State of Industrialization in India

The idea that India could be a superpower has gained prominence among the nationalist sections of the populace. Lamentably, they appear to be unaware about the rudimentary traits that a superpower need be characterized with. I venture to elucidate upon a process in this essay to which a superpower ideally owes its provenance. In other words, it is that process which would commence that nation’s voyage to “superpowerdom”. It shall, however, not be an entirely informed disquisition, primarily because such a topic necessitates a book in itself and an essay may not suffice.

Numerous countries in the continents of Asia and Africa have, insofar as the period of modern history is concerned, been under colonial rule. It is not an overstatement to contend that such nations owe much of their penury to colonial exploits. Yet, some of these nations progressively ascend the palisade of economic prosperity even as we speak. Be it human capital in general or global supply chains in particular, these nations have earned an influential position in the global economic arena. They owe their relative prosperity to a dynamic process called industrialization.

Definition

Investopedia defines industrialization as the process by which an economy transforms from a “primarily agricultural economy to one based on the manufacturing of goods” (Chappelow, Jim). Most commonly, this process is associated with the wave of industrialization in Europe, the United States and Japan. Fundamentally, a society that undergoes industrialization is able to consolidate small farm holdings under large farmers, reduce the proportion of population dependent on agriculture for its sustenance, train the proportion taken out of agriculture in skills that befit an industrial worker, and eventually absorb them into industries.

Historical observations

The effects of industrialization are but obvious. Owing to increased production and free access to markets, industrialization resulted in increased material wealth and restructured society. It heralded the emergence of capitalism. Prior to it, the feudal structure prevailed in society. Capitalism transformed the relationship between land owners and serfs into factory owners and workers. One may not discern the social effects at the outset, but as Richard Fitzgerald notes, people had worked outside of the local environment of their homes “for the first time since the Neolithic Revolution” (Fitzgerald, Richard). Conveyancing from home to one’s place of work is quotidian today, but it was a new experience in those times. The number of hours spent on work increased substantially. Exploitation of workers was common, until at least the 1830s when legislation was enacted for the protection of their rights.

Simplistically, a preindustrial society that is reliant on agriculture first transitions into an industrial society and thereafter progresses to the Information Age. Eminent analyst Abhijit Iyer-Mitra notes that to be able to function at peak efficiency in the Information Age, it is of utmost essence to have a strong industrial base. Lamentably, India has not achieved the desired extent of industrialization, and therefore, is technically a pre-industrial society. Often, some mistake the economic reforms of 1991 under Prime Minister P.V. Narasimha Rao as the commencement of industrialization in India. By and large, however, 1991 heralded only economic liberalization, in that it allowed foreign companies access to the Indian market. India’s manufacturing capabilities are yet not at peak.

Prior to the arrival of the British in India, traditional handicraft formed an integral part of Indian industry. Most of India’s exports consisted of manufacturers goods like cotton, silk, artistic ware, silk and woollen cloth. That the economic policies of the British wrecked the traditional handicraft industry in India is incontrovertible. Britain had already undergone industrialization. Therefore, the colonial administration began using India as a market, and flooded British machine-made goods into the Indian market. The economic situation was exacerbated by the fact that the decline of traditional handicraft was not followed by the rise of modern industrialization in India “due to the British policy of encouraging the imports of British made goods and exports of raw materials from India” (Civilsdaily).

The state of affairs in independent India

Owing to numerous social realities, the Indian leadership that had become popular after the advent of the Indian National Congress adopted a socialist stance. It was, therefore, not surprising that independent India continued with socialism as its economic system. Lamentably, that was to prove detrimental in the long-term. Government intervention in businesses have hardly ever proven efficient. It was quite an arduous task for entrepreneurs to set up private businesses in India for the better part of its independence, courtesy of the licence-raj system that fostered bureaucratic red-tapism. The government, too, did not follow a percipient industrialization policy.

At the onset of independence, the industrial sector was extremely underdeveloped. India had a literacy rate below 20%; wherefore, the necessary technical and managerial skills were in short supply. The government decided to follow Five-Year Plans for economic planning modelled on the Soviet Five-Year Plans. The First Five-Year Plan had not envisaged major programs for industrialization, but did set up important industries such as Hindustan Shipyard, Hindustan Tools, Integral Coach Factory etc.

It was the Second Five-Year Plan that accorded industrialization with the highest priority. The plan was based on the Feldman-Mahalanobis Model. In essence, its attention was directed towards the creation of industries dealing with capital goods — goods that are used in producing other goods, rather than being bought by consumers — on a large scale. The Third Five-Year plan followed the same strategy, and laid emphasis on machine building industries. Therefore, industrial production was able to grow at an appreciable rate for the duration of the first three Five-Year Plans (1950–1965).

