Evolutionary Dynamism of Manufacturing Sector in Punjab 2...

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Chapter 2 Evolutionary Dynamism of Manufacturing Sector in Punjab 2.1 Introduction This chapter serves as a background to the study. It traces the evolutionary dynamism of manufacturing sector in Punjab -a state, which, since the colonial period, being agriculturally advanced, had been engaged in the commercial cul- tivation of crops like wheat, cotton, sugarcane, oil seeds etc. on large tracts of irrigated land. There was no serious famine-like situation and the overall eco- nomic condition of the peasantry had been better than that in the rest of India. 1 Under such situation, based on the theoretical literature emphasising the inter- dependence between agriculture and industry, one may conjecture the evolution of a dynamic manufacturing sector in the state. But, how did it happen? What had been its nature? Following the rude shock of partition in 1947, how the industrial economy of the state could recover and attain dynamism in the post- independence period? and, What were those key factors that facilitated the state to attain growth dynamism in the sphere of small-scale industrial development? By way of addressing these questions, we understand the evolution of dy- namic manufacturing sector in Punjab in the follOwing sections. After deriving insights from the theoretical perspectives on the relation between agriculture and industry (in section two), we begin with the situation under the British rule and thereby discuss about public investment and commercialisation of agricul- ture in the state during this period (in section three). This discussion is further supplemented with an elaboration of the nature of capital accumulation and the magnitude of manufacturing activity during this period (in section four). Hav- IMukheIjee (1985) pOints out that the spread of benefits of'commercialization "was probably wider. at least in the agriculturally more advanced areas of the province. than in regions such as Bengal. Also. a larger portion of the profits from commercialization. whether through mortgage debt or sale of agricultural produce. was accumulated and retained within the agricultural sector in the hands of rural classes such as well-to-do peasants and landlords. It was not drained away from the agricultural sector through the usury trading network. as is supposed to have happened in Bengal" (p.65). 25

Transcript of Evolutionary Dynamism of Manufacturing Sector in Punjab 2...

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Chapter 2 Evolutionary Dynamism of

Manufacturing Sector in Punjab

2.1 Introduction

This chapter serves as a background to the study. It traces the evolutionary dynamism of manufacturing sector in Punjab - a state, which, since the colonial

period, being agriculturally advanced, had been engaged in the commercial cul­tivation of crops like wheat, cotton, sugarcane, oil seeds etc. on large tracts of irrigated land. There was no serious famine-like situation and the overall eco­

nomic condition of the peasantry had been better than that in the rest of India. 1

Under such situation, based on the theoretical literature emphasising the inter­dependence between agriculture and industry, one may conjecture the evolution

of a dynamic manufacturing sector in the state. But, how did it happen? What had been its nature? Following the rude shock of partition in 1947, how the

industrial economy of the state could recover and attain dynamism in the post­

independence period? and, What were those key factors that facilitated the state to attain growth dynamism in the sphere of small-scale industrial development?

By way of addressing these questions, we understand the evolution of dy­namic manufacturing sector in Punjab in the follOwing sections. After deriving

insights from the theoretical perspectives on the relation between agriculture

and industry (in section two), we begin with the situation under the British rule

and thereby discuss about public investment and commercialisation of agricul­

ture in the state during this period (in section three). This discussion is further

supplemented with an elaboration of the nature of capital accumulation and the

magnitude of manufacturing activity during this period (in section four). Hav-

IMukheIjee (1985) pOints out that the spread of benefits of'commercialization "was probably wider. at least in the agriculturally more advanced areas of the province. than in regions such as Bengal. Also. a larger portion of the profits from commercialization. whether through mortgage debt or sale of agricultural produce. was accumulated and retained within the agricultural sector in the hands of rural classes such as well-to-do peasants and landlords. It was not drained away from the agricultural sector through the usury trading network. as is supposed to have happened in Bengal" (p.65).

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ing understood the initial (British-time) situation, we examine the evolution and

growth dynamism of state's manufacturing sector during the post-independence

period (in section five). Following which, we highlight the prime role of state

support, entrepreneurial capability and artisans hip in attaining the growth dy­namism (in section six). We also discuss the structure of industrial labour mar­

ket along with its operational dynamics (in section seven). The final section sums

up the focus of this chapter.

2.2 Theoretical Perspectives on The Relation Between Agriculture and Industry

We generally observe that there exists much inter-dependence between agricul­

ture and the industrial sector. This inter-dependence between the two is so much

significant that one is often held crucial to the growth of the other and vice-versa.

The agriculture sector assumes significance for the growth of a sound indus­

trial sector as it helps (1) in manufacturing by supplying various raw materials,

(2) by releasing surplus labour for the industrial sector, (3) in maintaining low

wage rates by providing food items (to industrial workforce), (4) in procuring im­

ported machinery by providing earnings from agricultural exports, and so on.

Similarly, the industrial sector supports agriculture by (1) supplying inputs (like

fertilizers, insecticides, agricultural tools etc.), (2) generating adequate infras­

tructure for agricultural development, (3) providing market for the farm produce,

and so on.

This relation between agriculture and industry was recognised in economic

theory since its early beginnings in classical political economy. Bharadwaj (1987)

pOints out, "In Petty's time when different sorts of activities were carried on

within the same enterprise, neither social nor intra-enterprise division of labour

had progressed much so that the producers, mostly in possession of their own

means of production, employing also family labour, catered to a variety of their

own needs, the distinction between 'agriculture' and 'industry' did not emerge

sharply. It was in the works of the Physiocrats that such a sectoral separation

emerges Significantly, although 'industry' was perceived more as an appendage

to agriculture, and constituted predominantly artisan households" (p. AN-I5).

In Physiocrats' model of the economy, the agriculture sector dominated as a

sector generating not only major production but also surplus. They conceived

agriculture as the only productive sector and the rent (appropriated by landed

proprietors) as the only form of surplus generated. Since the artisan (manufac­

ture) sector was believed not to produce any surplus, the demand for the prod­

ucts of artisans emanated mainly from the rental revenues of the proprietors

(Bharadwaj, 1987, p. AN-I6). In spite of considering industry as appendage

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and sterile not generating any surplus, the Physiocrats' first macro-modelling of the economy facilitated thinking over the relationship between agriculture and industry.

As with the advancement of capital relations in agriculture and industry, there took place transformation in their inter-relation, Adam Smith, in contrast to Quesnay, recognised manufacturing sector contributing to 'net product' of the economy. In Smith's analysis, though the agriculture sector retained its par­ticular significance as an important provider of subsistence (food items), it was also observed that the industrial sector can provide relatively more advantages to the economy by allowing greater division of labour, which may lead to further sub-divisions and expansions in industrial employment along with the achieve­ment of higher productivity through the invention of superior machinery. Smith was of the opinion that in comparison to an economy without a substantial in­

dustrial sector, an economy, which develops its industry substantially, can enjoy relatively better terms of trade between agricultural produce and manufactures. Smith viewed the relation between agriculture and industry as the symbiotic re­

lation between the 'country' and the 'town' as he emphasised that the country supplies the town with the necessary subsistence and the materials of manufac­tures. The town repays this supply by sending back a part of the manufactured produce for the inhabitants of the country and thus, in any civilised society, the great commerce is carried on between the inhabitants of the country and the town (Eltis, 1988).

