My Paper published on the Indus International Research Foundation Website on 03 Mar 25.
India’s industrial landscape has undergone significant transformations, shaped by successive industrial revolutions and evolving policy frameworks. From the early days of import substitution to the liberalisation era and the push for self-reliance under initiatives like “Make in India,” the country’s industrial policy has played a crucial role in adapting to global technological shifts. India faces challenges and opportunities as the world has entered the Fourth Industrial Revolution, which is marked by artificial intelligence, automation, and advanced manufacturing. A strategic approach to industrial policy is essential to harness emerging technologies, boost competitiveness, and ensure inclusive economic growth. India can position itself as a global manufacturing and technology hub by fostering innovation, strengthening infrastructure, and promoting skill development. There is a need to study how India’s industrial policy has evolved in response to past industrial revolutions and examine the strategies needed to navigate the current and future waves of technological transformation.
Industrial Revolutions and Their Impact on India
The Industrial Revolutions are a series of transformative shifts in production processes, technologies, and economies that have reshaped society, work, and industries over the past few centuries. Each revolution has fundamentally transformed industries, economies, and societies, leading to greater productivity, new job roles, and sometimes societal challenges related to employment, equity, and sustainability. These revolutions are typically divided into four phases, each driven by ground-breaking technological innovations.
First Industrial Revolution (Industry 1.0). The First Industrial Revolution began around the 1760s and lasted into the mid-1800s. It marked the shift from agrarian to industrialised economies, primarily in Britain, and later spread to other parts of Europe and North America. Key innovations during this period included the development of the steam engine by James Watt (late 18th century), which revolutionised power generation, making it possible to mechanise production, move goods, and propel ships and trains. The introduction of machinery like the spinning jenny and power loom in the textile industry drastically increased productivity. Coal became the dominant energy source, fuelling steam engines, while iron and steel production saw significant advances. The steam locomotive and steamships revolutionised transportation, allowing goods and people to travel faster and more efficiently. The impact of the first revolution was a significant increase in factory-based production over manual labour, urbanisation due to the movement of people to cities for factory work, social changes resulting in the rise of the working class and the beginning of labour rights movements, and environmental effects, due to heavy reliance on coal.
Industry 1.0: Impact on India. India was largely bypassed during the First Industrial Revolution, as it was under British colonial rule. The British Empire used India as a source of raw materials and a market for finished goods produced in Britain. However, some initial industrial developments occurred under British influence. India had a well-established textile industry before British colonialism, but during British rule, many Indian textile mills were closed, and production shifted to England, where mechanised textile manufacturing flourished. India became a supplier of raw cotton to British mills. The British built an extensive railway network in India (starting in the 1850s) primarily to transport raw materials and finished goods. While the railways helped in internal transportation, they also tied India to colonial economic interests. India missed out on industrialisation, and its economy remained largely agrarian. Social and economic disparities deepened, and there was a growing dependency on British manufacturing.
Second Industrial Revolution (Industry 2.0). The Second Industrial Revolution began around the 1870s and continued into the early 20th century. This period focused on electrification, mass production, and scientific innovation, and it was particularly significant in the United States, Germany, and Britain. The key innovations included harnessing electricity for industrial use (e.g., electric motors, lighting, and factories powered by electrical systems). Henry Ford’s introduction of assembly lines in the automotive industry allowed goods to be produced on a large scale at reduced costs. New methods of producing steel, such as the Bessemer process, made steel more affordable and accessible, supporting infrastructure and transportation. The chemical industry expanded with new materials like synthetic dyes and fertilisers and pharmaceutical breakthroughs. Inventions such as the automobile (Ford’s Model T) and aeroplane (Wright brothers) reshaped transportation and communication. This revolution resulted in further urbanisation and the growth of large cities, a significant increase in manufacturing and consumer goods production, and social changes, such as the rise of labour unions and a growing middle class, and advances in global trade due to improved transportation and communication systems (telegraph and telephone).
Industry 2.0: Impact on India. The Second Industrial Revolution, characterised by electrification, mass production, and steel production, occurred just as India was under colonial rule. India remained a supplier of raw materials but began to see some early industrial ventures. Some Indian entrepreneurs, like the Tata family (who established Tata Steel in 1907), started building the foundations of Indian industry. Tata Steel was the first major steel manufacturing plant established to meet growing industrial needs. The introduction of electricity began to lay the groundwork for more modern industries, although the overall rate of industrialisation remained slow compared to Western powers. India’s industrial base remained underdeveloped, and the economy relied on British colonial policies. Industrial growth was primarily focused on sectors like textiles, tea, and jute for export.
