Deindustrialisation

India in the 19th century saw the establishment of the British as the political paramount. Their subsequent policies had a deep impact on every aspect of the Indian economy. One such impact was on the traditional industries, which underwent a steady decline due to the policies of the British. It was this process, which came to be referred to as the process of ‘deindustrialisation’. However, this process of deindustrialisation of Indian industries has become a major focus of recent academic debates.

The debate over the process started as early as the late 19th century itself, between nationalist economists, and British economists and imperialists. The British imperialists and administrators argued that British rule had beneficial effects. They attributed the failure of an Indian economic response to the industrial revolution, to Indian society’s ‘other-worldliness’, its lack of initiative and enterprise, its exclusiveness and the caste system. Opposed to this view were nationalists like R.C. Dutt and Dadabhai Nauroji, who postulated the view of a complete decline of Indian manufacturing industry with the coming of the British. Nauroji criticised the British for not establishing modern industry that could usher in an era of economic development. They argued that in the 19th century Indian manufacturing activity, especially cotton and silk textiles underwent a catastrophic decline. According to Dutta, this was because of the free-trade policy imposed by the British on India and the lack of tariff protection for the indigenous industries. As a result, the import of cotton goods trebled between 1870 and 1910 and Lancashire goods flooded the Indian textile market, thereby, having a disastrous effect on the indigenous industries.

 However, the basis of these arguments was often impressionistic, rather than statistical. The evidences taken up by the nationalists were from the speeches in the House of Commons and the ‘blue books’. The figures for domestic production and consumption were not available. In fact, what was classified as deindustrialisation was largely based on inference, and lacked much direct evidence. For instance, we can take up S.J. Patel’s argument, which on the basis primarily of census date from 1881 to 1931, postulated deindustrialisation giving rise to de-peasantisation, as indicated by the increase in the size of the landless agricultural labour force in this period.

This argument has been thoroughly criticised by D. Thorner. He stated that due to the changing classification criteria, Patel and others were able to exaggerate secondary employment in 1881 and underestimate it in 1931, and hence could see a steep deindustrialisation. The early census takers included many categories as engaged in secondary employment as being employed under the industrial sector, even people known as makers and sellers, part-time workers, women doing household work, etc. The relatively unchallenged view prevalent today considers a different concept, of the Full Time Job Equivalent. Using this, Thorner asserts that there was virtually no change in secondary employment in the census period. Thorner arrives at the startling conclusion that there was, over these fifty years, a 1% rise in the agricultural working population, and a 3% decline in the numbers of people involved in manufacture and trade. In other words, the occupational structure of India stood still.

However, Thorner’s viewpoints are not free of objections. Firstly, it was very difficult to separate the different categories of work in order to come up with a clear picture of the occupational structure of India. Further, Thorner remarks upon the remarkable fact that in a period when population increased by over 100 million, there was no significant change in the occupational structure. Thus, his analysis did not claim to establish anything concrete but it did help in destabilizing old certainties and proved that it wasn’t possible to quantitatively prove an absolute decline in industry solely on the basis of Census figures.

The next stage in the debate was set by M.D. Morris in his article “ Towards A Reinterpretation of 19th Century Indian Economic History”, who made theoretical objections to the older nationalist argument for deindustrialisation. He argued that the 19th century had seen significant economic improvement. There was expansion of agriculture, shift to high value crops, slow population growth and consequently a rise in per capita income.

Regarding the nationalist viewpoints, he argued that import statistics couldn’t be used as a basis for an economic theory. The Indian imports of Lancashire goods doesn’t tell the size of the domestic market, and an increase in imports doesn’t necessarily mean a decline in domestic industry – the market could be increasing, due to a rising population, rising purchasing powers, increase in per capita income, increase in per capita consumption, etc. A criticism of this view largely accepted today, is that there is no evidence for a rise in per capita income. Morris has been accused, perhaps correctly, of making generalisations at a macro level, which obscures spatial and chronological unevenness and specificities.

Another argument of Morris was that traditional textile industry in India benefited from increased imports of cheaper yarn, which helped it to compete with manufactured goods but more importantly reduced its cost of production. Thus, the price levels fell, the volume of marketed cloth expanded, and demand was deepened. This has been cautiously accepted by some other historians, as correct to a certain extent. However, as Toru Matsui points out, the cost of weaving for Indians was still higher, so Indian cloth was still more expensive than British imports. Hence Indian weavers could survive only by using tactics like reducing their incomes, which led to their impoverishment, and a shift to producing coarser varieties of cloth in which British manufactures weren’t competing. Moreover, he says that the prices fell only because of the cheapness of the clothes imported from Britain and the weavers would have benefitted if only yarn would have been imported.

