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16, , De-industrialization Debate, , , , Ct, , sf de-industrialization is an economic change in which employment in, The process ¢ lines duc to various economic or political reasons. De-industrializati,,, ing declines due to Ve : a . : NG, manufacturing dee! f manufacturing and into agriculture fia, thy, , fine! ~ movement of labour out © ng a, , be defined as the mo See ee aera, : ae vane a general reduction in the industrial capacip,, , words, the term de-industrialization means a gene" sDaciy at, , en, , activity as, for example, it happened in the case of gale Oe the British rule, indigenous industries were destroyed in the face of external competition from Britis, manufactured products., , The decline in employm, of manufacturing in gross domestic pr, can be due to distorted pattern of deve, to political factors., , The historical de-in, is said to be a product of the colonial r, followed by a significant decline in the artisan and m, , ent in manufacturing is also followed by the fall in the share, roduct (GDP). The process of de-industrialization, lopment in the economy and it can also occur dye, , dustrialization process observed in India during the 19th century, ule. The industrial revolution in Britain was, anufacturing activities in India., , 16.1 Pre-colonial Period, Prior to the colonisation of India, the country had reached significant fineness in the, , production of luxury products in the form of handicrafts. These luxury goods consisted, of cotton. silk, and ivory which had a significant market in Europe. Before mercantilism., these products were exported to the European market and these products were considered, very significant in bringing gold, silver and other valuable exchange items into India., During the period of mercantilism [1], the link between European markets and Indian, sub-continent became more direct and trade became easier. The rising import of Indian, cotton into Europe created significant competition for the British industry., , The major products exported to Europe included indigo, cotton textiles. spices. silk, and pepper. The wealthiest province of Bengal was prominent in textile manufacturing., especially muslin trade. Indian farmers began extensive cultivation of maize and tobacce, with increased yields due to improvements in the irrigation system. The arowth in the, agriculture sector expanded slowly and since it was the largest sector, total output growth, Was quite modest. The major exports in the manufacturing industry included ste, shipbuilding and textiles. ©, , ie and Structural Shift in the Indian Economy itish, n the period between 1775 and 1800, significant innovations occurred in the Bat”, , cotton industry which increased their total output and the cost of the production decline®, , id
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De-industrialization Debate, , focused i, often prance surplus quantity by using sophi Cotton. The Briti, . . Is, , the British colonies. The British cotton fac, cotton industry of the colonies. The pri, significantly to increase the dominance :, en , of the Briti were red, ,diacnous cotton industry 0 : ritish cotton, y ¢ reduced, indigeno Stadt y of the colonies and the domest; It led to a decline in the, roduction of Indian cotton fell. Mestic activities associated with th, ie, , The factory-driven technologies f :, saa), Resultantly, Yndia abirted i Satan Se of Cotton appeared between 1780 and, acted as a catalyst in migrating workforce sali woth Position as the exporter of cotton. It also, , The de-industrializationof India played ton industry to Indian agriculture., (particularly in rural areas) and unemployment. important role in increasing poverty, the agricultural sector. The British-led ie a disguised unemployment in, significant inflow of British cotton which fed to fallin cA Tehama, produced cotton due to low prices. Sh Neca athe oomseiea ly, ee the Se Process increased the unemployment of, , ployees of indigenous cotton industry of India. The unemployed artisans, and employees resorted to agriculture and it also contributed to the regression towards, agriculture and resulted in surplus labour in land. The colonial policies associated with, the land and taxation undermined ability of these poor peasants to control and command, the land. It pushed these peasants to take significant debt from non-cultivating, moneylenders who charged significantly high rates of interest, thus aggravating the, problem of indebtedness in rural areas., , The period from 1780-1860 saw dynamic shift in Indi, processed goods to exporter of raw materials (opium,, importer of manufactured goods. Britain replaced India, manufacturer of the world. The downfall of Mughal Empire a, , demand for domestically manufactured goods., , ‘a’s economy from exporter of, indigo and raw cotton) and, as the largest textile, Iso led to the reduced, , 16.3 Causes of De-industrialization . / a, In the period between 1775 and 1800. significant innovations occurred in arg, cotton industry which increased its total output and th of the Ot es th, created significant challenges for cotton produced in i, addition, during this time period, the contro! and influer, , i ian su, n region of the globe and their control on Indian =, licies of the British rulers were ¢, , e cost, India, which was, nee of Britain increased in the, b-continent increased, imed at increasing the, , , , , , easter:, significantly. Furthermore, the po, , market for British manufactured goods., The colonial rule under British destroyed tex, , tile and handicrafts industries through, , ——
