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In 1900, overwhelming majority of India͛s manufacturing workers were employed in small scale
industries, which continued even after 100 years, with more than two-thirds of manufacturing
employment being labour intensive and located in small firms.

Some historians believe that shrinking employment in small scale industries during colonial period
was a sign of the decline of artisans in competition with machinery.

However in an alternative interpretation, small scale industries as a whole was a dynamic sector with
some sections in decline, where the declines were derived to a lesser extent from competition with
machinery and to a greater extent from competition within small scale industry b/w different types
of firms.

Small scale industry contributed to the process of industrialization, characterized by labour intensive
industrialization involving creative and efficient use of manual labour, rather than substitution of
labour by capital.

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͚Large scale industry͛ can be defined by 3 basic characteristics, relating to technology, organization
and government regulation.

1. It uses machinery and steam powered technology, or its relatively more capital intensive
sector in manufacturing.

2. It is organized in large factories, employing several thousand persons.

3. They satisfy the original definition of a factory.

By contrast, the family firm or the household is the standard type of industrial organization.
Compared to large scale industry, the firms in small scale industry were of smaller scale and usually
unregulated. For majority of these units, the products and technologies dated before colonial
period. This set can be called ͚traditional͛ small scale industry with important examples being
handloom weaving, leather manufacture and a variety of industries using metals, wood and
minerals.
There was also a set called ͚modern small scale industry ͚, which used machinery to a greater extent
and had a higher average scale. Modern small scale industry had significant growth in the inter-war
period. For e.g. foundries, cotton gins, jute presses, presses for extraction of edible oil, rice mills and
flour mills.

Most modern small scale industry supplied old products. Sometimes, however, new technology led
to a new product altogether. E.g. machine milled rice was seen as a distinct product from hand
pounded rice. Also money made in a traditional small scale industry was invested in starting firms
that were bigger in scale, technologically more developed, and more capitalized.

However the distance b/w modern and traditional small scale industry was narrow.


 

 c





Occupational statistics in India began to be collected and reported from 1881, but there are no
reliable series available using the censuses before 1911 as the level of detail and the definition of
work and workers had changed significantly b/w the earlier censuses. Important changes in the 19th
century in the case of traditional and modern small scale industry posed as a major limitation. There
was also problem with employment data. (Industrial units differ in terms of productivity of labour, so
that the share of any one type of industry in employment can be different from its share in the
income generated by industry).

There were two main sources of employment data, the census giving total employment in industry
and the statistics on officially registered factories, giving employment for these registered factories.
Employment outside the registered factories was located mainly in traditional small scale industry. It
can be assumed that most firms in modern small scale didn͛t register themselves. Employment
outside the registered factories will be treated as employment in small scale industry.

Industrial employment in India since 1911.

1. There had been increase in both industrial and total employment with slow and fluctuating
growth in the former.
2. Despite the stagnation in employment share, the share of industry in the national income
grew steadily.
3. Industrial employment declined during 1911-1931, mainly due to decline in employment in
small scale industry.
On the assumption that real income per worker in small scale industry was derived only from rise in
hours-per-worker, the estimated hours-per-worker increased by 34% b/w 1900-1947.

The process of decline of households and rise of wage-labour units had begun in the colonial period
was indirectly evident from the fact that women͛s participation in industrial employment dropped
and wages and productivity in small scale industry increased.

B/w 1901-1947, there were significant growth rates total and per worker income in industry with
faster growth rate in income per worker in SSI than LSI.

Productivity increased in handloom textiles, tanning and metal work.

 industrial location

Colonial period ʹ nearly half employment in SSI located in the United Provinces, Punjab and Madras.

Post 1947, western India͛s employment share in SSI increased significantly. But in Eastern India, SSI
employment was less important and decreased in respect of LSI employment.

Most important industry was textiles, employing 1 in every 4 workers, with food processing, metals,
wood products and hides and skins next in importance.




 


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The censuses from British period depict that b/w 1881-1931 industrial employment declined steadily
from about 20 M to 13-15 M (18% to 9%) and employment in agriculture increased from 71 M to
100 M (62% to 71%). Decline in industrial employment was concentrated in SSI.

According to S.J. Patel, de-industrialization i.e. the decline of handicrafts in competition with
machine made goods occurred in the late 19th century. Further work by Daniel Thorner and J.
Krishnamurty showed that these shifts in occupational structure were probably extreme and arose
from census definitions and that occupational structure hardly changed b/w 1881-1951.