However, the consequence of paying attention solely to the capital goods sector was a lack of attention towards consumer goods. The importance of consumer goods cannot be trivialized. According to Rostow’s model of economic growth, a society goes through five stages of economic growth; the Age of High Mass Consumption being the fifth. Consumerism essentially ensures high industrial production, which subsequently results in high economic growth and high material prosperity. This was India’s precise point of failure. Manifestly, it could not be expected of a resource-crunched nation like India to swiftly ensure high mass consumption. However, it had failed to lay the very foundations for the same. India also failed to mechanize agriculture. Thus, Indian agriculture relied on predominantly dated methods, which eventually resulted in the failure of the Mahalanobis strategy and India faced a severe food shortage crisis in 1965–66. It was only thereafter that the government mechanized the agricultural sector and engineered the green revolution.

Notwithstanding the increase in agricultural yield, industrial growth fell sharply from 9% during the third Five-Year Plan to a mere 4.1% during the period of 1965–1975. While the 1980s saw increased government investment in industry and promotion of competition, it took major steps only in the liberalization of 1991, where it implemented the following reforms:

• Abolishment of the Industrial Licensing.
• Simplification of the procedures and regulatory requirement to start a business.
• Reduction in the sector exclusively reserved for the Public sector.
• Disinvestment of the selected Public-sector undertakings.
• Foreign investors were allowed to invest in the Indian firms.
• Liberalization of the trade and exchange rate policies.
• Rationalization and massive reduction in the structure of Customs Duties.
• Reduction in the excise duties.
• Reduction in the Income and Corporate taxes to promote Business.

Socioeconomic effects of industrialization

Such policies allowed for the growth of the services sector in India, and in a span of about twenty-five years, the Indian Gross Domestic Product had increased by 1100%. These observations are prima facie impressive. However, they are not sufficient indicators of socioeconomic conditions in India.

Counterintuitive though it may sound, the major upheaval that a firm and well-planned process of industrialization produces can actually result in a tempered society, should Abhijit Iyer-Mitra’s contentions be taken into consideration. India has not, he contends, been tempered by the process of industrialization. The social upheaval as a result of industrialization can be tackled only by the State. In such circumstances, the State resorts to ruthless enforcement of law and order. It does not allow the existence of fringe groups or mafia groups, who may well create zones into which even law enforcement agencies may fear to venture. In technical terms, this strong action by the state is termed, “monopoly over violence”. This is significant in light of the fact that private enterprise need be secured from malicious influence of extortionist feudal groups. They run parallel governments that have a propensity to set businesses afire. This is glaringly evident in a nation like India, where fringe groups could vandalize crucial infrastructure even on account of mere criticism. The N.N. Vohra Committee Report, for instance (authored by Narinder Nath Vohra, retired Home Secretary of India), examines the perils of the inefficiency of State apparatus in suppressing the influence of mafia in quite comprehensive a manner. For the State to possess monopoly over violence is, therefore, indispensable.

An examination of Industrial Revolution in the west would lend credence to the foregoing contention. An important consequence of industrialization was an increase in urbanization, but it also resulted in increased urban crime, owing to three factors, namely, poverty, unemployment and overcrowding in the cities. In the initial years of industrialization, there was no job security or social security for the factory worker. In the event that the worker lost his job, there would have been little chance for him to find an alternative source of income. Cities were unprepared for the influx of people who ventured to the urban areas in search of employment. It was then that the foundations of a modern, professional, full-time police force were laid. This period also saw an effort at the implementation of prison reforms. This is precisely what tempers society and it becomes more respectful of law and order. Thus, the State takes the lead in ensuring industrialization.

Abhijit Iyer-Mitra notes that a preindustrial, agrarian society is fundamentally not respectful of law and order, for a feudal disposition is prevalent amongst numerous, if not all, sections of society. Therefore, such societies always have high levels of societal violence. The State lacks monopoly over violence, which is evinced by the presence of such maleficent groups as may establish zones where law enforcement agencies prove ineffective. India happens to satisfy all the foregoing conditions, thus making it a preindustrial society that, without sufficient industrialization, has leapt into the Information Age. This poses an assortment of problems.

The Age of Hyperspecialization

The Information Age relies heavily on the private sector, for it is an era of hyperspecialization and rapid innovation, particularly in the medium and small-scale sector. The State is supposed to distance itself from businesses and allow the market to find its equilibrium. The advent of Globalization and the Information Age has ensured highly integrated and complex global supply chains. Manufacturing has become highly specialized. The economies that have marked a successful transition to this age are thus termed “knowledge-based economies”, for they evince high investment in education and technical skills. Thomas Malone et al explain the fundamentals in a very lucid manner in their article titled, “The Big Idea: The Age of Hyperspecialization” in the Harvard Business Review. They write:

Looking at today’s terrifically complex supply chains, one might think we’ve already reached the extremes of specialization. Boeing’s initiative to build the 787 Dreamliner, for example, was hailed as the epitome of subcontracting — and then proved to have gone a bridge too far when the parts failed to come together as seamlessly as envisioned, and delays ensued. A web page listing just the “major” suppliers of the plane’s components contains 379 links. But an aircraft is fundamentally a physical product. Consider how much more finely work can be diced when it produces intangible, knowledge-based goods and the information involved can be transported anywhere in the world nearly instantaneously and at almost no cost. Just as people in the early days of industrialization saw single jobs (such as a pin maker’s) transformed into many jobs (Adam Smith observed 18 separate steps in a pin factory), we will now see knowledge-worker jobs — salesperson, secretary, engineer — atomize into complex networks of people all over the world performing highly specialized tasks. Even job titles of recent vintage will soon strike us as quaint. “Software developer,” for example, already obscures the reality that often in a software project, different specialists are responsible for design, coding, and testing. And that is the simplest scenario.

