Industrialisation and liberalisation

The essentials

After independence, India followed a strategy of planned industrialisation within a mixed economy. The state set up heavy industries in the public sector (steel, power, machinery), regulated private industry through licensing and protected domestic producers from foreign competition. Public sector jobs offered security and benefits, and industrial towns grew around new plants.

Work in India is divided between the organised (formal) sector, covering government and larger enterprises with regular wages, legal protection and social security, and the unorganised (informal) sector, where most Indians work, with low wages, no job security and few benefits. Only a small share of the workforce is in the organised sector.

From 1991, India adopted liberalisation: reducing licensing and controls, opening the economy to foreign investment and trade, and privatisation or disinvestment of public enterprises. This brought faster growth in some sectors, especially services and information technology, and wider consumer choice. Critics note growing contract and casual employment, weaker job security and rising inequality.

Factory work raises sociological issues. Frederick Taylor's "scientific management" broke work into small timed tasks, increasing control over workers. Karl Marx argued that capitalism produces alienation, as workers lose control over the products and process of their labour. Trade unions organise workers, and strikes, such as the Bombay textile strike of 1982 led by Datta Samant, show both their power and their limits.

Key points

• Planning era: public sector, licensing, protection, mixed economy.
• Liberalisation (1991): deregulation, privatisation, globalisation.
• Most workers are in the unorganised sector.
• Subcontracting and outsourcing have grown.

Common mistakes

Do not equate liberalisation with the abolition of the public sector; it reduced, not ended, the state's role.