Women͛s participation in industry declined dramatically in the census period.

Another explanation for small or negative employment growth yet income growth was change in
industrial organization.
Employment in SSI fell before Independence due to a shift from less specialized labour to firms that
used more productive and more specialized labour.

% " &'!()$"! ( !"#!$

Industrialization that doesn͛t replace artisans with machines but allows the artisans to work harder,
improve quality, raise productivity, and contribute to industrial growth was defined as Labour-
Intensive industrialization, according to recent research. While Britain experienced the dual process
i.e. 1) industrialization meaning mechanization and 2) a process that puts an end to labour-intensive
industry, India mainly experienced the second.

However it͛s argued that there were some obsolescence and some survival, suggesting 2 important
lessons.

1.) There͛s no single universal model of industrialization. (Industries can be shaped by local
factors, should motivate us to redefine the term to suit local conditions of resources and
tastes.)
2.) Artisans were not just vulnerable targets of the competition imposed on them from outside.
(They responded creatively to these forces, producing different goods of different quality,
access new markets, share knowledge, cut costs, shift locations etc.) Because of these
unique strengths, a straightforward substitution of labour-intensive industry didn͛t occur
globally either.

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+

At the end of WWI, 2.5 M handloom weavers, with total employment in industries connected with
hand weaving possibly about 3 M or more i.e. 20% of industrial employment. The cotton mill
workforce formed 3% of industrial workforce. Handlooms accounted for about 25%of the cotton
cloth produced annually in the 1st half of the 20th century. Along with cotton, silk and synthetics
(excluding wool), handloom͛s market share in total cloth consumption was about 50 in the 1930s.
Market share of handloom cotton cloth was roughly stable b/w the 1890s-1930s. Total production of
cotton cloth expanded about 30% b/w 1900-1938. Rising production and a constant loom suggested
increase in the productivity and capacity of the looms.
(Even in the presence of a wide productivity gap b/w the power driven loom and the hand driven
loom, the latter still survived. Following reasons -)

,

Competition b/w machinery and crafts limited to certain products. A part of what hand weavers
made was highly skilled and met specific wants, enabling handlooms to survive. In the mid 19th
century, 2 types of cloth faced keen competition from foreign or Indian mill cloth- coarse medium
cotton cloth and the printed and bleached cotton cloth. Fabrics using coarse or very fine cotton yarn
or non cotton yarn or complex designs woven on the loom tended to use the handloom. For e.g.
saris with particular types of border design. Handloom survived partly because those types of saris
continued to be in demand as these products were so labour intensive that the mills did not enter
into their production by choice or they used non cotton fibres that cotton mills didn͛t want to
handle. Thus handlooms dominated textiles made of silk and other fibres.

The survival of the artisanal textiles was to a large extent due to segmentation of the markets for
artisanal and mill made textiles, also the weaving industry was expanding in output and labour
productivity in the early 20th century. Output per loom nearly doubled b/w 1920-1940, violently
disrupted by WWI, creating an acute scarcity of yarn and imposing an inflation tax on buyers of cloth
and the Great Depression depressed rural demand.

Real wages of skilled and unskilled workers outside agriculture and manufacturing increased 50-60%.
Production of food grains was stagnant, but that of non food grains (including major industrial raw
materials) expanded. However in south India, agriculture weaving was doing well. In Bengal,
agriculture was stagnant and weaving in decline. The ideology of swadeshi and the growing
nationalist sentiments in the inter war period helped the handloom weaver. The Swadeshi ideology͛s
campaign against foreign yarn and for Indian mill cloth hurt the weaver who consumed a lot of
foreign yarn and competed with the mills. Also the impact was variable over space. (E.g. in Bengal
handloom weaving actually declined in period where Swadeshi sentiment was most intense)

Simultaneously there were changes in industrial organization and technology that strengthened the
production side of the industry.

-



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Around the 3rd quarter of 19th century, the usual form of industrial organization in handloom
weaving was the household. In a weaving family, adult men typically worked as weavers, adult
women on winding and sizing operations, and children as assistants in both weaving and winding.

In the next fifty years, a significant no. of handloom factories appeared in the textile towns, started
by rich weavers and merchants who had made money in the relatively new trades in cloth, yarn,
dyes, gold thread and silk and employed migrant labour. They used improved tools and concentrated
in major textile towns of western India.

