Government Checks Industrial Growth War Production Is Diversion From Normal Production

Heavy industry was represented in India by the Tata Iron and Steel Works at Jamshedpur. There was nothing else of the kind and the other engineering workshops were really jobbing shops. Even the development of Tatas had been slow because of Government policy. During World War I, when there was a shortage of locomotives and railway carriages and wagons, Tatas decided to make locomotives and, I think, even imported machinery for the purpose; but when the war ended, the Government of India and the Railway Board (which is a department of the central government) decided to continue their patronage of British locomotives. There is obviously no private market for locomotives, as the railways were either controlled by Government or owned by British companies, and so Tatas had to give up the idea of making locomotives.

The three fundamental requirements of India, if she is to develop industrially and otherwise, are a heavy engineering and machine-making industry, scientific research institutes, and electric power. These must be the foundations of all planning, and the national planning committee laid the greatest emphasis on them. We lacked all three, and bottlenecks in industrial expansion were always occurring. A forward policy could have rapidly removed these bottlenecks, but the government’s policy was the reverse of forward and was obviously one of preventing the development of heavy industry in India. Even when World War II started, the necessary machinery was not allowed to be imported; later shipping difficulties were pleaded. There was neither lack of capital nor skilled personnel in India, only machinery was lacking, and industrialists were clamouring for it. If opportunities had been given for the importation of machinery, not only would the economic position of India have been infinitely better, but the whole aspect of the war in the far eastern theatres might have changed. Many of the essential articles which had to be brought over, usually by air and at great cost and under considerable difficulties, could have been manufactured in India. India would have really become an arsenal for China and the east, and her industrial progress might have matched that of Canada or Australia. But imperative as the needs of the war situation were, the future needs of British industry were always kept in view, and it was considered undesirable to develop any industries in India which might compete with British industries in the post-war years. This was no secret policy; public expression was given to it in British journals, and there was continuous reference to it and protests against it in India.

Jamshedji Tata, the far-sighted founder of Tata Steel, had vision enough to start the Indian Institute of Science in Bangalore. This research institute was one of the very few of its kind in India; the others were some government institutions with limited objectives. The vast field of scientific and industrial research, which has thousands of institutes, academies, and special stations in the U.S.A. and the Soviet Union, was thus almost wholly neglected in India, except for the Bangalore institute and some work done in the universities. An effort was made, sometime after World War II started, to encourage research and, though limited in scope, it has produced good results.

While shipbuilding and locomotive manufacture were discouraged and prevented, an effort to build up an automobile industry was also scotched. Some years before World War II, preparations were started for this and everything was worked out in co-operation with a famous American firm of automobile manufacturers. A number of assembly plants bad already been functioning in India. It was now proposed to manufacture all the parts in India with Indian capital and management and Indian personnel. By arrangement with the American corporation their patents could be used and their skilled and technical supervision was available for the initial period. The provincial government of Bombay, which was then functioning under a Congress ministry, promised assistance in various ways. The planning committee was especially interested in this project. Everything in fact had been fixed up and all that remained was to import the machinery. The Secretary of State for India however did not approve and gave his fiat against the importation of the machinery. According to him ‘any attempt to set up this industry now would divert both labour and machinery which are more urgently needed for the war.’ This was in the early months of the war, during the so-called phoney period. It was pointed out that plenty of labour, even skilled labour, was available and in fact was idle. War necessity was also a curious argument, for that necessity itself demanded motor transport. But the Secretary of State for India, the final authority, sitting in London, was not moved by these arguments. It was reported also that a rival and powerful automobile corporation in America did not approve of the starting of an automobile industry in India under someone else’s auspices.

