Introduction

While assessing the impact of liberalization measures initiated since 1991 on Indian industry, some historical background is worth keeping in mind. Every major capitalist nation in history has succeeded in attaining that position only on the back of a successful industrialization process. Following the British Industrial Revolution in the latter part of the eighteenth century, the nineteenth and twentieth centuries witnessed a number of industrialization-driven transformations of countries in the developed world. and in the second half of the twentieth century even in parts of the Third World. In the two-and-a-half century world history of modern industrialization, however, the Indian story stands out as a rather distinct one. It has been a long history of industrial development, but one that has failed to eliminate a persistent industrial backwardness.

India was one of the great manufacturing regions of the world of the pre-industrial revolution era, but its initial interaction with modern industry was a negative and destructive one. Colonialism and the forced integration of India into the international economy as an imperial appendage provided the context for its de-industrialization in the nineteenth century. Even before that process was completed, a modern factory sector came into being in the mid-nineteenth century. At that time much of what subsequently came to be called the industrialized world, with a few exceptions such as Britain, was still primarily agrarian. In the 150 years since, India's industrial sector has grown and its structure constantly evolved. Yet India has remained one of the most stunted cases of industrialization, understood as a process of rapid growth of per capita output and an increase in the share of the industrial sector in output and employment at the expense of agriculture.