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Industrialization in India from the late 1800s to 1947

Korean Minjok Leadership Academy
International Program
Jung, Jewon
Term Paper, AP World History Class, November 2008

Table of Contents

I. Introduction
II. Definitions
III. Objectives
IV. Development and History of the Primary Sector
IV.1 Agriclture
IV.1.1 Production of Main Food Crops
IV.1.2 Production of Cotton
IV.2 Livestock, Meat, and By-Products
IV.3 Mining
IV.3.1 Coal Mining
IV.3.2 Iron Ore Mining
IV.3.3 Gold and Silver Mining
V. Development and History of the Secondary Sector
V.1 Textile Industry
V.1.1 Problems then and now
V.1.2 Development during British Colonial Rule
V.2 Automobile Industry
V.2.1 Tata Motors
V.2.2 Hindustan Motors
V.3 Iron and Steel Industry
V.3.1 First Step Forward : Bengal Iron Works
V.3.2 Tata Steel
V.3.3 Indian Iron & Steel Co.
VI. Development of the Tertiary Sector
VI.1 Cinema
VI.1.1 Emergence of Silent Films
VI.1.2 From Cinema to Industry
VI.2 Banking & Finance
VI.2.1. Emergence of Modern Banks in India
VI.2.2. Quasi-central banks : Presidency banks
VI.2.3. The First Fully Indian-Owned Bank
VI.2.4. Swadeshi Influences on Indian Banking
VI.2.5. Decline of Banking during the Interwar Period
VII. Development of the Quarternary Sector
VII.1 Pre-Colonial Education System
VII.2 Higher Education
VII.3 National Literacy
VIII. Conclusion

I. Introduction
            In 1750, India produced nearly 25 % of the world's manufacturing output and was only outdone by China, which constituted 32.8 %. By 1880 however, India only took up 2.8 % of world exports (1), and after its independence from British colonization in 1947, it was one of the most poverty-stricken regions in the world. India's economic deterioration is particularly ironic, considering the industrial boom that Britain experienced during the same era (2). Nevertheless, from 1750 to 1947 India experienced modernization of its economy in various areas including agriculture, factory production, finance, and even film production. Though India did lose its edge in the textile trade and did in fact experience de-industrialization (3), its thriving "Bollywood" cinema market and automobile production in Hindustan are some notable examples of economic modernization.

II. Definition
            Industrialization will be examined based on the modernization of India's economy in the following four major sectors of the economy: primary, secondary, tertiary, and quaternary. The primary sector deals with the extraction and production of raw materials, and entails farming and mining. The secondary sector takes the materials gained from the primary sector and transforms the raw materials into final goods such as textiles and automobiles. The tertiary sector involves the provision of services such as banking, finance, and cinema to consumers and businesses. Last of all, the quaternary sector usually appears the latest in a country's modernization process. It entails technological research and education. Since this paper deals with the pre-colonial and colonial India, it safe to assume that the quaternary sector will hardly be invoked.

III. Objectives
            The four major sectors will be examined in order. The paper will focus on how they developed throughout history through production rates and statistics until independence in 1947. Considering the special colonial history of India and its de-industrialization phenomenon, this paper also seeks to answer whether British colonialism harmful or beneficial to the modernization of India's economy.

IV. Development and History of the Primary Sector

IV.1 Agriculture

IV.1.1 Production of Main Food Crops
            Compared to other countries India had from early on much more arable land reserved for main food crops, which were wheat, barley, maize, millet, sorghum, and rice. 10,900 thousand hectares were available for wheat growth in 1892, and by 1947 the land had expanded to 13,910 thousand hectares. India also had 26,556 thousand hectares of rice fields in 1890 and 34,625 by 1947 (4). The increase in the available farmland was primarily due to the development of irrigation and canal networks in Punjab, Narmada Valley, and Andhra Pradesh. Statistics about the available arable crop land alone however, does not signify an increase or a decrease in production levels. The annual growth rate of all crop output was 0.4 percent from 1891 to 1946. (5) The actual data concerning the output of main arable crops corroborate; in 1905 the wheat output was 116,359 thousand metric tons, but in 1947 the output had dramatically dropped to a mere 8,020 thousand (6). During the period between the two world wars, from 1918 to 1939, agriculture declined. (6a) For instance, the output of rice in 1918 was a dismal 38,088 thousand metric tons, compared to the 56,328 metric tons output in 1917 (7). Bengal especially suffered, with food output declining by 0.7 percent annually from 1921 to 1946.

