Rise of Modern Industries in British India | History Optional for UPSC (Notes) PDF Download

Modern Industries in British India

• Late 19th century saw the rise of large-scale machine-based industries in India.
• Industries were mainly in plantations and a few consumer goods sectors like textiles.
• Most industries, except textiles, were owned by Europeans, primarily the British.
• Indian industrialization began when Britain had surplus capital looking for investment opportunities abroad.
• India was attractive for British capitalists because of its cheap labor.
• Industrialization was driven by British interests, with profits repatriated to Britain.
• Indian capitalists were initially hesitant to enter the industrial sector.
• They faced significant challenges, leading to slow industrial progress.
• The First World War (1914-1918) created opportunities for industrial development in India.
• War eliminated foreign competition and increased domestic production needs.
• During the war, industrial development in India was uneven and regionally concentrated.
• This resulted in unequal industrial growth across different areas.
• The Second World War (1939-1945) marked a new phase in India's industrial development.
• Import restrictions and demand for war materials spurred the expansion of modern industries.
• Government protection for industries during this period also contributed to industrial growth.

Attraction of British Capitalists to Indian Industry

• British capitalists and investors were drawn to Indian industry by the promise of high profits.
• Factors such as extremely cheap labor, readily available raw materials, and a suitable climate in certain regions of India made it appealing for industry.
• India and its neighboring countries provided a ready market for many manufactured goods.
• There was a global demand for Indian products like tea, jute, and manganese.
• Meanwhile, profitable investment opportunities in Britain were diminishing.
• The colonial government and officials in India were willing to provide support and favors to British investors.
• Due to the high costs of transporting raw materials from India to Britain and bringing manufactured goods from Britain to India, the British found it more beneficial to establish heavy industries in India.
• Educated Indians and some national leaders, especially after the formation of the Indian National Congress, advocated for a new pattern of industrialization in India.
• During the World Wars, it became difficult to export and import goods, compelling the British to set up some modern industries to meet military, administrative, and civilian needs.
• The British were aware of the poor economic conditions in India and understood that worsening these conditions could rapidly spread feelings of nationalism and awakening among the Indian populace.

Features of Industrialisation

Monopoly of Foreign Capital:

• Most modern Indian industries were owned or controlled by British capital.
• Foreign capital often overwhelmed Indian capital in various industries.
• Indians had a significant share in the cotton textile industry from the start, and in the 1930s, they developed the sugar industry.
• Indian capitalists faced challenges from British managing agencies and banks.
• To enter certain industries, Indian businessmen often had to submit to English managing agencies that dominated those fields.
• Many Indian-owned companies were controlled by foreign managing agencies.
• Indians struggled to obtain credit from banks, which were mostly dominated by British financiers. When they did secure loans, they faced higher interest rates compared to foreigners who borrowed under more favorable conditions.
• Over time, Indians began to develop their own banks and insurance companies.
• In 1914, foreign banks held over 70% of bank deposits in India, but by 1937, this share had decreased to 57%.
• British enterprises in India benefited from close ties with British suppliers of machinery, shipping, insurance, marketing, and government officials to maintain their dominance in the Indian economy.
• The British Government also had a policy of favoring foreign capital over Indian capital.

Partial Railway Policy of the British Government:

• The railway policy of the British Government discriminated against Indian enterprise.
• Railway freight rates favored foreign imports over domestic products.
• It was more difficult and costlier to distribute Indian goods compared to imported goods.

Absence of Heavy or Capital Goods Industries:

• India had a nearly complete absence of heavy or capital goods industries.
• There were no large plants for iron and steel production or machinery manufacturing.
• Only a few small repair workshops and iron and brass foundries existed.
• The first steel in India was produced only in 1913.
• India lacked basic industries such as steel, metallurgy, machinery, chemicals, and oil.
• Development of electric power was also lagging.

Growth of Plantation Industries:

• In addition to machine-based industries, the 19th century saw the rise of plantation industries like indigo, tea, and coffee, predominantly owned by Europeans.
• Indigo production, introduced in India in the late 18th century, thrived in Bengal and Bihar. However, the advent of synthetic dyes led to its decline.
• The tea industry expanded in Assam, Bengal, Southern India, and Himachal Pradesh after 1850.
• Coffee plantations also emerged during this period in South India.

Maximum Profit of Industries to England and the English:

• Plantation and foreign-owned industries did not benefit the Indian people significantly.
• Profits were repatriated to Britain, with a substantial portion of expenses incurred on foreigners.
• These industries imported most of their equipment, employed foreign technical staff, and sold most of their products in foreign markets, with the foreign exchange earned used by Britain.
• The only advantage for Indians was the creation of unskilled jobs.

Miserable Condition of the Labours:

• During the British era, industrial laborers faced deplorable conditions.
• Most workers were underpaid, worked in harsh conditions, and had long working hours.
• Conditions akin to slavery prevailed in plantations.
• The plight of these workers was vividly depicted by Bengali writer Dinbandhu Mitra in his play Neeldarpan in 1860.

