Notes: Evolution of modern industry in India | Sociology Mains Optional for UPSC 2024 PDF Download

 Page 1


C-3 
 
Industrialization and Urbanisation in India: 
• Evolution of modern industry in India. 
• Growth of urban settlements in India. 
• Working class: structure, growth, class mobilization. 
• Informal sector, child labour. 
• Slums and deprivation in urban areas. 
 
 
Evolution of Modern Industry in India 
 
Early phase 1850s –  
Cotton and jute mills, Mines gradually flourished. Regulated to suit the needs of British 
capitalism. 
 
Between 1920s to 1940s –  
Phenomenal increase in demand of factory products in India. 
No serious efforts by Britishers to foster the growth of capital goods industry. 
 
There were however several business communities who were initially the collaborators and 
middlemen with the British, like the Parsis and Marwaris who ventured in to setting up 
industries.  
The Marwaris of Calcutta moved from being traders to industrialist in the jute business. The 
transformation of a few Marwari families from ‘traders to industrialists’ was gradual.  
 
This pattern can be described in the following steps:  
 
(A) They slowly increased their importance in the trade of raw jute and jute manufactures;  
 
(B) Some of the Marwari traders became members of the formal jute-trade organisations. 
Others became brokers to British managing agency houses, or, by buying shares got a place 
on the board of directors of British managing agency houses;  
 
(C) Finally, in the early 1920s, a few Marwaris entered the jute industries by setting up 
their own jute mills.  
The Birlas started their first jute mill in 1919, whereas Goenka and Bangur started theirs 
after World War II. 
 
The Parsis on the other hand did not face stiff opposition from the British like the Marwaris.  
 
They were the collaborators of the British and sympathized with them. 
 
1. They partly financed the military defence of the Bombay fort. 
2 They were loyal to the British during the Mutiny (1857), financing the British 
military apparatus.  
Page 2


C-3 
 
Industrialization and Urbanisation in India: 
• Evolution of modern industry in India. 
• Growth of urban settlements in India. 
• Working class: structure, growth, class mobilization. 
• Informal sector, child labour. 
• Slums and deprivation in urban areas. 
 
 
Evolution of Modern Industry in India 
 
Early phase 1850s –  
Cotton and jute mills, Mines gradually flourished. Regulated to suit the needs of British 
capitalism. 
 
Between 1920s to 1940s –  
Phenomenal increase in demand of factory products in India. 
No serious efforts by Britishers to foster the growth of capital goods industry. 
 
There were however several business communities who were initially the collaborators and 
middlemen with the British, like the Parsis and Marwaris who ventured in to setting up 
industries.  
The Marwaris of Calcutta moved from being traders to industrialist in the jute business. The 
transformation of a few Marwari families from ‘traders to industrialists’ was gradual.  
 
This pattern can be described in the following steps:  
 
(A) They slowly increased their importance in the trade of raw jute and jute manufactures;  
 
(B) Some of the Marwari traders became members of the formal jute-trade organisations. 
Others became brokers to British managing agency houses, or, by buying shares got a place 
on the board of directors of British managing agency houses;  
 
(C) Finally, in the early 1920s, a few Marwaris entered the jute industries by setting up 
their own jute mills.  
The Birlas started their first jute mill in 1919, whereas Goenka and Bangur started theirs 
after World War II. 
 
The Parsis on the other hand did not face stiff opposition from the British like the Marwaris.  
 
They were the collaborators of the British and sympathized with them. 
 
1. They partly financed the military defence of the Bombay fort. 
2 They were loyal to the British during the Mutiny (1857), financing the British 
military apparatus.  
3. A part of the Parsee community was fast to recognise that is was very useful to learn 
English, to adopt British customs and to intensify their relation with the British in order to 
improve the socio-economic position of the community in West India. 
 
The Parsis were among the first to build up the Indian cotton textile industry in Bombay.  
 
Parsis owned nine of ten mills built in Bombay between 1854 and 1863. This included two 
mills of the Petit family.  
 
In the period between 1878 and 1915, the Parsis owned 30 per cent of the mills in the city.  
 
Apart from this communities the bankers of Ahmedabad without any British intervention 
or association started setting up mills.  
After this initial foray many trading families started to invest in industrial enterprise.  
 
