The de-industrialisation in India

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The term de-industrialisation is associated with the general reduction in industrial capacity. De-industrialisation is the economic development in which the reduction is seen in the manufacturing sector as a share of total employment. As per the Kaldorian perspective deindustrialisation can bring negative impact on the long-term growth of the economy considering the growth pulling nature of the manufacturing sector, especially in developing economies.. The process of de-industrialisation is an economic change in which employment in the manufacturing decline due to various economic or political reasons The decline in employment in manufacturing is also followed by the fall in the share of manufacturing value added in GDP. The process of de-industrialisation can be due to development and growth in the economy and it can also occur due to political factors. In other words, the term de-industrialisation means a general reduction in the industrial capacity and came into prevalence in India with the destruction of the handicrafts industry by external competition from British manufactured products during the 19th century.

Initial idea of Indian de-industrialisation came from Sir William Bentinck, who acted as the Governor-General of India between 1833 and 1835 and his policy significantly impacted the cotton industry of India. The effect of British cotton industry on Indian cotton industry was originally presented by Karl Marx in Das Capital.

The industrial revolution in Britain is followed by a significant decline in the artisan and manufacturing activities in the colonial and semi-colonial regions of the East such as India.

India economy before De-industrialisation

Prior to the colonisation of India, the country had reached significant fineness in the production of luxury products in the form of handicrafts. These luxury goods consisted of cotton, silk, and ivory which had a significant market in Europe. 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 the British wool industry.

The economic performance of India since late sixteenth century has been recorded through various travelogues of Europeans who visited India in 17^th and 18^th century. As per the travelogues, the subjective view on the economic conditions of India can be assessed. The travelogues suggested that the ruling classes and middle class merchants in India enjoyed high quality food and clothing, ornaments, and other imported luxury products. However, the labouring classes of India mostly lived in poverty, had mud huts with thatched roof, and consumed inferior food.. There has been various estimated on the economic conditions of India in the period between 17^th century and 19^th century. It is estimated that India economic condition was very poor in the 1500 and 1600 as suggested by the per capita GDP of $550 in 1990 prices which later declined to $553 in the early 19^th century On the other hand, it is also estimated these estimates are underestimated and the GDP per capita in 1600 can be in the range of $700.. It is widely believed that India under the rule of Akbar was most prosperous and seen significant economic achievements But, in 18^th century the per capita income reduced to only $600 and in 19^th century the economic condition of India worsened.

The period from 1600–1871 saw an annual population growth rate of 0.22 %. Industry and commerce grew rapidly during the same phase, driven particularly by exports. 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. Indian cultivators began extensive cultivation of maize and tobacco with increased yields due to improvements in the irrigation system. The growth in the agriculture sector expanded slowly and since it was the largest sector, total output growth was quite modest. The major exports in the manufacturing industry included steel, shipbuilding and textiles. This led to the steady reduction in GDP per capital during this period before stabilizing a bit in the 19th century.

Indian De-industrialisation

In the period between 1775–1800, significant innovations occurred in the British cotton industry which increase their total output and the cost of the production declined. It created significant challenges for the Indian produced cotton which was high in prices. In addition, during this time period the control and influence of British increased in eastern region of the globe and their control on Indian sub-continent increased significantly. Furthermore, the policies of the British rulers of these colonies considered the need of increasing the market for British produced cotton. The British cotton was often produced in surplus quantity by using sophisticated machinery and was exported to the British colonies. The British cotton faced unequal competition from indigenous cotton industry of the colonies. The prices of the British cotton industry were reduced to significantly to increase the dominance of the British cotton. It led to decline in the indigenous cotton industry of the colonies and the domestic activities associated with the production of Indian cotton fell. The fall of Indian cotton industry is one of the important factors behind the decline of Indian GDP under the British Rule. The standard of living of British increased from the middle of seventeenth century and at the same period, the standard of living India decreased significantly.

The de-industrialisation in India began gradually in 19^th century.. India was considered a major world exporter of textile and cotton in the early 18^th century, however, by the middle of 19^th century, it lost in dominance and domestic market to the British cotton The British Cotton industry saw a significant increase in its productivity due to machine-based production which increased the overall supply of cotton based products in global as well as domestic market and put a downward pressure on the prices. British cotton first took over the export market and then Indian market and led to fall in production of Indian cotton industry. The percentage of population dependent upon industry in Gangetic Bihar Region, a cotton industry hub, declined from 18.6 percent in 1809 to 8.5 percent in 1901.

In India, by 1920, the trade to GDP ratio declined and international trade reshaped the domestic structure of the economy. 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. 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.

Cause of de-industrialisation in India

The downfall of Mughal Empire also led to the problems of aggregate supply for Indian manufactured goods. Other explanations for causes include the revolution in world transport and productivity gains by Britain from cottage production to factory goods resulted in uneconomic production in India. This resulted in Britain initially gaining control over export market and then domestic market as well.

The fall in the hegemony of Mughals reduced the overall productivity of agriculture and reduced the supply of grains. The grain was the primary consumption good for the Indian workers and was non-traceable. 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. 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 British destroyed 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:

• Introduction of machine made goods in the Indian subcontinent at a cheaper rate, which led to the destruction of the traditional textile industry of India.

• Tariff policy opted by the British led to the decay of the handicraft industry, the British government started using preferential trade policies under which British goods were entering in India duty free or no nominal duty payment while Indian exporters had to pay high duty on export goods to British Mainland.

• Internal Causes, as there were no efforts made to explore products for the Indian markets, the international trade market was in the control of international traders, the manually skilled laborers and traders associated with it were at the pity of the international trade merchants as far as supply or demand propagation in international trade markets was concerned. The guilds or craftsmen organization was also definitely very weak in India as compared to other nations.

• Changes in social conditions that resulted in consistent decline in manufacturing employment that requires access to raw materials and natural resources.

• British rule establishment also resulted in the loss of powers of the craftsmen organization and other bodies that used to supervise and regulate the trade, which results in the fall down of raw materials as well as the skilled laborers which further results in the decline of market value of the products

• The abolition of court culture and urban aristocrats resulted in decreased demand for these handicrafts as product demand for these dried up.

Impact of de-industrialisation in India

The effect of de-industrialisation on the Indian subcontinent is difficult to observe before 1810. 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.

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 laborers 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.

As the economic growth was on much minor scale, the effects of this on countering the de-industrialisation are much smaller. As Amiya Bagchi aptly stated: “Thus the process of de-industrialisation proved to be a process of pure immoderate for the several million persons…” The reality is the group declination resulting from the process of de-industrialisation.

The de-industrialisation of India played an important role in the underdevelopment and increasing poverty of the country. The British led globalization 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 labor of land. The colonial policies associated with the land and taxation undermined ability of these poor peasants 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.

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