Deindustrialization

From the last quarter of the 19th century onwards, one of the major planks of attack on the British rule was the process of de-industrialization brought about by its policies. This process had three components: a) the handicrafts in which a large number of people were engaged and which had become an integral part of the economy started declining after the establishment of the East India Company’s rule and this continued without any hindrance into the 20th century; b) the loss in employment opportunities as a result of the decline of handicrafts was not fully compensated by the establishment of modern industrial units; c) consequently, the pressure of population on agriculture increased and the share of agricultural sector in total working population in both absolute and relative terms went up. In other words, there was a transfer of population from non-agricultural vocations to agriculture and allies activities. This was completely contrary to what happens when a country starts on the path of modern economic growth.

Till the beginning of the 19th century India was famous for its handicrafts all over the world. They were not only very important items of export, but a strong pillar of the Indian economy. They consisted of textiles, metal wares, artistic pottery, carpets, woodwork, etc. They provided employment opportunities and sources of income to a large number of people and helped develop artistic skills. They catered largely to the needs of export, aristocrats and other urban dwellers and the army.

In the rural areas there were cottage industries, catering mainly to the needs of the local people. They were cheaper and not very artistic or of high quality. They were based on locally available raw materials and skills and were produced for local market. There was a unity between agriculture and village industries. While agriculture supplied food and raw materials to artisans, the latter supplied implements, ornaments, pottery, cloth, furniture etc. The barter system prevailed in rural areas and there was very little use of money in the process of exchange. Thus, villages, to a large extent, were self-sufficient.

Among the industrial activities, the most important was the production of textiles, both cotton and woolen. The production of cotton textiles was spread all over the country. They were produced for daily use as well as for satisfying the needs of export markets abroad and the rich aristocrats at home. The Dacca muslin, known all over the world, was the symbol of excellence. Next to cotton textiles were silk cloths for which there was a craze in foreign markets. The woolen goods of Kashmir, Punjab and other areas were much in demand. Varanasi, Mirzapur, Moradabad, Nasik, Pune, Hyderabad, Vishakhapatnam, Lahore and others areas were famous for metal wares. Rajasthan was well-known for its enameled jewelry, stone carving and arms. 

All these handicrafts entered an era of decline in the second half of the 18th century with the establishment of British rule in India. It meant the weakening of social prestige and economic power of regional rulers. The disappearance of Indian rulers and their courts meant the cessation of almost entire volume of demand for artistic foods and a great deal of demand for other urban handicrafts. Handicraftsmen lost their patrons who had been giving them material help and encouragement to improve their skills and indulge in experiments to bring in new patterns and designs.

However, the remnants of the old aristocratic sections of the society survived but they could not reverse the declining fortunes of handicrafts. The surviving native rulers were either without the means to sustain their old habits and standards of living.

Industrial Revolution in Britain brought a radical change in the state of economic and commercial relations with India. With the emergence of factory system, the scale of production became unprecedently very large for which the British market was utterly insufficient, and, at the same time, great amounts of raw materials were needed, which could not be supplied by local sources. Thus Britain had to look to India for marketing manufactures and securing raw materials, minerals and food grains to feed its factories and a fast growing number of workers. Moreover, the British market had to be reserved mostly for its own manufactures. The impact of these changes was felt initially in the case of cotton textiles which was the first to experience the process of Industrial Revolution.

British manufacturers began putting pressure on their government to restrict the sale of Indian goods in Britain. Heavy duties were levied on the import of plain cloth. However, even then Indian silk and cotton textiles could not be displaced from European markets. The Battle of Plassey (1757), followed by the grant of Diwani of Bengal, Bihar and Orissa (1765), made the English East India Company virtual ruler. It began using the revenues from these provinces to finance its export trade. Political power was used to dictate terms to craftsmen to sell their goods cheaper, even at a loss, to the East India Company. They were converted into some sort of bonded labourers and forced to work for low wages and were forbidden to work for Indian merchants. The East India Company saw to it that it rivals, both Indian and foreign, were not in a position to compete with it and could not offer higher wages and prices to craftsmen. The servants of the East India Company monopolized the sale of raw materials and the result was that craftsmen were charged exorbitant prices.

