Impact Of British Rule: De Industrialisation In India

1. SOUTH CITY COLLEGE/ECOH/IEH/NEW/DEINDUSTRIALISATION/SM/AUGUST2005
WEBPAGE: www.geocities.com/subirmaitra/www.html E-MAIL:subirmaitra@gmail.com
DE-INDUSTRIALISATION IN INDIA : THE DECLINE OF
HANDICRAFTS
India was not an industrial country in the true and modern sense of the term. But, by the standards
of the 17th and 18th centuries, i.e., before the advent of the Europeans in India, India was the 'industrial
workshop' of the world. Three kinds of industry existed in India—(i) the rural cottage industry (weaving,
carpentry, pottery etc.) usually providing the day-to-day requirements of the agriculturists in the village,
(ii) the urban domestic industry turning out various products (such as fine textiles etc.) for the use of
townsfolk and carried on by family members, possibly in a room in the house where the family lived and,
finally, (iii) the small urban factory producing more sophisticated products(like iron industry), engaging
some hired labourers and generally carrying specialization further than in domestic industry.
The urban industry of India, at the beginning of the nineteenth century, was mainly in the nature of
handicrafts, producing fine textiles or other luxury products for the aristrocracy. In the handicrafts Indian
urban industry had reached a high water-mark of excellence. The products of Indian industry enjoyed a
world-wide reputation. The urban industry occupied a very favourable and inportant position in India’s
economic activity. In spite of this we are confrontred with the problem of rapid decline both in the artistic
excellence and economic importance of these handicrafts, a decline which, though in some cases began as
early as the end of eighteenth century, became very marked about the middle of the nineteenth century.
This process came to be known as 'de-industrialisation'.
Economic historians, however, differ on the issue whether de-industrialisation had at all taken place
or not. Nationalist economists like R. C. Dutta, M.G.Ranade etc. argued that British misrule in India led to
the decline of Indian handicrafts. But, Morris D. Morris, Daniel and Alice Thorner were of the opinion that
de-industrialisation was a myth.
CAUSES OF DECLINE :
The major causes of decline in handicrafts in India during the British rule were as follows :
(a) DISAPPEARANCE OF COURT CULTURE : The main source of demand for the products of these handicrafts
came from the royal courts and the urban aristocrats. With the abolition of the royal court, the main source
of demand for the product of the handicrafts ceased to exist and handicrafts began to decline. ‘Karkhanas’
which were set up in different parts of the country to provide the requirements of the royal court and the
urban nobility had to be closed down when the establishment of British rule in India dislodged the local
rulers and their camp-followers.
(b) ADVERSE INFLUENCE OF BRITISH RULE ON TASTES AND HABITS : The establishment of the British rule
affected the existence of the handicrafts. With the virtual elimination of demand for the industry following
the disappearance of noble courts, the industry wished a new source of demand from the European officials
and tourists and from the 'baboos' and black Indian 'sahibs'. The European officials, of course, favoured
imported manufactures. The consumption habits of the newly educated Indians — a product of English
education — also dealt a crippling blow to these industries. These newly created Indian 'bourgeoisie' not
only disdained the products of indigenous industries but also tried to copy everything European which was
considered to be the "hallmark of enlightenment. "

2. SOUTH CITY COLLEGE/ECOH/IEH/NEW/DEINDUSTRIALISATION/SM/AUGUST2005
WEBPAGE: www.geocities.com/subirmaitra/www.html E-MAIL:subirmaitra@gmail.com
(c) PROHIBITION OF USE AND POSSESSION OF ARMS : British rule also effectively killed a handicraft which
used to produce arms ,weapons and shields by active prohibition of their use and possession.
(d) WEAKENING OF GUILDS : British also indirectly weakened the power of the guilds and other bodies
which regulated trade and controlled the quality of materials used. As soon as the supervising bodies were
removed, many evils such as adulteration of materials, poor workmanship etc. began to creep in which led
to a decline in value, artistic and commercial, of the wares.