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110 Economic History of India: 1857-1947, , their policies and introduction of machine-made goods into the Indian Marker, Soy, the causes of de-industrialization in India during that period were as under: Me op, 16.3.1 External Causes: These were as follows:, , 1. Introduction ef machine made poods in the Indian sub-continent at, Which led to the destruction of the traditional textile industry of India,, ‘Tarill policy opted by the British led to the decay of tlhe handicrafts industry, The, British povernment slatted using preferential trade policies under Which Britis,, woods entered India either duty tree ot by paying nominal duty. Conversely, Indian, h duty on export of goods to Britain,, , 4 cheaper ra, ¢,, , nN, , , , exporters had to pay hig, 16.3.2 Internal Causes: These were as under:, 1. The guilds or craftsmen organizations were weak in India as Compared to othe,, comntties, particularly in Europe. British rule resulted in the loss of powers of the, ctafismen organizations and other bodies which used to supervise and regulate the, trade, which resulted in the decline of market value of the products,, Changes in social conditions that resulted in consistent decline in manufacturing, , tr, , employment,, , 3. The abolition of court culture and the disappearance of urban aristocrats resulted jn, decreased demand for handicrafts and luxury goods., , The existing literature primarily attributes India’s de-industrialization to. Britain’s, productivily gains in textile manufacture and to the world transport revolution. Improved, British productivity, first in cottage production and then in factory goods, led to declining, world textile prices, making production in India increasingly uneconomic. These forces were, reinforced by declining sea freight rates which served to foster trade and specialization for, both Britain and India. As a result, Britain first won over India’s export market and, eventually took over its domestic market as well. This explanation for de-industrialization, was a powerful weapon for Indian nationalist to lambaste colonial rule., , The dissolution of Mughal hegemony. affected manufacturing through several, channels. The first was a reduction in overall agricultural productivity. Reduced, agricultural productivity was reflected in increase in the price of foodgrains. To the, extent that foodgrain were the dominant consumption goods for workers and that the, foodgrains wage was close to subsistence, this negative productivity shock put upward, pressure on nominal wages in cotton spinning and weaving mills, Declining textile prices, and rising nominal wages put downward pressure on profits,, , Around the beginning of the 19th century, the fundamental economic dynamic, underlying de-ndustrialization in India changed from decline in agricultural productivity, taking place at home to globalization shocks induced by events abroad, Globalization is the, most popular explanation for India’s de-industrialization in the literature, and is an important, component of the historiography of colonial India constructed by the Indian nationalists,, , The economic logic underlying the de-industrialization-through-globalization hypothesis, is that rapid productivity gains in European manufacturing—led by Britain—lowered the, relative prices of textiles, metal products and other manufactures in world markets. The, European industrial leaders shared those productivity gains with the rest of the world as
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De-industrialization Debate, mented world i, bie supplies of Manufactures :, , made yarn and cloth took away India’s lowered \, 7 INdIa'S loc,, , ‘ Vorld pri, al market fro1 Prices. Cheap British facto, factory., , Mn her ow, 16.4 Consequences of De-industrialisati VN producers,, SiMalsation, , The large-scale de ir Striali, Bence -indu trializati, = zation Created f;, far rea, cl, , economy. It led to manually skj i ;, aoe Skilled | 8 adverse ‘pact on the Indian, E, , abourer a § back on agriculture, res Ung in, : Ss fall b k, vercrov ding and dec ease in the efficier cy of g Tic Ir cto ragmentation o and, ga griculture Sector. f, , g£ on of |, , and, , holdings, excessive cultivation, and, straight impacts of de-i on. and low-grade and inferti, ee pacts of de-industrialization. It cr infertile land utilization were, disguised unemployment in rural area Ho a large base of under employ ie, a al areas. adabha; 7 - yment, argued that India bec exes [2] Dadabhai Naoroji_ and histori 2 | ame progressively ruralized j ) historian R.C. Dutt, destruction of artisanal e cy ruralized in the 19th centu vi, : mployment by British factor OWING! 