IV.1.2 Production of Cotton
            In 1865, India only produced 12 thousand metric tons of cotton. By 1889, the number had risen to 533, and in 1919 doubled to 1052 thousand metric tons. Note that during the post-World War I years India began to produce much more cotton that before. In 1947, however the cotton output directly after independence was 569 thousand metric tons (8). This meager amount gives onlookers a clue as to how Indian cotton producers were pressured by their British colonizers to increase output prior to independence.
            The amounts of cotton exported throughout Indian history are more tell-tale than the production rates alone. India exported 102 thousand metric tons of cotton in 1850; 250 in 1863; 326 in 1905; 456 in 1915; and 738 in 1930. After independence in 1947, cotton exports were down to 211 thousand metric tons (9). These numbers may be part of a pattern of British exploitation of Indian raw materials, as cotton exports increased drastically during the 1930s when the British economy was suffering from the Great Depression. Much earlier on, at the beginning of the 19th century, India became the supplier of the raw material, cotton, for England's Lancaster cotton textile industry. Like many other colonized countries, India's cheap cotton and other raw materials were exported to Britain to help produce final goods in British factories (10).

IV.2 Livestock, Meat, and By-Products
            There was no significant change in the number of horses, cattle, pigs, sheep, goats, and camels in India from the late 1800s to 1947. From 1895 to 1947, the number of horses increased from 1,133 thousand to 1,397 thousand. In the same period, the number of cattle rose from 78,380 thousand to 133,544 thousand (11). Though the number of cattle doubled, this is hardly significant when considering the natural population growth of animals. As the cow is a sacred animal in the Hindu religion, a major religion in India, there would likely be an increase in the number of cattle rather than a decrease. (12)
            Meanwhile, there were no systematic records of meat and byproduct outputs in India until the 1950s. However, it is safe to surmise that dairy products were produced in large quantities as they are considered an essential nutritional component of most Hindi meals in India. (13)

IV.3 Mining
            Coal mining was a profitable business during British colonial times. However, although the British did indeed support coal, gold, silver, iron ore and steel mining, they did not look favorably upon mining other metals such as lead. They believed that India's development of metallurgy would lead to production of weapons for the "natives," a potential threat to British rule. The British implemented the Arms Act in 1878 to outlaw Indian ownership of firearms and limited Indians from mining and working metals that might "sustain it in future wars and rebellions." (14) Several mines were actually closed down under British rule.

IV.4 Coal Mining
            Large-scale commercial coal mining in India began in 1774 under the East India Company in the Raniganj Coalfield along the Western bank of the Damodar River. The introduction of steam locomotives in 1853 made possible the effective transportation of coal from the mines to urban centers and ports (15). India's output of coal rose from 2,203 thousand metric tons in 1890 to 30,695 in 1947 (16). Coal mining proliferated during and after World War I; from 1920 to 1930, national coal output increased from 18,250 to 24,185 thousand metric tons (16a). However, coal mining declined during the early 1930s, when the output dropped by more than 4,000 thousand metric tons in just three years. The facts collaborate with other sources that claim Indian industries declined along with Britain's economic stagnation during the 1930s (17).

IV.5 Iron Ore Mining
            India's output of iron ore increased significantly during British rule, though there was a small drop in production during the early 1930s. In 1912, the national output in thousand metric tons was 24. By 1947, the quantity had reached an astounding 1,625 (18). Iron ore mining will be discussed in further detail below in the secondary sector, which deals with the iron and steel smelting industries.