Transport became one of the major problems of the war in India. There was the lack of motor trucks, of petroleum, of locomotives and railway wagons, even of coal. Almost all these difficulties would have been much easier of solution if the pre-war proposals on behalf of India had not been turned down. Locomotives, railway cars, motor trucks, as well as armoured vehicles would have been manufactured in India. Power alcohol would have helped greatly in easing the strain caused by scarcity of petroleum. As for coal there was no scarcity in India; there were huge reserves but only very little was produced for use. Coal production has actually gone down during the war years in spite of increased demand. Conditions in coal mines were so bad and wages so low that workers were not attracted. Ultimately the bar on women working underground was removed as women were available at those wages. No attempt was made to overhaul the coal industry and improve conditions and wages so as to attract workers. Owing to lack of coal, the expansion of industry has suffered greatly and even existing factories have had to stop working.

Some hundreds of locomotives and many thousands of railway cars were shipped from India to the Middle East, thus adding to the transport difficulties in India. Even the permanent way was uprooted in some places for transfer elsewhere. The casual way in which all this was done, without any regard to future consequences, was amazing. There was a complete lack of planning and foresight, and the partial solution of one problem led immediately to more serious problems.

An attempt was made at the end of 1939 or the beginning of 1940 to start an aircraft manufacturing industry in India. Again everything was fixed up with an American firm and urgent cables were sent to the Government of India and army headquarters in India for their consent. There was no response. After repeated reminders a reply was forthcoming disapproving of the scheme. Why make aeroplanes in India when you could buy them in England and America?

In pre-war days a large number of medicines and drugs and vaccines used to come to India from Germany. War stopped this. It was immediately suggested that some of the more essential vaccines and medicines might be made in India. This could easily be done in some of the Government institutes. The Government of India did not approve and pointed out that everything that was necessary could now be obtained through Imperial Chemical Industries. When it was suggested that the same thing could be made in India at much less cost, and utilized for army as well as general public use without any private interest, high authority was indignant at the intrusion of such base considerations in matters of state policy. ‘Government,’ it was said, ‘was not a commercial institution!’

Government was not a commercial institution but it was very much interested in commercial institutions, and one of these was Imperial Chemicals. This huge combine was given many facilities. Even without such facilities it had such enormous resources that no Indian firm, except to some extent Tatas, could possibly compete with it. Apart from these facilities it had powerful support both in India and England. A few months after leaving the viceroyalty of India, Lord Linlithgow appeared in a new role as a director of Imperial Chemicals. This demonstrates the very close connection between big business in England and the Government of India, and how this connection must necessarily affect policy. Lord Linlithgow may have been a substantial shareholder in Imperial Chemicals even when he was Viceroy of India. In any event he has now placed the prestige of his Indian connection and his special knowledge derived as Viceroy at the disposal of Imperial Chemicals.

Lord Linlithgow declared as Viceroy in December, 1942:

We have achieved immense things in the field of supply. India has made a contribution of outstanding importance and value… for the first six months of the war the value of contracts placed was approximately 29 crores. For the next months from April to October, 1942, it was. 137 crores. Over the whole period to the end of October, 1942, it was no less than 428 crores: and these figures exclude the value of work done in the ordnance factories which is in itself very considerable.

This is perfectly true and India’s contribution to the war effort has grown tremendously since this was said. One would imagine that this represents a vast increase in industrial activity and a much larger index of production. Yet, surprisingly, there has not been much change. The index of India’s industrial activity in 1938-39 was 111.1 (taking 1935 as 100). In 1939-40 it was 114.0; in 1940-41 it varied between 112.1 to 127.0; in March, 1942, it was 118.9; it fell in April, 1942, to 109.2, and then gradually rose to 116.2 in July, 1942. These figures are not complete as they do not include munitions and some chemical industries. Nevertheless they are important and significant.

The amazing fact emerges that the total industrial activity of India in July, 1942, was, apart from munitions, etc., only slightly in excess of the pre-war period. There was a brief spurt in December, 1941, when the index figure went up to 127.0, and then declined. And yet the value of Government contracts placed with industries was progressively increasing. For the six months October to March, 1939-40, these contracts amounted to 290 million rupees, according to Lord Linlithgow, and for the six months April to October, 1942, they were for 1,370 million rupees.

