order for the economy to succeed. This led to the formation of Hindustan Steel Limited (HSL), a government owned company and the establishment of three steel plants throughout the India during the 1950s. [31]
In 1991, the Indian economy underwent economic liberalisation. Through which, India transitioned to a more service and market based sector, with particular emphasis on expanding foreign and private investment within India. Furthermore, in response to deindustrialisation, liberalisation included reductions in import tariffs and taxes, as well as ending many Public Monopolies. [32] Majority of the changes were implemented as a condition for a $500 million loan by the IMF and World Bank to bail out India's government in December 1991. [33]
By the end of the 20th century, India had transitioned towards a free-market economy, through which there was a major decline of state control over India's economy and increased financial liberalisation. [34]
Prior to deindustrialisation, the Indian economy accounted for roughly 25% of the global economy. [35] [ need quotation to verify ] Economic data collected by the OECD shows that growth during the Mughal Empire's reign was more than twice faster than it was around five hundred years prior to the Mughal era. [36] Under the British Raj rule, from 1880 to 1920, the Indian economy's GDP growth rate and population growth rate increased at approximately 1%. [37]
Following deindustrialisation, India's share of the global economy had dropped to approximately 4% in the 1950s. [38]
India's annual growth rate remained approximately around 3.5% prior to economic liberalisation. Per capita income growth had averaged around 1.3% per year. [30]
India's GDP growth rate slowly increased to 7% in the 2018-19 period. [39]
During 2018, India became the fastest emerging economy in the world. India is predicted to return as one of the three largest economies in the world by 2034. [39]
By 2025, it is expected that the Indian working age population will account for at least one quarter of the world economy's working age population. [17]
By 2035, the five largest cities in India are expected to have economies similar in size to middle income economies. [17]
Amiya Bagchi considers the economic growth rate to have been insufficient to offset the trajectory of de-industrialisation, stating: "Thus the process of de-industrialisation proved to be a process of pure immoderation for the several million persons... [2] "
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: CS1 maint: location missing publisher (link)The economy of Bangladesh is a major developing market economy. As the second-largest economy in South Asia, Bangladesh's economy is the 35th largest in the world in nominal terms, and 25th largest by purchasing power parity. Bangladesh is seen by various financial institutions as one of the Next Eleven. It has been transitioning from being a frontier market into an emerging market. Bangladesh is a member of the South Asian Free Trade Area and the World Trade Organization. In fiscal year 2021–2022, Bangladesh registered a GDP growth rate of 7.2% after the global pandemic. Bangladesh is one of the fastest growing economies in the world.
The economy of India has transitioned from a mixed planned economy to a mixed middle-income developing social market economy with notable public sector in strategic sectors. It is the world's fifth-largest economy by nominal GDP and the third-largest by purchasing power parity (PPP); on a per capita income basis, India ranked 136th by GDP (nominal) and 125th by GDP (PPP). From independence in 1947 until 1991, successive governments followed the Soviet model and promoted protectionist economic policies, with extensive Sovietization, state intervention, demand-side economics, natural resources, bureaucrat driven enterprises and economic regulation. This is characterised as dirigism, in the form of the Licence Raj. The end of the Cold War and an acute balance of payments crisis in 1991 led to the adoption of a broad economic liberalisation in India and indicative planning. Since the start of the 21st century, annual average GDP growth has been 6% to 7%., India has about 1,900 public sector company, Indian state has complete control and ownership of railways, highways; majority control and stake in banking, insurance, farming, dairy, fertilizers & chemicals, airports, nuclear, mining, digitization, defense, steel, rare earths, water, electricity, oil and gas industries and power plants, and has substantial control over digitalization, Broadband as national infrastructure, telecommunication, supercomputing, space, port and shipping industries, among other industries, were effectively nationalised in the mid-1950s.
Around 500 BC, the Mahajanapadas minted punch-marked silver coins. The period was marked by intensive trade activity and urban development. By 300 BC, the Maurya Empire had united most of the Indian subcontinent including Tamilakam, which was ruled by Three Crowned Kings. The resulting political unity and military security allowed for a common economic system and enhanced trade and commerce, with increased agricultural productivity.