Thus, in its primitive form, industry had remained an appendage to agri­

culture. In such a situation, there had not arisen much possibility for inter­linkages. But, with growing speCialisation and increasing division of labour,

there took place a spatial and organisational separation of industry from agricul­

ture. The simultaneous progress in technology and product diversification in in­

put and output markets had resulted in the emergence of inter-linkages between industry and agriculture which became stronger over the period of time (Eapen, 2003). Hirschman (1958) has been the first to consider 'production linkages' as inducement mechanisms for stimulating economic activities through backward

and forward linkages. He considers backward linkages as those related with in­

put provision and the forward linkages as those related with the utilisation of

output.

Based on the idea of 'linked progress', Nurkse (1961) has advocated that the

sectors of farming and manufactUring must move forward together, though their

equilibrium rates of growth between the two may be different and vary over time.

Kuznets (1968) too opines that the industrialisation facilitates agricultural trans­

formation as a coincident revolution in agricultural productivity releases human

resources to industry and therefore, technological advancement must support

both.

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..

Kalecki (1960) too observes that the rapid development of industry requires

investment and technological advances in agriculture. Consequently. the basic

prerequisite for rapid industrialisation of an underdeveloped economy is a revo­lutionary upsurge in agricultural production.

In theoretical models like Hymer & Resnick (1969) and Ranis & Stewart

(1993), the interaction between agriculture and industry has gained attention.

However. the pioneering attempt to specifY. empirically and quantitatively. the

linkages between these two sectors has been made by Harriss (l987b.a). Har­

riss conceptualises the linkage of small industries with agriculture in two ways:

first, by exploring the nature of their linkage in terms of forward. backward or

consumption links beSides exploring whether these links are direct or indirect;

second. by interpreting the linkages in terms of (three types of) flows. viz. com­

modity flows. flows of finance (private investment capital, wages. interest. state

revenue and expenditure) and labour (location, migration and wages). In this

line, the macro-economic models have examined the impact of growth in the agricultural sector on the industrial segment.2

Thus. after gaining theoretical insights on the inter-dependence between agri­

culture and industry. we now turn to the case of Punjab. which have been an

agriculturally advanced state. To begin with. we discuss its state (both agricul­

tural and industrial) under the 'British Rule' in the subsequent sections.

2.3 Public Investment and the Commercialisation of Agriculture in British Punjab

In 1849, the British annexed the Punjab. However. the ruling groups were not

replaced but confirmed as useful intermediaries between the state and the peo­

ple and this partnership got further consolidated with their vital support to the

British for suppressing the first war of independence in 1857. This cooperation

continued with Punjab's contribution of manpower and logistic support to help

British subdue and police territories both in south Asia and overseas. Over half

of the British Indian army was recruited from the Punjab and the people of this

province was called (by the British) the 'Martial Races' of India (Ali, 1988).

By the early 1860s. the British desired the extension of cultivation to hitherto

barren interfluvial tracts. or doabs of western Punjab. This region was sparsely

populated by semi-nomadic pastoralists and was much under-developed. By

mid-1880s. these barren lands got irrigation by way of tapping the water re­

sources of western rivers with perennial canals. their branches and distribu-

2The emplncal studies, for example In the case of India, have found that one percent growth in the agncultural output increases industnal output by 0.5 percent and national income by 0.7 percent (Rangarajan, 1982).

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Table 2.1: Financial Record of the Productive Irrigation Canals of the Punjab in 1926-27

Particulars Total Capital Outlay at the end of 1926-27 Total Accumulated Surplus Revenues Total Area Irrtgated and Assessed to Water Rates Direct Revenue Assessed During the Year 1926-27 Indirect Receipts Total Assessed Receipts Working Expenses for the Year 1926-27 Net Assessed Revenue for the Year 1926-27 Percentage Earned over Total Capital Outlay in the Year 1926-27

Source: Paustian (1930. p.145).

Rs. 291,548.419 582.701,089 10.466.574 40.001.726 19.237.637 59.239.363 17.316.353 41,923.010

14.38%

taries. The canalisation of this region was done at such high pace that by 1947,

there had emerged one of the largest irrigation systems of the world. A total of

nine projects were accomplished. The largest irrigation system was of the Lower Chenab whose irrigated land was over 2,000,000 acres. The irrigation system

of Lower Bari Doab and Nili Bar irrigated over 1,000,000 acres each. Other ir­

rigation systems were Lower Jhelum (450,000 acres), Sidhnai(250,000 acres),

Chunian (100,000 acres), Sohag Para (90,000 acres), Upper Doab (80,000 acres)

and Upper Jhelum(40,000 acres) colonies3 (Ali, 1987, footnote 9, p. 114).

It is revealed out by table 2.1 that the investment in irrigation remained much

profitable for the British. By 1926-27, the total accumulated surplus revenues of

the canals were approximately twice as large a sum as the total capital cost of the

productive irrigation canals combined. For the year 1926-27 alone, these canals

earned a net surplus equivalent to 14.38 percent of the total capital investment

in these canals. With the completion of various works in the later years, the

net revenue as percentage of total capital invested got increased further to 16.3

percent for the period 1937-46 (Islam, 1997).

Table 2.2: Chronology of Railway Expansion in British Punjab Period Details of Railway Expansion

By IB61. the tirst railway line was opened between Karachi and Kotri 1861-70 By 1862. Lahore was connected to Amritsar

By 1870. This line was extended to Ghaziabad(in east) & Multan(in south). 1871-80 By 1873. line from Lahore to Jhelum was constructed

By 1878. a line from Kotri to Lodhran and Multan was opened. 1881-90 By 1883, line from Lahore to Peshawar was constructed.

By 1891. Delhi-Ambala-Kalka railway line was opened 1891-00 By 1896. the canal colOnies were linked by extending railway line to Lyallpur

Between 1895-1900. the Wazirabad-SanglaHill-KhanewalLine was opened By 1897. Delhi-Bhatinda-Samasata line was opened and then brought to Lahore.

1901- 10 By 1903. Malakwal-Shorkot Road line was opened By 1907. Shahdara was linked to Sangla Hill.

1911-20 By 1911. Line from Shorkot Road to Chichoki Mallian was opened Source: Calvert (1936. p. 107 -108).

3A large chunk of this canal-irrtgated area came to the share of Pakistan at the time of India's independence in 1947.

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Another major p\lblic investment was made in an extension of transport fa­cilities, especially railways. Table 2.2 gives the chronology of railway expansion in British Punjab. The railway mileage, which was 410 in 1872-73 increased to 5,500 in 1932-33 - a more than 13 times increase. By 1936, when Calvert wrote his Wealth and Welfare oJ the Punjab, the railway network was so well-developed that there were "very few places more than 25 miles from a line. The 660 stations serve on the average 50 villages apiece" (p.109).

The canal irrigation made possible the reclamation of large tracts of waste land and the railways gave an added impetus. The improvements in general communication system stimulated the cultivation of various crops like wheat, cotton, other cash crops, cereals & pulses etc. (Table 2.3).

Table 2.3: Decennial Acreage Under Different Crops ('000 Acres) Crops 1906 - 15 1916 - 26 1927 - 36 1937 - 46

Acres % Acres % Acres % Acres % Cereals & Pulses 7.214 25.70 8.024 27.13 8.656 27.61 10.031 30.70 Wheat 4.446 15.84 4.912 16.61 5.183 16.53 5.843 17.88 Minor Cereals 1.940 6.91 1.917 6.48 2.059 6.57 2.638 8.07 Cash Crops 1.739 6.20 2.549 8.62 3.180 10.14 3.350 10.25 Cotton 1.035 3.69 1.588 5.37 2.163 6.90 2.458 7.52 Fodder 1.614 5.75 2.289 7.74 2.794 8.91 3.483 10.66 Others 10.083 35.92 8.299 28.06 7.321 23.35 4.875 14.92 Total Sown Area 28.071 100.00 29.578 100.00 31.356 100.00 32.678 100.00

Source: Based on Islam (1997. p.69).