The capital and labour involved in the handloom industry became increasingly mobile. There was
migration from rural regions towards new points of trade and towards the railways and spinning
mills. E.g. migration into textile towns in western India, such as Sholapur, Malegaon, Bhiwandi,
Burhanpur and Surat, where handloom weavers came from depressed and overpopulated regions
such as eastern UP and Hyderabad state.

There was an increasing adoption of several types of tools and processes in the early 20th century.
The efforts of provincial governments in popularizing these instruments and the endogenous
capitalist tendencies mainly encouraged technological dynamism. There was a change from the
throw-shuttle type loom(set up in a pit dug in the living room of a weaver͛s home)towards the fly
shuttle loom and a loom mounted on a wooden frame which took up less space, could weave longer
lengths of yarn, becoming popular with the handloom factories. Warp preparation changed (from
systems where by the warp was stretched out towards the use of a warp beam). The advent of
synthetic dyestuffs in place of vegetable and animal substances was slowly integrated into textile
production.

A final stage in this process of endogenous technological change was the power loom factory where
the better off weavers bought discarded power looms at scrap rates, reconditioned these and
started to replace their handlooms by power driven looms in products where such switch was
possible. The first such weaver owned power loom factory appeared in the handloom towns about
1900 and used fuel oil. It spread faster in 1930s and by 1940, there were 15000 such looms.

*0 "0 

(Who gained from the market-driven technological and organizational change?)

There are several datasets on wages and earnings in hand looms in early 20th century but it͛s not
sure all of them refer to the same type of worker and also difficulties in trying to derive on an all
India average or a continuous time series.
Sivasubramonian͛s work on the national income suggests that real wages probably increased rather
modestly b/w 1900 and 1912. The war years saw a massive rise in prices, and inflation reduced
consumption and artisanal incomes.

For the long run, he concluded that weavers͛ money wages declined from a high level to very low
levels by the end of the 30s.

These conclusions of stagnant wages were applicable to a) ordinary semi-skilled cotton weaving and
b) hired workers. Returns to low skilled textiles remained small and unemployment among such
weavers ensured that wages remained depressed.

Several datasets on earnings from silk, fine cotton and exportable goods b/w 1880-1940 had a rising
tendency in general after adjustments made for price movements. In the inter-war period, prices
generally fell, but money-wages and yarn prices fell faster than product prices in handlooms. Value
added and profitability increased in 1924-40 i.e. the transition in the industry created space for the
capitalists to operate and generally benefitted capital more than labour. Inequality increased in
handloom weaving.

Capitalists gained because there were new avenues of making money, but these required capital.
Cotton yarn (earlier made locally by hand) were either imported or manufactured in mill towns and
distributed in hand loom towns and villages by merchants specializing in these new trade. These
tendencies created more capital for some groups of weavers. Around the 1920s profit rates were
high by any standard and profits were squeezed somewhat in the post Depression period, but didn͛t
decline to the extent that money wages did.

1!/22"!!$

There was differentiation amongst weavers based on product, status, skills and honor, leading to
growing inequality.

Hand loom weavers were differentiated with at the top were groups (who were actually migrants or
reported themselves as migrants) earning quite a good income by contemporary standards,
manufacturing silk or cotton textiles involving complicated designs, often using elaborate looms,
were urban, took part in long distance trade and were involved in a business network. Such practices
became more common during the decentralization of state power in the 18th century.

At the other end of the spectrum were the rural artisans who supplied simple routine articles to
their peasant neighbours. A large group of people was engaged in both labour and industry
according to season. These articles were rarely traded beyond the immediate neighbourhood. The
income of weaver handling silk or very fine cotton cloth was 3-5 times of a weaver making textiles
called ͚coarse͛ or ͚ordinary͛. Also, there were many types of weavers who combined rural and urban,
local and long distance trade, high and low skill, more capital or little capital. Throughout the 20th
century, the rural labourers who engaged in coarse weaving on the side tended to leave textiles and
move to general labour and semi skilled services.

The urban skilled weavers and silk weavers behaved differently. Silk weavers moved to skilled
professions and trade rather than labour when they left weaving and tried to improve conditions by
migrating from depressed regions and resettling as weavers at points of flourishing handloom trade.
It was these specialized elite-urban groups who controlled the trade in products and materials.