Certain historical time periods have been named "golden ages", where development flourished, including on the Indian subcontinent.
The Great Divergence or European miracle is the socioeconomic shift in which the Western world overcame pre-modern growth constraints and emerged during the 19th century as the most powerful and wealthy world civilizations, eclipsing previously dominant or comparable civilizations from the Middle East and Asia such as Qing China, Mughal India, the Ottoman Empire, Safavid Iran, and Tokugawa Japan, among others.
Proto-industrialization is the regional development, alongside commercial agriculture, of rural handicraft production for external markets. The term was introduced in the early 1970s by economic historians who argued that such developments in parts of Europe between the 16th and 19th centuries created the social and economic conditions that led to the Industrial Revolution. Later researchers suggested that similar conditions had arisen in other parts of the world.
The role and scale of British imperial policy during the British Raj on India's relative decline in global GDP remains a topic of debate among economists, historians, and politicians. Some commentators argue that the effect of British rule was negative, and that Britain engaged in a policy of deindustrialisation in India for the benefit of British exporters, which left Indians relatively poorer than before British rule. Others argue that Britain's impact on India was either broadly neutral or positive, and that India's declining share of global GDP was due to other factors, such as new mass production technologies or internal ethnic conflict.
The Great Depression in India was a period of economic depression in the Indian subcontinent, then under British colonial rule. Beginning in 1929 in the United States, the Great Depression soon began to spread to countries around the globe. A global financial crisis, combined with protectionist policies adopted by the colonial government resulted in a rapid increase in the price of commodities in British India. During the period 1929–1937, exports and imports in India fell drastically, crippling seaborne international trade in the region; the Indian railway and agricultural sectors were the most affected by the depression. Discontent from farmers resulted in riots and rebellions against colonial rule, while increasing Indian nationalism led to the Salt Satyagraha of 1930, in which Mahatma Gandhi undertook marches to the sea in order to protest against the British salt tax.
The Economy of India under Company rule describes the economy of those regions that fell under Company rule in India during the years 1757 to 1858. The British East India Company began ruling parts of the Indian subcontinent beginning with the Battle of Plassey, which led to the conquest of Bengal Subah and the founding of the Bengal Presidency, before the Company expanded across most of the subcontinent up until the Indian Rebellion of 1857.
The Mughal Empire was an early modern empire in South Asia. At its peak, the empire stretched from the outer fringes of the Indus River Basin in the west, northern Afghanistan in the northwest, and Kashmir in the north, to the highlands of present-day Assam and Bangladesh in the east, and the uplands of the Deccan Plateau in South India.
Weaving and cloth trading communities of Western India particularly of Gujarat are called Vankar/Wankar/Vaniya. The four major woven fabrics produced by these communities are cotton, silk, khadi and linen. Today majority of these community members are not engaged in their ancestral weaving occupation still some population of these community contribute themselves in traditional handloom weaving of famous Patola of Patan, Kachchh shawl of Bhujodi in Kutch, Gharchola and Crotchet of Jamnagar, Zari of Surat, Mashroo of Patan and Mandvi in Kutch, Bandhani of Jamnagar, Anjar and Bhuj, Motif, Leheria, Dhamakda and Ajrak, Nagri sari, Tangaliya Shawl, Dhurrie, Kediyu, Heer Bharat, Abhala, Phento and art of Gudri. Vankar is described as a caste as well as a community.
Since independence in 1947, the economy of Pakistan has emerged as a semi-industrialized one, the on textiles, agriculture, and food production, though recent years have seen a push towards technological diversification. Pakistan's GDP growth has been gradually on the rise since 2012 and the country has made significant improvements in its provision of energy and security. However, decades of corruption and internal political conflict have usually led to low levels of foreign investment and underdevelopment.
The Bengal Subah, also referred to as Mughal Bengal, was the largest subdivision of the Mughal Empire encompassing much of the Bengal region, which includes modern-day Bangladesh, the Indian state of West Bengal, and some parts of the present-day Indian states of Bihar, Jharkhand and Odisha between the 16th and 18th centuries. The state was established following the dissolution of the Bengal Sultanate, a major trading nation in the world, when the region was absorbed into the Mughal Empire. Bengal was the wealthiest region in the Indian subcontinent.