All these tremendous war orders thus do not represent any increase in the total industrial activity, but indicate its large-scale diversion from normal production to production for specialized war purposes. For the moment they supplied war needs but at the cost of a terrific lowering of production for civilian needs. This inevitably had far-reaching consequences. While sterling balances in favour of India grew in London, and money accumulated in the hands of a few persons in India, the country as a whole was starved of essential needs, vast and ever-increasing quantities of paper money circulated, and prices went up and sometimes reached fantastic figures. Already by the middle of 1942 a food crisis was evident; in the autumn of 1943 famine killed its millions in Bengal and other parts of India. The burden of the war and of the official policy pursued in its connection fell on scores of millions in India who were least capable of shouldering it, and crushed out of existence vast numbers of people who died by the cruellest of deaths—slow starvation.

The figures I have given end with 1942; I have no later ones. Probably many changes have taken place since then and the index of India’s industrial activity may be higher now.* But the picture they reveal has not changed in any fundamental aspect. The same processes are at work, the same crises follow one after the other, the same patchwork and temporary remedies are applied, the same lack of any planned and comprehensive outlook is evident, the same partiality for the present and future of British industry prevails—and meanwhile people continue to die from lack of food and from epidemics.

It is true that some of the existing industries, notably the textile, the iron and steel, and the jute industries, have prospered exceedingly. The number of millionaires among industrial magnates, war contractors, hoarders, and profiteers, has grown, and large sums have accumulated in the hands of small upper strata of India’s people, in spite of a heavy super tax. But labour generally has not profited, and Mr. N. M. Joshi, the labour leader, declared in the Central Assembly that labour conditions in India had become worse during the war. Land owners and middle farmers, especially in the Punjab and Sind, have prospered, but the great majority of the agricultural population have been hard hit by war conditions and have suffered greatly. Consumers generally have been progressively ground down by inflation and the rise in prices.

In the middle of 1942 an American technical mission—the Grady Committee—came to India to inspect the existing industries and make suggestions for increased production. They were naturally concerned with production for war purposes only. Their report was never published, possibly because the Government of India vetoed publication. A few of their recommendations were, however, announced. They suggested the production of power alcohol, the expansion of the steel industry, more electric power, greater production of aluminium and refined sulphur, and rationalization in various industries. They also recommended the institution of high-powered control of production, independent of established Government agencies, on the American model.

Evidently the Grady Committee was not filled with admiration for the leisurely, casual, and inefficient methods of the Government of India, on which even total war had produced little impression, They were struck, however, by the efficiency and organization of the Tata Steel Works, a vast organization run entirely by Indians. It was further stated in the preliminary report of the Grady Committee that ‘the mission has been impressed with the good quality and excellent potentiality of Indian labour. The Indian is skilful with his hands, and given satisfactory working conditions and security of employment, is dependable and industrious.’**

During the last two or three years the chemical industry has grown in India, shipbuilding has made some advance, and an infant aircraft industry has been started. All war industries, including jute and textile mills, have made vast profits, in spite of the super tax, and a great deal of capital has accumulated. The Government of India had put a ban on capital issues for fresh industrial undertakings. Recently there has been some relaxation in this respect, though nothing definite may be done till after the war. Even this little relaxation has led to a burst of energy from big business and huge industrial schemes are taking shape. India, whose growth has so long been arrested, appears to be on the verge of large-scale industrialization.

* It is not so. The Calcutta journal, Capital, of March 9th, 1944, gives the following figures for the index of industrial activity in India. (1935-36=100): 1938-39: 111.1. 1939-40: 114.0. 1940-41: 117.3. 1941-42: 122.7. 1942-43: 108.8. 1943-44: 108.0 (approx.). 1944 (January): 111.7. These do not include armament production. Thus, after more than four years of war, industrial activity as a whole in India was actually somewhat lower than in the pre-war period.

** Commenting on the shelving of the Grady Committee’s Report, Commerce (Bombay, November 28th, 1942) wrote: ‘The fact remains that powerful interests are operating abroad for the purpose of throttling further industrialization of this country, so that in the post-war world there would not be any dangerous competition to the west from the east.’



The Discovery Of India – Pt. Jawahar Lal Nehru




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