Bipan Chandra’s views emphasise the uniqueness and foreign nature of British rule in India and blame their policies for most of India’s economic ruin. The main thrust of the argument was that with the advent of British rule, and especially after the Charter Acts of 1813 and 1833, there was a sudden and quick collapse of the urban handicrafts industry. This was caused largely by competition with the cheaper imported machine-made goods from Britain. The ruin of Indian industries, particularly rural artisan industries, proceeded even more rapidly once railways were built. The cotton spinning and weaving industries were the worst hit; silk and woollen textiles fared no better, nor did the iron, pottery, glass, paper, metals, guns, shipping, oil-pressing, tanning and dyeing industries.

Another factor was the oppression practised by the English East India Company and its servants on the craftsmen of Bengal during the latter half of the 18th century, which compelled many of them to abandon their ancestral professions. In addition, there was a severe demand constraint on indigenous industrial produce. Firstly, the high import duties and other restrictions in British and Europe on Indian imports, combined with the development of modern manufacturing industries in British, led to the virtual closing of the European markets to Indian manufacturers after roughly 1820. Secondly, the decline of native rulers, the replacement of the indigenous ruling class by British officials, and general economic stagnation, particularly agrarian depression resulting from harsh land revenue policies of the British Indian government, all reduced domestic demand and greatly reduced the indigenous market for Indian manufactures. Thus British conquest led to the deindustrialisation of the country, and led to an increased dependence of the population on agriculture, transforming India into an agricultural colony of industrial Britain, whose principle functions were supplying raw materials for British industries, providing a market for British manufactures, and acting as an outlet of investment for surplus British capital.

In the 1970s and 1980s, the deindustrialisation debate was taken to a different level, when historians undertook comparative studies, and started highlighting regional variations in the impact of colonial rule on the Indian manufacturing sector. Prominent among such scholars was Amiya Kumar Bagchi, who studied deindustrialisation in gangetic Bihar, from 1809-11 to 1901. His two main references were the Buchanan-Hamilton Survey 1809-1811, which was an estimation of the size of the secondary sector in districts of northern Bihar in the early 19th century, and the census of 1901. On comparing these two data sources, Bagchi states there was substantial deindustrialisation in these areas in the census period – secondary employment declined from about 18% to 8.1%. In 1809-13, he estimates, the percentage of industrial to total population in the relevant districts of Buchanan-Hamilton’s survey ranged from 14.2% to 20.2%. The proportion of the industrial population dependent on cotton spinning and weaving was extremely high, ranging from 58% to 69.9%. In 1901, on the other hand, the population dependent on industry in the same region had shrunk to 5.5% – 11.6%, and the numbers dependent on cotton spinning and weaving to the industrial population was only 12.4% – 22.4%. Thus, the relative weight of the cotton sector in secondary industry – which it had dominated in the early nineteenth century – had contracted considerably by 1901. He goes on to say that it wasn’t only the cotton spinning and weaving industry that experienced a decline but even the silk industry and the dyeing industry got destroyed. The paper industry of Gaya and Shahabad contracted almost to the point of extinction.

Bagchi has been criticised on various grounds. Firstly, J. Krishnamurthy has thrown light on Bagchi’s methodological problem. He shows that Bagchi has only looked at data from four districts for his study. Further, the Buchanan-Hamilton Survey itself can be seen as impressionistic; many economists have pointed out major problems with this kind of a survey, based on the fact that in a multi-occupational structure, many individuals can seem to be employed in various kinds of activities simultaneously. In case of multiple sources of income, it becomes difficult to assign a household to any particular occupational sector, hence conclusions based on such surveys can be problematic. Secondly, one can point out that in the early estimates, part-time workers, women workers, seasonal workers, course goods producers, all were included in the figure for secondary employment, which hence seems high, compared to the later estimate, giving a picture of substantial deindustrialisation. Actually all of these wouldn’t have been full-time workers. This viewpoint has been supported by M. Vicziany as well.