Third Industrial Revolution (Industry 3.0). The Third Industrial Revolution began in the mid-20th century, driven by automation, information technology (IT), and digitalisation. It marked the transition to a more digitally interconnected and automated world. During this period, the development of computers, microprocessors, and personal computing systems revolutionised data processing, design, and manufacturing. The introduction of robotics and computer-aided design (CAD) and manufacturing (CAM) significantly improved precision and efficiency in production. The rise of the internet and mobile technologies allowed for instant communication and information sharing on a global scale. Advances in nanotechnology opened new frontiers for materials science, electronics, and medicine. The revolution caused significant advances in globalisation, as digital technologies allowed for integrating global markets and supply chains. The automation led to increased efficiency but also concerns over job displacement. Economic restructuring occurred with a shift from heavy industry to services and high-tech sectors. Data became a major driver of economic value, giving rise to the information economy.
Industry 3.0: Impact on India. India’s Third Industrial Revolution, driven by automation, IT, and digitisation, began to take shape in the late 20th century after India gained independence in 1947. The era was marked by significant transformations, especially in the 1990s. India’s economic liberalisation marked a turning point as the government moved away from socialist-style policies and began opening up to foreign investment, privatisation, and deregulation. This created the conditions for India to leverage the technological advances of the Third Industrial Revolution. In the 1990s, India became a global hub for software development and IT outsourcing, with cities like Bangalore and Hyderabad emerging as major IT centers. Indian companies like Infosys and Tata Consultancy Services (TCS) grew rapidly, and the country became known as the “back office of the world”. The growth of mobile phones, internet access, and low-cost smartphones transformed Indian communications, leading to a more connected society and significant opportunities for remote education, business, and services. Economic growth accelerated in the 1990s, particularly in the IT and service sectors, fuelling job creation and urbanisation. India made significant strides in the digital economy, improving efficiency and productivity in various sectors, including agriculture, healthcare, and education. However, challenges remained, such as infrastructure deficits, low levels of manufacturing, and inequality.
Fourth Industrial Revolution (Industry 4.0). The Fourth Industrial Revolution is ongoing and is characterised by the integration of cyber-physical systems, innovative technologies, and AI-driven automation across industries. It represents the fusion of the physical, digital, and biological worlds, driven by the unprecedented speed of technological advancements. Artificial Intelligence (AI) and Machine Learning (ML) are being used for predictive analytics, process optimisation, and automation across various sectors (from manufacturing to healthcare). The proliferation of IoT devices is creating smart factories, cities, and homes, with interconnected devices communicating and sharing data. Advanced and autonomous robots and drones are being used in manufacturing, logistics, and healthcare. 3D Printing (Additive Manufacturing) can create complex, customised products with less wastage, revolutionising the aerospace, healthcare, and construction industries. Blockchain technology is transforming finance, supply chain management, and healthcare industries by providing secure, transparent transactions. Smart manufacturing and personalised products are becoming the norm. Increased focus is on sustainability, as advanced technologies help improve efficiency and reduce environmental impact. There is a rise of data-driven business models, where data is a key asset for companies. The rise of automation and AI is creating new opportunities for skilled workers in tech-driven industries but causing concerns about job displacements. Changes to global supply chains, with digital twins and real-time data, provide greater efficiency and flexibility.
Industry 4.0: Impact on India. India is actively engaging with the Fourth Industrial Revolution, driven by AI, IoT, robotics, big data, blockchain, and smart manufacturing technologies. India’s response has been multifaceted. The Digital India campaign launched in 2015 aims to provide internet access to all citizens, increase the use of digital technologies in government services, and promote e-commerce and start-ups. This initiative has expanded internet connectivity and increased digital literacy. The Indian manufacturing sector is gradually adopting Industry 4.0 technologies like IoT, cloud computing, and advanced robotics. The Make in India initiative (launched in 2014) encourages investment in manufacturing and aims to make India a global manufacturing hub. India is investing heavily in AI, focusing on healthcare, agriculture, education, and urban planning. The government’s National AI Strategy aims to make India a leader in AI by 2030. AI, IoT, and drones are used in agriculture for precision farming and improving productivity. Apps are helping farmers access better market prices and agricultural advice. Smart city initiatives are being launched in cities like Bhubaneswar, Pune, and Ahmedabad, integrating digital technologies like sensors and smart grids to improve urban living standards. India has the potential to become a global leader in technology and innovation, but there are still significant gaps in infrastructure, digital literacy, and skilled labour. While tech-driven industries have flourished, manufacturing and rural areas are still catching up with automation and smart technologies. There are concerns about job displacement due to automation, but upskilling programs are being rolled out to ensure the workforce is ready for the new digital economy.