,&$/,!!$ )"$,,/!$*0$"

In cotton handloom weaving, the household was the universal unit about 1900. Women and girls of
weaving families performed warping of the yarn and shared with men the task of sizing. As a rule
weavers were men, sometimes assisted by young adults, mostly boys. About 1 in 19 women in
weaver families knew how to weave, but half heartedly and from observation rather than via
systematic apprenticeship such as boys went through. In fields allied to textiles, e.g. sericulture,
women performed vital tasks in the manufacturing process. Women formed 40% of the textile work
force in 1931 and a similar percentage in household industry.

The situation changed in the 20th century and the household unit declined in handloom weaving,
being replaced by factories staffed with migrant workers. In the traditional employment set-up, the
community itself was at times a resource, leading to different ways of pooling and allocating labour.
This whole range of socio economic systems began to give way to casual labour, factory labour and
male migrants in new industrial towns, wage relations continued for a long time to be embedded in
non-wage ones and the transition nearly completed in the power loom towns by the end of 20th
century. Simultaneously, there was a steady decline in the percentage of women workers in the
overall work force.

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In 1800-60, there was net decline in employment in textiles. The export market for cotton began to
wane from about 1800. Decline in cotton spinning began from the 2nd quarter of the 19th century. It
was speeded up only after the railways connected the ports with the interior (1860s and 1870s).
B/w 1860-1900, the railways intensified competition for hand loom cloth and the two famines of the
Deccan plateau caused disruptions for industry. However, factors at work favoured the weaver. The
commercialization of agriculture improved purchasing power and extended trade in cash crop
regions. Better conditions of demand were favourable for both hand loom and mill made textiles,
and recreated and sustained trade networks. Spinning mills began to be erected in cotton growing
regions. Western India and Tamil Nadu acquired comparative advantages in textiles. Thus there
were changes in consumption, trade systems and the commercialization of hand loom cloth in the
last 30-40 years of the 19th century.

WWI created an acute shortage of yarn proving a major disruption for the weaving industry.
However the inter-war period was one of growth and resulted in most types of changes in
organization and technology. By the 1920s migration into textiles towns had much enlarged in scale.
Power loom factories began to spread towards the end of inter-war period.

. $%"$$, !"/

The traditional hand loom was a far cry from the power driven loom. Even though the automatic
handloom (mounted on a frame inside the factory) and the power driven loom looked similar and
worked on the same principle, they differed in the source of energy. From the 1930s, the power
looms spread much faster when many interior towns with hand loom industries received electricity,
becoming India͛s largest industry at the end of the century.

The power loom grew from 15000 looms in 1940 to at least 1.5 M at the end of 20th century, much
of the growth occurring after the recent trade liberalization. The power loom industry supplied
nearly all of the demand for fabrics from apparel exporters. B/w 1985-1997, looms expanded by an
estimated 7-8 lakhs, additionally employing about 2 M persons. In 1991, it employed about 4 M
persons and 20% of all wage labour in industry and about one-third of wage labour in the informal
industry sector.


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Tanning of hides and skins became a major export industry in the late 19th century. These were the
major export during the period 1870s down to the Great Depression but afterwards the export fell.
There was increase in the use of tanned hides as inputs by local leather manufactures and thus the
export of such manufactures began to increase. Much of the industry is built on a foundation of
skills, expertise and capital accumulated during the colonial period.

Tanning was originally a rural craft and practiced under condition of extreme servitude. It was mainly
an occupation for part-time agricultural labourers and placed low in the caste hierarchy and had
little bargaining power in dealing with their main customers, the peasants. The Ä

c were the
main tanning caste of north India. The usual organization in rural tanning was either a single
household or a kind of collective labour not ordinarily seen in other crafts. The export market
concentrated hide trade in Kanpur, Madras, Bombay, and Calcutta.

The superior quality demanded by foreign consumers of Indian hides encouraged the establishment
of factories in these cities which were owned by hide merchants. These developments rather
weakened the rural barter system, as anyone who had access to hides wanted to sell it to an
exporter. It also encouraged leather artisans to migrate to the cities and were re-employed as
factory labourers in the merchant owned urban tan yard. In the course of this change, flaying,
tanning, and leather manufacture- which were performed by the same person formerly separated
out. Thus, there was increase in division of labour and specialization.