IV.6 Gold and Silver Mining
            India's total output of gold in 1885 was only 0.2 metric tons. However, with the expansion of gold mines, output reached an all-time high in 1915 at 17.3 metric tons. The gold output quickly decreased after the 1915 peak, and in 1947 only amounted to 5.2 metric tons (19). As for silver, India was a major importer, not an exporter or a producer nation. According to the American Council Institute of Pacific Relations in 1933, China and India were longtime importers of silver, as opposed to exporter nations like the United States, Mexico, Canada, and Australia. (20

V. Development and History of the Secondary Sector

V.1 Textile Industry

V.1.1 Problems then and now
            The textile industry is one of the biggest components of the Indian economy today, and accounts for 21 percent of employed workers in India (21). Many of the advantages that sustained India's textile industry in the past still continue to influence the market. For example, India still has a huge production capacity, and still has a large pool of skilled and low-wage workers available for cheap labor. At the same time, the current weaknesses of the Indian textile industry are the same ones that plighted it in the past, during British rule. Some problems include the import of cheap textiles from other neighbors, the use of outdated manufacturing technology, and disorganization. One aspect that may have changed is the shift in competition. India had to struggle against cheap British textiles before independence, but now have to deal with cheap Chinese textiles. The textile industry has yet to undergo a dramatic modernization process.

V.1.2 Development during British Colonial Rule
            Prior to British rule in the eighteenth century, Indians had dominated the world textile trade. However, along with the Industrial Revolution, the advent of spindles, looms, and new spinning processes made better textile producers out of the British (22). In India, the textile industry evolved from being a mere domestic industry to a top notch national industry far before the Industrial Revolution. Meanwhile, after the introduction of looms and spinning mills, Lancashire was the center of the cotton and fabric industry in Great Britain, out-competing India though lower production costs, greater supplies, and forced tariffs (23)
            Thus, the traditional textile industry of India went under de-industrialization during British rule. Nonetheless, modernization of India's textile industry took place during the early 19th century; the first textile mill in the country was established at Fort Gloster near Calcutta in 1818. A few years later, the first cotton textile mill of Bombay was established in 1854 by a Parsi cotton merchant. In 1861, the first cotton mill in Ahmedabad was established in the Gujarat region. By the end of the 19th century, there were 178 cotton textile mills in India.

V.2 Automobile Industry
            India's automobile industry is the tenth largest in the world, producing 2 million units annually (24). Though India's automobile industry did not flourish until after independence, the foundations of domestic carmakers such as Tata Motors and Hindustan Motors were set up prior to 1947.

V.2.1 Tata Motors
            In 1897, Mr. Foster of Crompton Greaves Company in Mumbai became the first person in India to own a car. A few years later in 1901, Jamshedji Tata became the first Indian to own a car in his homeland (25). Jamshedji Tata was a pioneer in the field of modern industry in India, being the founder of what would later be called the Tata Group of companies (26). One such company is today's Tata Motors. Tata Motors is part of the Tata and Sons Group, which was founded by the aforementioned Jamshetji Tata and J. Baker. Founded in 1945, just two years before independence, the industry did not generate much profit until it formed a joint venture with Daimler-Benz AG of Germany in 1954.

V.2.2 Hindustan Motors
            Hindustan Motors is another major Indian automobile manufacturer and it is famous for the Ambassador car, a model popular among Indian taxi drivers (27). The company was founded before Tata Motors, in 1942, by B. M. Birla. Hindustan Motors Limited commenced its operations in a small assembly plant in Port Okha in Gujarat, until the facilities were later transferred to Uttarpara, West Bengal in 1948. Currently Hindustan has operational facilities in Chennai, Kolkata, and Indore. (28)

V.3 Iron and Steel Industry

V.3.1 First step forward : Bengal Iron Works
            In 1870, James Erskine founded the Bengal Iron Works, the first step towards an iron/steel smelting industry ever taken in India. He used raw coal to fire open top furnaces, using the locally available poor-grade iron ore. Operations began in earnest in 1875 at Kulti. The plant at Kulti also made steel, but could not overcome the competition from imported steel. Though Bengal Iron Works was the first plant to produce iron and steel, more credit is given nowadays to TISCO, which was able to produce steel and make profit. The plant was not very successful, and was salvaged by Sir Rajendranath Mookerjee and Sir Acquin Martin, the founders of Martin & Co.
            The two important and historic iron and steel industries of Indian colonial history that still exist today are Tata Iron and Steel Company, Ltd (TISCO) and The Indian Iron and Steel Company, Ltd. (IISCO)

