EP-501, Evolution of Indian Economy Midterm

Submitted by: Prashun Pranav (CISLS)

An Overview of De-industrialization debate during British Rule

Introduction
The two hundred years long colonial rule had deep adverse impact on the rich and prosperous
India economically, socially and politically. Indian manufactured products were renowned in the
different part of the world due to their quality and antiquity. India had a variety of industries
producing one of the best qualities of textiles, gems, leather products etc. in the whole world.
the inter region trade was facilitated from 2nd century to 14th century through well developed silk
route which connected present day South and South East Asia to Europe via Central Asia and gulf
countries. From the period of King Ashoka to Mughal rule various travelers had given Indian
textiles and handicraft products significant places in their account. When Vasco de Gama
returned from India, he carried varieties of Indian made products and species to Europe with him
and earned huge profits by selling it there. Until 17 th century international trade was dominated
by India and China and both countries accounts for one third share in the world market. It has
been pointed out by Aditya Mukherjee that until 1820 India and China together had
approximately 48percent share in worlds total GDP (Mukherjee). The British East company
established in 1600 persuaded the local rulers with their permission started trade in India. It was
the Battle of Buxer in 1764 which laid the foundation of British Rule by providing them diwani of
present-day Bihar, Bengal and Orissa. In this term paper, we will try to analyses the
deindustrialization of India debate with the help of available literature.

Impact of Deindustrialization on Cotton Industry

The phenomenon of deindustrialization is reverse of industrialization on the one hand
industrialization leads to increase in employment in manufacturing or secondary sector on the
other hand deindustrialization is defined as a situation in which there is decrease in employment
of population engaged in manufacturing sector or secondary sector. Until 1813 East India
Company (EIC) had monopoly on trade in India. Indian textile industry was second largest
employer of people after agriculture. Work in textiles involves from converting cotton into yarn,
to weaving of clothes, washing, printing and dying it in different shades. Local textile industry
was so developed that it not only fulfills the demand of local market but also produces for world’s
export. Textile industry was one of the forerunners of industrial revolution in England. With the
invention of spinning ginny and power loom the production techniques got mechanized there. It
enabled Britain to produce clothes at low cost locally, hinted Indian made cloth severely. The
export of cotton cloth declined from 17 lakh kg yearly in 1801-05 to 2.81 lakh kg yearly in 1811-
15 from Kolkata only (Habib, Under Free Trade, 1813-57; Habib, Under Free Trade, 1813-57).
Between 1814-35 finished cotton pieces export from East Indies also declined drastically i (Habib,
Under Free Trade, 1813-57). Indian market was flooded with British good after the abolition of
monopoly of trade of East India Company in India. In 1815, the Britain’s cotton manufactured
goods export to India was only 0.8 million yards. After 15 years in 1830 it increased to 45 million
yards and in 1839 it reached to 100.5 million yards (Habib, Under Free Trade, 1813-57; Habib,
Under Free Trade, 1813-57). In monetary terms India’s import of cotton goods in 1840 was £2.22
million which increased to £4.97million in 1857 (Habib, Under Free Trade, 1813-57 80). It shows
that value of import of cotton clothes from England to India doubled in seventeen years. Britain
government sharply increased tariffs on import of Indian clothes into Britain. After industrial
revolution on the one hand British textiles enjoyed free access to Indian market and on the other
hand British government restricted import of Indian textiles by putting heavy duties and tariffs.
In 1835, Indian importer had to pay an import duty of 10percent on cotton goods, 20percent on
silk goods and 30percent on the woolen goods for importing goods in Britain where as in India
they paid only 3.5percent per cent for cotton goods and silk goods and only 2percent for woolen
goods. These high duties emerged as a second evil for Indian goods. According to an estimate by
Ellison, 3.4 per cent of Indian Textile market was captured by the British manufactured textiles
during 1831-35 but in next 25 years British manufactured textiles captured 35.3 per cent of Indian
textile market (Habib, Under Free Trade, 1813-57). At that time along with manufactured cotton
textiles Britain had also started to import cheap cotton yarn into Indian market. The lost
domestic market impacted Indian weavers severely. Since demand also decreased from
European nations, they had no more choice to continue sane level of production. It led to huge
reduction in their income which subsequently impacted their well-being and made their
condition deplorable. It has been pointed by Meghnad Desai that Indian weaver who were still
engaged in weaving would have to face approximately 43 per cent decrease in their total income
despite of having availability of relatively cheaper yarn imported from Britain between 1818-21
and 1829-31ii.Also alone in Madras Presidency there had been 35 percent reduction in the prices
of inferior variety of clothes and the net income of weavers decreased by 75 per cent.
Amiya Kumar Bagchi tried to analyze the extent of deindustrialization in Gangetic Bihar by
studying the percentage of population dependent on secondary industry in 1819-13 and in
1901.The East India Company specifically deputed Francis Buchanan Hamilton to study and
survey the natural resources present in different parts of India. His data on occupation of people
in Gangetic region provided a significant view of the population engaged in secondary sector
activities. In major citiesiii of gigantic region in Bihar 18.6 percent of total population was engaged
or dependent in secondary sector activities (Bagchi).IN 1901 total population engaged in
secondary sector activity in the Gangetic plain reduced to only 8.5percent (Bagchi).Since India
was the largest producer and importer of cotton goods before 18 th century its true that cotton
textile sector was impacted the most but other than cotton other the deindustrialization was
quite visible in other textiles like silk, wool and other industries like hand paper making, steel,
glass making etc.