Slow and Painful Progress of Modern Industries:

• Overall, industrial progress in British India was slow and painful, primarily focused on cotton and jute industries and tea plantations in the 19th century, and later on sugar and cement in the 1930s.
• As late as 1946, cotton and jute textiles accounted for 40% of factory workers.
• The Indian Planning Commission noted a decline in processing and manufacturing jobs from 10.3 million in 1901 to 8.8 million, despite a 40% population increase.
• The government made no effort to protect, rehabilitate, or modernize old indigenous industries.

Adverse Policy of the Government:

• Even modern industries developed during British India without government support and often against British policy.
• British manufacturers viewed Indian industries as competitors and pressured the Indian government to discourage industrial development.
• British policy artificially restricted and slowed Indian industrial growth.
• Indian industries, in their infancy, required protection but were at a disadvantage compared to established industries in Britain, France, Belgium, Germany, Italy, the U.S.A., and Japan.
• While other countries protected their infant industries with heavy customs duties, India was subjected to a policy of Free Trade imposed by Britain.
• The British Government of India refused to provide financial or any other assistance to nascent Indian industries, unlike European and Japanese governments supporting their own infant industries.
• Many Indian projects, such as the construction of ships, locomotives, cars, and aeroplanes, could not commence due to the government’s refusal to offer assistance.
• Indian industrial development was also regionally imbalanced, with industries concentrated in a few regions and cities, leaving large parts of the country underdeveloped.
• This uneven economic development led to income disparities and complicated national integration efforts, making it harder to create a unified Indian nation.

The Growth of Two New Social Classes:

• Despite being limited, the modern industrial development in India led to the emergence of two new social classes: the industrial capitalists and the modern working class.
• These classes were unprecedented in Indian society, as they were a product of modern mines, transportation, communication, and industries.
• Both groups had a strong interest in the industrial development of the country and were associated with new technology, social relations, ideas, and a fresh outlook.
• Unlike previous classes, they were not burdened by old traditions, customs, or outdated ways of life.

Development of major industries

Cotton-textile:

• The first cotton mill in India was set up in Calcutta in 1818 A.D. However, the textile industry grew significantly in the Bombay region under Indian entrepreneurs by the 19th century.
• The first cotton textile mill in Bombay was established by Cowasjee Nanabhoy in 1853 A.D.
• The industry saw gradual expansion. By 1879, there were 56 cotton textile mills in India employing nearly 43,000 people.
• The growth of the Indian textile industry alarmed British manufacturers, leading the Manchester Chamber of Commerce to request the abolition of import duties on yarn and cotton cloth from the Indian government, which was granted in 1879.
• In 1896, import duties were reinstated, and an excise duty of 3.5% was imposed on cloth produced in Indian mills, hindering the growth of Indian cotton textiles.
• By 1905, India had 206 cotton mills employing nearly 196,000 people.
• Before World War One, cotton industry existed in India with the involvement of European managing agencies and traditional trading communities like Gujarati banias, Parsis, Bohras, and Bhatias.
• The real success of Indian industrialists emerged during the cotton industry in western India.
• Before World War One, imported textiles dominated Indian markets, but this import significantly declined during the war, halving between 1913-14 and 1917-18.
• This decline was due to transport dislocations caused by the war and the 7.5% import duty on cotton textiles imposed in 1917.
• There was military demand and a call for ‘Swadeshi’, advocating the boycott of foreign goods in favor of indigenous alternatives.
• Under pressure, the British Government increased the import duty on foreign cloth to 7.5% in 1917, with further increases in the coming years.
• Additional protection was provided to the Indian cotton industry through the Cotton Textile Act of 1934 A.D.
• The Second World War significantly boosted the growth of Indian cotton textiles, leading to its flourishing.
• When the British left India, there were 421 cotton textile mills with 202, 814 looms, and between 1941-46, India even exported cloth to Britain in considerable quantities.

Jute Industry:

• Jute was developed in the early 1800s as a cheap substitute for flax, with Bengal as the main supplier of raw jute to industries in Dundee, Scotland.
• The first jute mill in India was established by an Englishman named George Aeland in Rishra, Bengal, in 1855.
• Its proximity to raw materials and cheap labor gave it an advantage over the Scottish industry.
• The jute industry expanded gradually; by 1882, there were 20 jute mills, mostly in Bengal, employing around 20,000 people.
• By 1901, the number of jute mills had increased to over 36, employing nearly 115,000 individuals.
• World War I and II significantly boosted the industry.
• During World War I, the demand for jute products surged, leading to a substantial increase in paid-up capital.
• For example, capital rose from 79.3 million in 1914-15 to 106.4 million in 1918-19, and further to 179.4 million in 1922-23.
• The majority of capital investment came from British sources, organized through the Indian Jute Mills Association (IJMA), which controlled output to maintain high prices.
• The industry's profitability continued until the Great Depression.
• Despite the dominance of expatriate capital, Indian investors, particularly Calcutta-based Marwaris, began to enter the jute industry in the 1920s.
• They initially invested by buying stocks and lending money, eventually gaining influence in European managing agencies.
• Prominent figures like G.D. Birla and Swarupchand Hukumchand established their own jute mills in 1922, marking the start of Indian-owned jute mills around Calcutta.
• The Marwari influence expanded into other sectors such as coal mining, sugar production, and paper manufacturing.
• Between 1942 and 1945, they began to take over some European companies.
• By the time the British left India in 1947, the number of jute mills in the country had increased to 113.