(e) COMPETITION FROM EUROPEAN MANUFACTURERS : The competition from the European manufacturers
was also partly responsible for the decline of Indian handicrafts. In the matter of quality, Indian weaver
could easily hold his own; but in the matter of price, he was hopelessly beaten by the machine made goods.
Great regard for everything foreign by the Indian middle class helped foreign goods a great deal in their
competition with Indian textiles. Thus, the process of decay which began with the establishment of foreign
rule and foreign influence got completed by the competition from foreign goods.
(f) TARIFF POLICY : The tariff policy pursued by the British Government was also responsible for the decay
of handicrafts. This tariff policy came to be known as 'one-way free trade'. To put her manufacturing
industries on a sound footing at home, England pursued the policy of protection through the imposition of
import duties. But for India, she preached the gospel of free trade. R. C. Dutt wrote that the East India
Company and the British Parliament following the selfish commercial policy of a hundred years ago,
discouraged Indian manufacturers in the early years of British rule in order to encourage the rising
manufacturers of England. Their policy was to make India subservient to the industries of Great Britain
and to make the Indian producer grow raw material for the industries of England. Indian cotton and silk
goods which could be sold at a price 50 to 60 per cent lower than the price of cloth manufactured in
England were subjected to import duties varying between 70 to 80 per cent in England simply to drive
them out from the British market.
(g) WEAK INDUSTRIAL STRUCTURE : Some people argue that the weaknesses in the industrial structure itself
must also be blamed for this decline of handicrafts. No efforts were made to explore markets for products.
Indian foreign trade was in the hands of foreigners. This meant that Indian artisans and producers were at
the mercy of foreign merchants so far as sales or demand propagation in overseas markets were concerned.
India also did not have a class of industrial entrepreneurs.
(h) EXPLOITATION OF CRAFTSMEN BY MERCHANTS : As the power of native rulers declined, British
merchants and their commission agents began to exercise illegitimate pressure on craftsmen for delivery of
goods to them on a priority basis at unduly low prices. Craftsmen were forced to sign agreements for
delivery which under more normal conditions, they could hardly be induced to. Due to exploitation, Indian
craftsmen were forced to abandon their crafts in some cases or to flee to regions where more sympathetic
policies are still pursued.
EFFECTS OF DE-INDUSTRIALISATION :
De-industrialisation brought far-reaching changes in the economy of India. These are:
(i) DISPLACEMENT FROM TRADITIONAL OCCUPATION : India's traditional village economy had been
characterised by Marx as the "blending of agriculture and handicrafts". Apart from agricultural activities,
spinning and weaving were also carried on by each family as subsidiary industries in the old Indian village

3. SOUTH CITY COLLEGE/ECOH/IEH/NEW/DEINDUSTRIALISATION/SM/AUGUST2005
WEBPAGE: www.geocities.com/subirmaitra/www.html E-MAIL:subirmaitra@gmail.com
economy. By breaking up the Indian handloom and destroying the spinning wheel, the British ended the
"blending of agriculture and handicrafts". As a result, the artisans were displaced from traditional
occupations. Finding no other alternative source of livelihood, the artisans fell back on land.
(ii) DECLINE IN AGRICULTURAL EFFICIENCY : Overcrowding of agriculture badly affected its efficiency. The
problem of subdivision and fragmentation of land holdings, overcultivation or cultivation of inferior and
unproductive land, etc. are the direct effects of the British rule. Over-burdened agriculture failed to
generate surplus and consequent shortage of capital resources required for improvements in land and that
the pressure on land enticed competition among cultivators to acquire tenancies on grossly unprofitable
and high rate of rent.
