We Missed Industrial Revolution

Is India headed there again? asks Ajit Balakrishnan

He was a stout, illiterate man, son of a butcher, struggling to earn enough to feed his 13 children by weaving handloom cotton in his tiny home when he suddenly hit on an idea that could increase his earning and feed his family.

The idea was to make a small improvement in his spinning wheel such that it could, for the same effort.

So, he put eight different spindles that were powered by a single wheel.

This allowed him to produce eight threads in the same amount of time it previously took to produce one.

He called this the spinning jenny, made a few of these contraptions, and earned a little money selling them to his neighbours.

The year was 1764, the man was James Hargreaves, and he was in Lancashire, England.

His invention triggered Samuel Crompton to invent the spinning mule and Charles Babbage to invent a weaving machine, thus triggering what we have come to know as the Industrial Revolution.

It is this tiny invention, the spinning jenny, which had a cataclysmic effect on India s economy by reducing the number of workers needed to produce cotton cloth and thus created the impetus for the Indian Independence movement and was symbolised in the charkha symbol in the flag of that movement.

What leaves me puzzled even after digging through many thousands of Web pages and books is this: If the idea of a spinning wheel with multiple spindles struck this lone man in Lancashire, why didn t a similar thought strike any one of the hundreds of thousands of cotton spinners in India at that time in the 1760s?

Robert Allen, the distinguished economic historian, suggests the spinning jenny and the related Industrial Revolution occurred in Britain rather than in India because wages were exceptionally high compared to capital prices in Britain, so the jenny was profitable to use in Britain but not elsewhere.

Since it was only profitable to use the jenny in Britain, that was the only country where it was worth incurring the costs of developing and using it, and that irrespective of the quality of their institutions or the progressiveness of their cultures the Indians would have not found it profitable to mechanise cotton production in the eighteenth century .

Not inventing the spinning jenny and mechanised weaving and the other inventions that soon followed the steam engine, steam-powered locomotives, ships, and so on kept India imprisoned in the pre-industrial era and Indians had to wait for the British to colonise them and then teach them about such industrial things.

Are there some equally disturbing things at work in India that might signal to us Indians that something wrong is under way? I can list a few and, please, dear reader, please list some others that are disturbing to you.

We set up high-quality institutions like the Indian Institutes of Technology, hoping that the students who graduate from there will innovate at a world-class level and bring India up to the level of the best in the world.

But horror of horrors: Tuition businesses like those in Kota lure hundreds of thousands of students to attend coaching classes and game the IIT entrance examinations.

And about 200,000 students take the IIT entrance test.

Of those about 10,000 are given admission which means that 95 per cent go home disappointed.

Then there are children who cannot make it to any of the top institutions such as IITs and Indian Institutes of Management and their parents send them to study abroad, paying Rs 50 lakh to Rs 60 lakh a year or more it is estimated that last year 450,000 went abroad to study.

Let us look at another aspect of this puzzle. In the late 1980s, India had a small bunch of tech companies designing and building computers and related hardware under the protection of 100 per cent import duty on such items.

Then, as Siddhartha Mukerji points out in his recent book India's Software Industry: Politics Institutions and Policy Shift: During 1991, NASSCOM (National Association of Software and Service Companies) lobbied with the government and for the first time secured income tax exemptions on the profits of software exports.

Later, due to the pressure by NASSCOM, the government lowered the import duties from a high 114 per cent to almost zero, and all of the players designing and building computer hardware perished or switched to the business of providing services workforce to foreign companies.

The shift from information-technology products to IT workforce services was complete from that day onwards.

Now, we as a nation are proud that we supply workforce to the worldwide IT industry: Earning a gigantic $250 billion as revenue and employing more than 5 million young Indians no doubt a great step forward but letting United States-based tech giants own the IT product market.

Surprisingly, Indian-origin people are now increasingly dominant as senior executives/chief executive officers of these American tech giants.

Now, as the world swings into the era dominated by artificial intelligence, it looks like India's role will again be to supply workforce to the new set of United States-based tech giants like OpenAI, which are set to dominate the world.

What if we discover that the AI wave will dispense with the need for a cheap tech workforce?

More importantly, what is in India's political economy that drives us to seek IT services revenue rather than leading in IT products? The answer to that question may tell us why the spinning jenny was not invented in India and the Industrial Revolution did not start in India.

Ajit Balakrishnan (ajitb@rediffmail.com), founder and CEO, Rediff.com, is an Internet entrepreneur.

Feature Presentation: Aslam Hunani/Rediff.com