V.3.2 Tata Steel
            Tata Steel was established by Indian Parsi businessman Jamshetji Nusserwanji Tata in 1907. It was the first steel company in India, and the company also had significant labor policies that differed from the prevailing British system. For example, Tata Steel introduced an 8-hour work day in 1912 when only a 12-hour work day was the legal requirement in Britain. In its modern-day website, the company boasts that its operations since 1907 were never once disrupted by a labor strike (29). Tata Steel is one major component of the Tata Group, along with Tata Motors.

V.3.3 The Indian Iron & Steel Co. Ltd
            If Tata Steel was founded by an Indian businessman, IISCO was established by Englishmen to suit the needs of the impoverished British government, which suffered from disruption of supplies of iron and steel from Europe during World War I (30). G. H. Fairhurst founded the IISCO plant at Burnpur, which went into operation in 1918. At first, IISCO only had iron making facilities, but in 1939 the Steel Corporation of Bengal set up a steel plant at Burnpur as well. The two merged and operated under Martin Burn's agency during the late 1940s and the early 1950s.

VI. Development and History of the Tertiary Sector

VI.1 Cinema

VI.1.1 Emergence of Silent Films
            India is famous for its cinema industry, known collectively as "Bollywood" by the world. The first motion pictures received by Indians was the Lumiere Brothers' Cinematographe's six soundless short films, which were shown at the Watson Hotel, Bombay in 1896. Hiralal Sen and F. B. Thanawalla were the two pioneers of the Indian cinema, producing short films in Calcutta and Bombay in 1900. However, the turning point came on 1913, when Dhundiraj "Dada" Phalke produced India's first fully indigenous silent firm Raja Harishchandra. This film had titles in both Hindi and English and was released at the Coronation Cinema in Bombay. (31)

VI.1.2 From Cinema to Industry
            During the 1920s, the Indian cinema became a regular industry and came under business laws and regulations. Many new film makers gained fame during the 1920s, such as Dhiren Ganguly for England Returned, Baburoa Painter for Savkari Pash, Suchet Singh for Sakuntala, and Chandulal Shah for Guna Sundari. The Indian sound films quickly replaced the silent films during the 1930s, when the first Indian sound film Alam Ara, directed by Ardershir Irani, was released in 1931 at the Majestic Cinema in Bombay (32)

VI.2. Banking and finance

VI.2.1. Emergence of Modern Banks in India
            Modern banking systems and institutions emerged in India during the late 18th century. Among the first banks were The General Bank of India, established in 1786, and the Bank of Hindustan. Both are no longer in operation, and the oldest bank still in existence is the State Bank of India, which was first founded as the Bank of Calcutta in 1806. (33)

VI.2.2. Quasi-central banks : Presidency banks
            The Bank of Calcutta, which was renamed as the Bank of Bengal, the Bank of Bombay, and the Bank of Madras were the three presidency banks of India from the early 1900s to 1925. These quasi-central banks were established by the British East India Company. The three banks merged in 1925 and formed the Imperial Bank of India. After independence in 1947, it became the State Bank of India. The presidency banks were formed for the benefit of the British. The first of the three banks, the Bank of Calcutta, was formed mainly to finance General Wellesley's wars against Tipu Sultan and the Marathas. (34)

VI.2.3. The First Fully Indian-Owned Bank
            The Allahabad Bank, established in 1865, was the first fully Indian owned bank (35). This enterprise was one of many opened by Indians to finance the profitable Indian cotton trade, which met a short boom during the American Civil War when the supply of cotton from the Confederate States of America to Lancashire was cut short. However, the speculative ventures resulted in mass bankruptcies and banking in India remained under European dominance for many more years to come until the early 1900s. Foreign banks such as the Comptoire d'Escompte de Paris formed branches in Calcutta during the 1860s. Calcutta soon became a banking center.