This challenged the monopoly of British capitalist, the government started adopting 
discriminatory policies towards them.  
 
The tariff, taxation and transport policies were made favourable to the British capitalist.  
 
Thus, there was stiff competition in the marketing of goods as well.  
 
The Indian capitalist organized themselves in to Federation of Indian Chambers 
of Commerce and Industry (FICCI).  
 
The capitalists were aware that they would be better off in a free India and were active 
supporters of nationalist struggles.  
 
The leadership of the national movement were also aware of the need for industrialization 
of the country. 
 
 
At the time of independence :  
Several jute and cotton textile mills , sugar factories and two major iron and steel plants 
existed. 
 
After Independence: 
Mixed economy, conscious and deliberative efforts for industrialisation through successive 
5YP.  
Industrial output grew till mid sixties then faced recession leading to sharp fall in capacity 
utilization and in public investment 
 
Post Independent India saw industrial policies being shaped by not only the aspect of 
colonialism but it was also informed by dominant paradigms of development discourse and 
by contemporary politics. 
 
This history made Indian leaders wary of international free trade.  
 
Page 3


C-3 
 
Industrialization and Urbanisation in India: 
• Evolution of modern industry in India. 
• Growth of urban settlements in India. 
• Working class: structure, growth, class mobilization. 
• Informal sector, child labour. 
• Slums and deprivation in urban areas. 
 
 
Evolution of Modern Industry in India 
 
Early phase 1850s –  
Cotton and jute mills, Mines gradually flourished. Regulated to suit the needs of British 
capitalism. 
 
Between 1920s to 1940s –  
Phenomenal increase in demand of factory products in India. 
No serious efforts by Britishers to foster the growth of capital goods industry. 
 
There were however several business communities who were initially the collaborators and 
middlemen with the British, like the Parsis and Marwaris who ventured in to setting up 
industries.  
The Marwaris of Calcutta moved from being traders to industrialist in the jute business. The 
transformation of a few Marwari families from ‘traders to industrialists’ was gradual.  
 
This pattern can be described in the following steps:  
 
(A) They slowly increased their importance in the trade of raw jute and jute manufactures;  
 
(B) Some of the Marwari traders became members of the formal jute-trade organisations. 
Others became brokers to British managing agency houses, or, by buying shares got a place 
on the board of directors of British managing agency houses;  
 
(C) Finally, in the early 1920s, a few Marwaris entered the jute industries by setting up 
their own jute mills.  
The Birlas started their first jute mill in 1919, whereas Goenka and Bangur started theirs 
after World War II. 
 
The Parsis on the other hand did not face stiff opposition from the British like the Marwaris.  
 
They were the collaborators of the British and sympathized with them. 
 
1. They partly financed the military defence of the Bombay fort. 
2 They were loyal to the British during the Mutiny (1857), financing the British 
military apparatus.  
3. A part of the Parsee community was fast to recognise that is was very useful to learn 
English, to adopt British customs and to intensify their relation with the British in order to 
improve the socio-economic position of the community in West India. 
 
The Parsis were among the first to build up the Indian cotton textile industry in Bombay.  
 
Parsis owned nine of ten mills built in Bombay between 1854 and 1863. This included two 
mills of the Petit family.  
 
In the period between 1878 and 1915, the Parsis owned 30 per cent of the mills in the city.  
 
Apart from this communities the bankers of Ahmedabad without any British intervention 
or association started setting up mills.  
After this initial foray many trading families started to invest in industrial enterprise.  
 
This challenged the monopoly of British capitalist, the government started adopting 
discriminatory policies towards them.  
 
The tariff, taxation and transport policies were made favourable to the British capitalist.  
 
Thus, there was stiff competition in the marketing of goods as well.  
 
The Indian capitalist organized themselves in to Federation of Indian Chambers 
of Commerce and Industry (FICCI).  
 
The capitalists were aware that they would be better off in a free India and were active 
supporters of nationalist struggles.  
 
The leadership of the national movement were also aware of the need for industrialization 
of the country. 
 
 
At the time of independence :  
Several jute and cotton textile mills , sugar factories and two major iron and steel plants 
existed. 
 