Impact of Deindustrialization on Jute Handloom and Silk industry

The jute handloom industry was dominated in Bengal as cultivation of jute were carried out in
adjoining areas. Jute weavers used to produce jute bags, ropes and other stuff used for packaging
and handling materials. Due to its low-cost jute made products were very popular in Europe
which facilitates export from Bengal providing opportunities for thousand of people including
women. Due to growth of Jute industry in Scotland the export of finished jute products declined
significantly Europe started to import raw jute from India. In 1849-50 Indian export basket
constitutes only 0.49 per cent of raw jute but in 1872-73 the share of raw jute in Indian basket
increased to 7.33 per cent (Habib, Indian Economy, 1858-1914). According to Iran Habib jute
industry became almost invisible in Bengal by 1900 iv.
Indian silk clothes were very popular in European markets due to its quality and comfort. Bengal
was the area which involved in from rearing of silkworms, processing it into yarn and
manufacturing of silk clothes. This industry suffered a lot due to intense competitions from
European clothes. The export of mulberry silk reduced to one forth between 1867-68 to 1900-
01. In 1901, 1.15 million kilograms silk was imported from Europe to India. The import of silk from
Europe and reducing export of silk to Europe destroyed local as well as international market for
indigenous market for natural mulberry silk.

Impact of Deindustrialization on Iron, steel and glass industry

Other then textiles there were several other industries flourishing in India at the advent of
Britishers. These industries include iron and steel, glass industry, lac bangles and hand paper
industry. The quality of iron and steel produced in India was world renounced. People used
charcoal and their conventional method of smelting to produce iron and steel made goods. Late
nineteenth century saw an unprecedented import of goods made from iron and steel from
Britain. In India raised charcoal cost and reducing availability of wood also made the survival of
these industries tougher in front of the British iron and steel. In second half of nineteenth century
a native iron making center catering the local demand in United Province was wiped out of the
market by cheap British iron by 1864-65.These imports made thousands of small tool makers and
iron smiths who were surviving on traditional method of iron smelting and modeling (Habib,
Indian Economy, 1858-1914).Indian were also known to the method of paper making by hand
and after 1840 due to demand this industry stated to revive leading to the establishment of new
factories. They cater demand of paper in administration and education mainly. Secretary of state
Charles Wood ordered that all the papers used in the government offices will only be purchased
in England. This order became the prime region for decline of this industry (Habib, Indian
Economy, 1858-1914). In early 1900s there were some new mills which stated to compete with
imported paper. The bangles industries also suffered a lot both glass bangles and lac bangles
demand decreased in India due to the influx of cheap glassware from Europe.