*$$"&! 30"(" %"3c.% 

In north Indian towns the growth of a number of highly skilled crafts increased especially in the
Mughal empire which included towns such as Delhi, Agra, Amritsar, Lahore, Multan, Srinagar,
Lucknow, Moradabad, Farrukhabad, and Benares. The urban crafts (skilled crafts) were woollen
carpets, engraved brassware, wood carving, ivory carving, jewellery, decorated pottery and shawls
and had participated in a long distance trade before the 19th century. These were mainly consumed
by the rich of these towns. Many of these rich consumers became impoverished and these products
began to be exported as well as traded over long distances within India during the colonial period.
For e.g. Shift from local to long distance trade are Moradabad͛s decorated brassware and Srinagar͛s
shawls.

One result of commercialization was the increasing competition between craft towns which lead to
disappearance of industry on a small scale.

 !" $"0#!$ did not change dramatically in the colonial period. These crafts were
practiced either in households or more commonly in workshops. In these crafts, training on the job
was important. The artisans wanted to preserve skills and confine access to skills to a small, trusted
group of people.
In these crafts too, new type of merchants appeared and they wanted to take control of production.
What emerged was a variety of '$!"'! / !, between the households or master artisans on
the one hand and the merchant on the other hand. For e.g. Agra and Amritsar carpets, where
European and American carpet traders started factories in the inter-war period. The two stage three
party contracts ʹ between the merchant and the master and between master and apprentices ʹ
were often known as 4"4."in northern India. Given that a clear employment contract did
not often exist in these factories, they were really not factories in the modern sense.

*(02*$$

Weaving of woollen garments and blankets was largely a rural and nomadic occupation during the
mid 19th century. Wool was produced and largely woven by the shepherds because both sheep-
rearing and domestic labours were relatively cheap.

From the end of 19th century there was reduction in the supply of home-grown wool as well as the
locally woven blankets and garments. Long distance trade in both wool and woven products
expanded. Sheep rearing relocated towards areas that could support better breeds and easier
grazing conditions. The railways played a role in deciding which regions would specialize in wool
weaving. Thus Rajputana specialized in wool production where as the United Provinces and Punjab
developed as major weaving centres. Consumers increasingly preferred the finer products made in
new weaving establishments in the cities, using traded wool rather than the coarse rural blankets.
There was increase in specialization due to competition from urban weaving and the depletion of
pastures (brought separation of spinning, weaving and the rearing of sheep).

The largest of the new establishments were two European factories in Kanpur and Dhariwal. These
supplied woollens to the army but later started supplying woollens to urban citizens. Muzaffarnagar
and Bijnor in UP and Panipat and Ludhiana in Punjab developed handloom-powerloom complexes
for blanket weaving. The railways enabled these towns to develop as points from which finer
blankets were exported towards Bombay and Calcutta. Many cotton weavers in these cities shifted
to wool and the existing woollen manufactures expanded and diversified.

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The major occupation of blacksmith and carpenters in the colonial period was to supply and repair
agricultural implements. The carpenters and smiths often belonged to the same caste but different
sub-castes.

The most important '4 ,!.' !3$." 3cultivated land and performed agricultural labor. They
were mainly from north India. During the colonial period small factories were started to
manufacture cutlery, metal tools, machine parts, and durable consumer goods. These new
enterprises were mainly located in the suburbs of the big cities to meet the demand for these items.
The blacksmith by tradition shifted towards these flourishing factory enterprises. Thus, they became
full time blacksmiths and specialization increased.

The north Indian &$!!" , 5,." 3were also known to perform rural labour. The growing demand
for metal utensils, the poor quality of their pottery, and the difficulty of long distance trade in the
average earthenware articles adversely affected them. The only segment where superior skills could
be seen was in objects of art. Towards the end of this period, this sector diversified into ceramic
tools and components, which is now its one of the major outputs.

The trade of '"&!" was also characterized by similar movement. The furniture industry started
to develop during the colonial period. The industry developed initially by drawing in artisans who
were engaged in supplying traditional rural demand. The urban industry developed which was
mainly factory based. Thus, in the course of adapting to a new demand, there was increasing
specialization, urban migration, and changes in trade organization in favour of larger, city based
workshops.


 



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One of the fundamental long term tendencies in traditional small scale industry has been the
increasing employment of hired labour or the growth of a labour market.

'!$"/$"

The word ͚factory͛ refers to a shed where a large number of workers gathered to work. Such sheds
were not usually registered officially as factories. Factories grew in traditional small scale in four
circumstances:

1. They appeared in towns that received a large number of migrants, such as handloom
weaving in Sholapur
2. Factories appeared in industries that were relatively less skill intensive, such as tanning of
hides and skins.
3. Factories appeared in industries that were partially mechanized. For e.g. the zari industry in
Surat and processing of yarn prior to weaving.
4. In some skilled crafts of northern India where merchants set up large sheds where master
artisans came with their teams of apprentices to work.