India’s Industrial Policy: Successes and Failures.
India’s industrial policy has evolved dramatically since its independence in 1947. Successive governments have attempted to foster economic growth, self-reliance, and industrial development. Both successes and failures have marked the journey, and the country’s industrial policy continues to evolve in response to changing global and domestic challenges.
The Early Years (1947–1960s): A State-Led Vision. India faced several economic challenges during independence, including widespread poverty, underdeveloped infrastructure, and agricultural dependence. India’s first Prime Minister, Jawaharlal Nehru, envisioned transforming the country into a self-sufficient industrial economy independent of foreign domination. The Industrial Policy Resolutions of 1948 and 1956 were central to this vision. The 1948 Industrial Policy laid the groundwork for India’s industrialisation by categorising industries into three lists: public sector, private sector, and mixed sector. The 1956 Industrial Policy Resolution was more ambitious, emphasising the development of heavy industries, including steel, coal, and electricity. It sought to build the foundation for a planned economy, where the government played a leading role in industrial development through public sector enterprises (PSEs). Defence, railways, and energy sectors were nationalised to ensure strategic control. The public sector became the backbone of India’s industrialisation, establishing companies like the Steel Authority of India (SAIL) and Bharat Heavy Electricals Limited (BHEL). Industrial infrastructure, such as power plants and transportation networks, began to develop, fueling growth in other sectors. However, the state-driven approach led to few inefficiencies. Public sector enterprises were often plagued by bureaucratic red tape and a lack of competition. Over-regulation and a focus on import substitution stifled innovation and private enterprise. The ‘License Raj’ system, introduced in the 1950s, required businesses to obtain government permits for even modest expansions, creating an environment of inefficiency and stagnation.
The License Raj (1960s–1980s): Protectionism and Stagnation. In the 1960s and 1970s, India’s industrial policy became more protectionist, emphasising self-reliance and import substitution. The government imposed high import tariffs and relied on state-run industries to drive economic growth. This period was characterised by extensive regulation, government control, and the License Raj, which restricted the entry and development of private industries. Under this framework, large public sector corporations were created to operate in sectors like steel, oil, and telecommunications, while private industries were subject to tight controls. The government also focused on large-scale infrastructure projects to meet the country’s basic needs. Public sector enterprises were crucial in building foundational industries such as steel, electricity, and transportation. Major infrastructure projects, such as the development of the Indian Railways and major steel plants, helped lay the foundation for industrial growth. However, the policy of protectionism often backfired. The License Raj restricted the growth of smaller businesses and stifled entrepreneurship. The system of permits and controls created an atmosphere of corruption and inefficiency, while large companies focused on bureaucratic hurdles instead of innovation. Industrial growth remained stagnant in many sectors, and India’s manufacturing sector failed to achieve global competitiveness, mainly due to a lack of technological innovation and investment.
The Liberalisation Era (1991–2000s): Reform and Opening Up. The most significant shift in India’s industrial policy came in 1991 when the country faced an economic crisis. With a balance-of-payments crisis and a stagnant economy, India embarked on a series of reforms to liberalise the economy. The new industrial policy, unveiled in 1991, dismantled the License Raj, allowing private enterprises to flourish and foreign direct investment (FDI) to flow into the country. The 1991 reforms also included reducing tariffs, deregulating industries, and encouraging private investment in sectors previously dominated by state-owned enterprises. The government reduced its direct control over industrial industries and focused on creating an enabling environment for businesses to thrive. Liberalising India’s economy significantly increased foreign direct investment (FDI) and boosted the private sector. The IT and services sectors experienced remarkable growth, positioning India as a global software and IT outsourcing leader. The emergence of IT giants like Infosys, Wipro, and Tata Consultancy Services (TCS) transformed India’s economic landscape. India also experienced a substantial increase in exports, particularly in pharmaceuticals, textiles, and engineering goods. While services like IT and telecommunications flourished, the manufacturing sector struggled to grow simultaneously, lagging behind other emerging economies. Regional disparities in industrial development persisted, with major cities like Mumbai, Delhi, and Bangalore benefiting more from liberalisation, while smaller towns and rural areas saw limited growth. Infrastructure bottlenecks, such as poor roads, outdated ports, and power shortages, continued to constrain industrial development.