There took place an increase in the acreage of all the crops. The cereals &

pulses retained a major share of the cultivated area. The wheat occupied the second place as it was cultivated over more than one-sixth of the total culti­

vated area. It was mostly grown in canal colonies and was exported to different European markets, particularly after the opening up of the Suez Canal in 1869.

The cultivation of cash crops also gained significance over time. The decennial acreage under cash crops became almost twice in 1937-46 period than that in 1906-15 period. BeSides other cash crops, it was cotton that gained significance

during this period. Its acreage became more than double. It is learned that

various economic incentives along with the availability of canal irrigation and

transport and communication facilities contributed significantly to the increased

cultivation of various crops in the province.4

Nonetheless, the state failed to provide a determined developmental stimu­

lus and as a consequence, Punjab remained an underdeveloped region. It is

noteworthy that under the colonisation policy of the state, thC? land distribu­

tion by the state was governed by the need of the British to consolidate their

political position to fulfill military requirements and to maintain an extractive

system to finance their administration. The studies like Ali (1988) have found no

evidence about the state's utilisation of Significant proportion of its surplus on

4BaneIjee (1982. p. 47-76) provides a detailed account of the growth of commerCial agriculture in Punjab during the British rule.

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developmental activities in the province. 5 A major part of the revenue from canal

colonies was sent to the centre where it was utilised for military expenditure and for the maintenance of imperialist political and administrative superstructure

and the rest was used for administrative expenses within the province, largely on irrigation, revenue and police departments.

However, after gaining insights about public investment and commerCialisa­

tion of agriculture, we discuss below the nature of capital accumulation and the

state of the manufacturing sector during the British rule so as to understand its evolution since the pre-independence times.

2.4 Nature of Capital Accumulation and the State of Manufacturing Sector in British Punjab

The agriculture sector generated economic surplus - a large part of which was

appropriated by the state in the form of land revenue. The land revenues were

based on initial assessment and were to remain in effect for some years. Mter-wards, these were revised (generally upwards). Such mechanism was generally

inelastic to economic fluctuations and bad harvests. Consequently, there re­

mained very little possibilities for capital accumulation by the peasantry: rather

the farmers had to approach sahukars for meeting their land revenue obligations

and other crop and non-crop related expenses. These sahukars were largely en­

gaged in the profession of money-lending and the interests charged were gener­

ally usurious.

As far as the rights over land were concerned, the British conferred the oc­

cupancy rights of land in canal colonies to the cultivating classes, mostly Jats. These rights were to be converted automatically into the proprietary rights af­

ter ten years of cultivation. Such a provision provided an easy (and profitable)

collateral against which the money-lenders provided credit to the peasantry.6

The widespread indebtedness led to the displacement of zamindars' ancestral

holdings to the money-lenders at a large scale. Having observed such massive

mortgages and being alarmed by the impending political and economic crisis, the

field officer Thorburn published his monograph Musalmans and Money-Lenders in the Punjab in 1886.7 This attracted the attention of the British authorities and

subsequently, the state passed the Punjab Alienation of Land Act in 1901. Under

this act, the alienation of land among the members of agricultural tribes was

5Similar has been the observation made by MukheIjee (1985. p. 65) as she points out "Yet in spite of all these 'advantages'. there is no evidence of a progressive transformation of agriculture along capitalist lines. either by the index of a rapid increase in productivity through investment of capital in agricultural production, or by that of a growth of capitalist relations in agriculture."

6Such a choice by the moneylenders was also guided by the fact that they were not granted any rights over the land.

7 An Indian reprint of this monograph got published in 1983. see, Thorburn (1983).

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permitted but the sales by agriculturists to persons not belonging to the agri­

cultural tribes were prohibited. It also prohibited village artisans and menials (dalits) to possess lands.

A consequence of this Act had been the fact that the position of the agricultur­

ist money-lender got strengthened with the elimination of sahukars from the land

market. But. this Act did not result in the virtual withdrawal of the sahukars from the rural economy as they continued to extend credit to the zamindars. But

they took care in making advances by keeping in mind the circumstances and

position of the client. Besides this. they also learned to manipulate the law. They devised a new type of benami mortgage by which they used to get rich agricul­

turists to buy land and then transfer the property (informally) to them. Thus. the

overall accumulation of agrarian surplus remained confined to the land market.

Moreover. the non-cultivating classes. in response to this act. had to seek other alternatives for investing their surplus money. There was a diversion of

capital from money-lending to trade and commerce. It marked a new chapter

in the rural economy of the Punjab. The industry being the lucrative option in the presence of inbuilt talents of the artisans (like Ramgarhias) facilitated the

growth of numerous cottage and small scale industries in the subsequent years.

Various manufacturing activities in these industries were pursued in both rural

and urban areas and the people were skilled in various crafts not only in cloth

weaving. utensil making and basket weaving but also in works like iVory carving.

wood carving. metal inlay work etc. (Latifi. 1911).

The Khaddar industry was the most important industry of Punjab. Owing to

the climate of Punjab being somewhat cold. the people required coarse clothing.

Khaddar was well suited to the needs of the people. The raw material was ob­

tained locally and the industry was pursued as a home industry. Similarly. the

mill yarn hand-loom weaving was also dominant and the most important cen­

tres were Hoshiarpur. Jalandhar. Ludhiana. Amritsar. Gurdaspur and Sialkot

districts (Chitra. 1948. p.155). A number of Momins or Julahas were engaged

in this industry and a variety of cloth articles like dhoties. sarees. chaddars.

coatings. shirtings. towel. lungis. shawls and carpets were available.

Woollen industry was another important industry of Punjab. Ludhiana. Dera

Gazi Khan. Bhera. Amritsar. Panipat and Dhariwal were famous woollen weav­

ing centres. Most of the wool was produced locally and the finest material was

coming from Hissar. The products of this industry were rugs. shawls. namdas

(coloured felts), hosiery goods. serges and pile carpets. The pile carpets of Amrit­

sar and Multan were famous. Similarly. the silk looms used to employ thousands

workers at chief centres like Amritsar. Lahore. Multan and Jalandhar. Earlier the

raw material was used to be imported from China but with passage of time. it was

produced locally. This industry produced articles such as turbans. waist bands.

sarees. fringes. tassels and pyjama strings. The embroidery industry emerged as

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of workers (Table 2.4). There was a spurt in the evolution of registered factories during the war years of 1941 to 1944. The number of registered factories dur­ing this period had increased considerably. In 1946, the total number of existing factories recorded an increase of 68 percent over those of 1937 while the workers employed were more than double the number of 1937.

