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Tales Of Trade: How The Railways Transformed India, But Didn’t Make It America

Submitted by shashi on Fri, 03/02/2018 - 11:00

This is a series based on The Stories of Indian Business Series: 10 Extraordinary Tales of Trade, published by Penguin Random House and edited by Gurcharan Das.

Indian Railways: The Weaving of a National Tapestry

- By Bibek Debroy, Sanjay Chadha, Vidya Krishnamurthi

Imagine how the world must have seemed to the ordinary Indian who had never seen anyone or anything move at a speed greater than fifteen kilometres an hour. The railways liberated us from our narrow, provincial mindset that had been limited to local customs, local knowledge and local connections. They brought us travelling merchants, artisans, singers and new products.

After the 1860s, our horizons began to expand to a world of distant towns and unfamiliar landscapes. And, like the English language, the railways helped to unify India and give us an Indian 'world view'. They changed our public spaces. Major Indian cities were reshaped around railway terminuses, with broad avenues leading up to them. Indeed, the new stations, not only in the metropolitan cities of Calcutta, Bombay, Delhi and Madras, but also in many other cities, brought about a revolution in architecture and urban design in the country.

For the first time, we faced the significance of the railway timetable. Our daily lives began to become timebound.

If our pre-modern world had been space-bound and time-free, our modern world became space-free but time-bound.

The towns and villages that were on the railway line were lucky; they prospered. The others got left behind. The train platform was such a psychological draw that young people went out in the evenings to the platform for chai or paan, or merely to linger there for a whiff of modernity. This must have been one of the reasons why 'platform tickets' came into being.

At Independence, in 1947, it was more than 50,000 miles long, employing more than a million men, with 9000 locomotives, 225,000 freight cars, and more than 16,000 passenger coaches.

As we noted, the railways had a profound effect on millions of lives as people began to move and merchants began to send their goods to distant parts of the country. New towns came up along the railway lines. However, there was also a downside. Artisans in villages and towns began to lose their living because they could not compete with British-manufactured goods that began to arrive rapidly. Earlier, the peasants had stored their surplus grains in the good years. Now the railways began to carry food and commercial crops to the ports for export. Reserves were thus depleted, and in the devastating famine years of the 1870s and 1890s, there was no stored surplus to fall back on. It would have needed a more benign and farthinking government to prevent the downside.

The railways were born of the industrial revolution. The authors of this book begin with a famous quote from Karl Marx, who predicted that railways would create an industrial revolution in India and transform the country. They did not.

But how did British capital, which also built railways in America, bring about an industrial revolution there?

I learned at university that exchange is natural to human beings, and if you create the conditions for exchange—like infrastructure, such as the railways—economic activity will arise spontaneously. One should have expected entrepreneurs to respond vigorously in an industrial age, creating small and big industries in the vicinity of the railways; an industrial revolution should have been the result.

This remains one of the intriguing questions of history.

Indeed, by the First World War, some thought India was ready to take off.

Our authors inform us that India had 28,000 miles of rail track by 1905, making it the third largest railway network in the world. India also had the world’s largest jute manufacturing industry, the fourth largest cotton textile industry, the largest canal system, and 2.5 per cent of world trade. It also had a merchant class hungry to become industrialists.

After World War I, industrialization did accelerate. G.D. Birla, Kasturbhai Lalbhai and other businessmen made huge trading profits during World War I and reinvested them in setting up industries. Between 1913 and 1938, Indian manufacturing output grew 5.6 per cent a year, well ahead of the world average of 3.3 per cent. By 1947, industry’s share of national output doubled to 7.5 per cent from 3.4 per cent. Yet, it was not enough to transform India’s agricultural society broadly. Modern industry, alas, employed only 2.5 million people out of a population of 350 million. The authors of this volume point out that the railway network had neglected freight, and also that its construction had bypassed significant geographical parts of the country. Moreover, India’s agriculture remained stagnant. You cannot have an industrial revolution without an agricultural surplus or the means to feed a rapidly growing urban population.

In the end, the spread effects of this great investment were limited. By contrast, Japan’s railways, built at the same time, delivered more positive results.

The Japanese had economized with their limited capital and had built a more geographically intensive network. The Indian railway network, although huge in absolute terms, was comparatively small, in both per-capita and per-square mile terms. In 1937, India had twenty-six miles of railway lines per 1000 square miles of land, when the US had 80 and Germany 253. This partially explains why the railways did not engender an industrial revolution in India. Sadly, the massive construction of the railways was not enough to modernize the Indian economy. India alone, among the great railway countries, remained relatively unindustrialized. In the other railway powers—the United States, Russia and Germany—the railway had been a dynamo of the industrial revolution. It had no such effect in India. Nevertheless, it is a powerful British legacy in a landscape of backwardness. Without the railways, India would have been even less industrialized.