Today, there is broadly agreement on four aspects of Indian deindustrialisation. Firstly, that it took place predominantly in the pre-census period, i.e. before 1881. Secondly, the peak period of deindustrialisation was 1850 to 1880. Thirdly, the improvement in the 20th century was in terms of aggregate output, not employment. Fourthly, there was great regional variation within the broad paradigm of deindustrialisation. East India saw the earliest and most drastic deindustrialisation, most notable examples being Dhaka and Murshidabad. There was less deindustrialisation in South India. In central India, it took place in the late 19th century: as Harnetty points out, by the end of the 19th century, the handloom share had declined to a quarter. Finally in Rajasthan, deindustrialisation took place in the early 20th century.

 

Konrad Specker stated that there was a decline in industry from the early to the late 19th century. However, he puts the blame for the decline on an agrarian crisis, fluctuations in agricultural prices and variations between food and cotton prices instead of blaming the British economic policies. A decline in agrarian output meant lower aggregate demand, which thus had an adverse effect on industry – for instance, the demand for and hence output of handloom products declined. Consequently weavers in the south suffered periods of depression, which constituted an important factor for the migrations overseas. He, however, emphasises the resilience of the domestic handloom sector, which received some compensation in the form of new export markets being created by the migration of Tamil-speaking people to Sri Lanka, Malaya etc. Moreover, he points out that all sectors of Indian manufacture didn’t suffer. For example, makers of Kanjeevaram saris benefited from using superior imported yarns. Some weavers thus created niche markets for their products, which were inaccessible to British goods.

Yanagisawa has also studied deindustrialization in South India and states that in the first three decades of the 20th century, the cotton mill production rose substantially. In order to counter this, the handloom sector developed alternative productions. Four types of alternative production emerged: fine-coloured cloths with high-count yarns, silk and sometimes jari or gold thread; coloured cloths woven with artificial silk yarn for lower-class consumption; coloured cloth exported abroad; and rough cloth with low-count yarns. The last of these shifts, towards coarse cloth production, was, according to Yanagisawa, largely a product of the late 1930s and the 1940s, and of war conditions. Yanagisawa also points to a shift in fashions, and consequently in demand and consumption patterns, that partly determined the shifts in handloom production. Production for female demand ( especially among the upper classes, where women’s clothes became costlier ) was one of these shifts, as handlooms began to cater to specific and new kinds of needs, supplying bodices and blouses. Demand for handmade saris also probably increased. Thus, the data generated by this study demonstrates that there was no decline in the south Indian handloom industry in terms of the number of looms despite the competition from indigenous mill-made cloth; in fact, the market for handloom production in certain products expanded. However, as Yanagisawa admits, the ‘economic condition of weavers may generally have worsened.’

Sumit Guha has analysed the Central Provinces. Until the 1860s, there was a flourishing textile manufacture and a large export trade in Central India. Nagpur was among the most prominent centers. Adverse changes, however, took place in the 1860s, as the prices of raw cotton soared. Local weavers dealing in coarser kinds of manufacture seem to have experienced a significant starvation of raw material, and a certain differentiation seems to have been generated by the shift to the production of finer fabrics, which were less affected by the boom in cotton prices. The dependence of C.P weavers on handspun yarn made this struggle all the more unequal. Between 1870 and 1895, two processes seem to be tied together. First, the weavers shifted to machine-spun yarn, and the spinning industry underwent a great decline. Spinning seems to have been reduced to a secondary or part-time occupation, often combined with agricultural labour.. Second, there was a distinct recovery in both the production and the consumption of handloom production, and the demand for coarse cloth picked up. Employment in weaving picked up, although the collapse of handspinning meant a definite fall in cumulative employment between 1870 and the twentieth century.

The spinning industry was obviously decimated, with handspinning being completely destroyed by 1900 and weaving labour seems to have in many cases undergone a considerable deterioration in its terms of existence in the twentieth century. The other side of the picture is output and productivity, which seems to have undergone a certain qualitative expansion over time. In its basic outline, this does not seem so very different from the south Indian case, where again the case against de-industrialization seems to rest largely on the increase and sophistication of output.

Finally, one can turn to recent writings on the subject of deindustrialisation with the most prominent among them being those of Tirthankar Roy. He tries to reject a rigidly Marxist understanding of the Indian economy, and looks at imports as part of the process of international specialisation, not just of imperialism as understood in the Marxist context. Throwing light on the integration of the Indian with the world economy, he shows that this didn’t have only negative effects; in certain sectors for instance, there was a reduction of costs. Thus he questions the very assumptions on which the Nationalist-Marxist views and analyses were based.