The migration of artisans is connected with the growth of factory labour. From the last quarter
of 19th century there was large scale migration of artisans groups to industrial towns. Some of
 them gave up their crafts to become general labourers. Some enter the mills and the others
relocated their crafts near sources of raw material and market points.

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In the skilled craft, there was no explicit labour market in existence. Due to the absence of migration
or technological change, wage labour developed but to a limited extent. As the skill intensive
industries commercialzed, firms recruited labour without fully fledged hiring.

This happened in two ways:-

1) Firms using mainly family labour employed workers from within the family.
2) Masters hired apprentices.
The family firm and the master apprentice system were two pre-factory systems of
production. They survived the colonial period and participated in long distance trade and
industrialization. Children were also employed in both forms of traditional institution. But as
long as they were employed within the family, within the master apprentices system, or
within localized limited hiring, children worked without the existence of an explicit market
for the services of child labour.

The family firm and domestic labour were usual among Hindu artisans and the apprenticeship
system among the Muslim artisans. For e.g. the apprenticeship system in the towns of western U.P.
there is an important contrast b/w medieval Europe and India. In the medieval Europe- the standard
historical dimension of apprenticeship where the authority of masters were exercised via the guilds.
The guild in the sense of a corporate body recognized by the local governments was almost non-
existent in India. A master was generally called ͚Ustad͛ which was powerful term in the north Indian
urban craft background.

Carpet weaving is one of the most well documented e.g. of apprenticeship. This industry was found
mainly in large factories owned by carpet merchants in cities such as Amritsar, Agra & Srinagar in the
inter-war period.

!."c/ !,

There were 2 major mixtures of family labour and the master apprentice system- (1) Domestic
collective work, (2) Inter family apprenticeship.

All over India, women were often found working in collectives inside someone͛s home or in common
spaces inside a village populated by artisans. North Indian embroidery especially Lucknow chikan is
the most famous e.g. warping of thread before it goes into the hand loom was done, and continues
to be done in some regions by women and girls in a common area shaded by trees inside the
weaver͛s village. This is an e.g. of domestic collective work in the rural setting.
In industries and regions where the main system was family labour, children were available for hire
in neighbourhood firms. Such hiring necessarily involved boys and it often led to near-formal
apprenticeship such as that in carpets.

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Family labour declined in the long run and so the apprenticeship system after 1947. The factors that
might have been responsible were:-

1) Loss of capital- As supply of labour increased relative to capital investment, funds become
less easily available, making survival difficult for the average families.
2) As the trade expanded and markets integrated, production concentrated in towns that had
a comparative advantage over their competitors. This increased migration. Migrants were
mainly solitary males rather than families.
3) The simple needs for division of labour and specialization are served less efficiently inside a
family.
4) Surplus labour available for industrial employment increasingly originated among groups,
such as small peasants who didn͛t have prior experience in industry and thus had no
priorities with traditional employment institutions.
5) With the increase in division of labour, craftsmanship became less important than before
and with it family firm or apprentice system lost one important reason for its existence i.e.
the training function.
6) The unequal job opportunities for men and women. When new opportunities arose for
some members of the family, the whole family͛s occupational profile changed, forcing the
other members to change work as well. When specific tasks tended to be replaced by
factories, machinery, or male labour, women became unemployed.

*$,*$"4" 

B/w 1881-1971, the percentage of women in industrial (& textile) workforce steadily declined and
started rising slowly after 1971 as calculated in the Indian census. For at least the last 50 years, the
%age of household industry workers in the total industrial workforce has also declined. These 2
observations suggests that industrialization imposed a long term pattern of change in the labour
market that had the consequences of (a) the exit of women workers & (b) the decline of the family
as a work unit.

The most apparent reason for women leaving industry is the decline of the family firm itself. As work
shifted from the household to the wage workshop, women withdrew from work. In the South Asian
family, the age groups of 15-24 tends to be most adaptable in terms of participation in the job
market and those younger are still at school. In India, nearly all women in the 25-24 age groups were
already married. Women participation in wage work industry in India was therefore both low and
dependent upon their husband͛s job pattern.
The proportion of women in the manufacturing workforce began to rise again from the 1970s. The
average age at marriage for women in India crossed 19 in 1971, the proportion of those unmarried
increased among adult women, and therefore participation by women in industrial wage work began
to increase.