Contemporary Industrial Policy (2010s–Present): Innovation and Sustainability. In recent years, India has focused on fostering innovation, enhancing manufacturing capabilities, and promoting sustainable growth. The government introduced initiatives like Make in India (2014) and Atmanirbhar Bharat (Self-Reliant India) to boost manufacturing, promote domestic production, and reduce dependence on imports. The National Manufacturing Policy, introduced in 2011, aimed to increase the manufacturing sector’s contribution to GDP and create millions of jobs. In addition to manufacturing, there is a significant emphasis on digital transformation and innovation. The Digital India initiative and push for smart manufacturing technologies like the Internet of Things (IoT), artificial intelligence (AI), and robotics have become key drivers of the new industrial vision. Manufacturing sectors, particularly defence, electronics, and renewable energy, have grown. India has attracted significant foreign investment in automotive, renewable energy, and electronics manufacturing industries. Startups, particularly in technology and fintech, have flourished, leading India to become one of the world’s largest startup ecosystems. Despite efforts to promote “Make in India,” India remains heavily dependent on imports for critical goods, particularly in the electronics, machinery, and oil sectors. The manufacturing sector still struggles with low productivity, skill mismatches, and limited technological adoption, particularly in traditional sectors like textiles and heavy machinery. Infrastructure issues, particularly logistics and energy, continue to hamper industrial growth.
Future Prospects.
India’s industrial policy must address key challenges such as improving infrastructure, boosting manufacturing competitiveness, and fostering innovation. It should embrace Industry 4.0 technologies like AI, robotics, and IoT to enhance manufacturing efficiency, improve product quality, and create high-tech jobs. Promoting green technologies and sustainable manufacturing processes to align with global environmental goals. India has immense potential to be a leader in renewable energy, electric vehicles, and green manufacturing. Addressing skill gaps through focused training programs to match the evolving needs of industries. A skilled workforce is critical to driving innovation and improving productivity, improving logistics, reducing bottlenecks, and modernising infrastructure in key sectors like energy, transport, and digital connectivity and ensuring that industrial growth is inclusive by promoting development in underserved regions and sectors, mainly through the support of MSMEs (Micro, Small, and Medium Enterprises).
As India looks toward Industry 5.0, it will focus on enhancing human-machine collaboration and making technological advancements more sustainable and inclusive. The country will aim for human-centric industries, where technology augments human capabilities rather than replaces jobs. India is already taking steps towards green manufacturing and using renewable energy sources. Circular economy models will gain more traction in textiles, electronics, and automobiles. As automation increases, India must focus on developing a skilled workforce capable of working alongside robots and AI, emphasising sectors like healthcare, advanced manufacturing, and engineering. India is expected to see significant advancements in AI-driven healthcare, telemedicine, and precision medicine, potentially leading to universal healthcare access.
Conclusion.
India experienced and continues to experience the effects of industrial revolutions differently. It faced challenges in the early stages due to colonialism. Still, with economic liberalisation and the rise of IT and digital technologies, it has become an industrial powerhouse in software, telecom, and services. The next phase, Industry 5.0, promises to create more human-centric, sustainable, and technologically advanced industries, though challenges in infrastructure, digital equity, and job displacement must be carefully addressed.
India’s industrial policy has also come a long way, from state-led, protectionist measures to liberalisation and reforms aimed at global competitiveness. The successes and failures of past policies offer valuable lessons as India charts its path forward. To achieve sustainable and inclusive growth, India must continue to adapt its industrial policies, focusing on innovation, technology, and infrastructure while fostering an environment of competition and entrepreneurship. The future of India’s industrial landscape lies in its ability to embrace new technologies, meet global standards, and capitalise on its demographic and economic potential.
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