Roy states that the tendency to exaggerate deindustrialisation and the decline of the handloom sector has gone too far, especially for the 20th century; handloom production in fact shows an increase in market share in the 1930s. His data almost solely pertains to the 20th century, particularly the 1920s to 1950s. He suggests that the early nineteenth century provides a mixed picture, one that it is unsafe to generalize on the basis of. He calls for attention to the segmentation of the market, and argues that obsolescence ( caused by relative technological backwardness and cost-inefficiency in a context of international competition ) affected some sectors of the textile industry, while a wide range of crafts suffered no obsolescence of any kind, but rather a ‘commercialization’. Productivity increased, as did income, even as employment fell. The data for the productivity and the export of handloom cotton and silk goods, hides, skins, carpets and rugs from the early twentieth century all bear this out.

Making a theoretical objection to the Marxist understanding of international trade as necessarily disruptive, he expresses a preference for Adam Smith’s perspective, in which free trade can lead to international specialisation, making use of comparative advantages, increased division of labour, lowering of costs and hence an across-the-board increase in wealth. Imports of superior technology, superior product inputs (like thread, yarn, dyes) can actually benefit traditional industries, as can organisational changes, urbanisation, concentration of workers and production, specialisation, localisation etc. Organisational and scale advantages improve the weavers’ bargaining power vis-à-vis the suppliers of raw materials and the buyers of the produce. The competition from Lancashire etc. compelled the indigenous industry to innovate. While skilled weavers (like the Momins, Padmasalis) with a long tradition of weaving adopted better technologies to stay in business, the industry shed part-time and unskilled weavers. There was a greater adoption and especially diffusion of better technologies. For example, the flyshuttle was now used by approximately 50% instead of around 10%. This increased the productivity of the textile industry as a whole, which explains the decline in employed weavers despite an increase in overall output. Thus, Roy essentially argues that these handloom industries survived as a result of the major technological changes that helped in keeping the production stable and ensured that these products had a steady market. In fact by the 1940s, all fibres except wool accounted for nearly 50% of the market share. However, he does admit that as a result of this increasing technological shift the number of people employed in the industries had gone down.

He further argues that several traditional industries were basically not affected by British imports, such as leather, basket making, rope making, brassware etc. In the older accounts, the textile industry’s decline has been used to argue for a deindustrialisation of India as a whole, which generalisation can be questioned. Thus, he cautions against extrapolation from textile data alone. This assertion can, however, itself be questioned: the textile industry was the major employer, hence to some extent must be the central focus of any argument. Also, one can keep in mind that it was this very industry which was the vehicle of the first Industrial Revolution, in Britain.

Roy points to certain specific changes that defined commercialization in the Indian economy: long-distance trade expanded, regional markets integrated on an unprecedented scale, and contract law and private property rights came to characterize all economic relations. The important point here is that these processes held good as much for traditional industry as they did for modern industry. Production on contract for distant markets replaced earlier, non-commercial forms of production. In a context dominated by long-distance trade and the integration of markets, access to working capital and reliable information were indispensable. However, only a small number of entrepreneurs could command these resources, and they consequently expanded their business and managed to exert a tighter control over manufacturing processes. Capitalist relations thus evolved within the framework of traditional industry. Both part-time employment and household involvement in small-scale production declined, as specialization became the order of the day for labourers. Thus, argues Roy, there were ‘segments of decline and segments of growth’ within traditional industry in India, as was the case with all successfully industrializing nations. There was a genuine impetus and potential for growth from within the modernized and transformed ‘traditional’ sector.

While concluding, one can note that the debate on deindustrialisation has involved arguments over the very definition of the term itself. Emphasising different criteria of determining or defining deindustrialisation – such as industrial output, industrial employment, industry’s income, its share in the national income, the level of technology – leads to sometimes very different conclusions. The Nationalist-Marxists tend to look mostly at the employment and income aspects, hence they tend to see Indian industry declining or stagnating up until 1947. Recent writings, T. Roy in particular, have tended to emphasise technological innovations, productivity of labour, and total output. These naturally present a different picture. In light of these divergent views, one must exercise caution in making any sweeping generalisations about the state of indigenous industry in the Indian economy in the 19th and early 20th centuries. A balanced view must necessarily look at all the various factors on which the process of economic development is predicated, with due attention given to regional and chronological variations and specificities.