Growth of Indian Capitalist Enterprise | Indian Economy

The below mentioned article provides short notes on the growth of Indian capitalist enterprise during British rule.

Long two hundred years of British rule had resulted in the emergence and growth of a number of Indian capitalist enterprises. Huge inflow of foreign capital along-with the influx of foreign entrepreneurs resulted into greater volume of investment along-with development of railways of factory system of industries like tea and coffee, indigo, coal mining etc.

Moreover, the British rule had changed the composition of India’s exports. More and more primary products and processed raw materials got their birth in the priority list of Indian exports replacing our traditional handicrafts. This development and changes in the composition of exports in India during those days led to the emergence of a good number of processing industries gradually.

Among these processing industries the most prominent were cotton ginning and cotton pressing factories, jute presses, tanneries and leather works, mills for polishing rice and so on. In addition to these, expansion of certain mineral products was undertaken in response to the export needs.

Moreover, systematic production of variety of forest produce was also undertaken in India during those days. Exporters in India also started to export certain forest produce like lac.

All these developments in the various fields of production, domestic and export trade were finally responsible for the establishment of suitable financial institutions in India. These institutions were advancing necessary finance so as to carry on both productive and other trading activities.

Among those various institutions operating during the second half of the 19th century, the most prominent was the ‘Managing Agency Houses’. These Managing Agencies were working with the sole objective to raise funds from both India and England and also to bear responsibility on behalf of their clients for running various industries and trading establishments in India.

These above mentioned factors were responsible for the emergence and growth of a number of Indian capitalist enterprises in India during the British period. This process of industrial transition in India during the British period can be broadly classified into industrial growth during the 19th century and industrial progress during the 20th century.

During the 19th century, British investors started to pioneer industrial enterprises in India as they had experiences of running industries at home. British enterprises also received maximum state support. Although the Britishers initiated industrialisation process in the 19th century but they were primarily interested in making profit and not in accelerating the economic growth in India.

By the middle of 19th century, Indians started to join the ranks of industrialists and their participation in British companies started to grow continuously and steadily. The indigenous business groups which participated in industrial ventures were mostly from Parsis, the Marwaris, Gujaratis, the Jains and the Chettiars.

At the end of 19th century there were about 36 jute mills, 194 cotton mills, a good number of plantation industries and the production of coal had risen to over 6 million tonnes per annum.

Although these industries were being developed but by this time the Indian economy was being gradually converted into agricultural colony of the British exporting agricultural commodities like rice, wheat, jute, cotton, oilseeds, tea etc. and importing British manufactures.

During the first part of 20th century, Swadeshi movement stimulated the industrialisation process in India and thus the existing industries and new industries had maintained a slow but steady growth till the outbreak of the First World War in 1914.

By this time more than 70 cotton mills and 30 jute mills were set up, coal production was doubled, the foundation of iron and steel industry was laid and railway network was extended.

The First World War (1914-18) raised huge demand for factory goods in India and also resulted in substantial fall in imports from England and other countries. This situation provided additional incentive to increasing the production of iron and steel, cotton and woollen textiles, jute, leather goods etc.

Accordingly, Indian factories and mills increased their production and utilised their capacity upto the fullest extent. But faster development of these Indian industries was retarded due to the absence of heavy industries and machine tools industries.

In 1923, the then Government of India accepted the recommendation of First Fiscal Commission and offered protection to some selected Indian industries against foreign competition. During the period 1924-39, various major industries like iron and steel, cotton textiles, jute, matches, sugar, paper and pulp industry etc. were brought under protection scheme.

This led to rapid expansion of protected industries in India. These protected industries captured the entire Indian market and eliminated foreign competition totally.

Again the outbreak of Second World War in 1939 changed the industrial scenario of India and increased the demand for manufactured goods substantially. This led to rapid expansion of the existing industries which in turn utilised its existing capacity to the fullest extent.

This had resulted into increase in the industrial output by 20 per cent during the period 1939-45. But Indian industries had to suffer again for want of replacements of machine, stores and technical knowledge during the post-war period.

Thus in the early part of British rule, Britishers tried to transform the Indian economy as the producer of industrial raw materials and tried to capture Indian market for their industrial finished goods and thus started exploiting Indian economy in a different way.

Later on, British capitalists gradually developed various industries like, jute, tea, coffee, cotton and textiles, paper and paper pulp, sugar etc. in India only due to geographical reasons and exploited Indian labourers extensively.

Thus we can now conclude with what Pt. Jawahar Lai Nehru said, “India was under an industrial capitalist regime but her economy was largely that of pre-capitalist period minus many of the wealth-producing elements of that pre-capitalist economy. She became a passive agent of modern industrial capitalism suffering all its ills and with hardly any of its advantages.”