EHI ASSIGMNMENT

Aashutosh Saini
Roll No. 33
Q. In what manner did the railways affect industrialisation and
employment creation in the Indian economy during the colonial
rule ?
( 20 marks )
Ans.

The introduction of railways in 1853 had a significant impact on the

Indian economy and its rapid expansion affected industrialisation and
employment creation in several ways. This network which covered most
of the subcontinent, radically altered India's transportation system.
Railways offered the possibility of greatly reduced transport costs as well
as reliability and speed. It was believed that this network would assist
the economic development of India and provide both a market for British
goods and a source of raw material.
EMPLOYMENT CREATION
Once in operation the railways offered substantial advantages over more
traditional modes of transport such as pack-bullocks, camels, boats and
human carriers. By reducing transport costs railways brought
considerable savings and economic benefits to India. Railways helped
Indian agricultural commodities to become competitive internationally
and made possible an enormous expansion in the export of products
such as wheat, rice, jute, leather, oilseeds and cotton. Before coming of
the railways, farmers used to grow a variety of crops in their land that
was basically meant for subsistence. This was due to limited
connectivity with other areas because of lack of a fast and effective
mode of transport. But now agriculture began to become
commercialized. Instead of producing solely for local market in which
price fluctuated, agriculturalists found that they could sell their surpluses
outside the local region. Thus agriculture output began to increase which
affected employment. The expansion of acreage generated by railways
led to a net increase in jobs in the agricultural sector.
The decline in transport costs also had an impact in the non agricultural
sector. In some regions it caused output and employment in certain
occupations to expand, in others to contract. Railways was one of the
major sources of employment creation in colonial India. It required so

many workers that by the late nineteenth century they constituted the
largest single employer within the modern sector of the economy. Yet at
the same time railways were creating jobs, they were the cause of loss
of jobs to many owners and operators of alternative means of long
distance transport who found themselves unable to compete with
railways. Whatever the absolute gain or loss in non agricultural
employment, in net terms railways did not alter the composition of the
labour force in the major sectors of non agriculture that is at the all India
level approximately the same percentage of total workers was employed
in trade , industry , and services at the beginning of the period under
the consideration as at the end. Similarly, the proportion of workers in
agriculture and non agriculture did not alter significantly, and India
remained a pre dominantly agricultural country.
INDUSTRIALISATION
Before the advent of railways, there were virtually no modern industries
in India. In the manufacturing sector the effect of railways on output and
employment was mixed. Railways played a major role in the growth of
India's modern industry by transporting raw materials at lower cost and
carrying finished goods to different markets. However the growth was
extremely limited. Heavy industries like the Indian railway workshop that
manufactured locomotives were not able to expand and grow during the
colonial period. That is why materials and manpower for railways were
imported from Britain which was promoting industrialisation there and
stagnation in India. The Government of India did little to aid or stimulate
the development of heavy industries or management skills within India.
The colonial government and the railway companies followed policies
from which British industry and financial institutions were the primary
beneficiaries and completely ignored India's industrial development. On
the other hand, with the introduction of railways small and local
industries that were earlier sheltered from competition by the high cost
of transport were forced to compete with industries outside the local
region.
Railways stimulated coal production but they did not provide the
demand to the coal industry that they did in other countries where
greater use of machinery and increased productivity consequently led to
lower coal prices. Though India had ample coal production but the rates
for transporting it by rail were very high and low price of labour
prevented the use of machinery for production. The rise in the railway
rates hindered Indian industries. Industries needed coal as their raw
material, though it was extracted for cheap but transportation increased
the final costs and hence it discouraged industries as they were not able

to compete with foreign producers who had the advantage of low costs
of transportation in their own country and low sea-rates to India. As a
result the spread affects from increased production of coal remained
limited. The industry was in 'comparative disadvantage'. The high rates
hit the infant industries, particularly those not located at the ports. Block
rates did impede the establishment of industries that would have served
internal markets.
CONCLUSION
Railways led to increased agricultural output, growth of modern industry
and miming, new jobs (although many jobs were lost) , redistribution of
urban population, higher incomes for some segments of the population
and numerous other economic changes. In the limited economic
development that India experienced before independence, railways
unquestionably played a major role. Without them, freight shipments
would have been much more expensive, more resources would have
been used to ship goods and fewer goods would have been transported
to internal and overseas markets.