2.5 Evolution of Manufacturing Independence Punjab (India)

Sector in Post-

It is noteworthy that at the eve of independence, the Punjab was a well­balanced economic region possessing economic resources in such a way that

every sub-region was vital for the prosperity of the other. Nonetheless, there had been marked disparities in the development of various sub-regions within the province. Industrially, the East Punjab got little attention and there was a high concentration of industrial activity in Western districts. 10

2.5.1 Event of Partition and the Shattering of Punjab's Industrial Economy

As soon as the British rule in India came to an end by 1947, there took place the

formation of another nation, called Pakistan. The Greater Punjab was bifurcated

and the Pakistani side came to be known as West Puryab and the Indian side was called East Puryab. Following the partition, there was a large scale migration and

displacement of non-Muslims and Muslims from West and East Punjab respec­

tively. It could not be a peaceful resettlement of the population; rather there took place widespread communal disturbances and massive blood-shed on both sides of the border. As far as the industrial economy is concerned, it is learned that the partition had disturbed the raw material sources, markets and finance me~hanisms. The East Punjab emerged as the great loser as it used to depend

more on West Punjab not only for its supplies of raw materials like wheat. cotton, lime, coal, gypsum, salt and wool, etc. but also for its markets. 11 Moreover, the

wealth and development resources that came to the share of East Punjab were considerably small. 12

A large number of factories at important city centres such as Lahore, Multan,

Lyallpur, Gujranwala, Sialkot and Wazirabad which had flourished on account

IOAnwar (l953) pOints out that at the eve of independence. 40 percent of the industry of the Punjab was located in Lahore alone.

iiFor example. 30 percent of the output of the hosiery Industry was readily consumed In the markets of West Punjab.

12In the agricultural sector. the refugees In East Punjab had to bear the net loss of about 20 lakh acres of land besides their compromise with the land quality. Moreover. the East Punjab got only three million canal irrigated acres out of a total of over fourteen million acres.

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of generations-long sunk capital and finance of the non-Muslims, were left to the share of Pakistan. The industrial centres of Rawalpindi, Sialkot. Lahore,

Wazirabad and Gujranwala were built largely by the non-Muslims and in these industrial centres, about 400 industrial establishments, valued at nearly Rs. 40

crores, belonged to non-Muslims (Rai, 1965, p.137). The Muslims in East Punjab

left about 1000 establishments which were of very poor nature. Similarly, a

number of famous industrial institutions were lost in West Punjab. 13 Out of

the total number of factOries in the Punjab, East Punjab received 415 factories (employing 43,024 workers) whereas West Punjab got 602 factOries (employing 1,09,471 workers) (Table 2.5).

Table 2.5: Status of Industry in East and West Punjab at Time of Independence East Punjab West Punjab

Industry No. of No. of No. of No. of Type Factories Workers Factories Workers Textiles 106 14.071 16 20.074 Engineering 79 6,437 154 24.135 Minerals and Metals 67 3,691 75 7.666 Food. Drink and Tobacco 40 3.562 39 4.295 Chemicals. Dyes. etc. 18 1.548 36 2.816 Paper and Printing 8 1.733 42 3.899 Wood. Stone and Glass 14 1.067 38 7.789 Tanneries 2 106 3 1.954 Gins and Presses 72 4.155 178 14.843 Miscellaneous 9 6.654 21 22.000 Total 415 43,024 602 1,09,471

Source: Vakil (1950. p.151).

The exodus of Muslim skilled labour from East Punjab crippled the industries

like hOSiery, metal works. tanning and leather and lac industry in which the

Muslims formed a majority of skilled and semi-skilled labour.14 Being already

backward in industrial development. the East Punjab suffered much on this

account. Most of the factories and workshops were closed. The carpet and

basket weaving. foundry and engineering industries which were mostly in the

hands of Muslims suffered a serious setback. A survey conducted by the East Puryab Board oj Economic Inquiry had revealed that in the border districts of

Amritsar. Jalandhar. Gurdaspur. Firozpur and Ludhiana. most of the industries

had to remain understaffed due to the migration of Muslims which formed 54

percent of the total number of workers. The shortage oflabour resulted in sharp

rise in wage rates which rose from Rs. 48 per month in 1946-47 to Rs. 63 per

month in 1947-48. The total gross value of industrial output also fell from Rs.

12.5 crores in 1946-47 to Rs. 10 crores in 1947-48 (Vakil. 1950. p.146-147).

The industries like textile and hosiery industry suffered due to the shortage

of raw materials and markets. The woollen industry which was one of the best

13Prime among them had been the Craik Technical Institute. the Dyeing and Calico Printing Institute. the Weaving Demonstration Factory, the Central Pottery Agency etc.

14As many as 18.54.188 MuslimS belonging to 22 different tribes of artisans and menials mi­grated to Pakistan. They constituted 38.6 percent of the total Muslim population of the Punjab (GoP. 1950. p. 159).

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organised industries in East Punjab was considerably dislocated. Earlier. it used

to get a good supply of its long staple wool from Pakistan but now. the inadequacy

of this raw material affected its output significantly. Similarly. a majority of the

skilled workers employed by the industry in Amritsar. Dhariwal and Panipat were Muslims. Their migration to Pakistan resulted in the scarcity of skilled

workmen. As this industry depends. to a large extent. on skilled workers. its

value of products manufactured and the value added by manufacture declined significantly in comparison to the all-India level. 15 Similar had been the plight of

hosiery industry. which was mainly concentrated in Ludhiana (East Punjab).

There had been a loss of business confidence as well. There took place a flight

of capital from East Punjab. The banking facilities also got dislocated. The fear

and panic of the partition did not allow individuals to invest in industry. Avail­

ability of adequate capital for the industry became a major problem. Moreover.

the locational disadvantage of the state having a border along a hostile country could not attract capital from other states.

2.5.2 Rebuilding From the Wrecks of Partition and the Industrial Growth Dynamism During Pre-Green Revolution Period

After partition. the East Punjab was left as industrially backward region and the

damage done by the partition had been so wide and rampant that it was not pos­

sible to rehabilitate the dislodged industrial economy without strenuous effort

of the state. The state government too lost no time and with the help of central

government took immediate steps by providing liberal financial assistance. raw

materials. new sites for industrial establishments and the training facilities in

different lines to the displaced persons and others.

A significant proportion of the migrated Hindus and Sikhs had a greater ur­

ban element. They were not used to rural life and agricultural occupation. More­

over. there was also little scope for accommodating them in the agricultural sec­

tor. So. the state made schemes for the establishment of new townships and

industrial areas near the principal cities. There have been very few who could

bring their wealth with them. After losing their hoards. the erstwhile rich had to

make a fresh start in their struggle for existence. The state aptly modified the

State Aid to Industries Act. 1935 to help the small industrialists. 16

Table 2.6 provides the figures on the financial help provided by the state to

the industrialists during the 1948-49 to 1950-51 period. This liberal financial

15Vakil (1950) pOints out that for India. the value of products manufactured got increased from Rs. 6.9 crore in 1946 to Rs. 8.2 crore in 1947 but for East Punjab. it has fallen from .Rs. 2.2 crore in 1946 to Rs. 1.4 crore in 1947. Similarly. the value added by Manufacture in East Punjab decreased from Rs. 86lakhs in 1946 to Rs. 59 lakhs in 1947.

16Earlier the loans advanced under this Act needed some immovable property as security but after partition. it provided loans up to Rs. 2000 merely on two good personal securities without their having to pledge any property for the purpose.

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Table 2.6: Financial Help (in Rs.) Provided by State to Industrialists, 1948-49 to 1950-51

Loans Subsidies Grants-in-Aid Total

Source: GoP (1952).

1948-49 3.72.500 1.24.246

4.96.746

1949-50 4.26.450 83.561 8.000

5.18.011

1950-51 2.99.200 33.300 1.000

3.33.500

assistance had gone a long way towards inspiring confidence among the worn­out industrialists.

