Deindustrialization of India | Causes and Impacts

De-industrialization means ruining of industries. One of the major debates of modern Indian history revolves around this question. The nationalist historians like R.C. Dutta, R.P. Dutt, Tarachand etc. wrote that due to various economic policies of British and industrial revolution of England, the traditional Indian industries heavily suffered, though slowly but certainly. The colonial historians, however, refute this charge. Morris D. Morris, a US Scholar, called Deindustrialization a myth. It is also interesting to note that Deindustrialization was never seriously discussed by the nationalist leaders as they discussed the drain of wealth.

Even the literature of that period did not show any great concern on this issue. Statistically too, it is not easy to prove the extent of industrial ruin in the colonial regime as documents from villages, district towns related to local industries and a total number of employed people in it, and its role in the revenue generation is not available. Nevertheless, a historical analysis of industries in the pre-colonial era and colonial-era may help us in understanding the various aspects of Deindustrialization.

Indian Industry in the 17th Century

The seventeenth-century India had a balanced economy. Both agriculture and industry were developed and helped in the growth of internal and external trade. The Indian cotton and silk products were in great demand in England. “Almost everything that used to be made of wool or silk, relating either to dress of the women or the furniture of our houses, was supplied by the Indian trade” (Weekly Review, 1708, Thomas, P.J., pp. 30.). Besides, Indian indigo, pepper and saltpetre were also in great demand. Many people in England, especially the mercantilist and woollen and silk manufacturers cried foul and complained that Indian trade led to the export of wealth from England. Under the pressure of capitalists, the English government passed an Act in 1700 and banned all kind of cloth, silk, muslin and calicos (printed or dyed), not only of India but also of Persia and China. Despite the ban, the Indian goods continued to hit English and other European markets through smuggling mainly by the East India Company. In 1720, through another Act, a penalty of £5 was imposed on those who wore Indian silk or calicos and £20 on those who sold it. Louis XI, the King of France, through an order in 1726, announced capital punishment on smuggling of Indian cotton goods in France if a smuggler repeated the crime thrice.

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Causes of Deindustrialization

  1. The Industrial Revolution of England, which began in the 1750s and 1760s, was a great event of the modern world. It brought many positive changes for England and negative changes for India. The political defeat of Indians in the hands of English complicated the matters. After their victory at Plassey (1757) and Buxar (1764), the English East India Company exported raw material like cotton from India to Manchester and Lancashire mills. The Indian weavers were deprived of raw materials. Either it was not available to them or if available at a much costlier rate.
  2. The manufactured English goods, especially cotton cloth, were much cheaper as they were made in mills, whereas the Indian cloth was a handloom product, so relatively costlier. How long hands could have competed with machines?
  3. The Charter Act of 1813 ended the monopoly of East India Company except in tea trade and trade with China. Hundreds of English companies started coming and selling their products in a ‘free market’.
  4. Almost all European nations adopted the protectionist policy against Indian goods with an exception of Holland (the Netherlands). The European countries imposed heavy duties on Indian goods, as high as 200% to 400% on various items. In India, however, on English goods, the import duty was nominal, as low as 2-10%. This unequal competition ruined Indian industries. Thus, the political control over India was directly linked with the decline of industries.
  5. The annexation policy of British was also responsible for Deindustrialization. The local Rajas, Nawabs and their officials were regular customers of various indigenously manufactured items like cloth, swords, furniture and other household articles. The annexation of Indian states meant the loss of biggest market for Indian manufacturers. The new ruling class, the Governor-General, Governors, military officers, civil servants were English. Their taste was different. They preferred English goods, be it cloth, furniture, ink, paper, utensils, shoes or weapons. Even the rising Indian middle class copied the lifestyle of English and felt ‘proud’ and ‘modern’ in using English goods. The purchasing power of common Indian was very poor due to high rate of taxation, so they could not afford to purchase most of the manufactured items. Naturally, the Indian industries had no other option except to wait for their demise.
  6. The modern means of transportation, especially railways and roads, made the ruin of Indian industries almost inevitable. The mineral belt and agricultural production belt were connected with ports, through rails, road or both. Similarly, the ports were connected with the markets where English goods reached easily. This phenomenon brought a peaceful, but painful, demise of Indian industries.
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It is almost a fashion among the nationalist historians to blame always the British for all the ills in India. A retrospect was not honestly done. There were some internal weaknesses too, responsible for the ruining of Indian industries.

Firstly, the Indian manufacturer failed to find new markets. The Indian traders did not explore the other countries and continents. The element of adventurist trader was missing in India. Most of the Indian goods were handled by European companies.

Secondly, no Indian rulers, except Tipu, ever made any effort to formulate any trade policy or to implement it. They did, literally, nothing to improve trade and commerce, internally or externally. In their official meetings, they hardly discussed trade and commerce. For most of them, land revenue remained ‘primary’ and the ‘only’ source of income.

Thirdly, the Indian rulers never gave priority in making a powerful navy. The Mughals were based in north India, so navy, sea or commercial ship never became important for them. Though Marathas and Mysore had ships their ships could not match with the European ships. The Indian coastal trade was monopolised by the Europeans i.e., the English, Portuguese, Dutch and French in the eighteenth century. Once industrial revolution began in England, they started bringing English goods in India. Had coastal trade been under Indian control, it would have been difficult for them to bring their manufactured items in India.

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Impacts of Deindustrialization

  1. The unique oriental balance between manufacturing industries and agriculture was greatly disturbed. During the Mughal’s days, the peasants were also engaged in manufacturing activities, whole or part-time. Even for the state, manufacturing units were good source of revenue, apart from land revenue. But the ruining of industries made India primarily an agricultural economy, that too which supplied agricultural raw material to England.
  2. Pressure on agriculture and realisation of economy increased. The craftsmen and artisans who lost their employment had to rush towards agricultural field. They were ‘unwelcomed’, ‘unwanted labourers’. This resulted into subdivision of holdings, over-cultivation, encroachment on village pastures and forest land. It also led to disguised unemployment in rural areas which became a major area of concern for independent India planners. Abundance of labour class created unhealthy competition which led to undercut each other’s wages.
  3. It also brought loss to traditional Indian art and craftsmanship. Indeed, it was a great ‘cultural loss’ for India.