The history of cotton can be traced from its domestication, through the important role it played in the history of India, the British Empire, and the United States, to its continuing importance as a crop and commodity.
The textile industry in India, traditionally after agriculture, is the only industry in the country that has generated large-scale employment for both skilled and unskilled labour. The textile industry continues to be the second-largest employment generating sector in India. It offers direct employment to over 35 million people in the country. India is the world's second largest exporter of textiles and clothing, and in the fiscal year 2022, the exports stood at US$ 44.4 billion. According to the Ministry of Textiles, the share of textiles in total exports during April–July 2010 was 11.04%. During 2009–2010, the Indian textile industry was pegged at US$55 billion, 64% of which services domestic demand. In 2010, there were 2,500 textile weaving factories and 4,135 textile finishing factories in all of India. According to AT Kearney’s ‘Retail Apparel Index’, India was ranked as the fourth most promising market for apparel retailers in 2009.
The economic history of the United Kingdom relates the economic development in the British state from the absorption of Wales into the Kingdom of England after 1535 to the modern United Kingdom of Great Britain and Northern Ireland of the early 21st century.
Deindustrialisation refers to the process of social and economic change caused by the removal or reduction of industrial activity and employment in a country or region, especially heavy industry or manufacturing industry. Deindustrialisation is common to all mature Western economies, as international trade, social changes, and urbanisation have changed the financial demographics after World War II. Phenomena such as the mechanisation of labour render industrial societies obsolete, and lead to the de-establishment of industrial communities.
Muslin, a Phuti carpus cotton fabric of plain weave, was historically hand woven in the areas of Dhaka and Sonargaon in Bangladesh and exported for many centuries. The region forms the eastern part of the historic region of Bengal. The muslin trade at one time made the Ganges delta and what is now Bangladesh into one of the most prosperous parts of the world. Of all the unique elements that must come together to manufacture muslin, none is as unique as the cotton, the famous "phuti karpas", scientifically known as Gossypium arboreum var. neglecta. Dhaka muslin was immensely popular and sold across the globe for millennia. Muslin from "India" is mentioned in the book Periplus of the Erythraean Sea, authored by an anonymous Egyptian merchant around 2,000 years ago, it was appreciated by the Ancient Greeks and Romans, and the fabled fabric was the pinnacle of European fashion in the 18th and 19th century. Production ceased sometime in the late 19th century, as the Bengali muslin industry could no longer compete against cheaper British-made textiles.
The Mughal Empire's economic prowess and sophisticated infrastructure played a pivotal role in shaping the Indian subcontinent's history. While Mughal Empire is conventionally said to have been founded in 1526 by Babur, the Mughal imperial structure, however, is sometimes dated to 1600, to the rule of Babur's grandson, Akbar. The economy in the South Asia during the Mughal Empire era performed just as it did in medieval times, though now it would face the stress of extensive regional tensions. Mughal India's economy has been described as a form of proto-industrialization, an inspiration for 18th-century putting-out system of Western Europe prior to the Industrial Revolution. It was described as large and prosperous. India producing about 28% of the world's industrial output up until the 18th century with significant exports in textiles, shipbuilding, and steel, driving a strong export-driven economy. While at the start of 17th century, the economic expansion within Mughal territories become the largest and surpassed Qing dynasty and Europe. The share of world's economy grew from 22.7% in 1600, which at the end of 16th century, has surpassed China to become the world's largest GDP. Bengal Subah, the empire's wealthiest province alone, the province statistically has contributed to 12% of Gross domestic product and a major hub for industries, contributing significantly to global trade and European imports, particularly in textiles and shipbuilding.
The economy of South Asia comprises 2 billion people living in eight countries. The Indian subcontinent was historically one of the richest regions in the world, comprising 25% of world GDP as recently as 1700, but experienced significant de-industrialisation and a doubling of extreme poverty during the colonial era of the late 18th to mid-20th century. In the post-colonial era, South Asia has grown significantly, with India advancing because of economic liberalisation from the 1980s onwards, and extreme poverty now below 15% in the region. South Asia has been the fastest-growing region of the world since 2014.