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Indian Economic Policy

Notes either to the Government or interests in some way connected with Britain. Though
industrialisation was started by the British in the 19th century, the Britishers were more interested
in their profit and not in accelerating the economic growth of India.
Apart from the British, the Parsis, the Jews and the Americans were also prominent first as
merchants and later as industrialists. They were close-knit and highly progressive communities.
The Parsis were particularly progressive to rapidly adopt European business methods.
Within the Indian community, conditions were not favourable for the emergence of industrial
leaders, partly because of the peculiar way in which factory industry came to India, as compared
to its development in England. In the West two principal groups were ready to set up factories:
the merchants and the master craftsmen. The merchants had capital, marketing ability and
capacity to manage labour. The master craftsmen did not have capital but had understood the
materials and their proper handling. Because of certain peculiar features, neither Indian
merchants nor Indian craftsmen took interest in the factory system. Most Indian merchants
belonged to the Baniya or moneylending community. They possessed capital and were always
eager for its security and profits. But when the factory system was introduced in India by the
British, the merchant class found greater opportunities for trade. The development of shipping
and the building of railways resulted in larger trade, both external and internal. Besides, there
were more opportunities for lending money. Thus, the merchants found greater scope for profits
in their traditional occupations and hence did not give them up and take to the factory industries.
At the same time, Indian craftsmen too did not play the part played by their western counter-
parts in the field of industrialisation because they did not possess large capital. Besides, they
were without proper training and education.
However, Indians joined the ranks of industrialists early in the middle of the 19th century and
their role grew throughout the period, continuously and steadily. They used the same managing
agency system as the Britishers. They were becoming increasingly important members of
companies established by the Britishers. Those indigenous business groups who gave up
traditional occupations and who took to industrial ventures were the Parsis, the Gujaratis, the
Marwaris, the Jains and the Chettiars.
(B) Private enterprise and industrial growth in the first half of the 20th century
Over 70 cotton mills and nearly 30 jute mills were set up in the country. Coal production was
more than doubled. Extension of railways continued at the rate of about 800 miles per annum.
The foundation of iron and steel industry was finally laid during this period.
The war of 1914-18 created enormous demand for factory goods in India. Imports from England
and other foreign countries fell substantially. Besides, the government demand for war-purposes
increased considerably. As a result, great stimulus was given to the production of iron and
steel, jute, leather goods, cotton and woollen textiles. Indian mills and factories increased their
production and were working to full capacity. But on account of the absence of heavy industries
and also of the machine tools industry, they could not develop fast enough.

In 1905, the Swadeshi movement was started. It stimulated Indian industries and there
was a slow but steady growth in the field of existing industries as well as the establishment
of new industries between 1890 and the outbreak of the war of 1914.

(C) Causes of slow growth of private enterprise in India’s industrialisation (1850-1957)
It is important to find out the reasons why Indian industry did not expand significantly relative
to the rest of the economy over the hundred years before Independence. They were :
(a) Unimaginative private enterprise : One important reason frequently mentioned is the
inadequacy of entrepreneurial ability. Indians were reluctant to enter the industrial field
because of the comparatively easier and secure scope for profit which existed in trading
and moneylending. The Britishers who pioneered industrial change in India were not

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