© IE Online Media Services Pvt Ltd
Tags:
Journalism of Courage
— Ritwika Patgiri
Amid mounting pressure on Indian exports to the US due to high tariffs and intensifying global competition, the Atmanirbhar Bharat and Swadeshi vision appear to be gaining renewed momentum. It is evident in the overwhelming preference for Indian-made goods and the rise in indigenous innovations like Mappls, the indigenously developed navigation app.
In his Diwali Mann Ki Baat address to the nation last month, Prime Minister Narendra Modi stated that the demand for locally made, or swadeshi products, surged in the festive season. According to the Confederation of All India Traders (CAIT), the 2025 Diwali season recorded the highest ever sales of 6.05 trillion, with 87 per cent of the customers preferring Indian-made goods over foreign imports.
The Make in India movement was launched in 2014 and aimed to attract both national and international companies to set up operations in India. However, the share of manufacturing in the total Gross Value Added (GVA) has remained stagnant between 2013-14 and 2023-24, witnessing only a slight rise from 17.2 per cent to 17.5 per cent.
The story of India’s manufacturing sector and swadeshi goods can be further understood through the history of the Industrial Revolution and its aftermath.
In the 1750s, Great Britain, Spain, Portugal, the Dutch Republic, and France were the five major European colonial powers. However, by 1850, Britain had transformed itself into the “workshop of the world” and emerged as the unrivalled colonial empire.
Two major developments defined this period. First, the Industrial Revolution, which took place from around 1750 to 1914. This period was marked by rapid technological change that began in Great Britain. Before 1750, Britain’s economy was agrarian in nature, with around 80 per cent of the population engaged in small small agricultural farms in rural areas.
Manufacturing was small in scale and localised in nature. It relied on basic tools, such as carts, mills, looms, powered by people, animals, or waterwheels. Society was organised along a rigid class system based on wealth and social position determined largely by birth.
There is no one single event that marked the beginning of the Industrial Revolution. However, industries that saw the first wave of the revolution witnessed the production of coal, iron, cotton, and wool. The use of steam power and electricity also changed the nature of work in the factories. The period also saw a massive rise in Britain’s population as a result of improved living standards and declining death rates.
The development of textile mills and factories hired a large number of workers and concentrated production in certain locations. This led to the emergence and growth of modern towns and cities like Manchester and London, as workers moved to these areas in search of work. As a result, pre-industrial rural Britain became increasingly urbanised.
The other significant process that shaped Britain’s transformation was the British East India Company and its overseas trade. Western European powers appropriated massive economic surplus from their colonies in Asia, Africa, and Latin America, which substantially aided their own industrial transformation. This extraction of wealth also led to the diffusion of capitalism across European settlements.
In the context of India, this process took the form of what was defined as the “drain of wealth”. Initially used by Dadabhai Naoroji and R C Dutt, the “drain of wealth” referred to the transfer of India’s surplus to Britain.
Economists Prabhat Patnaik and Utsa Patnaik also underlined that this drain has both internal and external dimensions. The internal dimension implied extraction of economic surplus from producers through rent and taxes, including land revenue. Independent Indian producers paid revenue directly to the British government, while cultivating tenants paid it to zamindars or landlords, who then paid it to the colonial state. The external dimension, on the other hand, involved the transfer of India’s economic surplus through exports.
However, the earnings from these exports were kept by the British government and were used for “home charges” like administrative and military expenses. The colonial system of trade was thus unique, as Indian producers of export surplus were paid out of their own tax contribution.
Further, imports of cheap British manufactured goods, like textiles produced using raw materials from India, flooded the Indian markets. This displaced local artisan spinners and weavers, leading to a large-scale deindustrialisation of local crafts, as shown by scholars like Amiya Kumar Bagchi.
Thus, India’s handicrafts and cottage industries declined under a cycle of exploitative colonial policies. On one hand, Indian producers paid heavy taxes to the colonial state and received payments for their exports drawn from those same taxes, while the actual benefits went to the colonial State.
On the other hand, cheap British goods flooded the Indian market that displaced local producers. The “drain of wealth” or the accumulated surplus, thus, aided Britain’s industrialisation. Scholars like Friedrich List have argued that Britain’s stringent protectionist policy against Asian textiles for almost 150 years spurred innovation and import substitution that met British local demands.
Therefore, the full story of the Industrial Revolution is incomplete without understanding Britain’s colonial policies abroad and its protectionist policies at home.
The decline of the traditional artisanal industry in colonial India had an adverse impact on the rural economy. According to economic historian Tirthankar Roy, about 15-20 per cent of India’s working population in the 1800s was employed in industries like spinning and weaving, manufacturing of leather and leather goods, metalwork, carpets and rug making.
These industries did not use machinery and were not organised in large-scale factories. Instead, they were concentrated within the household and were run by family labour. Hence, they were traditional in nature.
The deindustrialisation of the Indian economy during the colonial rule can, thus, be understood as the decline of traditional industries caused by technological obsolescence and colonial policies. While the close economic relationship with Britain did help establish some modern industries in India, such as textile mills, the overall impact was negative. Many artisans were forced to abandon their crafts and seek precarious employment in agriculture.
However, some economic historians have opined that the decline in employment in traditional industries was not necessarily a result of deindustrialisation. They argue that the process of commercialisation, which resulted in internal competition among traditional industries, saw the displacement of less efficient industries while the productive ones survived.
This is also explained through a gendered shift in employment patterns by showing that women’s employment in industries in India fell from 40 per cent in 1881 to 13 per cent in 1971. The commercialisation thesis argues that women workers exited the traditional industries as the household declined as a unit of production and were replaced by male labour.
Thus, the industrial revolution, British colonial policies, and internal market forces changed the nature of India’s rural economy, leading to the decline of traditional industries and an increase in the share of employment in agriculture.
The legacy of this transformation continues to shape India’s manufacturing landscape, which remains characterised by a structural dualism: the coexistence of large formal firms and numerous small, low-productivity informal units, and very few medium-sized enterprises in between. This is known as the phenomenon of the “missing middle”.
Despite initiatives like Make in India, the manufacturing share in GVA has remained largely stagnant. To overcome this colonial and structural legacy, policy attention needs to focus on strengthening the “missing middle”, fostering technological upgrading, and deepening industrial linkages that can transform the industrial sector in India.
How far was the Industrial Revolution in England responsible for the decline of handicrafts and cottage industries in India?
Examine how the decline of the traditional artisanal industry in colonial India crippled the rural economy.
Explain the concept of the “drain of wealth” as articulated by Dadabhai Naoroji and R.C. Dutt.
In light of India’s Make in India initiative, how relevant are the lessons from colonial-era industrial and trade policies today?
Suggest policy measures that could address the “missing middle” and promote balanced industrial growth in contemporary India.
(Ritwika Patgiri is a doctoral candidate at the Faculty of Economics, South Asian University.)
Share your thoughts and ideas on UPSC Special articles with ashiya.parveen@indianexpress.com.
Subscribe to our UPSC newsletter and stay updated with the news cues from the past week.
Stay updated with the latest UPSC articles by joining our Telegram channel – IndianExpress UPSC Hub, and follow us on Instagram and X.