Owing to the persisting problem of accommodating a large number of refugees

and the simultaneous demand for skilled labour. the state drew up schemes to provide short-term training courses to the displaced persons. The state provided

the staff and the students with accommodation, raw materials etc. A total of 17 demonstration parties were shifted to the refugee camps to impart short-term training in various crafts to the displaced persons. Up to the end of 1949-50. they

had trained 1.570 persons. In order to encourage training, the state awarded a number of scholarships and stipends. 17

Nonetheless. their effort remained inadequate. So. the Industries Depart­ment undertook the task of establishing various vocational training centres to provide short-term courses with intensive training in various small scale indus­tries. Through these centres, training in carpentry, smithy, foundry, moulding

and welding. oil pressing, manufacture of surgical instruments, utensil making, hosiery, leather goods, cycle repairs etc. was provided in almost every important city of Punjab. Moreover, the state also arranged special training programmes

for the widows living in widow homes. The state also opened up Cotton and Wool Spinning and Weaving Centres at several places. These centres provided work to 14,000 spinners and 1,400 weavers. Moreover, in 1949, the state stopped giving

free rations to the displaced persons in refugee camps so as to force them for

work. In this line, many of the centres were closed and the important refugee

camps were turned into 'Work Centres' for providing training facilities and the gainful employment. 18 By the end of 1950. there were 15 work centres 19 left with

a total capacity of 1400 workmen. '\

17Significant among these have been 29 Gandhi Memorial Scholarships for students specialising in various crafts. Five of these scholarships valued £300 each for training abroad. The rest carried Rs. 100 per month each for training within the country.

18Initially. the state started forty two such centres to teach a number of crafts. The state also paid. for the first three months. stipends to facilitate them during the initial training period but thereafter. the trainees were paid standard daily wages.

19These work centres operated at Jalandhar. Ludhiana. Abdullapur. Panipat. Sonepat. Rohtak and Hissar.

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All this gave a fillip to the revival of some industries in the state. Soon came the era of planned economic development. Although the First Five Year Plan laid special emphasis on agriculture, the efforts of the state government were also directed towards industrial development in the state. During this plan period, the vacuum created by the migration of skilled labour was filled up and most of the uprooted small scale industries were rehabilitated. Six industrial areas at Jalandhar, Ludhiana, Jagadhari, Panipat, Sonepat and Bahadurgarh (covering a total area of 1.576 acres) were established to settle the industrialists. Jalandhar

and Batala became the home of the sports good industry: Ludhiana started gain­ing Significance for cycles and sewing machine parts industry: Jagadhari started producing high class plywood and Sonepat also started manufacturing cycles.

Similarly, the textile industries of Amritsar had started working to their full ca­pacity and the manufacturing of machine tools and agricultural implements in Ludhiana had become known throughout the country.

An Industrial Finance Corporation was set up. It provided liberal loans to various industries. By the end of 1964-65, it provided cumulative loans worth

Rs. 71,588 since its inception in 1953-54 (GoP. 1966. 1968). A vigorous drive was also carried out for integrating the various small scale industries on coop­

erative lines for increasing their efficiency and economic functioning. Moreover.

the state made the provision for marketing facilities and raw materials, qual­ity marketing for industrial goods, testing, finishing, heat treatment and other common facility services.

lt was also thought that there should be a diversification of current indus­

trial nature and thereby a move for the establishment of some large and medium industries like the newsprint mill. a cement factory, a large factory for the pro­duction of steel and structural machine tools was made but these initiatives

could not be implemented due to the Chinese aggression on India's borders in

1962 which resulted in the state economy being switched to meet the defence

needs. But. there was another set back of Indo-Pak conflict in 1965 to Punjab's

industrial economy. which caused a flight of capital from the state.

Nonetheless, the state set up industrial estates at Ludhiana, Malerkotla,

Batala. Nilokheri and Sonepat at a total cost of Rs. 74.97 Lakhs and conse­quently. by the end of 3rd Five Year Plan, there were 13 urban and 34 rural

industrial estates. On the whole, as a result of the efforts in the first three Five

Year Plans, the state of Punjab had achieved some progress. notably in the field

of small scale industries. The contribution from the industries to the total state

income has increased progressively over the years and rose from 10.2 percent

in 1952-53 to 11.2 percent in 1955-56, 13.7 percent in 1960-61 and 16.4 per­cent in 1964-65. By 1964. the number of registered working factories alone had

witnessed an increase of 111.7 percent over 1956 and the number of workers

engaged in the factories increased by 84.8 percent over the same period.

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But, this period also witnessed a series of agitations by the Hindus and the Sikhs to assert their demand for a separate state - as a consequence of which, there took place Punjab's reorganisation on a linguistic basis. But, it gave shock

to the industrial economy that had just started to recover. All the registered paper and glass factories had gone to Haryana, another newly formed state af­ter reorganisation in 1966. Similarly, the developing industrial complex around Delhi came to the share of Haryana and whatever mineral and forest resources were available had gone to either Haryana or Himachal Pradesh, another neigh­bouring state of Punjab.

As a result of this state reorganisation, the new state of Punjab was left with

8 urban and 20 rural estates. There were only 4,069 factories registered under the Factories Act in 1965. Out of them, 3,544 were actually working and were employing 1,03,654 workers. Only seven of these factories employed 1,000 or

more workers and none exceeded 5,000 workers. There were 14,589 units reg­istered with the Industries Department for the purpose of getting loans and the supply of scarce raw material, etc. These units provided employment to 1,26,058 workers.

Thus, at the eve of Green Revolution, Punjab was once again a less important state in terms of its industrial development. It remained primarily an agricultural

state with more than 70 percent of its population dependent on agriculture with all sorts of problems related to seasonal, chronic and disguised unemployment.

2.5.3 Industrial Evolution During Post-Green Revolution Period

Owing to the adoption of Borlaug seed-fertilizer technology during the mid-1960s, the state of Punjab made remarkable achievement in the production of

food grains. Such an advent has been aptly known as the Green Revolution (Wolf, 1969). The agriculture sector became more productive. The rapid growth of agri­

culture had a large impact on the entire economy.

As far as the industrial sector is concerned, the increasing use of new agricul­

tural technology stimulated the demand for intermediate inputs like fertilizers,

pesticides, power, diesel, capital goods (like electric motors, diesel engines, trac­

tors, threshers, etc.) and other consumption goods. In response to this newly

emerging demand, there emerged vibrant engineering and hand-tool industries.

There also emerged industries processing agricultural products. Similarly, in­

creasing per capita income levels of large rural population provided a push to

all sorts of consumption goods industries. The food processing industries like

dairying, grain mills, edible oil manufacturing, breweries and beverage industry recorded rapid expansion. Similarly, a big spurt had taken place in the pro­

duction of textiles and durable consumer goods like sewing machines, radios,

bicycles, television sets etc. (Bhalla, 1995).

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This period also witnessed a significant urbanization of Punjab in response to agricultural marketing cum trading activities. The urban population grew by

44.5 percent during the 1971-81 period, which has been very high than the 25

percent growth during the previous decade. As a consequence of growing ur­

banisation and agricultural prosperity, there emerged a clustering of numerous

large and small-scale industries in large cities. Much of this clustering took

place in those cities which were situated on the 'Grand Trunk' road from Delhi to Amritsar.