After the Industrial Revolution began, heavy duties were imposed on Indian textiles trying to enter British market. The objective of the British government was to reserve and secure domestic market for British manufactures by imposing prohibitive duties on Indian goods. India was, thus, reduced from the state of a manufacturing to that of an agricultural country.

Up to 1813, Indian cotton and silk goods were highly competitive in British market. They could be sold at a price from 50 to 60 percent lower than those produced in Britain and could yet make a profit. H.H. Wilson noted: ‘It consequently became necessary to protect the latter by duties of 70 and 80 percent on their value, or by positive prohibition…British goods were forced upon her without paying any duty, and the foreign manufacturer employed the arm of political injustice to keep down and ultimately strangle a competitor with whom he could not have contended on equal terms.’

In 1813, the monopoly of the East India Company over trade with India was abolished to facilitate the unrestricted entry of British manufactures into India. The East India Company ceased to be a trading concern after 1833 and Indo-British trade from that time onwards came to be handled by private traders. While the British professed free trade in theory, so far as India was concerned, they practiced it only as regards their exports to it. the Indian products, entering British market, were subjected to heavy duties.

From 1850s onwards, railways were constructed in India and better roads were built. The opening of the Suez Canal in 1869 shortened the distance between Europe and India and, thus, the time taken in the transportation of goods. All these developments helped rural artisans who were till then protected because of the lack of transport and communication facilities to reach them and had, therefore, preserved the isolation of villages suffered. The armour of isolated self-sufficient villages was pierced and ultimately destroyed by steel rail. British manufactures which were much cheaper and much better led to a rapid decline in demand for the products of village artisans and they were rendered jobless.

With the rise of the railways, the importance of waterways declined and a number of centres of handicrafts situated on river banks ceased to be commercially significant. Mirzapur is a typical example of this.

Cities like Delhi, Murshidabad, Patna, Dacca, Lucknow and so on became politically much less important after the establishment of British rule and this adversely affected the fortunes of craftsmen. With the disappearance of old administrative establishments their population declined sharply. Hence there was a dearth of buyers for the handicrafts.

Ruined handicraftsmen became impoverished and failed to find alternative employment opportunities and had no way out but to become dependent on agricultural sector. In the rural areas, artisans had been already pushed out of their whole-time or part-time vocations and made to seek sources of livelihood in agricultural sector.

Indian nationalists during the 19th and 20th centuries, made the policies of the British government responsible for the decline of indigenous industries, leading to the process of de-industrialization and growing pressure of population on land. There have been, on the other hand, persons absolving the British rule of this charge by asserting that there is a strong likelihood that the traditional sector, generally speaking, did not decline absolutely in economic significance. It is even possible, they argue, that absolute growth occurred, thereby bolstering the expansionist forces in the economy. They also hold that due to the efforts of the British, pre-conditions for industrialization were created.

It was Daniel Thorner who tried to test the de-industrialization hypothesis. He investigated the phenomenon on the basis of the census data from 1881 to 1931. He did not deny that Indian handicrafts declined after the establishment of British dominance over the country, but this was the inevitable consequence of the Industrial Revolution and it was not a phenomenon peculiar to India but a world-wide development affecting different countries at different times.

Thorner formulated the hypothesis as follows: the decline of handicrafts continued well on into the 20th century, that it was not compensated by a sufficient rise in modern industry, and that in consequence the Indian economy became more and more agricultural.

Thorner argues that there was a possibility that there might have been a major shift of population from industry to agriculture between 1815 and 1880, but in the absence of suitable data nothing can be said with any measure of certainty. Further, even at the time of 1881 census almost 75 percent of the working force was engaged in agriculture and allied activities. Thus any large extent of de-industrialization was not possible. New employment opportunities in the secondary sector were created during 1880s onwards in modern industries set up in the country and they might have offset the falling unemployment opportunities due to the decline of handicrafts. Consequently, the occupational distribution of working force remained unaltered.