(iii) UNEMPLOYMENT AND UNDEREMPLOYMENT : De-industrialisation caused imbalance in the occupational
structure leading to rural unemployment and under-employment. Daniel and Alice Thorner showed that in
1881, the number of workers engaged in agricultural activities stood at 7.17 crores. The numbers swelled
to 10.02 crores in 1931. As against this, people engaged in industrial activities declined from 2.11crores to
1.29 crores between 1881 and 1931. However, a plausible inference of de-industrialisation can be drawn
from Thorners' figures. But, the timing of de-industrialisation is controversial. Amiya Bagchi used
employment statistics of the period 1809 to 1901 as evidence of de-industrialisation when the proportion of
cotton spinning and weaving population to total industrial population declined from 62.3 p.c. to 15.1 p.c.
People released from industry of various kinds found agriculture as the only alternative means of
livelihood. Consequently, agricultural sector became overburdened with surplus population. A new
proletariat class — landless labourers — emerged in the countryside.
WAS DE-INDUSTRIALISATION A MYTH:
Three different sets of views have emerged round the process of de-industrialisation following the
evidence suggested by nationalist economists, modern researchers and foreign scholars. One school of
thought represented by Daniel Thorner tends to argue that de-industrialisation might have appeared in the
early 19th century but the evidence of industrialisation was clearly visible in the last decade of the 19th
century and the early 20th century. Secondly, to the U.S. scholar Morris D. Morris the stage of de-
industrialisation in India was highly difficult to find. Nationalist economists, however, had no doubt about
de-industrialisation. In support of their assertion, nationalists like R. C. Dutt, M. M. Malabya relied on
external trade statistics which indicated a rapid growth of imports of broadcloth in conjunction with a
decline in textiles import. The value of imports showed a remarkable uptrend during 1860 and 1900 when
it rose from 96 lakh pounds to 27 crore ounds. Fall in exports is tantamount to loss of foreign market of
indigenous products while rise in imports means destruction of home-made goods in the home market.
However, this trade data do not clearly explain de-industrialisation since this data do not give any definite
inkling about the decline in productions. Industrial production data is more decisive on the question of
industrialisation which was not available at that time. In view of this, researchers now rely more on the
industrial distribution of the workforce.
According to Morris D. Morris, de-industrialisation was a myth since it did not take place even in
the early 19th century.Morris argued that nationalists' index of de-industrialisation (that is, external trade
data) could not stand as a fair index. Further, nationalists did not take into account the 'compensatory

4. SOUTH CITY COLLEGE/ECOH/IEH/NEW/DEINDUSTRIALISATION/SM/AUGUST2005
WEBPAGE: www.geocities.com/subirmaitra/www.html E-MAIL:subirmaitra@gmail.com
effect' of de-industrialisation. According Moris, had there been de-industrialisation, village handicrafts
would not have survived long. Unfortunately, his arguments were more conjectural and dubious. Village
handicraft industries survived mainly as an only occupation left to the artisans. Above all, artisans were
forced to put themselves into the clutches of moneylenders. In a colonial economy, this merchant capital or
the question of exploitation played a dominant role in the survival of these industries. In terms of output
and employment,handloom and a variety of traditional industries suffered a catastrophic decline.
The purpose of Daniel Thorner’s study was to evaluate the notion of de-industrialisation in India
under British Rule during the last phase of the 19th century. Thorner’s presentation of the issue is a
threefold proposition to the effect that decline of handicrafts continued into the 20th century and it was not
compensated by a sufficient rise of modern industry. In consequence the Indian economy became more and
more agricultural. To test this hypothesis, Thorner depended on the information available in the census
report from 1881 to 1931. As an index he considered Manufacturing Work Force (MWF) and reached the
conclusion that the census data for males do not support the case either for absolute de-industrialiation or
even for relative de-industrialisation. He suggested that if indeed a major shift from industry to agriculture
ever occurred during the British Rule in India, it might have happened sometime between 1815 and 1880.
J. Krishnamurthy challenged Thorner‘s thesis on theoretical and empirical grounds. To discuss de-
industrialisation Krishnamurthy defines industrialisatlon as a rise in the share of manufacturing output per
capita. This is historically associated with a rise in the share of manufacturing workers to total workers.
