30 Jun 2020
1947 was a historic year for India. The country was free of foreign rule and there was hope and expectation as a new India began emerging.
While the yoke of colonial rule had been thrown off, the Indian economy was still largely colonial – foreign firms dominated and sectors such as agriculture and infrastructure were under-developed. Fortunately for India, there was a class of Indian businessmen ready to lead the country towards greater economic progress.
During the 17-year tenure of Jawaharlal Nehru, India’s first prime minister, the building blocks for a new India were put in place. India’s Constitution was finalised, princely states amalgamated, refugees re-settled, and a new Planning Commission set up to oversee the introduction and progress of a planned economy moving towards self-reliance.
India’s First Plan (1951-56), with an outlay of Rs Rs.19,600 million, focussed on transport, communication and power. The Government’s focus on regulating industry was evident from the Industrial Policy Resolution of 1948 and the Industrial (Development and Regulation) Act of 1951 (IDRA), which marked out 38 ‘scheduled industries’ which required licenses in keeping with the Government’s aim to prioritise national interest and ensure optimal allocation of scarce resources. Though it was well intentioned, on ground, the process was cumbersome, and open to misuse.
Industry was also impacted by the Industrial Policy Resolution (IPR) of 1956, which superseded the policy of 1948, and emphasized a more socialist role for the State. Seventeen industries were reserved exclusively for the State.
IPR cast a long shadow on the Second Plan where massive investments were earmarked for capital goods and engineering, but by the State.
While IPR 1948 was viewed with scepticism by both the Indian Chamber of Commerce and the Bengal Chamber, the European industrialists had their apprehensions too. The labour unrest and policies of the 1950s and 1960s forced many to withdraw while the Government took over several sick companies in the 1970s.
While the systems were still crystalizing, TISCO, with the support of the Government and a loan from the World Band, doubled its capacity by 1958, even as other companies grew and expanded operations. The Birla Group, which controlled 245 companies in 1948 set up a textile mill in Ethiopia, the first international venture.
IEA and EAI in the New India
Even as industry expanded and the economy stabilised, the two Associations continued to deal with the same issues such as labour and procurement of raw material. But they were both competing for Members, voice, and authority. In 1940 IEA founded its western regional office, starting a formalised structure.
In 1945, EAI published the first compendium of the engineering industry, publicizing its activities and establishing its credentials with its impressive list of Members. In 1950, IEA requested EAI to include its Members in the compendium, but a mix up in the 1957 edition, where IEA Members were listed as EAI Members escalated tensions between the two.
The role of the Associations got sharper after Independence and against the backdrop of the Industrial Disputes Act 1947 and the Industrial Employment (Standing Orders) Act 1946. As labour-related issues continued, IEA restructured its labour department and set a precedent by offering the first specialised paid service to Members, which became a source of revenue for the Association. The practice of paid services for Members continues till date in CII.
The Associations also found representation in bodies such as All-India Organisation of Industrial Employees and the Central Advisory Council of the Industry. Their stature and impact grew and EAI successfully voiced the challenges of shortage of raw material faced by the National Metal Industry and persisted with the matter with the Government till tin plate allotment was made. Another first was the participation of EAI in a Government-led trade delegation to Indonesia.
In fact, the 1950s saw the partnership with the Government strengthening. Steel became a public sector responsibility under the Second Five-Year Plan and the new Industrial Policy Resolution of 1956, and as the Government started establishing steel plants, the Associations helped train the requisite staff.
The 1960s were marked by two Five-Year Plans, tighter and more State controls, the Indo-China and the Indo-Pak wars. In 1962, prime minister Nehru breathed his last and was replaced by Lal Bahadur Shastri. After Shastri’s death in 1966, Nehru’s daughter Indira Gandhi became the prime minister. Faced with extreme food shortages, devaluation of the rupee and regional discontent, the country saw many changes: the planning process was suspended for three years; privy purses for royalty and the managing agency system were discontinued; taxes increased sharply, and banks were nationalised in 1969.
Industry faced many changes too – based on the recommendations of the Karve Committee, in 1967, some industries were earmarked for the small-scale sector aimed at increasing employment. New rules were instituted to control foreign exchange and monopolistic practices.
India’s first industrial slowdown came about in the 1960s as a result of various global and domestic factors. The ill-effects of the licensing system continued to hamper the growth of industry.
Although till late 1960s, British firms remained Members of the Chambers, their numbers and presence in key positions was dwindling. The tide started turning when P. Bhattacharji of Burn and Co. became the Head of IEA in 1960.
Another notable Indian who joined the Bengal Chamber of Commerce as Assistant Secretary in 1963 and worked with BA Tarlton at IEA was Tarun Das.
Tarun Das was to play a key role in the history of the organisation that became the Confederation of Indian Industry in 1992.