When India got its independence after long period of subjugation, its land and people were a picture of distress, removed from great events of its past glory and splendour.
A whole creative side of India civilization and vibrant economy of Ancient and Medieval India had shrunk under the foreign rule. Down to the eve of British rule India had rich and prosperous economy due to its flourishing agricultural and manufacturing industries.
Indian industries not only met all local wants but also enabled India to export finished products which had a world-wide market. Indian exports consisted chiefly of manufactures like cotton and silk fabrics, muslins, calicoes, artistic ware, silk and woolen cloth.
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Kashmiri shawls and carpets ; jewellery, stone carving, filigree work in gold and silver, and artistic work in marble, sandalwood, ivory, and glass formed other impartment industries, products of which were in great demand the world over.
British India- But this vibrant economy started to decline under the impact of the British connection and industrial in Europe, revolution. The Industrial Revolution first of all wiped out the market for India’s artisans in Europe, because the economies of large scale production in the new English factories made it impossible for the artisan products to complete with factory products.
By the beginning of the 19th century the staple industrial export, cotton textiles, began to decline and soon they ceased to be exported. In general there had been adverse impact on artisan sector under British rule. The old crafts were left to languish and decay was not prepared to modernise.
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The void created by decay of Indian handicrafts was not filled by the rise of modern industry in India because of the British policy of encouraging the import of manufactures and export of raw materials from India.
The British policy of drain of wealth and the arbitrary lassiez Faire changed India to a purely agricultural economy i.e., a source of cheap raw materials and food grains for England and dependent totally on industrial supplies from England. [Down to the beginning of 19th century the shipbuilding industry was more developed in India than in England. Like the India textile industry, it roused the jealousy of English manufacturers and its progress and development were restricted by legislation].
The British government was never interested in the industrialisation of India. But in response to the great pressure built up by the national movement, the British were forced to permit the establishment of some consumer goods industries like cotton textiles, sugar, paper, matches and to some extent iron and steel which did make some progress under the colonial regime. Moreover, the British government provided discriminatory protection to some selected industries since 1923.
Under colonial rule, local enterprise was confined largely to trade and commerce mainly in and around fort cities like Bombay (Mumbai), Calcutta (Kolkata) and Madras (Chennai).
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A few industrial centers grew around these cities through private entrepreneurship and the extremely narrow base of industrialization remained confined to these very few cities. The British, however, through the managing agency system did exercise control over the ownership and management of industrial undertakings.
To ensure that India remained an appendage of the British colonial system the British never permitted the establishment of capital goods industries in India.
The industrial pattern in India on the eve of planning 1950 was marked by:
(i) Low capital intensity:
It was the result of two factors first, the general level of wages in India was low, and, second, the small size of the home market in view of the low per capita income and the limited use of mass production (or high capital intensity) techniques resulted in low capital per worker employed.
(ii) Lop-sided pattern of industry:
The peculiarity of the industrial pattern of India was the high concentration of employment either in small factories and household enterprises, i.e., the lowest size- group or that there was a high concentration of employment in large factories, i.e., the highest size group. The medium sized factories did not develop in India.
The existence of this lop-sided industrial pattern was due to the colonial nature of our economy. The foreign firms and those owned by big business and industrial magnates were of a very large size coming at the top of the pyramid, and at the bottom were a very large number of indigenous small sized firms. The lop-sidedness of the industrial pattern was reflected in the absence of the middle entrepreneurs running medium sized firms.
(iii) Composition of manufacturing output:
Reflects the preponderance of consumer goods industries vis-a-vis producer goods industries. In 1953, the ratio of consumer goods to produce goods worked out to be 62: 38.
According to the criteria suggested by Haffmann India seems to have entered the second stage of industrial development. But even then, there is no doubt that the capital-goods, sector is under-developed and there is a need for the expansion of this sector so as to ensure a rapid rate of growth to make economy self-reliant and ultimately faster the pace of industrialisation in the country.
With the initiation of the Indian five year plans in 1951, it was imperative that the perspective should change in favour of industrial development of India as well simultaneous development of agriculture to constitute the complementary to each other as far as development of economy is concerned. Development of agro-industries, village industries and small scale enterprises would form an essential part of in industrial development process.