If we consider the 1980-81 to 1990-91 period, we observe that this had been

a period of high growth in terms of both output and employment. The overall an­

nual growth in industrial output and employment had been 16.73 percent and

5.25 percent respectively. The highest growth had been recorded by repair ser­vices. Some of the fastest growing industries, in terms of output, had been wood

products, non-metallic products, basic metal products, non-petroleum products and the transport eqUipment industry. The industries like metal products, cot­

ton textiles, non-electrical machinery, leather products etc. could not register

significant growth (Table 2.7). Similarly, in terms of employment, some of the

best performing industries were wood products, leather products, non-metallic

products, food products and beverages whereas the industries like cotton tex­

tiles, non-cotton textiles, non-electrical machinery, basic metal products and

transport equipments could not perform better. Consequently, the employment elasticity of output showed varying pattern across the industries. The leather

products industry emerged as the best performer followed by wood products,

food products and beverages, electrical machinery and non-metallic products (Table 2.7).

Table 2.7: Growth Profile and Employment Elasticity Across Various Industries, 1980-81 to 2000-01

Industry 1980-81- to 1990-91- 1990-91- to 2000-01-Type Gr[Y) R Gr(Ll R 1) R Gr[Y) R Gr(Ll R 1) R Food Products/Beverages 16.39 9 9.52 5 0.58 4 13.29 9 2.85 6 0.21 3 Cotton Textiles 10.97 13 -0.72 14 -0.07 14 18.70 2 3.94 2 0.21 4 Non-Cotton Textiles 14.01 10 2.53 13 0.18 11 16.21 5 0.93 13 0.06 13 Wood Products 22.15 3 15.33 2 0.69 3 10.89 13 -0.03 14 0.01 14 Leather Products 13.26 11 11.54 3 0.87 1 10.03 14 1.36 12 0.14 10 Non-Petroleum Products 19.71 6 4.43 8 0.22 9 12.68 10 2.63 7 0.21 5 Non-metallic Products 21.96 4 9.78 4 0.45 6 19.31 1 3.13 5 0.16 9 BaSic Metal Products 20.39 5 2.66 11 0.13 13 12.63 11 3.37 3 0.27 2 Metal Products 8.56 14 3.47 9 0.41 7 14.22 7 1.37 11 0.10 12 Non-Electrical Machinery 12.96 12 2.55 12 0.20 10 18.49 3 3.27 4 0.18 7 Electrical Machinery 18.03 8 8.09 7 0.45 5 13.51 8 2.52 8 0.19 6 Transport Equlpments 18.73 7 3.30 10 0.18 12 16.71 4 2.27. 9 0.14 11 Other Industries 25.14 2 9.20 6 0.37 8 15.51 6 4.84 1 0.31 1 Repair Services 41.18 1 31.55 1 0.77 2 11.84 12 2.00 10 0.17 8 All Industries 16.73 5.25 0.31 14.73 2.45 0.17

Note 1: '" over years 1980-81, 1990-91 and 2000-01 lmpltes that these years represent the average oJthe initial three years oJthat decade. It has been done to check the yearlyjluctuations in the data. Note 2: Y - Output: L - Labour: R - Rank in descending order. Note 3: Gr implies average growth rate and 1] reJers to the 'employment elasticity oj output'. It is estimated as the ratio oj the growth rate oj employment and output. Source: GoP (1979, 1986, 1996, 2004c, 2006).

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Table 2.8: Significance of Various Industries in the Post-Green Revolution Period industry 1980-81· 1990-91· 2000-01· Type y R L R Y R L R Y R L R Food oauc,s

23.40 and Beverages I 8.76 5 22.73 I 13.03 2 20.02 I 13.53 2

Cotton Textiles 13.08 2 14.44 2 7.88 6 8.05 5 11.07 5 9.30 4 Non-Cotton Textiles 11.03 3 21.08 I 8.71 5 16.23 I 9.90 6 13.97 I Wood Products 0.57 13 1.47 13 0.89 14 3.66 11 0.64 14 2.86 14 Leather Products 1.62 11 2.15 11 1.20 II 3.84 10 0.79 13 3.45 10 Non-Petroleum Products 10.99 4 3.65 9 14.14 2 3.38 12 11.81 3 3.44 II Non-metallic Products 0.64 12 1.81 12 1.00 13 2.75 14 1.47 11 2.94 12 Basic Metal Products 10.06 5 7.16 7 13.70 3 5.58 9 11.38 4 6.10 9 Metal Products 7.54 7 11.68 3 3.65 9 9.85 3 3.49 9 8.86 6 Non-Electrical Machinery 5.48 8 8.17 6 3.94 8 6.30 8 5.45 8 6.82 8 Electrical Machlnary 3.01 10 2.21 10 3.36 10 2.89 13 3.02 10 2.91 13 Transport Equipments 8.81 6 11.57 4 10.44 4 9.60 4 12.37 2 9.43 3 Other Industries 3.59 9 5.04 8 7.20 7 7.28 7 7.70 7 9.16 5 Repair Services 0.17 14 0.81 14 1.17 12 7.56 6 0.91 12 7.23 7 All Industries lOO.OO 100.00 lOO.OO 100.00 100.00 lOO.OO

Note 1. Note 2 and Source: Same as Table 2.7.

During the decade of 1990s, the highest output growth has been recorded by

the industries like non-metallic products, cotton textiles, non-electrical machin­

ery, transport equipment and non-cotton textiles. The industries like leather

products, wood products, basic metal products and non-petroleum products

could not record much growth in their output. Similarly, in terms of employ­

ment, the cotton textiles emerged as the best performer followed by basic metals,

non-electrical machinery, non-metallic products and food products and bever­

ages. The industries like wood products, non-cotton textiles, leather products

and metal products could not record Significant growth. Consequently, the em­

ployment elasticity of output went in favour of industries like basic metals, food

products and beverages, cotton textiles and non-petroleum products (Table 2.7).

2.5.4 Current State of Manufacturing in Punjab

At present, the manufacturing sector account for about 14 percent share in

state's net domestic product. This share has increased over the period of time.

It was below 6 percent in 1966-67 and since then, it has grown by 2.41 times

(Table A.9). It needs to be noted that the current state of Punjab's manufacturing

sector represents a pyramidical structure containing three layers (fig. 2.1).

MediulTI & Large

Industries

St"all-Scule Industries

Ovvn-Account Enterprises & Village Industries

Figure 2.1: Structure of Punjab's Manufacturing Sector

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Figure 2.2 Punjab's SSI's Exports (Rs. Lakh) vis-a-vis Medium/Large Industry

--SS) - - MediulT)/Large Industry

Source: RaHilly & Nanda (2007).

small scale sector in total exports decreased to 52.6 percent in 1998-99.

B. Existence in the Form of Clusters

Punjab's small-scale manufacturing sector has emerged in the form of clus­ters. As per the data provided by the Third All-India Census of Small-Scale Indus-tries. it has been observed that there are as many as 67 clusters of registered small-scale enterprises in the state out of a total of 1223 clusters spread all-over

India. Similarly. the Census pOints out the existence of 12 clusters of unorgan­ised enterprises in the state.

It has been already pOinted out by studies like Mohan (2002) that there is a

heavy concentration of industrial clusters in the districts of Ludhiana. Jalandhar

and Amritsar. One may attribute the industrial development of these districts to

regional inequality in the industrial development pattern of the state. This is true to some extent as we observe that the industrial development in the state has not

been uniform across all the districts. Obviously. it cannot be so due to a variety of factors. The sheer absence of any cluster in the districts of Mansa. Fatehgarh

Sahib and Nawanshahar adds some weight to the inequality argument.