After Independence: 
Mixed economy, conscious and deliberative efforts for industrialisation through successive 
5YP.  
Industrial output grew till mid sixties then faced recession leading to sharp fall in capacity 
utilization and in public investment 
 
Post Independent India saw industrial policies being shaped by not only the aspect of 
colonialism but it was also informed by dominant paradigms of development discourse and 
by contemporary politics. 
 
This history made Indian leaders wary of international free trade.  
 
Nehru who was inspired by Fabian socialism and by the Russian example decided to adopt 
a socialist pattern of economic development. Much of early economic activity in newly 
independent India was state induced, and state controlled.  
 
Nehru wanted to adopt Harold Laski’s idea of mixed economy, which he did. 
 
The state controlled major industries and public related services.  
 
In setting a path for the economic policy after Independence, Nehru followed a 
development discourse and models which were current and popular at that time.  
 
He truly believed that like Russia India needed to develop its heavy industries which were 
capital intensive.  
 
Thus, in the initial phase of economic development saw setting up heavy industries and the 
construction of dams. 
 
Some critics of Indian economic development believe that the economy of 
the Nehruvian and post-Nehruvian era, with inefficient public sector entities on the one 
hand, and crony-capitalist private sector entities on the other, that used the so-called 
license raj to carve out lucrative niches for themselves on the other, was a product of 
economic policy foundations laid during Nehru’s tenure. 
 
After independence, India opted to have a centrally planned economy to ensure an 
effective and equitable allocation of national resources for the purpose of balanced 
economic development.  
 
The idea of planning was taken from Russian centralized planning system.  
 
Indian Economy is based on the concept of planning. This is carried through her Five-
Year Plans, developed, executed and monitored by the Planning Commission.  
 
 
Post Liberalisation: 
- LPG era 
- New technology 
- More investment 
- Service industry booming 
 
Thus, after liberalisation: 
- Emergence of a market economy with a fast growing private sector 
- Planning became indicative rather than prescriptive in nature.  
 
India followed polices of: 
- Import substitution 
- Industrialisation and state intervention in labour and financial markets 
- A large public sector 
- Overt regulation of business 
- Central planning. 
Page 4


C-3 
 
Industrialization and Urbanisation in India: 
• Evolution of modern industry in India. 
• Growth of urban settlements in India. 
• Working class: structure, growth, class mobilization. 
• Informal sector, child labour. 
• Slums and deprivation in urban areas. 
 
 
Evolution of Modern Industry in India 
 
Early phase 1850s –  
Cotton and jute mills, Mines gradually flourished. Regulated to suit the needs of British 
capitalism. 
 
Between 1920s to 1940s –  
Phenomenal increase in demand of factory products in India. 
No serious efforts by Britishers to foster the growth of capital goods industry. 
 
There were however several business communities who were initially the collaborators and 
middlemen with the British, like the Parsis and Marwaris who ventured in to setting up 
industries.  
The Marwaris of Calcutta moved from being traders to industrialist in the jute business. The 
transformation of a few Marwari families from ‘traders to industrialists’ was gradual.  
 
This pattern can be described in the following steps:  
 
(A) They slowly increased their importance in the trade of raw jute and jute manufactures;  
 
(B) Some of the Marwari traders became members of the formal jute-trade organisations. 
Others became brokers to British managing agency houses, or, by buying shares got a place 
on the board of directors of British managing agency houses;  
 
(C) Finally, in the early 1920s, a few Marwaris entered the jute industries by setting up 
their own jute mills.  
The Birlas started their first jute mill in 1919, whereas Goenka and Bangur started theirs 
after World War II. 
 
The Parsis on the other hand did not face stiff opposition from the British like the Marwaris.  
 
They were the collaborators of the British and sympathized with them. 
 
1. They partly financed the military defence of the Bombay fort. 
2 They were loyal to the British during the Mutiny (1857), financing the British 
military apparatus.  
3. A part of the Parsee community was fast to recognise that is was very useful to learn 
English, to adopt British customs and to intensify their relation with the British in order to 
improve the socio-economic position of the community in West India. 
 
The Parsis were among the first to build up the Indian cotton textile industry in Bombay.  
 
Parsis owned nine of ten mills built in Bombay between 1854 and 1863. This included two 
mills of the Petit family.  
 
