The deindustrialization of India

The dwindling of manufacturing in India

was part and parcel of the process
of Indian economic decline.

In the first half of the 18th century,

India was a global
manufacturing powerhouse.

Indian textiles were worn
around the world.

They were worn around Asia.

They were exported to Europe.

They were worn by American slaves.

And, they were sent to Africa.

Indian agriculture had high productivity

and Indian textile manufacture
had relatively high productivity,

of course, both by
the global standards at the time.

The subsequent decline was striking.

In 1750, it is estimated that
India accounted for about a quarter

of the world's manufacturing output.

By 1800, this had gone down to one fifth.

By 1880,

India was accounting for less than 3%
of the world's manufacturing output.

What were the causes of this decline?

One major economic problem
for India during this time was drought.

Prior to 1775,

it was relatively wet weather for India.

The chance of a drought in a given year
was less than one in five.

After 1775,

the chance of drought
in a given year rose to 40%.

Agriculture was such a major part
of the Indian economy

that if a drought came
and the harvests were bad,

very few other things went well in India.

Another major economic problem for India
was the collapse of Mughal rule

culminating in the early 18th century.

Historians have debated
just how much this mattered

for Indian economic prosperity.

The traditional view was
that the collapse of Mughal rule

led to quite a bit of disorder in India

that led to higher trade barriers
that led to foreign invasions

and, in general, India was less
of a single, coherent economic unit.

There have been subsequent
revisionist accounts

which suggest the collapse of Mughal rule
was not in every way a total disaster,

but still a balanced perspective
seems to suggest

that the collapse of Mughal rule
really did bring

some serious economic problems for India.

If one looks at data on grain wages,

they start to decline
in the late 17th century,

and this decline continues
throughout most of the 18th century.

The problems became much worse
in the early 19th century

with the Industrial Revolution of Britain,

the rising productivity
of the British textile industry,

and, combined with that,
the British takeover of India.

All of a sudden, British textile mills
were more productive

and offered a cheaper product.

To make matters worse,

parts of the world such as
much of Latin America,

the United States, Australia,
Canada, and New England

all put stiff tariffs on foreign textiles,
including textiles from India.

British rule forced free trade on India,

that is the Indians had to accept
British textiles with no tariffs.

Now in general, economists are
strong believers in free trade

and the benefits of
international exchange.

But this particular episode of free trade

doesn't seem to
have worked out all that well.

For one thing, India did not have
free trade to export its textiles,

but perhaps, more importantly,

the Indian economy was seeing
significant disruptions

because of the cheaper British textiles,

and there were too many barriers to trade.

There was too much corruption.

There was not enough infrastructure
or resource mobility

for free trade between India and Britain

to lead to a reallocation of Indian labor

to sectors where it would be
more productive.

So it wasn't really a free trade at all.

It was free in one particular way,
and it certainly wasn't a fair trade.

What happened is that a lot of
Indian textile workers lost their jobs

and were unable to find
lucrative employment somewhere else.

The rate of deindustrialization
starts to slow down by the 1860s,

and by the late 19th century,
early 20th century,

India is very much reindustrializing.

This is in part due to better technologies,

better education for some workers,

and, in general, India is now competing
as a low wage supplier of textiles.

Whereas, Great Britain, the United States,
and other locations have much higher wages.

Over time in the 20th century,

India built up a significant
and diversified manufacturing base,

especially after independence.

A great deal has been written
on the deindustrialization of India.

You can simply Google
"India deindustrialization"

and you'll find many sources.

The single source that
I have found most helpful

and, I think, most accurate
is the one listed here.