But this is neither a necessary nor a sufficient condition for industrialisation. With this proposition
Krishnamurthy argues against Thorner that to show that the number or the proportion of working force
engaged in manufacturing has remained roughly constant does not disprove the de-industrialisation
hypothesis. The hypothesis can only be tested by the data on output in manufacturing and total output in
the economy. But at present neither the data on output in non-factory establishment nor the data on output
per worker in such establishments can be depended upon.
Krishnamurthy is correct in his criticism of Thorner that MWF data alone do not give us a total
picture of the degree of de-industrialisation. But what Krishnamurthy overlooks is that the output data---
like the working force data — alone cannot give us any measure of de-industrialisation. We can hardly
understand anything from the ratio, suggested by Krishnamarthy without considering the institutional—
structural framework of the economy.
Apart from the usual index number problem associated with the measurement of the change in
such a ratio, there also exists the problem of ownership of the output. When the manufacturing sector of a
colonised economy is in the hands of imperialists, then the output may be generated for the outside market.
In such a situstion any increase in output may not increase the net national income. The profit accrued may
not be ploughed back Into the economy.
R. Chattopadhyay’s objection to Thorner is twofold. FIrst, Thorner was wrong in considering the
ratio between the industrial working force and the total working force as the index of de-industrialisation.
By taking the total working force as the denominator of the ratio, Thorner did not take into account the
unemployed population and the dependants. The correct method would be to consider the industrial
working force as a ratio of total population. The ratio between the industrial working force and the total

5. SOUTH CITY COLLEGE/ECOH/IEH/NEW/DEINDUSTRIALISATION/SM/AUGUST2005
WEBPAGE: www.geocities.com/subirmaitra/www.html E-MAIL:subirmaitra@gmail.com
population may decrease owing to an increase in population over time without a corresponding increase in
industrial working force. This phenomenon should be considered as a case of relative de-industrialisation.
The second objection regarding Thorner’s method of collection of data on the working force can
be made clear by three points. First, Thorner’s handling of the data on general labour is wrong because he
includes workers under this heading only workers in the agricultureal sector. B.R.KaIra, a census officer
for 1961 census, calculated that about 20 per percent of the unspecified labourers were in the urban areas.
Secondly, the idea of including trade in the industrial sector is also erroneous. This is particularly so when
the object is to study the process of de-industrialisation. Thirdly, Thorner did not take the data on female
workers into account.
Following R. Chattopadhyay’s own definition, we can evolve the following criteria for the study
of changes in an economy vIs-a-vis industrialisation --- (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 strictly
define a process of industrialisation. Similarly a decline in all the three factors will strictly indicate a
process of de-industrialisation. A decline in the second or third factor together with a constant NNP will
also indicate a process of de-industrialisation.
As far as the output part of (i) and (ii) are concerned the information available for India is
scattered and needs through research. But studies by Thorner, S. J. Patel and S. Sivasubramaniam show
that national income in India remained more or less stagnant over the period 1900-1940. So, if we can now
show that manufacturing working force declined over the period, then we have a strong case for de-
industrialisation. A.K.Bagchi has interpreted de-industrialisation as a decline in the proportion of
population dependent on industry in total population. He has based his estimation on the detailed tables
giving the number of common artisans prepared by Buchanan Hamilton from his survey of different
districts of Blhar over 1809-13. Bagchi has made certain adjustment in the data. To arrive at an estimate
regarding the family size of industrial workers Bagchi has assumed that except for cotton spinners, each
industrial worker supported five people Including himself. An average cotton spinner was assumed to
support either only himself or two persons including himself. Based on these alternative assumptions
Bagchi has derived two estimates of the proportion of total population dependent on the industrial
population for 1809-13 in the 5 districts of Bihar. Comparing them with the 1901 census figures he has
come to the conclusion that in all these districts there was a rapid decline in the proportion of population
dependent on industry suggesting a de-industrialisation. Bagchi has argued that since the districts
concerned had nothing unique compared to other parts of India, his de-industrialisation thesis is true for the
whole of India.