Iron and Steel:

• Modern Iron and Steel Industry: The modern iron and steel industry in India began with the establishment of a plant in Jamshedpur in 1907 by Jamshedji Tata, a key figure in India's industrial development.
• World War I Impact: The plant reached its full capacity due to the increased demand for iron and steel during World War I.
• Competition and Growth: Other companies were set up in West Bengal and Mysore, but they faced competition from imported steel and iron.
• World War II Influence: World War II further boosted the industry, helping it establish a strong foundation in India by the time the British left.

Coal Industry:

• Development under European Companies: The coal mining industry grew under various European-owned joint stock companies.
• Role of Railways: The construction of Indian railways made coal a necessary item for production, and other developing industries in India also required coal.
• Employment and Production: In 1906, the coal mining industry employed nearly 100,000 people. The two World Wars further boosted coal production.
• Consumption and Export: A part of coal production was exported, but most was consumed by indigenous industries.
• Continuous Flourishing: The coal industry flourished uninterrupted during British India.

Plantation Industries:

• In addition to machine-based industries, the 19th century saw the rise of plantation industries like indigo, tea, and coffee, predominantly owned by Europeans.
• Indigo manufacture, introduced in India at the end of the 18th century, thrived in Bengal and Bihar.
• Indigo planters became notorious for their oppression of peasants, forcing them to cultivate indigo. This exploitation was vividly depicted by Bengal writer Dinbandhu Mitra in his play 'Neeldarpan' in 1860.
• The indigo industry faced decline due to competition from German synthetic products. The invention of synthetic dye dealt a significant blow to the indigo industry, leading to its gradual decline.
• The tea industry flourished in Assam, Bengal, South India, and the Himalayan hills after 1850. Being foreign-owned, it received government support in the form of rent-free land and other facilities. Over time, tea became widely used across India and an important export item, progressing more than other plantation industries.
• Coffee plantations emerged in South India during this period. However, the coffee industry faced competition from Brazilian coffee in the international market after a favorable period until 1920-21.
• The rubber plantation industry also developed during this time but was eventually outcompeted by Brazilian rubber in the international market after a period until 1920-21.

Other Mechanical Industries:

• During the late 19th and early 20th centuries, various other mechanical industries emerged in India. These included cotton mills, rice and flour mills, timber mills, leather tanneries, woollen textiles, paper and sugar mills, iron and steelworks, and mineral industries such as salt, mica, and saltpetre, as well as cement.
• Industries like paper, matches, sugar, and glass became prominent during the 1930s. However, these industries experienced limited growth. Nonetheless, each managed to establish itself before the British left India.
• Research indicates that government policies and British capital restricted Indian enterprise in certain sectors. However, between the westernized elite and the subsistence economy of peasants, there existed an intermediate level known as the bazaar. This was where Indian businessmen and bankers operated, as these sectors were either too risky or offered low returns to attract European investors.
• The bazaar was a profitable area for indigenous merchants and bankers from the mid-18th century until the Gandhian movements in the 20th century. Some of these indigenous firms leveraged new opportunities presented by the empire, such as railways and telegraphs, to run sophisticated and integrated business networks across the subcontinent.
• These firms later expanded their operations overseas to places like China, Burma, the Straits Settlements, the Middle East, and East Africa. These activities generated indigenous capital, which was then invested in industries after World War I. Therefore, India's underdevelopment was not due to a lack of entrepreneurial skills.

Labour laws

First Factory Act - 1881:

• Based on the recommendations of a commission set up in 1874.
• Important Provisions:
  • Prohibition of child labor for children under 7 years old.
  • Fencing of dangerous machinery.
  • Regulation of working hours for children under 12 years old.

Second Factory Act - 1891:

• Established based on the recommendations of a commission formed in 1884.

Important Provisions:

• Prohibition of child labor for children under 9 years old.
• Regulation of working hours for children under 14 years old.
• Mandatory recess of 90 minutes.
• Provision of a weekly holiday for female laborers.

Factory Act 1909 & 1911:

• Implemented similar provisions specifically for the jute industry.

Indentured Labor Abolishment (1922):

• Indentured labor, which had begun in 1830, was abolished.

Indian Trade Union Act (1926):

• Provided legal recognition and status to labor unions.

Trade Dispute Act (1929):

• Established special courts for resolving trade disputes.
• Declared strikes illegal in public utility services.

Act of 1935:

• Recognized Labour Constituencies.
• Provided for the election of labour representatives.

National Service Ordinance - 1940:

• Recognized the duty to work.
• Protected the rights of workers.

Essential Services Maintenance Ordinance - 1941:

• Prohibited employers from dismissing workers without valid reasons.