Thorner’s analysis and conclusions were challenged by Amiya Kumar Bagchi. He took a serious objection to Thorner’s contention that the decline of handicrafts was not a phenomenon peculiar only to India, but it was a world-wide phenomenon affecting different countries at different times. The ruin of traditional craftsmen was a painful, but inevitable consequence of the Industrial Revolution.

According to Bagchi, this contention ignored the difference in the impact of the industrial revolution on the developed and the underdeveloped countries. Bagchi argued that de-industrialization was the inevitable result of industrialization of developed countries of today during the 19th century because despite unprecedented productivity growth in advanced capitalist countries, sustenance of capitalist development in the 19th century required a continuous transfer of resources from the underdeveloped to the advanced capitalist countries.

He further argues that during the 19th century, in the countries of Western Europe their own industrial revolution led to the decline of traditional handicrafts but the people out of jobs were offered alternative opportunities in the newly emerging factories and related establishments. This was not the case in countries like India. Industrial Revolution in Britain had, for a long time, an adverse impact on employment and income in the secondary sector in India.

In Britain, the destructive effects of the development of the lead sector of the Industrial Revolution – the cotton mill industry – were not felt by a very large segment of the population because hand-spinning and weaving constituted a relatively smaller segment. As against this, points out Bagchi, in India hand-spinning and handloom weaving constituted the largest traditional non-agricultural activity and employed an enormous number of people. Hence destructive effects on this sector had a generally depressive effect on the rest of the economy.

Bagchi has challenged ‘the doctrine of ruin in traditional handicrafts’ on the ground that it is based on illicit generalization. Bagchi looked into the phenomenon of the decline of employment opportunities in the secondary sector in the areas of Gangetic Bihar (the old districts of Patna, Gaya, Shahabad, Monghyr, Bhagalpur and Purnea) during the entire 19th century. He came to the conclusion that there was de-industrialization whose impact could not be alleviated by the development of modern industries and other non-agricultural activities in and around Calcutta.

  1. Krishnamurty questioned Thorner’s conclusion on two counts, namely, the ambiguity of the concept of de-industrialization, and the objectionable quality of data used by him. He contended that industrialization and de-industrialization could only be defined in terms of changes in manufacturing output per capita or per worker engaged.

Krishnamurty brought in the pattern of output and the degree of capital intensity in manufacturing in his analysis. During the period 1901-51 the ratio of workers in manufacturing to total workers varied only from 8.9 percent to 10.4 percent. He further states, ‘In the context of such a limited change, the use of such terms as industrialization or “de-industrialization” can be quite misleading unless one is talking in terms of output or output per capita.’

Krishnamurty concluded that even though there was a decline in the employment opportunities in handicrafts, which was not outweighed by increasing employment opportunities in modern manufacturing sector, yet the total output to the relative share of secondary sector in national income might have gone up.

Raghabendra Chattopadhyay challenged Krishnamurty’s arguments. He objected to the inclusion of ‘the share of manufacturing in the total national output’ in the definition of industrialization or de-industrialization. Krishnamurty, on the other hand, rebutted Chattopadhyay’s assertion of de-industrialization as a measurable phenomenon as largely irrelevant. He stated that none of our estimates show sharp and sustained changes in manufacturing employment and the available output estimates do not suggest rapid growth or rapid decline during the period 1900-50 and for the period before 1900, given the quality of the output and employment estimates, no firm verdict is possible.

Morris D Morris believes that there was no de-industrialization. He – on the basis of certain statistical calculations – states that absolute employment in the handloom sector did not decline between 1800 and 1950.

According to Neil Charlesworth, in the book ‘The British Rule and the Indian Economy’, general statistic on the cotton industry suggests only about one percent factory production of cotton textiles exceeded that of handlooms.

Thus, there are some important reservations about the general extent of the de-industrialization process.

In conclusion we can say that the collapse of handloom industry was not a single uniform cataclysmic process. Areas like Bengal Presidency where British intrusion was the earliest, the destructive impact was felt more acutely. Secondly, as most of the handicraft works was combined with agricultural operations, it is hard to be precise about the number of industrially employed persons in the 19th century. The debate on the extent of de-industrialization in India in the 19th century continues till date.