16 ‘the, , The de-industrializationof India led to und ‘d 'y-made goods., and unemployment in t ; derd evelopment and widespread poverty, a € country. In particular, the de-industrializati eet, increased unemployment among artisans and emplov de-industrialization process, who shifted to agriculture as a last resort TI "ole oyees of indigenous cotton industry, fend revenue: underrafived Ars seaifly ; he colonial policies associated with land and, , ability hese poor peasants to control 3, land. It pushed these peasants to debt trap of non-crltivating Hoe tesla tha a, high rates of inte i i Financ: sloractic a, i a i rest and indulged in other financial malpractices which, inter alia,, include adopting unfair means in the maintenance of accounts., , The idea that India suffered de-industrialization during the 19th century has a long, pedigree. The image of skilled weavers thrown back on the soil was a powerful metaphor, for the economic stagnation which Indian nationalists believed was brought on by British, rule. However. whether and why de-industrialization actually happened in India remains, open to debate. Quantitative evidence on the overall level of economic activity in India, , in the 18th and 19th centuries is scant, let alone its breakdown between agriculture., w assessments of de-industrialization rely on, , industry, and services. Most of the existing, , Very sparse data on employment and output shares., India’s textile producers—already well integrated, , faced a big negative price shock. Failing to keep up with, , growth achieved abroad, the Indian textile industry took the, nsued. As if this was not, , profitable, and de-industrialization ¢ Lal eae, Productivity-induced negative price shock was reinforce. 4 ‘ i, event. Trade barriers between India and its foreign markets decline, , the irausport revolution but also due to tariff policy - - among the econ, To sum up, there has been 4 long standing debate among, F ‘, , eatin t » sub-continent, One oft, regarding the slow pace of industrialization m Ws a ss a entreprencuts and the rapid, . 7 ig ess of th - af Ind deof enquiry is * retary pace of progress ¢ sources af Inc, s unsatisfactory P: : r, strides in progress by their western counterparts. European productivity, industrialization were both the globalization ely ) Indian agriculture, A . negative roduc, gains in manufacturing plus the newalve’ P, , induced by decline of Mughal Em, , d into the world textile market—, the factory-based productivity, price hit, became less, enough, the foreign, her powertul global, particularly due to, , ymic historians, he main points, , , , nati, Phe long-run, shocks due fo, tivily shocks (€, , pire.
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7 oN, , 412 Economic History of India: 1857-1947, , In short, de- :, o {i ying. two factors:, i: a ali machine made goods in the Indian subcontinent al, , which led to the destruction of the traditional textile industry of India., 2. Tariff policy opted by the British led to the decay of the handicraft industry. The, British government started using preferential trade policies under which British, goods were entering India duty-free or on nominal duty payment while Indian, exporters had to pay high duty on goods exported to Britain,, By 1860, India had completed the transition from being a net exporter to a ny, importer of textiles. By the late 19th century, India’s de-industrialization was over, and, the country began a period of slow re-industrialization., , industrialization in India during colonial period can be attributed Maj, : ain],, y, , 4 cheaper Tale, ,, , Endnotes, , 1, Mercantilism refers to a pre-classical school of thought believing in a commercial policy, under which generation of stock of precious metals like gold and silver through an export, surplus was the main objective. This school strongly supported tariffs, quotas, embargoes,, colonialism and strict navigation laws to build up national political and military power., Classical economists like Adam Smith (1723-1790) and David Ricardo (1772-1823) did not, approve of these restrictive ideas and instead advocated competition and free trade., The policy of mercantilism was pursued by almost all European countries in the 17th and, carly 18th centuries to increase wealth and power by encouraging export of goods in return, for gold., , As a school of thought, mercantilism advocated commercialisation and industrialization as, key objectives of economic policy of a nation. The mercantilists developed the balance of, Payments concept primarily because they considered it in the national interest to overbaiance, imports with exports and thus to acquire precious metals., , Pursuing the mercantilist approach, individual governments in Europe promoted large, investments in export industries; built high tariff walls to restrict imports which could be, produced domestically; restricted exports of domestic raw materials which could be used by, the domestic industry; interfered with the emigration of skilled workers; encouraged, immigration of skilled workers; and, in several cases, prohibited sales of precious metals to, foreigners., , Under mercantilism, one country’s gold gain almost always resulted in a gold loss to one of, its trading partners. Hence, all nations could not succeed at the same time. This resulted in, sharpened trade rivalries. When successful, mercantilist policies generally resulted in full, employment of a country’s resources and Jed to rapid economic growth, , Disguised unemployment is related io farming as a family occupation Small-sized farms, employ more workers than needed. Even if some hands are withdrawn from the farm, total, , output is not affected. According to American economist Ragnar Nurkse (1907-1959)),, , disguised unemployment exists when marginal productivity of labour, over a wide, , range, is, zero.