Deindustrialization and Deurbanization

There were various cities throughout the country which were prime center of secondary sector
manufacturing activities. These were the place where one can find various trades, craftsmen,
artisans, workers engaged in various activities. Even the products produced in village households
were subjected to markets in these urban cities. The process of deindustrialization created
existential crisis for the city dwellers and the city. Various scholars have urged that India saw raid
deurbanization during the nineteenth century. Montogomery Martin first highlighted the process
of deurbanization while making some advice to the Britain parliament. He mentioned the ruining
of cities like Dhaka, Patna, Surat, Murshidabad and several other places. Dhaka was very famous
for muslin clothes all over the world. It provided jobs to 150000 people which subsequently
reduced to 30000-40000.Brirish government in its own report which was based on survey by
Buchman highlighted the decline of cities in almost all presidency. In that period population of
most of the cities reduced except Kolkata (Habib, Indian Economy, 1858-1914 84). Patna which
was an important city in Gangetic region had 312000 population in 1812 its population reduced
to 250000 in 1835 and in 1872 its population reduced to 158900.Almost the inhabitants in Patna
reduced to half in sixty years which indicates the loss of opportunities in the city which earlier
encouraged them to reside there. Murshidabad a city in Bengal indicated the starker pattern in
population decrease in cities. Here population reduced to only 24534 in 1873 from 165000 in
1812.Cesus data pointed the ruining of city by huge decrease in city population. Surat which was
one of the prime port cities during eighteenth century and an important location for textiles
industry witnessed its population was 250000 in 1811 according to official estimate it reduced to
124406 in 1816 and in 1851 it reached to 89505 according to local survey (Habib, Indian Economy,
1858-1914).
 Population Change in Major Cities
Patna Murshidabad Dhaka Surat
Year Population Year Population Year Population Year Population
1812 312000 1813 165000 1815 150000 1811 250000
1835 250000 1829 146000 1830 66986 1816 124406
1872 158900 1872 25534 1851 89505
Source: Prepared from Irfan Habib’s book Peoples History of India Volume 25, Page number: -84,
which was compiled by various census and official estimates.

We can observe in case of Surat its population decreased by more then 50 percent between 1811
to 1816 which also indicated towards influx of British goods and less availability of work in cities
after ending of monopoly of trade of company in 1813v.Since it was the port cities it felt the shock
immediately and more severely. These reduced population of cities intensifies pressure on
agriculture. The proportion of people directly dependent on agriculture increased. An estimate
by Dharmendra Kumar shows five percent increase in people engaged in agriculture in1901 from
1801 in Madras presidency (Habib, Indian Economy, 1858-1914 85). It’s also true that there were
some new cities developing due to development of some modern industries but the population
engaged or dependent on these industries were quite low as compared to the proportion of
people who lost their work due to deindustrialization.

Contesting views about deindustrialization of India during British Rule

The phenomenon of deindustrialization of India first put forwarded by nationalist scholars remain
uncontested almost for half century. One of the initial investigations of alleged
deindustrialization of India was done by Danial Thorner in 1962 and by Morris D Morris in
1963.He considered census data to verify the claims and concluded that there is no sound basis
in census data that can verify the claim of sustained deindustrialization during 1881-1931. But his
analysis was myopic due to two reasons one was his definition of deindustrialization and second
was the limited time frame. He only compared the data of forty years but the proponent of
deindustrialization theory claimed this process since starting of 1880s.considering ratio of
population engaged in secondary sector to total population as parameter for deindustrialization
was not appropriate as this ratio can increase even if we have constant population in secondary
sector and there is decline in population which was the case for India in nineteenth century. Also,
his basis for classification of workers into different group was critically challenged by
Raghabendra Chattopadhyay (Chattopadhyay).
American Scholar Morris D Morris believed that the claim of destruction of livelihood to Indian
Textile workers was not valid and he provided three reasons to support his argument. First, he
considered that there will be increase of demand of textiles clothes due to price fall due to
increased competition from British imported goods. Second, he argued that consumption of cloth
increased due to low cost and now Indians can afford more clothes so local manufactures could
coexist because only import cannot fulfill the increased demand. Third he argued that availability
of cheaper imported yard helped local industries to compete with foreign goods. These claims
were not relevant as cost of production didn’t decrease for local manufacturers and increased
export of raw material to Britain made situation more challenging for them. Colin Simmons
critically raised questions about the claims of professor Morris and also to the nationalist
economic historians and tried to present his view in his article about debate of deindustrialization
and industrialization of Indian Economy (Simmons).

