The first cotton mill in Bombay came up in 1854 and it went into production two years later. By 1862, four mills were at work with 94,000 spindles and 2,150 looms. Around the same time jute mills came up in Bengal, the first being set up in 1855 and another one seven years later in 1862. In north India, the Elgin Mill was started in Kanpur in the 1860s, and a year later first cotton mill of Ahmedabad was set up. By 1874, the first spinning and weaving mill of Madras began production.
Who set up the industries? Where did the capital come from?
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The Early Entrepreneurs
Industries were set up in different regions by varying sorts of people. The history of many business groups goes back to trade with China. From the late eighteenth century, the British in India began exporting opium to China and took tea from China to England. Many Indian became the junior player in this trade, providing finance, procuring supplies, and shipping consignments. Having earned through trade, some of these businessmen had visions of developing industrial enterprise in India.
In Bengal, Dwarkanath Tagore made his fortune in the China trade before he turned to industrial investment, setting up six joint-stock companies in the 1830s and 1840s. He believed that India would develop through westernization and industrialization. He invested in shipping, shipbuilding, mining, banking, plantation, and insurance. Tagore’s enterprise sank along with those of others in the wider business crises of the 1840s, but later in the nineteenth century, many of the China traders became successful industrialists.
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Jamsetjee Jeejeebhoy was the son of a Parsi weaver. Like many others of his time, he was involved in the China trade and shipping. He owned a large fleet of ships, but competition from English and American shippers forced him to sell his ships by 1850s.
In Bombay, Parsis like Dinshaw Petit and Jamsetjee Nusserwanjee Tata who built the huge industrial empire in India accumulated their initial wealth partly from exports to China, and partly from raw cotton shipments to England.
In 1912, J. N. Tata set up the first iron and steel works in India at Jamshedpur. Iron and steel industries in India started much later than textiles. In colonial India industrial machinery, railways, and locomotives were mostly imported. So capital goods industries could not really develop in any significant way till Independence. Partners in the enterprise were J. N. Tata, R. D. Tata, Sir R. J. Tata, and Sir D. J. Tata.
Seth Hukumchand, a Marwari businessman who set up the first Indian jute mill in Calcutta in 1917, also traded with China. So did the father as well as the grandfather of the famous industrialist G. D. Birla.
The capital was accumulated through trade networks. Some merchants from Madras traded with Burma while others had links with the Middle East and East Africa. There were yet other commercial groups. But they were not directly involved in external trade. They operated within India, carrying goods from one place to another, banking money, transferring funds between cities, and financing traders. When opportunities of investment in industries opened up, many of them set up factories.
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As colonial control over Indian trade tightened, the space within with Indian merchants could function became increasingly limited. They were barred from trading with Europe in manufactured goods and had to export mostly raw material and food grains – raw cotton, opium, wheat, and indigo – required by the British. They were also gradually edged out of the shipping business.
Till the First World War, European Managing Agencies in fact controlled a large sector of Indian Industries. Three of the biggest ones were Bird Haigler & Co., Andrew Yule, and Jardine Skinner & Co. These Agencies mobilized capital, set up joint-stock companies and managed them. In most instance Indian financers provided the capital while the European Agencies made all investment and business decisions. The European merchant-industrialists had their own chambers of commerce which Indian businessmen were not allowed to join.