But. at the same time. we too observe that the clusters in Punjab are recog­nised as the Natural clusters. whiclf emerged on their own in response to the

local conditions favouring a specific type of industrial activity. If it is so then

the clusters in districts like Bathinda and Muktsar have been agro-based mainly

due to their geographical character of being in the cotton belt of the state. Like­

wise. the emergence of sports good cluster in Jalandhar is very much associated

with the settlement of refugee artisans who migrated from Sialkot at times of

partition. Amritsar has remained an important centre of industrial activity and

trade even during the pre-independence times (GoP. 1914. 1947). Similarly. the

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emergence of machine tool cluster in Ludhiana district is due to the remarkable achievement of this district during the Green Revolution period (Suri, 1970).

C. Preponderance of Unorganised Segment

There is the preponderance of un organised activity in Punjab's small-scale manufacturing sector. A majority of the enterprises, no matter whether regis­tered or unregistered, meet the criteria of being unorganised i.e. they employ less than ten workers and thereby, as per the Indian Factories Act, 1948 cannot be considered as the organised concerns. Such an inference has been derived by

the analysis of raw data belonging to the Third Census of Small Scale Industries. In this Census, the small-scale industries were asked about their registration status and then, specifically about their registration under the Indian Factories Act, 1948. By analysing this information, we have found that there are very few units registered under this Act; rather they are known to be 'registered' due

to their registration with the industries department for getting certain benefits. Consequently, we find that in terms of the number of enterprises, there is an overall domination of the unorganised segment (Table 2.10).

Table 2.10: Share of Unorganised Industry (%) in Punjab's Small-Scale Manufactur­ing Sector

Industry Number of Fixed Total Gross Total Type Units Assets Workers Output Exports 1<'ood PrOducts

99.03 85.42 93.37 76.15 55.19 and Beverages Textiles 97.58 59.65 86.27 74.69 87.04 Wearing Apparel 99.88 92.34 99.14 93.54 87.41 Leather Products 96.13 52.01 78.64 33.34 14.32 Wood Products 99.00 92.46 97.08 85.58 100.00 Publishing, Printing 98.45 91.68 92.91 80.24 97.04 Chemical Products 95.84 79.27 84.90 77.31 100.00 Rubber Products 96.26 73.53 80.30 64.07 41.72 Basic Metal Products 88.50 61.87 68.71 51.08 47.64 Fabricated Metal Products 95.78 74.62 81.33 60.19 31.15 Machine Tools 96.80 81.03 88.36 82.59 37.13 Transport Equlpments 91.05 47.84 72.42 58.16 41.05 Other Manufacturing 99.28 80.44 95.65 64.94 15.41 Repair Services 99.66 94.17 98.93 88.09 100.00 Other Industries 98.90 87.71 90.57 72.16 88.93 All Industries 98.63 78.72 90.56 70.30 72.50

Note: the fixed assets are as on 31 st March, 2002 and the gross output and exports are valued during 2001-02. Source: Based on Gol (2004).

These enterprises employ 90.5 percent of the total workforce - 29.5 percent

in rural areas and 61 percent in urban areas. Similarly, their shares in the gross output and exports are as high as 70.3 and 72.5 percent respectively.

They also account for 78.7 percent of fixed assets. Such a predominance of the

unorganised activity is found across all the industries.

In fact, Punjab's unorganised enterprises make the highest contribution

(14.29 percent) to the total exports made by the unorganised segment to In­

dia's small-scale industries' export pool. Such significant contribution places

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Table 2.11' Unorganised Industry's Export Performance Across States Unorganised State's Contribution to

Exports (in Rs. Cr.) Industry's Share Indian SSI Exports Organised Unorganised Total in State's SSI Total Unorganlsed

State SSI SSI SSI Exports SSI Industry Punjab 768.68 2026.08 2794.76 72.50 19.71 14.29 Maharashtra 576.46 728.62 1.305.08 55.83 9.20 5.14 Haryana 844.84 583.86 1,428.70 40.87 10.07 4.12 Gujarat 6.31 13.58 19.88 68.28 0.14 0.10 Tamil Nadu 1.381.43 841.87 2.223.30 37.87 15.68 5.94 Karnataka 283.35 235.91 519.26 45.43 3.66 1.66 Himachal Pradesh 11.58 2.25 13.83 16.26 0.10 0.02 Kerala 435.97 304.17 740.14 41.10 5.22 2.14 Andhra Pradesh 199.26 268.26 467.51 57.38 3.30 1.89 West Bengal 126.77 445.82 572.59 77.86 4.04 3.14 Rajasthan 211.42 378.84 590.27 64.18 4.16 2.67 Madhya Pradesh 116.14 87.30 203.44 42.91 1.43 0.62 Assam 1.30 13.76 15.06 91.36 0.11 0.10 Uttar Pradesh 388.62 1.070.85 1,459.47 73.37 10.29 7.55 Orissa 77.01 214.98 291.99 73.63 2.06 1.52 Bihar 15.69 15.93 31.62 50.38 0.22 0.11 Other States 928.15 576.96 1.505.11 38.33 10.61 4.07 India 6.372.97 7.809.03 14.182.00 55.06 100.00 55.06

Note1: the term Orgamsed refers to those enterpnses which are regLStered under section 2(m)(i) and 2(m)(ii) of the Indian Factories Act. 1948 and the 'Unorganised' refers to aU others. Note 2: SSI stands for 'Small-Scale Industry'. Source: Same as table 2.10.

Punjab's unorganised enterprises quite distinctively amidst their counterparts in other Indian states as the share of other states is much lower. e.g. Uttar Pradesh contributes the second highest (7.55 percent) followed by Tamil Nadu (5.94 percent), Maharashtra (5.14 percent) and so on (Table 2.11).

2.6 Prime Role of State & Entrepreneurship in Shaping Growth Dynamism of Punjab's Manufacturing Sector

2.6.1 Stimulating Role of the State

As we have discussed above that the state played a key role in facilitating the

rebuilding of Punjab's industrial economy from the wrecks of partition. The state

role attained pertinence due to the locational disadvantage of the state. Punjab is far away from the sources of basic raw materials such as coal, pig iron and

petroleum products. The market for many of the industrial products too lies

outside the state. Moreover. Punjab being the border state had to provide special

incentives to the entrepreneurs for attracting capital.

In its earlier industrial poliCies. the state introduced various incentives for setting up and promoting industries. It made the provision for (1) infrastruc­

tural facilities. (2) various incentives to new industries. (3) incentives for locating

industries in backward districts. (4) assistance to small industries and (5) the

establishment of promotional. financial and research institutions.

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For providing infrastructural support to the industries, the state had estab­

lished various focal pOints and industrial estates in different parts of the state.

These focal points and industrial estates were provided with power, roads and

communication facilities. In a few selected cases, the state had also set up re­search and training institutes. Besides these, the state also provided a substan­

tialland subsidy to the prospective entrepreneurs.

In terms of state's effort to provide various incentives to the new en­

trepreneurs and industries, it provided a variety of tax incentives, which included

exemption from octroi duty, electricity duty and various other tax concessions. It

also provided a depreciation allowance and a capital investment subsidy. More­

over, the state also provided interest-free loans and interest subsidies for certain

periods depending upon the degree of backwardness of the industrial location.

