Impact of Industrialization in India
Industrialization of a country means to include manufacturing industries apart from agricultural industries to develop the country. A country that is only based on agriculture cannot develop as much as an industrialized country can. In fact, both are the pillars that bear the responsibility of improving and maintaining a stable economy for the country. Though industrialization has its own disadvantages affecting the environment and health of the people without proper industrialization, the country remains underdeveloped. It provides all the necessary elements for strengthening the economy of the country with its technological progress. Industrialization in India started in 1854 with the first cotton mill in Bombay. Since then India has always moved forward in its industry setup and thus making it a developing country from an underdeveloped one.
The economy plays a significant role in the growth of every country across the world. It is the economy that determines and separates the developed country from the underdeveloped country. The economy of the developed nation depends mainly on the industrial sector while the underdeveloped countries’ economy mainly depends on the agricultural sector. To revive the economic status, industrialization plays an instrumental role in bringing the economical shift in numerous countries across the globe and the same shift occurred with industrialization in India.
History of industrialization in India
During the colonial period, India followed the non-industrial model as a developing country. However, a significant number of Indians took this model as a hindrance towards growth and they opined that only industrialization could maximize the economic growth of the country. After independence, India’s first Prime Minister Jawaharlal Nehru employed the tool of industrialization to eradicate poverty from the country.
With the introduction of industrialization, there was a significant amount of growth through the flow of internal and external economies that pushed the country towards self-sufficiency. Further, the government realized that the potential of exports and agriculture was limited and hence taxation occurred based on the terms of trade. Heavy industry of the country was given attention by emphasizing import substitution.
The introduction of industrialization in India could only be catalyzed through the implication of a centralized and planned economy. The administrative control occurred with the foundation of The Industries Act 1951 which focused on the development and regulation of the industry.
While there were numerous East Asian countries building strong private sectors through the intervention of the state, India during the same period was focusing on state regulation over important industries. In the mid-19th century, industrialization in India went through two major shifts which were rural electrification and activism of the state in subsiding new seeds and fertilizers.
By the end of 1970, India was self-sufficient in grains with the success of the green revolution. Some of the major changes that occurred during this period were regulation on prices, nationalized banks, trade restrictions and squeezing of the foreign investment.
In the late 19th Century, economic reforms were launched to promote a competitive economy. The promotion of a competitive economy opened the door for foreign investment and trade. There was also a considerable amount of reduction in the use of import licenses and tariffs that encouraged the idea of global integration. Such changes enabled import-export trade to carry out business operations without the requirement of permit or license.
Ownership Pattern and Role of Industry
The progress of industrialization since the year 1951 has been the most important feature of economic development in India. This could be understood through the commodity composition of India’s foreign trade.
On one hand, the import of manufactured goods has been greatly minimized while on the other hand, import of India’s engineering goods has been maximized. Industrialization also brought the growth of managerial and technical skills which increased the efficacy in operations. There are three categories of ownership patterns which are followed by every industry as per their objective. These three categories of ownership have been discussed below:
Corporate Sector - Various forms of corporate companies fall under this sector which is further subdivided into the public corporate sector and private corporate sector. In the public corporate sector, there are public corporations and governmental departmental enterprises. Whereas, in the private sector there are both public and private limited companies.
Non-Corporate Sector - This sector involves the industrial units i.e. the units in which the owners are either partners or sole proprietor and HUFs ( Hindu Undivided Families)
Others - These industries include village industries units like manufacturing of khadi, sugar mills and similar other industries as such.
Thus, it can be stated that the role of the industry since industrialization had a major impact on the Indian economy.
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FAQs on Industrialization in India: History and Impact
1. What is the history of industrialization in India before independence?
The history of industrialization in pre-independence India began in the mid-19th century but was shaped heavily by British colonial policies. While Britain's own industrial revolution led to India becoming a source of raw materials and a market for finished goods, some modern industries did emerge. The process was characterised by:
- Pioneering Sectors: The first successful industries were cotton textiles (the first mill set up in Bombay in 1854) and jute textiles (the first mill in Rishra, Bengal, in 1855).
- Limited Diversification: Growth was largely confined to textiles, with the establishment of the Tata Iron and Steel Company (TISCO) in 1907 being a major exception that marked the beginning of the iron and steel industry.
- Colonial Constraints: Industrial growth was often hindered by discriminatory British policies, such as unfavourable tariffs and a lack of government support, which favoured British industries.
- Rise of Indian Entrepreneurs: Despite challenges, Indian entrepreneurs, particularly from communities like the Parsis, Marwaris, and Chettiars, played a crucial role in establishing and funding these early industries.
2. What were the key phases of industrial development in post-independence India?
Since independence in 1947, India's industrial growth pattern can be understood through four distinct phases:
- Phase 1 (1951-1965): Foundation and Growth. This was the strongest phase, focusing on building a strong industrial base. It was driven by the Industrial Policy Resolution of 1956, which emphasised the development of heavy industries and a dominant role for the public sector.
- Phase 2 (1965-1980): Structural Retrogression. This period saw a significant slowdown. Factors included the aftermath of wars, severe droughts, the global oil shock, and highly restrictive policies of the 'License Raj' which stifled competition and efficiency.
- Phase 3 (1981-1991): Recovery and Revival. The government initiated partial liberalisation and policy reforms to address the stagnation. This led to a recovery in industrial growth, setting the stage for major economic changes.
- Phase 4 (1991-Present): Post-Reform Era. Triggered by a balance of payments crisis, India launched comprehensive economic reforms in 1991. This phase is marked by liberalisation, privatisation, and globalisation (LPG), leading to increased foreign investment, competition, and diversification of the industrial sector.
