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The Indian Industrial Sector at independence

The Indian Industrial Sector at independence

  • Before the colonization of India under the British rule, India was a leading manufacturer of items like cotton and silk fabrics, handicrafts etc. These products were exported at very high prices in the world markets.
  • The colonization of India along with the advent of the Industrial revolution in Europe in the 19th century reversed India’s position in the world industrial From being the leading exporter of manufacturing items, it was made the leading importer of cheap machine-made goods manufactured in Europe.
  • These factors resulted in large scale decline in the value addition as well as the employment generated by the Indian industrial sector. This phenomenon (particularly the decline in employment) is defined as de-industrialization in the Indian context.
  • At the time of independence only two industries viz. cotton textiles in western India and Jute in eastern India contributed to about two-thirds of value addition and employment of Indian manufacturing sector, Further, the jute industry was almost exclusively owned by British managing agencies.

As a whole, the basic features of the Indian industrial sector at independence were as follows:

  • The sector was extremely underdeveloped with very weak infrastructure.
  • The lack of government intervention in favour of the industrial sector was considered as an important cause of under — development.
  • Export orientation had been against the country’s interests.
  • The structure of ownership was highly concentrated.
  • Technical and managerial skills were in short supply.
  • Due to the above features, India chose an inward-looking industrial policy with active government participation. Import substitution was an important aspect of such policy.
  • Import substitution is defined as a conscious effort to replace major consumer imports by promoting the emergence and expansion of domestic industries. It requires the imposition of protective tariffs and quotas to get the new domestic industries started.
  • Such development policy adopted by India and some other developing nations found support in the writings of economists like Ragnar Nurkse, Singer and Prebisch.
  • The active role of the State was clearly articulated in pre-independence industrial documents like the report of the National Planning Committee (1938) under the Chairmanship of Jawaharlal Nehru and in the Statement of Industrial Policy (1945). The SIP (1945) can be regarded as a precursor of all the thinking that became enshrined in the key industrial policy resolutions after independence.

Two important aspects of SIP (1945) were:

  • Introduction of the concept of Industrial Licensing.
  • Special importance given to the development of steel, heavy engineering, machine tools and heavy chemical industries.

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Indian Economy

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