Lamentably, the variables point that India cannot expect to emerge as an efficient power in the Information Age. According to the Food and Agriculture Organization of the United Nations, a benumbing 59% of India’s total workforce was engaged in agriculture in 2016, which contributed only 23% to India’s nominal GDP. The average size of the holding had been estimated to be 1.15 hectare. Alarmingly, the average size of these holdings has shown a steady declining trend over various Agriculture Censuses since 1970–71. It points to tremendous agricultural stress. The required shift from agriculture to manufacturing has not reached a desirable level. Recent reports of graduates being unemployable in the industry also evince industrial stress. The economy of India, therefore, is in a perilous situation.

There are no straightforward solutions to the monumental problem that India faces. On one hand, enforced industrialization would inevitably inflict shocks on the society, which could probably engender mass-resentment. On the other hand, it would result in the entry of corporates into agriculture, which, in the long run could theoretically, by means of corporate farming and innovative farming techniques, result in increased agricultural yield. Successful employment of small farmers into industries would also tackle unemployment problems.

Education obstacle

The human resources required for an industrial society can only be cultivated by means of a vibrant education system. An industrial workforce requires heavy investments in education, and the quality thereof in India is a cause of concern. Philip Altbach goes so far as to describe India’s higher education system as a “sea of mediocrity in which some islands of excellence can be found.” Much of the systemic ossification can be attributed to the substantial migration from villages to cities in account of the economic liberalization of 1991, which led to an exponential increase in higher education enrolments. Carnoy et al note that in no country has rapid expansion been accompanied by improvement in overall quality, and that India is no exception. Philip Altbach notes the following problems:

To some extent, a decline in quality at the bottom tier of Indian higher education is an inevitable result of massification and can be found worldwide. Students with poorer academic qualifications are able to gain access to higher education. In India, the complex system of reservations policy for disenfranchised groups has exacerbated this problem — while at the same time providing opportunities that did not exist before. The existing modest admissions standards are relaxed for these groups, while little extra help is provided for students without adequate secondary school achievement, thus contributing to high dropout rates.

Shortage of funding is yet another significant problem. India’s education expenditure is a meagre $8 billion in public funds and another $8 billion in private funds by the elite, which amounts to $16 billion. Such a meager budget would prove inadequate in the creation of a factory-floor workforce. Abhijit Iyer-Mitra contends that India would need a bare minimum of $400 billion in education investment, which would nonetheless not match, say, American standards of investing about $40,000 on every student.

Conclusion

Increased privatization could be the commencement of corrective measures, for the State machinery can function efficiently should it restrict itself to law and order, and leave most if not all of business and education to the private sector. It would be essential for the State to gradationally approve sales of PSUs to the private sector, as a consequence of which there would be a greater amount of funds to modernizing law enforcement and the education system. Subsequently, industrialization could be implemented, primarily employing the current small and medium-scale farmers, trained with the requisite skills. While the theoretical synopsis points to the possibility of a successfully industrialized India, it is evident that a solution to India’s monumental problems would require decades. The progress remains to be seen.

WORKS CITED

Altbach, P.G. India’s higher education challenges. Asia Pacific Educ. Rev. 15, 503–510 (2014). https://doi.org/10.1007/s12564-014-9335-8

B2B, Post author By, et al. “Industrial Development in India.” Civilsdaily, 6 Oct. 2017, www.civilsdaily.com/industrial-development-in-india/.

Carnoy, M., Loyalka, P., Dobryakova, M., Dossani, R., Froumin, I., Kuhns, K., et al. (2013). University expansion in a changing global economy: Triumph of the BRICS?. Stanford, CA: Stanford University Press.

Chappelow, Jim. “Industrialization Definition.” Investopedia, Investopedia, 29 Jan. 2020,www.investopedia.com/terms/i/industrialization.asp.

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IANS. “Nearly 70 Percent of Indian Farms Are Very Small, Census Shows.” Business Standard, Business-Standard, 9 Dec. 2015, www.business-standard.com/article/news-ians/nearly-70-percent-of-indian-farms-are-very-small-census-shows-115120901080_1.html#:~:text=As%20much%20as%2067%20percent%20of%20India%27s%20farmland,the%20holding%20has%20been%20estimated%20as%201.15%20hectare.

Thomas W. Malone,  Robert Laubacher and Tammy Johns. “The Big Idea: The Age of Hyperspecialization.” Harvard Business Review, 1 Aug. 2014, hbr.org/2011/07/the-big-idea-the-age-of-hyperspecialization.