India After Independence

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State, Market & Economy

Big Industry Before Independence:

Anupriya Singhal & Aoneha Tagore

The world over, in the eighteenth and nineteenth centuries, private sector units were of a laissez-faire variety i.e., the private sector was completely free of state interference. Private enterprises were units owned and managed by individual proprietors and partnerships. Even in India, private business houses in spite of many obstructions placed by the British government flourished and managed to earn huge profits. This was also the era when government investment in industry was zero. Thus, in this paper we try to analyse the rationale behind government investment in industry post independence. At the beginning of the First World War, Europeans managing agency houses enjoyed unchallenged supremacy in the private corporate sector of the Indian economy. At the end of the Second World War this supremacy had been broken and Indian entrepreneurs, advancing by rapid strides in the inter-war period, were now in a position to take over the business of the departing British. On the whole there had been substantial progress with regard to the expansion of the industrial complex as well as the industrialisation of the corporate enterprise. At the end of the British rule, India had a larger industrial sector, with a stronger element of indigenous enterprise, than most under developed countries in the world. The First World War ushered in a new phase of British imperialism in India—a phase which was fundamentally different from the pre war period in the method of appropriation of India’s commodity surplus by Britain. The Second World War, by bringing about the liquidation in India’s sterling debt, decisively ended this phase of British domination over India. In the post war period there was a clear shift in the relationship between India and Britain in all respects. Not that the importance of India to the British economy declined, but there was a change in the nature of benefits flowing from the possession of India. In the triennium before the First World War, UK’s share in India’s imports was 62.8% on the eve of the Second World War it stood at 30.5%.

Industrial Growth 1880-1947
The diminishing inflow of British investment enabled Indian merchants and manufacturers to seize the initiative for developing newer industries. On the other hand the repatriation of British capital acted as an adverse factor on general conditions of trade and industry which have been particularly prosperous during 1900-14 on account of an ample flow of British capital. A comparative study of tropical development between 1880 and 1913 shows that India had done better in organised industry than most other tropical countries, such as Egypt, Kenya, Uganda, Nigeria, Indonesia, Philippines and Venezuela. India’s annual rate of industrial growth from 1880 to 1913 was about four to five per cent. During this twenty year period the early growth rate of manufacturing activities in the Philippines was 4.7 per cent; for India the corresponding rate of growth, as estimated by K Mukerji, was 6.4 per cent.

Centre for Civil Society


State, Market & Economy

Table I
Index Of Manufacturing Production
Country Year 1938 South Africa 1,067.3 USSR 857.3 Finland 300.1 India 239.7 New Zealand 227.4 Denmark 202.1 Australia 192.3 World Average 182.7 Norway 169.2 Canada 161.8 USA 143.0 UK 117.6 France 114.6 Switzerland 82.4 Spain 58.0 Source: Industrialisation and Foreign Trade, USA, 1945, Table III, League of Nations. Thus as visible from the table, India’s rate of industrial growth was well above the world average. Both in the period preceding the First World War and in the period following it, India’s considerable industrial development occurred through import substitution. The very process of import substitution on a large scale was, bound, in the long run, to create a new demand for basic capital goods. A typical instance was the move for the...
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