In the period between 1878 and 1915, the Parsis owned 30 per cent of the mills in the city.  
 
Apart from this communities the bankers of Ahmedabad without any British intervention 
or association started setting up mills.  
After this initial foray many trading families started to invest in industrial enterprise.  
 
This challenged the monopoly of British capitalist, the government started adopting 
discriminatory policies towards them.  
 
The tariff, taxation and transport policies were made favourable to the British capitalist.  
 
Thus, there was stiff competition in the marketing of goods as well.  
 
The Indian capitalist organized themselves in to Federation of Indian Chambers 
of Commerce and Industry (FICCI).  
 
The capitalists were aware that they would be better off in a free India and were active 
supporters of nationalist struggles.  
 
The leadership of the national movement were also aware of the need for industrialization 
of the country. 
 
 
At the time of independence :  
Several jute and cotton textile mills , sugar factories and two major iron and steel plants 
existed. 
 
After Independence: 
Mixed economy, conscious and deliberative efforts for industrialisation through successive 
5YP.  
Industrial output grew till mid sixties then faced recession leading to sharp fall in capacity 
utilization and in public investment 
 
Post Independent India saw industrial policies being shaped by not only the aspect of 
colonialism but it was also informed by dominant paradigms of development discourse and 
by contemporary politics. 
 
This history made Indian leaders wary of international free trade.  
 
Nehru who was inspired by Fabian socialism and by the Russian example decided to adopt 
a socialist pattern of economic development. Much of early economic activity in newly 
independent India was state induced, and state controlled.  
 
Nehru wanted to adopt Harold Laski’s idea of mixed economy, which he did. 
 
The state controlled major industries and public related services.  
 
In setting a path for the economic policy after Independence, Nehru followed a 
development discourse and models which were current and popular at that time.  
 
He truly believed that like Russia India needed to develop its heavy industries which were 
capital intensive.  
 
Thus, in the initial phase of economic development saw setting up heavy industries and the 
construction of dams. 
 
Some critics of Indian economic development believe that the economy of 
the Nehruvian and post-Nehruvian era, with inefficient public sector entities on the one 
hand, and crony-capitalist private sector entities on the other, that used the so-called 
license raj to carve out lucrative niches for themselves on the other, was a product of 
economic policy foundations laid during Nehru’s tenure. 
 
After independence, India opted to have a centrally planned economy to ensure an 
effective and equitable allocation of national resources for the purpose of balanced 
economic development.  
 
The idea of planning was taken from Russian centralized planning system.  
 
Indian Economy is based on the concept of planning. This is carried through her Five-
Year Plans, developed, executed and monitored by the Planning Commission.  
 
 
Post Liberalisation: 
- LPG era 
- New technology 
- More investment 
- Service industry booming 
 
Thus, after liberalisation: 
- Emergence of a market economy with a fast growing private sector 
- Planning became indicative rather than prescriptive in nature.  
 
India followed polices of: 
- Import substitution 
- Industrialisation and state intervention in labour and financial markets 
- A large public sector 
- Overt regulation of business 
- Central planning. 
Till 1980 this was the general tone of economy, the growth rate was steady but not 
substantially and it was generally referred to as the ‘Hindu growth rate’, because all 
other surrounding Asian economies, especially the ‘East Asian Tigers’ were growing at 
rapid pace.  
 
In 1980 the first steps towards liberalization were taken up by Indira Gandhi and 
followed by Rajiv Gandhi, this involved: 
- Easing restrictions on capacity expansion for incumbents 
- Removed price controls  
- Reduced corporate taxes. 
 
The economic liberalisation of 1991, initiated by then Indian prime minister P. V. 
Narasimha Rao and his finance minister Manmohan Singh in response to 
a macroeconomic crisis did away with the Licence Raj (investment, industrial and import 
licensing) and ended public sector monopoly in many sectors, thereby allowing 
automatic approval of foreign direct investment in many sectors.  
 
Since then, the overall direction of liberalisation has remained the same, irrespective of 
the ruling party at the centre, although no party has yet tried to take on powerful lobbies 
like the trade unions and farmers, or contentious issues like labour reforms and cutting 
down agricultural subsidies.