3. Which were the pioneering industries during the early industrialization period in India?
The early phase of industrialization in India was dominated by a few key sectors that laid the groundwork for future development. The primary pioneering industries were:
- Cotton Textiles: This was the most significant early industry, with the first steam-powered mill established in Bombay in 1854. Bombay and Ahmedabad emerged as major hubs.
- Jute Textiles: Concentrated in Bengal, the jute industry was another pioneer. The first mill was set up near Calcutta in 1855, primarily serving the export market for packaging materials.
- Iron and Steel: A critical development was the establishment of the Tata Iron and Steel Company (TISCO) in Jamshedpur in 1907. It was India's first large-scale, privately-owned steel plant and a symbol of indigenous industrial capability.
- Other Industries: While smaller in scale, industries like sugar, cement, and paper also began to develop during this period, contributing to the diversification of the industrial landscape.
4. What were the major positive and negative impacts of industrialization on Indian society?
Industrialization has had a profound and dual impact on Indian society, bringing both significant advantages and considerable challenges.
Positive Impacts:
- Economic Growth: It has been a primary driver of India's GDP growth and helped transform the nation from an agrarian to an industrial and service-based economy.
- Employment Generation: Industries create a vast number of jobs, reducing dependency on agriculture and raising income levels for many.
- Self-Reliance: Development of domestic industries has reduced India's dependence on foreign imports for essential goods, from steel to pharmaceuticals.
- Infrastructure Development: The need for industries has spurred the growth of transport, communication, and energy infrastructure.
Negative Impacts:
- Environmental Degradation: Industrial activities are a major source of air and water pollution, deforestation, and contribute significantly to climate change.
- Social Inequality: The benefits of industrial growth have not been distributed evenly, often leading to a widening gap between the rich and the poor.
- Displacement of People: Setting up large industrial projects has often led to the displacement of local communities, particularly tribal populations, from their lands.
- Poor Working Conditions: In many unorganised sectors, workers face low wages, long hours, and unsafe working conditions.
5. How did the policies of the colonial government simultaneously help and hinder industrial growth in India?
The colonial government's policies had a contradictory effect on Indian industrialization. While their primary goal was to benefit the British economy, some actions inadvertently laid the groundwork for future industrial growth.
How they hindered growth:
- Discriminatory Tariffs: Britain imposed high import duties on Indian goods while allowing British machine-made goods to enter India with minimal tax, destroying traditional handicraft industries. This policy of 'one-way free trade' created an unfair competitive environment.
- Drain of Wealth: Resources and capital were systematically transferred from India to Britain, leaving little for domestic investment in industries.
- Neglect of Technical Education: The colonial administration made little effort to establish institutions for advanced technical and scientific training, which was essential for industrial innovation.
How they inadvertently helped:
- Introduction of Railways: The development of a vast railway network, though built to transport raw materials and troops, created a unified national market and the necessary infrastructure for moving industrial goods.
- Administrative and Legal System: The establishment of a modern administrative system, a common legal framework, and the use of English as a business language provided a stable foundation for modern corporate structures.
6. In what ways does the concept of 'de-industrialization' apply to India's economic history under British rule?
The concept of 'de-industrialization' refers to the process of social and economic change caused by the removal or reduction of industrial capacity in a country. This term is widely used by historians to describe the economic impact of British rule on India in the 19th century. It applied to India in the following ways:
- Decline of Traditional Handicrafts: India was historically a major exporter of high-quality textiles. The influx of cheap, machine-made textiles from British factories led to the collapse of India’s traditional handloom weaving and spinning industries.
- Shift from Producer to Supplier: India's role in the global economy was transformed from a producer of finished goods to a mere supplier of raw materials (like raw cotton and indigo) for British industries.
- Increased Pressure on Agriculture: Millions of artisans and craftspeople who lost their livelihoods had no option but to turn to agriculture for subsistence. This increased the pressure on land and led to widespread rural unemployment and poverty.
7. Why did early industrialization in India concentrate on specific sectors like cotton and jute?
The concentration of early industries in cotton and jute was not accidental but was driven by a combination of geographic, economic, and political factors:
- Abundant Raw Materials: India had a natural advantage in these sectors. The Deccan plateau region was ideal for growing raw cotton, while the fertile plains of Bengal were the primary source of raw jute in the world.
- Presence of Port Cities: The major centres for these industries, Bombay (for cotton) and Calcutta (for jute), were major port cities. This facilitated the import of machinery from Britain and the export of finished goods to international markets.
- Availability of Capital: Indian merchants and moneylenders who had accumulated wealth through trade (like the opium trade with China) were willing to invest their capital in these promising new industries.
- Demand and Market: There was a ready domestic and international market for both cotton textiles and jute products (used for packaging), ensuring profitability for the early industrialists.
8. Why is the period from 1965 to 1980 often considered a phase of industrial retrogression in India?
The period from 1965 to 1980 is termed a phase of 'industrial retrogression' or 'stagnation' because the industrial growth rate, which was robust in the first decade after independence, slowed down significantly. The key reasons for this slowdown were:
- External Shocks: India faced two major wars (with China in 1962 and Pakistan in 1965), which diverted national resources from development to defence. This was followed by the global oil price shocks of 1973 and 1979, which drastically increased the cost of energy and imports.
- Agricultural Failures: Successive severe droughts in the mid-1960s led to poor agricultural performance. This reduced the supply of raw materials to agro-based industries and decreased the purchasing power of the rural population.
- Restrictive Government Policies: The industrial licensing system, popularly known as the 'License Raj', became extremely restrictive. It created bureaucratic hurdles, discouraged private investment, and limited the ability of existing firms to expand, thereby stifling competition and efficiency.
- Infrastructure Bottlenecks: The performance of key infrastructure sectors like power and transport failed to keep pace with industrial needs, creating significant bottlenecks for production.