Alternative View by Tirthankar Roy

The claim of decline of traditional manufacturing industries was also contradicted by Tirthankar
Roy in his essay (Roy). He has presented the view that net effect of deindustrialization was not
negative. He is of view that this industry due to changing market conditions changed their own
character and organization and survived during British India. He tried to contradict basis of claims
made by Amiya Kumar Bagchi and Bipin Chandra. He has taken national income, industrial
employment and textile industry. He urged that due to market segmentation textile industry
survived and it stated to cater the demand of specific population in the country. He also claimed
that national income increased in first half of twentieth century also technological backwardness
could not be blamed for deindustrialization. He agreed that it was indeed textile industry was
negatively impacted but this cannot to true for other industry and for whole economy. He also
questions the definitions of employment etc. used in various surveys and census by British. He
strongly believed that the changed organization of traditional industry during British rule helped
India post-independence to industrialize. The deindustrialization of Indian industry was balanced
by new capital-intensive industries (Roy). He said that the commercialization of agriculture
helped to get connected with world market increased the reach of Indian best quality products.
He believed that there were increased productivity and income in traditional industries and also
sustained competition.

Conclusion
The deindustrialization of Indian Economy during British Rule seems to be well intended process
by British to hamper the indigenous capabilities of Indian Economy to import cheap raw material
from here and to export finished good for Indian market. This process was carried by various
means like political affiliation, direct rule, unfair trade barriers and arbitrary market rules. This
process endangered the lives of millions and ruined many flourishing cities. However new
industries and infrastructure development like railways, telegraph etc. was restricted to limited
area with aim of deepening the root of the British rule in India. The newly developed industries
were not able to provide significant employment to masses and its geographical extent was very
limited. Some regions in Southern part of India were less impacted by deindustrialization due to
geographical and administrative regions (Habib, Under Free Trade, 1813-57). There were few
industries which evolved with time by changing its character to compete with British goods. The
intention of British rule India can be understood from the statement of East India Company given
in British Parliament:
“This company has in various ways, encouraged and assisted by our great manufacturing
ingenuity and skill, succeeded in converting India from a manufacturing country into a country
exporting raw produce” (Habib, Under Free Trade, 1813-57).

i
East Indies were areas of present-day Indonesia which includes Greater Sunda Islands and Lesser Sunda Islands.
ii
Meghnad Desai in his article demand for cotton textiles in nineteenth century India pointed out various dynamics
which changed the demand and supply of cotton textiles in India and in world market and its impact on the life and
livelihood of the people engaged in this sector.
iii
Francis Buchanan Hamilton included four districts i.e., Patna-Gaya, Purnia, Bhagalpur and Shahabad
iv
Irfan Habib in his book series A Peoples History of India’s 28 th volume Indian Economy, 1858-1914 described
about how flourishing jute handloom industry in area of Bengal disappeared within 50
years.
v
Charter Act of 1813 ended the monopoly of trade of East India Company in India and China except tea and coffee.
It provided access to Indian market to other English and European companies.
References

Bagchi, Amiya Kumar. "De-industrialization in India in the nineteenth century: Some theoratical
implications." The Journel of Development Studies (2007): 139. English.

Chattopadhyay, Raghabendra. "De-industrialisation of India Reconsidered ." The Economic and Political
Weekly (1975).

Habib, Irfan. Indian Economy Under Early British Rule. Vol. 25. New Delhi: Tulika Books, 2013.

—. Indian Economy, 1858-1914. Vol. 28. New Delhi: Tulika Books, n.d. English.

Mukherjee, Aditya. "Empire: How Colonial India Made Modern Britain." Economic and Political Weekly
(2010): 73–82. <http://www.jstor.org/stable/25764217>.

Roy, Tirthankar. "De-industrialization: Alternative View." Economic and Political Weekly (2000).

Simmons, Colin. "‘Deindustrialization’ Industrialization and the Indian Economy, 1850-1947." Modern
Asian Studies (1985).