.$"

The decline of households and old style apprenticeship suggests that traditional industries in India
changed from social contract to an unregulated labour market in respect of employing children. E.g.
carpet weaving supplies. The partition witnessed large scale migration of carpet ustads from India to
Pakistan. The old factories were destroyed but didn͛t disappear. These factories prospered after the
Iranian revolution of 1979.

Labour laws in India made the survival of children in the factories unsustainable. The result was a
retreat of carpet weaving into small and rural factories. E.g. Mirzapur-Bhadohi in eastern U.P. the
workshops were owned by Hindus of peasants͛ castes and they began to recruit employees from one
of the most densely populated, & impoverished agrarian zones, eastern U.P. & north Bihar. Children
were no more employed as a part of a master-apprentice system, but merely cheap labour.








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Small scale industry had little or no contact with the formal banking sector. The main form of
working capital financing had been trade credit.

Producers and merchants often devised their own system of informal finance.  '. / !,% 
!. $"!.  1 (A worker apprentice had an a/c with the employer/master. Wages were
added on the credit side & loans or withdrawals in the debit, the a/c was cleared on certain festive
days. Some such implicit banking was more or less universal in the urban crafts).it was easier to raise
fixed capital loans in certain towns than in others. E.g. Surat town- a major textile centre where
employers & traders in the zari industry routinely gave loans to their contractors for the purchase of
machinery.

."0 $2!.&! !

The wholesale trader, the raw material importer & the factory owner were the new types of
capitalist. There are 3 factors determining their background:-
 1) Difference in the levels of skills mattered. In many traditional industries craftsmanship
was the main form of fixed capital and those who possessed such capital could often
control the trade as well because they could ensure quality. For e.g., in weaving such
logic worked more than in a relatively unskilled craft such as tanning.
2) Whether a craft was export oriented or oriented to home market mattered. In
exportable crafts, the larger scale of trade and the nature of the market made working
capital and information both scarce resources. Thus, the merchant firms had greater
control over production and in the case of crafts serving local consumption the
producers knew the market as well as the marketing system and the need for capital
was smaller.
3) Social hierarchy mattered. For tanners to either get loans for their business or to start a
new enterprise was difficult I n the face of resistance from their upper caste neighbours,
weavers, on the other hand, did not face such social pressures.

$'!$ "0#!$ 

Collective organizations played an important role in the traditional small scale industry. E.g. masters
needed some system of control over the graduation of their apprentices into masters and thus into
potential competitors. Insiders needed to control the entry of outsiders into the craft. Where both
employers and workers belonged to the same community, conflicts over industrial relations could be
kept in check by strengthening the sense of belonging to a community. Markets that are
underdeveloped or beyond the access of a particular business group, these functions tend to be
provided by a collective organization.

In India, a formal association such as the guild was rare. Nevertheless caste and community
associations developed to take care of some of these roles.

c
c
 c



Modern small scale industry can be organized into the following points:-

1. "$ $2 0"$%!.7 Modern small scale industry didn͛t grew that much during the period
1900, but factories with little machinery and less than a 100 workers each started growing
in the 1930s. Their growth accelerated in the inter war period.
2.  !"/ 0"$&  7 The modern small scale industry concentrated on textiles, food, drink,
tobacco, wood and ceramics. Many products were seasonal.
3. c'7The broad groups of food ʹ drink ʹ tobacco and wood ʹ stone ʹ glass accounted for
about 20 per cent of factory employment in 1931. About 1/3rd of factory employment can be
expected to have been in small factories with some usage of machinery.
 4. "0 ʹ A segment such as the power loom factories dealt in old products. They represented
advanced forms of traditional small scale industry. Others were of new origin in terms of
capital and labour, though not necessarily in markets.
5. $'!$7 The growth of modern small scale industry dispersed registered factories beyond
the main mill towns, such as Calcutta or Bombay. Modern small scale industry clusters were
located all over India. Generally they were located near sources of raw material and some of
these clusters were located close to big cities. For e.g. tanning in Dharavi (Bombay),
engineering and metal working firms such as the foundries of Howrah (near Calcutta).