VI.2.4. Swadeshi Influences on Indian Banking
            During the early 20th century, the banking market had expanded to include the Punjab National Bank in Lahore and the Bank of India in Mumbai. The Swadeshi movement was effective and influential during the early 20th century, and local Indian businessmen and political figures founded banks of and for the Indian community (36). The aforementioned Punjab National Bank was the first Swadeshi Bank (37). The movement for economic independence led to the formation of the Indian Banks' Association in 1946, as a representative body of regulations of banks operating in India. (38)

VI.2.5. Decline of Banking during the Interwar Period
            During World War I, II, and even until independence, Indian banking faced many challenges. More than 94 banks in India collapsed between 1913 and 1918 from insufficient investments. (38a)

VII. Development of the Quaternary Sector : Education

VII.1 Pre-Colonial Education
            Prior to British rule, there was widespread education at a local level among the Indians during the 18th century. For example, there was usually a school for every temple, mosque, or village. There were even printed books in India for schoolchildren as early as 1579, and students from all classes of society attended schools. Pre-British schools did not have to pay land taxes, but after the East India Company took over, it put a stop to land grants for Indian schools and therefore restricted the Indian education system from getting any financial benefits. (39)

VII.2 Higher Education
            Along with British rule came the emergence of higher education and western universities during the 19th century. The British established St. Xavier's College, Sydenham College, Wilson College, and Elphinstone College in India (40). These universities however, were actually part of the British efforts at effective colonization. British education administrator Thomas Macaulay said in 1835: "We must do our best to form a class who may be interpreters between us and the millions whom we govern, a class of persons Indian in blood and colour, but English in taste, in opinions, words and intellect." Macaulay was the maker of Colonial Britain's Educational Policy in India, and harbored bitterness towards the Indian traditional education system: "It is, no exaggeration to say, that all the historical information which has been collected from all the books written in Sanskrit language is less valuable than what may be found in the most paltry abridgments used at preparatory schools in England." (41)

VII.3 National Literacy
            Though the British did establish many institutes of higher education, the rest of the Indian public were neglected. Literacy was extremely low among the Indians under British colonization. In 1911, only 6% of the adult population could read; in 1931, it had only slightly increased to 8%; in 1947, the literacy rate was 11%.(42)

VIII. Conclusion
            Because it would have been difficult to reach a judgment about the effects of British colonization on India's economic modernization and development as a whole, the economy was examined sector by sector.
            The primary sector included agriculture, livestock, and mining. Though statistics from the late 1800s to independence in 1947, it was easy to see that available land for food crops expanded during the colonial period. However, at the same time, it was evident that wheat and rice production faltered under colonial rule. Not only that, cotton was produced primarily to support the Lancashire textile mills in England.
            On the other hand, the secondary sector developed under British rule, as coal mining boomed and later fueled the Indian iron and steel industries. Nevertheless, restrictions by the British in fear of Indian armament deterred potential business expansion.
            In the tertiary sector, the cinema industry was relatively free of restrictions and contents dealt with glorification of traditional Indian culture and Hindi romance. The banking and finance services by Indians could not grow as much under European rule, but the Swadeshi movement enabled local businessmen and politicians to successfully establish their own enterprises.
            Last of all, the quaternary sector failed under British administration, whose educational policies were short-lived, prejudiced, and limited, available only to the elite class.
            Because the British introduced regulation, standardization, and new technologies to India, but at the same time de-industrialized India through exploitative tactics, one cannot reach a black-or-white judgment as to whether British rule benefited or deterred modernization of India's economy.