Similarly, the state, in its effort to assist small industries, has introduced

several promotional measures, incentives and training programmes at both the

national and state level. These measures were aimed, in initial stages, to protect

the small industries from competition with the large units. The reservation policy

adopted by the Government of India must be seen in this context. 20 Besides

these, the state introduced other protective measures like the exemption from

excise duty up to a certain limit, controlled price for scarce raw materials etc.

Similarly, various other promotional programmes were also in operation like

the refinanCing facilities through the Industrial Development Bank of India (IDBI) and the National Bank for Agricultural and Rural Development (NABARD). the

provision of credit for working capital from commercial banks and investment

capital from State Financial Corporations on a priority basis.

Moreover, the state had also provided technical assistance and common ser­

vice facilities. It has provided industrial development-cum-service centres, test­

ing and tool room facilities, research and development facilities for all types of

industries. It had established institutes like the Hand Tool Design Institute at Ja­

landhar, Machine Tool Design and Development Centre at Batala, Research and

Development Centre for Bicycles at Ludhiana and the Sewing Machine Develop­

ment Centre at Ludhiana. Similarly, for the expedition of the implementation of

the programs for small scale industries and to reduce the delays, the state had

established the district industrial centres. With the help of these centres, all the

services had become available at a single office.

20The reservation policy was adopted in 1967 with the reservation of 47 items. This list went up to 873 in 1984. But, following the recommendations of the Abid Hussain Committee (Gol, 1997). a process of de-reservation was started to make this segment of industry competitive.

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capital to start big industrial establishments but they were well-endowed with considerable skills and technical expertise.

The Ramgarhias have a long history of serving the state as carpenters and blacksmiths. These people are "credited for having pioneered the manufacture of

Persian wheel. bullock drawn flour mills and hosiery machinery in the undivided Punjab" (Kalra, 1975). Their services were greatly acknowledged and utilised by the British in building canal colonies, construction and furniture work at their summer capital (Shimla) (Saberwal, 1976).

Owing to their long continuation in their works involving considerable skill, they have developed a 'natural' bent of mind towards technology. They are very fast in learning new skills and in a way, one may say that they are good imita­

tors who can build any thing once they have some model to copy. The education level of the Ramgarhias is low. But, due to their technical bent of mind, they have proved themselves as skilled workmen, who even without any formal qual­ification, are competent enough to produce new, durable and cheap models of various types of machinery and machine tools.

The remarkable success of engineering industry during the Green Revolution

period goes to the credit of Ramgarhias. The fast growth of engineering industry in the Ludhiana district, where Ramgarhias are concentrated, is due to the en­

terprise of these artisans (Pandit, 1985). They have made numerous innovations of machinery not only in the agricultural sector (like mechanical harvesters, iron ploughs, seed sowing machines, trolleys etc.) but also in various other industries like steel re-rolling.21

2.7 Industrial Labour Market Structure and Its Opera-tional Dynamism

The dynamism of the labour market in Punjab has been very much favourable

to the growth of small-scale manufacturing sector from its very beginning. It is

learned that since independence, a variety off actors have facilitated the availabil­

ity of adequate labour for (intensive and extensive) utilisation by the manufac­

turing sector - India's partition being the one of them (as discussed above), Green

Revolution being the other22 , heavy flow of migrant workers from the neighbour­

ing poor states the other, small-size and consequent (statutory) relaxation from labour laws, corrupt bureaucracy and thereby the possibilities of maintaining

21Kundu & Bhatia (2003, p. 256) reveals that about fifty percent of the small-scale steel re­rolling units are owned and managed by the 'Ramgarhia' mistries.

22 As the mechanisation of agriculture released surplus (local) labour for ready employment in the industry. sharp difference between the agricultural and the industrial wage also attracted the local labour (from neighbouring villages) to seek regular employments in industry.

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wrong labour records23 and so on. We discuss below the structure of labour

market and its operational dynamism.

2.7.1 Three-tier Structure of Industrial Labour Market

The industrial labour market in Punjab has emerged, over the period of time,

in the form of three major segments. The first segment is constituted by the

entrepreneurial class who are the employers of workforce and are generally Bun-niahs, Marwaris or the skilled Ramgarhias. The second segment is constituted

largely by those who themselves are the workers but at the same time possess

little bit capital and skill so that they can run their small businesses either alone

or with the help of a few wage workers. A large number of self-employed work­

ers and the owners of small establishments (who themselves are the workers)

come under this segment. And, the third segment is represented by a vast num­

ber of workers who have nothing but their labour. These workers are generally

the migrants or locals (mostly from low socio-economic background). They are

generally unorganised and are not able to pursue some strong collective action

in contrast to other trade union that are somewhat strong but not that much

effective in influencing the state (as we'll see in seventh chapter, section 7.4.2).

As there is no effective system of imparting off-the-job skills to the workers

and a large majority of the workers acqUire skills while working on their specific

jobs and activities. It involves a lot of time in acquiring a certain kind of skill. In

such a situation, whoever makes the early start is placed at the higher rungs of

the occupational hierarchy. Similar has been the experience of most of the local

labour whose early entry into the industrial sector have enabled them to acquire

the ranks of skilled workers whereas the migrant workers, a large number of

them are the beginners, have to contend with relatively inferior jobs. Such a

pattern reveals a certain kind of occupational segregation in Punjab's industrial

labour market where the better occupations or activities are performed by the

native workers and those involving risk or exposed to hazardous conditions of

work are left for the migrant workers. Similarly, the women and children can be

found performing the Simpleton tasks whereas the men are involved in full-time

better occupations.24

23 As in the case of steel re-rolling mills in Mandi Gobindgarh. it is revealed by Kundu & Bhatia (2003) that the "entrepreneurs do not show most of the labourers engaged in their units in the register. even as daily wagers" (p.260) to avoid their statutory obligations under labour laws.

24As discussed in the next chapter. section 3.5.2.

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2.8 Summing-Up

Thus. a central purpose of this chapter has been to decipher the evolution of manufacturing sector in Punjab so as to gauge the relative significance of un­organised segment in it. In light of the fact of Punjab being an agriculturally

advanced state. the theoretical insights on the inter-relation between agriculture and industry have led us to explore the evolution of a dynamic industrial sec­tor. We have explored the state of industrial sector since the British times by

examining the conditions of commercialisation of agriculture and the accumula­tion of capital. We have also observed how the rude shock of partition shattered the industrial economy of the state. Similarly. we have also learned how the

state could recover and rebuild its industrial profile and since then. how it at­tained growth dynamism during the post-Green Revolution period. We have also deciphered the significant role of the state and entrepreneurship and artisan­ship in shaping the growth dynamism of the manufactUring sector in the state.

Similarly. we have also understood the structure of Punjab's industrial labour market and the operational dynamics of the labour market in three vital aspects of (1) recruitment and retaining of labour. (2) utilisation of labour and working conditions. and (3) the remuneration of labour.

It needs to be mentioned that an upshot of such operational dynamics of in­dustriallabour market in Punjab seems to be the fact that the workforce may be

largely exposed to a range of vulnerabilities. Their working and living conditions

may be pathetic. Surprisingly, we have not observed much concern about this undeSirable outcome, at least in academic research.25

This provides sound basis for having a thorough study on the dynamics of

insecurity in Punjab's unorganised manufactUring sector. We do the same in

the subsequent chapters by way of examining both the secondary as well as the first-hand information that we have collected through our detailed primary

survey.

25A few of the studies by Manjit Singh (Singh. 1990b. 1991a. 2002) have raised the issue but it has not got attention for wider research.

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