Industrialisation in India

The Specificity of Indian Industrialisation

India’s industrialisation shares some features with the Western model, but it also differs in important ways. There is no single standard path to industrial capitalism — each country’s experience is shaped by its own history, policies, and social structure.

Employment Structure: A Key Difference

In developed countries, the majority of workers are in the services sector, followed by industry, with less than 10% in agriculture. India presents a very different picture. In 2018–19, nearly 43% of workers were employed in the primary sector (agriculture and mining), 17% in the secondary sector (manufacturing, construction, and utilities), and 32% in the tertiary sector (trade, transport, financial services, etc.).

But here is the serious problem: when we look at each sector’s contribution to economic growth, agriculture’s share has fallen sharply, while services now contribute more than half of the GDP. This means the sector that employs the most people — agriculture — generates very little income for them. In other words, most Indians work in low-productivity, low-income jobs.

A more detailed breakdown of employment shares in 2018–19 shows:

• Agriculture: 42.5%
• Mining and quarrying: 0.4%
• Manufacturing: 12.1%
• Trade, hotel, and restaurant: 12.6%
• Transport, storage, and communication: 5.9%
• Community, social, and personal services: 13.8%

The Nature of Employment: Self-Employed, Salaried, and Casual

Another major difference between developing and developed countries is the proportion of people in regular salaried employment. In developed countries, most workers are formally employed. In India, the situation is reversed:

• Over 52% of workers are self-employed
• Only about 24% are in regular salaried employment
• Approximately 24% are in casual labour

These proportions have remained broadly similar from 1972–73 to 2018–19, as shown in the chart mentioned in the textbook.

The Organised vs. Unorganised Sector

Economists distinguish between the organised (formal) and unorganised (informal) sector. There is debate over how to define these, but one common definition says: the organised sector consists of all units employing ten or more people throughout the year. Such units must be registered with the government so that employees receive proper wages, pensions, and other benefits.

In India, over 90% of all work — whether in agriculture, industry, or services — is in the unorganised or informal sector. This has three major social implications.

First, very few people have the experience of working in large firms where they meet people from different regions and backgrounds. Urban living does provide some exposure — your neighbours in a city may be from a different place — but for most Indians, work still happens in small-scale workplaces. Here, personal relationships determine many aspects of work. If the employer likes you, you may get a raise; if you have a fight, you may lose your job. This is very different from a large organisation with well-defined rules, transparent recruitment, and formal mechanisms for complaints and redressal.

Second, very few Indians have access to secure jobs with benefits. Of those who do, two-thirds work for the government. This is why government jobs are so fiercely sought after. The rest of the population is forced to depend on their children in old age. Government employment has also played a major role in overcoming boundaries of caste, religion, and region. One sociologist has argued that the reason there have never been communal riots in a place like Bhilai is because the public sector Bhilai Steel Plant employs people from all over India who work together. Others may question this claim, but the point remains that public sector workplaces have been important spaces for social integration.

Third, since very few people are members of trade unions — a feature of the organised sector — unorganised sector workers do not have the experience of collectively fighting for proper wages and safe working conditions. The government has laws to monitor conditions in the unorganised sector, but in practice, workers are left to the whims and fancies of the employer or contractor.

Globalisation, Liberalisation, and Changes in Indian Industry

Since the 1990s, the government has followed a policy of liberalisation. Private companies, especially foreign firms, are now encouraged to invest in sectors earlier reserved for the government, including telecom, civil aviation, and power. Licenses are no longer required to open industries. Foreign products are easily available in Indian shops.

As a result, many Indian companies — small and large — have been bought over by multinationals. At the same time, some Indian companies are themselves becoming multinationals. An example of the first is when Parle drinks was bought by Coca Cola. Parle’s annual turnover was Rs 250 crore, while Coca Cola’s advertising budget alone was Rs 400 crore. This level of advertising has naturally increased the consumption of Coke across India, replacing many traditional drinks.

The next major area of liberalisation is retail. The government is also trying to sell its share in several public sector companies — a process known as disinvestment. Many government workers fear that after disinvestment, they will lose their jobs. In Modern Foods, which was set up by the government to make healthy bread available at cheap prices and was the first company to be privatised, 60% of the workers were forced to retire in the first five years.

Outsourcing and Contract Labour

More and more companies are reducing the number of permanent employees and outsourcing their work to smaller companies or even to homes. For multinational companies, this outsourcing happens across the globe, with developing countries like India providing cheap labour. Because small companies have to compete for orders from big companies, they keep wages low, and working conditions are often poor. It is also more difficult for trade unions to organise in smaller firms. Almost all companies, even government ones, now practice some form of outsourcing and contracting, but the trend is especially visible in the private sector.

Summary: The Current Picture …