De-industrialization is the process of destruction of a nation’s industrial capacity in which its industries and manufacturing industries including textile, mining, construction activities get destroyed due to underdevelopment or natural calamities. When these industries get destroyed then very few remain to take care of unemployment. Ultimately standard of living can’t be kept up. Deindustrialization implies a decline in industrial capacity and employment.
Mughal disintegration is the most important reason behind de-industrialization in India. During the Mughal reign, India saw a growth of cottage industries due to high per capita incomes and purchasing power. The decline of the Mughal government led to the abolition of royal courts and decreased demand for handicrafts from royal households.
British rule and policies have been cited as the chief causes of de-industrialization. The acceleration of this process under the British can be accounted for in terms of their state policies, especially taxation, and institutional framework.
The European policies aimed to encourage the manufacturing but instead, British industries were de-industrialized. Imports of foreign goods that were produced in the countries with lower labor costs helped in the decline of British industry. The industrial revolution and the import of manufactured goods from other countries contributed to the de-industrialization.
The main reason for the de-industrialization of India was the inability of Indian industries to compete with the foreign goods due to various reasons. Nevertheless, the main cause for the de-industrialization was the change in consumer habits and the rise in purchasing power of people who preferred imported products to indigenous Indian products.
Poverty is very common in the developing countries of Asia. The main cause of poverty is unequal competition. The invention of power-loom in Europe completed the decline of this important industry. Though machine-made goods could not compete in quality with the local products, lower price and change in taste led to de-industrialization.
The entire natural flow of exports and imports was disturbed. Foreign goods in place of Indian goods were monopolized and natural products of India like cotton, silk, jute, and indigo were exported from India to the UK. At the same time, England forced India to purchase English goods to such an extent that it caused havoc in the country's handicraft, textile as well as other industries.
The death of industrialization began when the East India Company took over trade in the late eighteenth century and only worsened with the British rule establishment that succeeded it; neither of the two could keep up with the changing times and could not be able to help develop new business networks or institutions that would continue to meet the demands of the growing economy.
The de-industrialization of India started in the 19th century enabled by British colonialism, which made India a private corporation. It led to the destruction of India’s handicraft industry.
The impact of de-industrialization on the Indian economy may seem minimal but it actually led to a ruralization of India. As numerous factors come into play, what we now call rural India is actually much smaller cities that probably had high industrial prospects.
De-industrialization played a major role in the decline of the artisan industry. The effects of de-industrialization include ‘constant laying off employees’, ‘displacement of artisans from traditional occupations’ and ‘declining purchasing power of these (workers) in the early 1980s.
De-industrialization deeply influenced the various sections of Indian society. Till then, India was mostly an agricultural country. But after its arrival, agriculture and industry had to run side by side. With the expansion of factory industries, there came a greater demand for raw materials like cotton, jute and other vegetable fibers.
De-industrialization did not necessarily lead to disguised unemployment. The structural transformation towards the services sector had a positive impact on the growth of employment in the unorganized sector and this has to be recognized by policy makers.
Deindustrialization in India refers to the decline of India's share of industries in its gross domestic product (GDP). India became one of the major markets for the British made cotton yarns and cloths and became one of the large suppliers of Grain.