*./!. !/&$2 !"/' !""$0'! 8

The reasons were:

1. Use of machinery depended on the diffusion of cheap electric power.

2. New firms usually sold products via marketing networks that were urbanized. For e.g.
leather was exported and therefore benefitted from being close to a port.
3. Sometimes their markets were concentrated. For e.g. engineering firms supplied cast ʹ iron
tools, parts, and consumer goods to urban users, including the government and the mills.
Cotton gins did business largely with the Bombay mills.
4. Small firms used the railways and very many used the telegraph.
5. While modern small scale industry was more dispersed than the large scale industry, it
retained an urban and sometimes a big city, bias.
6. Except to a limited extent for Madras and modern Kerala, little research exists on these
enterprises.
7. Since many of these factories were seasonal and satisfied the official definition of a ͚2'!$"/9
imperfectly, they periodically went in and out of the factory statistics. Therefore, factory
statistics are a rather poor guide on the scale and growth of such factories. Nevertheless,
they make a good guide on certain qualitative aspects, especially location.
8. Some of the districts grew later to become major industrial clusters employing hundreds of
thousands of workers each.
9. In major regional and agrarian histories, the growth of modern small scale industry in
agriculturally developed areas has been touched upon briefly. For e.g. canal colonies in
Punjab, Coastal Andhra, the Upper Doab, and Tamil Nadu, and the sugarcane belt on the
Nira canal system in Bombay.

C.J Baker suggests two hypotheses on this growth which may have general validity:

1. Classes allied with land and having investible surplus moved into industry in some regions. They
did so due to a combination of two factors:
i. Agricultural commercialization in the last quarter of the 19th century. In Punjab, Coastal
Andhra, Tamil Nadu, the Nira Valley and Khandesh, prosperity based on rice, wheat,
sugarcane, and cotton induced many farmers to set up cotton gins, sugar mills, rice mills
and oil mills.
 ii. A fall in relative return to land from the interʹwar period, as agriculture began to
become less profitable than before.
2. In another variation of the relativeʹreturns view, there was a fall in finance capital. The
Depression of the 1930s brought in a crisis of inadequate liquidity, as real debt volume increased
and incomes fell. With the crash of agricultural prices, land lost its worth as collateral. This
forced liquidation of gold and silver assets and the relocation of capital from rural to urban
sectors.

Via banking, some of this rural capital moved into industry. The major expansion in small factories
occurred in the 1930s and the 1940s especially in Tamil Nadu.

However in a recent criticism, Haruka Yanagisawa has pointed out that the growth of such factories
in Tamil Nadu began in 1910s. One major source of the growth of such rural factories was increased
demand for their products. For e.g. the rice mills initially produced rice for export to Southeast Asia.
Increasingly, local consumers began to replace the export market. For e.g. low cost and better
quality of parboiled rice and increasing consumption of rice by people who formerly ate coarser food
grains were the major reasons.

*.$%"!.'&! !,$" , ' !"/8

James Berna observed that only a minority of the entrepreneurs have had trading background.
Capitalist include mainly ,"'.! 3 "!  3 %.! '$" %$"4" 3 2$"," 2'!$"/ %$"4"  
0" who had started many small scale engineering firms in south India. The entrepreneurs
here were people without access to family or community capital and they depended on the
partnership organization.

However, as Berna notes again, the partnership could become an inherently unstable system in an
environment of capital shortage. Conflicts between industrial interests and financial interests were
common in partnership firms. Industrialist wanted to re-invest or put in money; financiers tended to
be conservative about risks and wanted quick and high returns, or to take out money.

 c

Commercialization transformed traditional small scale industry and created modern small scale
industry in the colonial India. A key feature was increasing use of wage labour in place of family
labour. The labour market emerged slowly out of two traditional institutions, the family and the
master apprentice system. The trend of decay in these institutions in the long run was mainly due to
factors such as migration, new entry in capital and labour and the reduced role of craftsmanship.
There were changes in which children and women were employed in small scale industry due to a
shift from traditional institutions to markets for casual labour. A form of industrialization occurred
that was based on utilizing labour income productively, rather than replacing labour by machinery.
The key process was commercialization and modernization of the traditional small scale industry,
resulting in capital accumulation on a small scale but there was not a rapid increase in average
income.

There was a persistence of traditional organizations in the short run and movement towards the
labour markets slowly began. Colonial India was therefore different from other cases in one respect.
For e.g. in parts of Europe, large scale industry had indirect roots in small scale industry. But in India,
the two developed side by side and were different from each other.