DE- INDUSTRIALIZATION IN INDIA –

The so called phenomenon of ‘ De –industrialization’ is the most argued topic

among the Economic Historians. In simple terms in the Indian context De-industrialization
means the collapse in the traditional industry or our ‘home industry’. Daniel Thorner defined
de industrialization as “a decline in the proportion of working population , or a decline in the
proportion of population dependent on secondary industry to total population”. The political
and economic changes that accompanied the British rise to power in India during the 19 th
century had a serious effect on the domestic manufacturing industries .The fate of Indian
industry before 1860 has usually been analyzed in terms of this phenomenon of de-
industrialization, with British rule seen as destroying handicraft industries and ruining their
work force by commercializing agriculture , promoting imports of manufactured consumer
goods and inhibiting India’s established exports of cloth.

The industrial revolution in the 19th century deeply affected the traditional industry of India.
The trade between India and the world increased dramatically and the modern industry in
Britain began to compete with the traditional industry of India. In particular , products of the
mechanized textile industry in Britain began to compete with the handmade yarn and cloth in
the Indian market. De industrialization is a theory that suggests the net effect of this ‘
globalisation’ was negative. The theory consists of four propositions : traditional industry
declined in India ; it declined because of technological obsolescence that is , it declined
because the hand –tools began to compete with machinery ; it implied that this battle which
occurred in the market place , was forced by Britain’s commitment to free trade as an engine
of growth ; closer economic relationship with Britain did create some modern industries in
India such as the textile mills , but this creative role of globalization did not compensate for the
destructive role that it played. Many economic historians argue that -One of the reasons why
modern industry did not grow enough is that , it was a kind of an implant rather than an
extension or evolution out of traditional industry. This topic is a heated debate mainly because
this case highlights the adverse impact of colonialism on India.

D.R Gadgil attributed the decline in handicrafts in three causes-

i. disappearance of the court culture of the Moghal days and old aristocracy .

ii. the establishment of an alien rule with the influx of many foreign influences.

iii. the competition from machine made goods.

In addition to this R.C Dutt held the view that the tariff policy pursued by the British
government as the leading cause or the ‘first among equals’ towards the decay of handicrafts’.
This tariff policy came to be known as ‘one way free trade’ policy which meant that what was
good and profitable for Britain was considered to be the same for India. Alarmed by the
consistent and steady growth of the Indian Cotton Industry Lancashire manufacturers seemed
insecure. So, The British House of Commons passed a resolution in the year 1877 that the
Indian Tariffs on British textiles being ‘protective’ in nature ‘are contrary to sound commercial
policy and ought to be removed’.

To quote from Romesh Chandra Dutt’s classic work ‘The Economic History of India under
British Rule’ : ‘”the East India Company and the British parliament following the selfish
commercial policy of a hundred years ago, discouraged Indian manufactures in the early years
of British rule in order to encourage the rising manufacturers of England . Their fixed policy ,
pursued during the last decade of the 18th century was to make India subservient to the
industries of Great Britain and to make the Indian producers grow raw material for the looms
and manufactories of England , English goods were admitted in India free of duty or on
payment of a nominal duty”.

Of course Britain too experienced a decline in its traditional industry , but the modern industry
played a compensatory role there. In India on the other hand the situation was different. To
quote PC Joshi , “ foreign economic penetration intensified , there was a ruin and
pauperization of the artisans there was an arrest in any kind of industrial development and
had put sharp limits to their conversion into an industrial working class”. In short the
industrial development was halted all over the country. The idea of de industrialization has
two distinctive roots. The first is an Indian Nationalist tradition represented by RC Dutt ,
Dadabhai Naoroji and the second root is Marxist theories of imperialism. This topic has not
only been the most popular worldview among historians but has also become a kind of an
unquestioned official ideology that has shaped the average sense of Indian history way
overwhelmingly. Almost all the school hold acceptable view that economic and political
changes from the 18th century did lead to a decline in some industrial activities and growth in
some others. The depth of this phenomenon seeks attention on the part of treatment done by
the colonial revenue policies , forced production for the market that broke up the village
communities altering the economic scenario of India characterized by the stagnation of the
economy and extreme poverty.

Three different sets of views have emerged round the process of de industrialization following
the evidence suggested by nationalist economists and foreign imperial scholars . One school
represented by Daniel Thorner tends to argue that de industrialization might have appeared in
the early 19th century but the evidence of industrialization was clearly visible in the last decade
of the 19th century and the early 20th century. Secondly , to the Us scholar Morris. D. Morris the
stage of de industrialization in India was highly difficult to find. National economists , however
had no doubt about this phenomenon. In support of their assertion , nationalists like R.C.Dutt
relied on external trade statistics which indicated a rapid growth of imports of broadcloth in
conjuction with a decline in textile import. According to Morris.D.Morris , de industrialization
was a myth since it did not take place even in the early 19th century . Moriss.D. Morris argued
that nationalists index of de industrialization that is , external trade data could not stand as a
fair index. Further , nationalists did not take into account the ‘ compensatory effect ‘ of the
phenomenon . According to him, had there been de industrialization , village handicrafts would
not have survived long. Unfortunately , his arguments were more dubious as the village
handicraft industries survived mainly as an only occupation left to the artisans. Daniel Thorner
another prominent economist studied the notion of de industrialization in India during the last
phase of the 19th century. His presentation of the issue is threefold proposition to the effect
that decline of handicrafts in India continued not as a result in the rise of modern industry but in
consequence the Indian economy became more and more agricultural. He suggested that if
indeed a major shift from the industry to agriculture ever occurred during the British rule in
India , it might have been sometimes between 1815 and 1880. Following R. Chattopadhyay’s
own definition we can list down the following criteria for the study of changes in the economy –
i. change in NNP ii. Change in the ratio of manufacturing output to the total output (NNP).
and iii. Change in the ratio of manufacturing working force with respect to total population .
If all these three factors increase over the years we can define a process of industrialization .
Similarly, a decline in all these factors would indicate the process of de industrialization .

Amiya Kumar Bagchi has interpreted de industrialization as decline in the proportion of

population dependent on industry and in total population. He has based his estimation on a
detailed tables giving the number of common artisans prepared by Buchanan Hamilton from
his survey of different districts of Bihar over 1809-13. He came to the conclusion that in most
of the districts of India there was a rapid decline in the proportion of population dependent on
industry suggesting a de – industrialization. He argued that his de industrialization thesis is
true for the whole of India.

As the growth of modern industry was on a smaller scale , the effect this had in countering the
de industrialization was weaker. In the words of Amiya Bagchi : “thus the process of de
industrialization proved to be a process of pure immiseration for the several million persons”.