(1)      Clingingsmith 2005
(2)      Arnold-Baker 2001 pp. 695-696
(3)      Arnold-Baker 2001 p. 1205
(4)      IHS pp.156, 162
(5)      Roy 2006. pp.20-22.
(6)      IHS p. 191
(6a)      Roy 2006. pp.20-22.
(7)      IHS p. 192
(8)      IHS, pp.248-249
(9)      IHS pp.334-335
(10)      Sugihara
(11)      IHS, p. 291
(12)      Article : Cow Protection Movement, from Wikipedia
(13)      van der Veer 1994, pp. 87-88, quoted after google books
(14)      Arnold 2004 pp.100-101
(15)      Coal Mining in India
(16)      IHS pp. 354-355
(16a)      IHS pp. 354-355
(17)      Sugihara
(18)      IHS pp. 373-374
(19)      IHS pp. 406-407
(20)      Memorandum (Institute of Pacific Relations, American Council), Vol. 2, No. 22, Nov. 17, 1933
(21)      India Business Directory
(22)      Clingingsmith 2005
(23)      Economy Watch
(24)      Timmons 2007.
(25)      BBC News, April 3 2007
(26)      Article Tata Motors, from Wikipedia
(27)      Article Hindustan Motors, from Wikipedia
(28)      About us, from Hindustan Motors
(29)      Article Tata Steel, from Wikipedia
(30)      Article IISCO, from Wikipedia
(31)      Article Bollywood : History, from Wikipedia
(32)      Article : Cinema of India, from Wikipedia
(33)      Article : Banking in India, from Wikipedia
(34)      Article : Bank of Calcutta, from Wikipedia
(35)      Article : Allahabad Bank, from Wikipedia
(36)      Article : Swadeshi Movement, from Wikipedia
(37)      Article : Punjab National Bank, from Wikipedia
(38)      Article : Banking in India, from Wikipedia
(39)      Dharampal 2000. Introduction Volume III. pp. 07-86
(40)      Article : History of Education in India, from Wikipedia
(41)      British Education in India


Note : websites quoted below were visited in November 2008.
1.      Clingingsmith, David Lawrence and Williamson, Jeffrey G., Mughal Decline, Climate Change, and Britain's Industrial Ascent: An Integrated Perspective on India's 18th and 19th Century Deindustrialization (November 2005). NBER Working Paper No. W11730, abstract
2.      Arnold-Baker, Charles, The Companion to British History, Routledge, London and New York, 2001
3.      Roy, T. (2006). "Agricultural Prices and Production, 1757?1947", pp.20-22 in Encyclopedia of India (vol. 1), edited by Stanley Wolpert. Thomson Gale 2006
4.      International Historical Statistics; Africa, Asia & Oceania 1750-2000, Fourth Edition; B. R. Mitchell; London : Palgrave Macmillan, 2003
5.      Sugihara, Kaoru; Notes on the Trade Statistics of British India; Osaka University, Faculty of Economics
6.      Peter van der Veer, Religious Nationalism, Hindus and Muslims in India, 1994
7.      Arnold, David (2004). The New Cambridge History of India: Science, Technology and Medicine in Colonial India. Cambridge University Press
8.      Dharampal, 2000. The Beautiful Tree, Volume III. Mapusa: Other India Press
9.      Article : Cow Protection Movement, from Wikipedia,
10.      Coal Mining in India : the Past, from Government of India, Ministry of Coal
11.      India Textile Industry, from Maps of India's India Business Directory
12.      The Textile Industry, from Economy Watch,
13.      Timmons, Heather, 2007. In India, a $2,500 pace car. International Herald Tribune .
14.      BBC News, April 3 2007, India's Ministry of Heavy industries & Public Enterprises Draft Automotive Mission Plan 2006-2016, Timeline: India's automotive industry
15.      About us, from Hindustan Motors Ltd.
16.      British Education in India, from South Asian History
17.      Article : Tata Motors, from Wikipedia
18.      Article : Hindustan Motors, from Wikipedia
19.      Article : Tata Steel, from Wikipedia
20.      Article : IISCO, from Wikipedia
21.      Article : Bollywood : History, from Wikipedia
22.      Article : Cinema of India, from Wikipedia
23.      Article : Banking in India, from Wikipedia
24.      Article : Bank of Calcutta, from Wikipedia
25.      Article : Allahabad Bank, from Wikipedia
26.      Article : Swadeshi Movement, from Wikipedia
27.      Article :Punjab National Bank, from Wikipedia
28.      Article : History of Education in India, from Wikipedia

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