India Language and Culture

Deindustrializationis a process of social and economic change caused by the removal or reduction of industrial capacity or activity in a country or region, especially heavy industry or manufacturing industry. It is the opposite of industrialisation.

The possible four process of deindustrialization are :

1. A straightforward decline in the output of manufactured goods or in employment in the manufacturing sector. This, however, can be misleading because short-run or cyclical downturns may be misinterpreted as long-run deindustrialization
2. A shift from manufacturing to the service sectors, so that manufacturing has a lower share of total output or employment. This may also be misleading, however, as such a shift may occur even if manufacturing is growing in absolute terms
3. That manufactured goods comprise a declining share of external trade, so that there is a progressive failure to achieve a sufficient surplus of exportsover imports to maintain an economy in external balance
4. A continuing state of balance of trade deficit (as described in the third definition above) that accumulates to the extent that a country or region is unable to pay for necessary imports to sustain further production of goods, thus initiating a further downward spiral of economic decline.

During the reign of the Mughul Empire, India was the largest non-manufacturing economy on earth. But in the later half of 18th century, India underwent political turmoil and Europeans (mainly British) got an opportunity to become political masters. During their rule, British mercantilism targeted weakening of the craft guilds, pricing and quota caps, and banning production of many products & commodities in India. The process of de-industrialization was very rapid in India and within 120 years of British Raj (1750-1870), share of Indian GDP in global GDP reduced to one-eighth of global GDP and further to one-twenty-fifth in next 80 years (1870-1950). India became a major player in the world export market for textiles in the early 18th century, but by the middle of the 19th century it had lost all of its export market and much of its domestic market. Other local industries also suffered some decline, and India underwent secular de-industrialization as a consequence. While India produced about 25 percent of world industrial output in 1750, this figure fell to only 2 percent by 1900. We use an open, specific-factor model to organize our thinking about the relative role played by domestic and foreign forces in India's de-industrialization.

India underwent de-industrialization during the late 18th and early 19th centuries. We can distinguish two main epochs of de-industrialization that have different underlying root causes. The first epoch runs from about 1750 to 1810 and resulted from the collapse of the Mughal empire. As central authority waned, revenue farming expanded, the rent burden increased, and regional trade within the sub-continent declined, all serving to drive down the productivity of foodgrain agriculture. Grain prices rose, and given that ordinary workers lived near subsistence, the nominal wage rose as well. As a consequence, the own-wage in Indian textile manufactures increased, hurting India's competitiveness in the export market. India thus lost ground to Britain in the world textile market during a period when most British production was still carried out using the cottage system. This version of events is also supported by Bairoch's evidence that in the second half of the 18th century India's share of world industrial production fell faster than in any other part of the non-European world. During the second epoch, running from roughly 1810 to 1860, productivity advance resulting from the adoption of the factory system drove down the world price of textiles. The productivity of Indian agriculture improved during this period under the relative security of Company rule, and grain prices stabilized. The relative price of grain continued to rise, however, since the world price of textiles continued its secular fall.

By 1860, India had completed a century-long two-part transition from being a net exporter to a net importer of textiles. Indian de-industrialization was about over.

By

Shariq Us Sabah

shariqussabah@yahoo.com

Researcher

Modern History

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