Development Experience (1947-90) and Economic Reforms since 1991
Current Challenges Facing Indian Economy
Development Experience of India
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Industrial sector on the eve of independence.

Due to unfair British policies, India’s world-famous handicraft industries declined and no corresponding modern industrial base was allowed to come up to take pride of place so long enjoyed by the former.

Deindustrialisation
As discussed earlier, the economic policies pursued by the colonial government in India were concerned more with the protection and promotion of the economic interests of their home country rather than the development of the Indian economy.  Deindustrialisation was only its extension.
Meaning of Deindustrialisation

It is the process of the reduction of production capacity and industrial activity in an economy or region.

Deindustrialisation in India

Britishers followed the policy of systematically de Industrialising India.

Motive behind the deindustrialisation by the British government

The primary motive behind the deindustrialisation by the British government was two-fold:
1. To get raw materials from India at a cheap rate and thus to reduce India to a mere exporter of raw materials to the British industries.
2. To sell British manufactured goods in the Indian Consumer Market which was now deprived of the supply of locally made goods.

How Britishers successfully implemented the policy of deindustrialisation in India?

  • Indian Industries are deprived of modern technologies for decades by the then British Government.
  • Colonial Government exported raw material to Britain, for meeting the increased demand of British industries due to the mass production revolution in Europe, this cause acute shortage and rise in the price of raw material for indigenous handicraft industry.
  • Unfair Trade policy: Government increased the export duty of finished goods causing a rise in the price of Indian Finished goods in the international market, hampers Indian handicraft industries.
  • The colonial government waived off Import duty on finished goods from Britain, due to which domestic handicraft industries had to compete with better quality and cheap machine-made products, and forced them to shut down in the absence of demand.

Modern Industries

  • During the second half of the nineteen, the modern industries began to take root in India,
  • Initially, this development was confined to the setting up of cotton and jute textile mills. The cotton textile mills, mainly dominated by Indians, were located in the western parts of the country, namely, Maharashtra and Gujarat, while the jute mills dominated by the foreigners were mainly concentrated in Bengal.
  • Some other modern industries namely (Cement, Paper, fertilizers and sugar) root up in India after II world war majorly in Madras Presidency.
  • There was hardly any capital goods industry to help promote further industrialization in India.
    • The iron and steel industries began coming up at the beginning of the twentieth century. The Tata Iron and Steel Company (TISCO) was incorporated in 1907.

Shortfalls of Industrial Policy of Britishers:

 The growth rate of the new industrial sector and its contribution to the Gross Domestic Product (GDP) remained very small. It was no substitute to the near wholesale displacement of the country’s traditional handicraft industries.

Another significant drawback of the new industrial sector was the very limited area of operation of the public sector. This sector remained confined only to the railways, power generation, communications, ports and some other departmental undertakings.

There was hardly any capital goods industry to help promote further industrialisation in India.

Quick Acid Test

Britishers followed the policy of systematically deindustrialising India. The primary motive behind the deindustrialisation by the British government was two-fold:
1. To get raw materials from India at a cheap rate and thus to reduce India to a mere exporter of raw materials to the British industries.
2. To sell British manufactured goods in the Indian Consumer Market which was now deprived of the supply of locally made goods.

Before British Rule, India was particularly well known for its handicraft industries in the fields of cotton and silk textiles, metal and precious stone works etc. These products enjoyed a worldwide market based on the reputation of the fine quality of material used and the high standards of craftsmanship seen in all imports from India.

However, the following policies introduced by the colonial government significantly reduced the demand for handicraft products of India

  • Indian Industries are deprived of modern technologies for decades.
  • Colonial Government exported raw material to Britain, for meeting increased demand of British industries due to mass production revolution in Europe, this cause acute shortage and rise in price of raw material for indigenous handicraft industry.
  • Unfair Trade policy: Government increased export duty of finished goods causing rise in the price of Indian Finished goods in international market, hampers Indian handicraft industries.
  • Colonial government waived off Import duty on finished goods from British government. Due to which domestic handicraft industries had to compete with better quality and cheap machine-made products and forced them to shut down in the absence of demand.

There was hardly any capital goods industry to help promote further industrialization in India.

During the second half of the nineteen, modern industry began to take root in India,

Initially, this development was confined to the setting up of cotton and jute textile mills. The cotton textile mills, mainly dominated by Indians, were located in the western parts of the country, namely, Maharashtra and Gujarat, while the jute mills dominated by  the foreigners were mainly concentrated in Bengal.

Some other  modern industries namely (Cement, Paper, fertilizers and sugar) root up in India after II world war. But It was no substitute of wholesale displacement of Indian Handicraft Industry ruined by Britishers.

The growth rate of new industrial sector and its contribution to the GDP remained very small. Another significant drawback of the new industrial sector was the very limited area of operation of the public sector.

Modern industries which were in operation during the second half of the 19th century:

  • Cotton textile industries: Thesewere mostly set up by Indians and were located in Maharashtra and Gujarat.
  • Jute industries: These were mostly dominated by foreigners and mainly concentrated in Bengal.
  • Iron and steel industries:These were set up in the beginning of the 20th  The Tata Iron and Steel Company (TISCO) was established in India in 1907.
  • Sugar industry, cement industry and paper industry:These were set up after the Second World War mainly in Madras presidency.
  • Capital goods industry means industries which can produce machine tools which are, in turn, used for producing articles for current consumption.
  • Capital goods industry plays an important role in developing industrial base by providing new machineries and equipments for new production units.
  • The iron and steel industries began coming up at the beginning of the twentieth century. The Tata Iron and Steel Company (TISCO) was incorporated in 1907.