Critical Analysis of Ruler Mistakes and Economic Breakdown in India (1929–2025): An Industrial Policy Perspective

 

Title: Critical Analysis of Ruler Mistakes and Economic Breakdown in India (1929–2025): An Industrial Policy Perspective

Abstract

This paper critically examines the interplay between political decisions and economic outcomes in India from 1929 to 2025, focusing on industrial policy missteps and their ramifications. It highlights the need for empirical longitudinal studies, regional analyses, and the integration of technology in policy frameworks. By analyzing statistical data and case studies from various Indian states, the paper underscores the importance of nuanced, region-specific approaches to industrial development.

Key words - Critical Analysis, Ruler Mistakes, Economic Breakdown, India (1929–2025: Industrial Policy Perspective

Introduction

India's economic trajectory has been significantly influenced by its rulers' policy decisions. From the colonial era's extractive policies to post-independence industrial strategies, the nation's economic landscape has been shaped by a series of successes and failures. This paper delves into the critical mistakes made by policymakers, emphasizing the gaps in existing literature and the need for comprehensive analyses that consider regional disparities and technological advancements.

Literature Review

India's economic history is shaped by a series of pivotal decisions taken by its political leadership, many of which have significantly influenced industrial growth and economic stability. From the colonial legacy of economic suppression to the post-independence state-led industrialization, the 1991 liberalization, and contemporary global integration, rulers’ mistakes—both acts of commission and omission—have often led to economic breakdowns. This literature review critically examines key academic contributions from 1999 to 2025 that assess these leadership missteps and their consequences, particularly focusing on India's industrial sector.

 

Historical Context and Economic Framework

The foundation of India’s modern industrial economy was laid in the early post-independence period. Bardhan (1999) and Kohli (2004) describe how the Nehruvian model emphasized state-led industrialization, focusing on heavy industries and public sector undertakings. While this was a bold strategy aimed at self-sufficiency, it fostered inefficiency and bureaucratic inertia, leading to stagnation by the late 1970s.

Following the balance of payments crisis in 1991, India adopted liberal economic reforms that transformed the industrial landscape. Rodrik (2006) cautioned that while these reforms unlocked new opportunities, they also increased India’s vulnerability to global economic shocks. Scholars such as Jha (2016) stress that these reforms, though essential, lacked safeguards for weaker sections and small enterprises, revealing a pattern of partial implementation—a recurring leadership flaw.

 

Leadership Mistakes and Their Economic Impacts

State Overreach and Policy Stagnation (1950s–1980s)

The early decades after independence were dominated by centralized planning and licensing. Bardhan (1999) argues that excessive state control under the “License Raj” stifled innovation and discouraged private sector participation. This was a classic case of misaligned policy and market realities, resulting in stagnant industrial output during the 1970s and 1980s.

Delayed Reforms and Reactive Governance (1980s–1990s)

Kohli (2004) and Jha (2010) identify the hesitancy in economic reforms as another critical mistake. While countries like China began opening up in the 1980s, India clung to outdated policies until the 1991 crisis forced radical liberalization. This delay caused prolonged underperformance in industries and missed foreign investment opportunities.

 

Sector-Specific Failures and Economic Consequences

Manufacturing Sector Decline

The failure to establish robust manufacturing capabilities has been widely critiqued. Kumar (2018) emphasizes that policies were poorly structured and inadequately implemented, with weak support for infrastructure and labor reforms. The "Make in India" initiative, launched in 2014, aimed to revive manufacturing but fell short due to a lack of coordination among ministries and states (Chakrabarty, 2015).

Informal Sector Neglect

Srinivasan (2020) highlighted how the informal sector, which employs a large portion of the industrial workforce, has remained perennially neglected in policy frameworks. This was most evident during the COVID-19 pandemic, where sudden lockdowns led to mass unemployment and migration, indicating inadequate crisis preparedness and policy foresight.

Tax Reforms and SMEs

Kumar (2020) critically analyzed the introduction of the Goods and Services Tax (GST), which, despite its intent to unify markets, imposed heavy compliance burdens on small and medium enterprises (SMEs). The transition was abrupt, lacking digital infrastructure and awareness, which hurt industrial productivity, especially in tier-2 and tier-3 cities.

 

Governance and Corruption

Leadership integrity and transparency play a pivotal role in industrial development. Sharma (2021) discusses how corruption scandals such as the 2G spectrum scam and the coal block allocation controversy disrupted investor confidence and stalled major industrial projects. These instances illustrate how poor governance directly translates into economic inefficiency and policy paralysis.

Moreover, Singh and Sharma (2023) link political cronyism with resource misallocation in industries, particularly in sectors like mining and telecommunications, suggesting that leadership bias and lack of regulatory independence have skewed industrial outcomes.

 

Impact of Global Economic Shocks

Rodrik (2006) and Rao (2022) explore the vulnerabilities India has faced due to global economic integration. The 2008 financial crisis and the COVID-19 pandemic exposed the fragility of India’s supply chains and its over-reliance on global demand. Rao (2022) notes that India's policy response to these crises was slow and insufficient, leading to prolonged disruptions in industrial activity.

For instance, during the pandemic, countries like South Korea and Germany provided targeted industrial stimulus, whereas India’s Atmanirbhar Bharat package lacked clarity and execution speed, undermining its potential benefits (Srinivasan, 2020).

 

Technology, Innovation, and Missed Opportunities

One of the overlooked aspects in the literature is the failure to capitalize on technological advancements. Mehta and Singh (2023) highlight the sluggish progress in electric vehicles (EVs), despite policy incentives. Ineffective coordination among departments and poor charging infrastructure meant India missed early leadership in the EV market, ceding ground to China and Western countries.

In the context of Industry 4.0, Singh and Batra (2024) argue that India's manufacturing sector has not been adequately digitized. While private firms have adopted automation, government support remains fragmented, creating a digital divide between large corporations and MSMEs.

 

Key Thematic Findings

Across the reviewed literature, the following themes emerge:

• Policy Inefficiency and Fragmentation: Initiatives like GST, "Make in India," and EV adoption suffered due to poor design and lack of stakeholder consultation (Kumar, 2018; Chakrabarty, 2015).
• Corruption and Governance Failures: Large-scale scams and delays in industrial approvals illustrate how political mistakes breed economic instability (Sharma, 2021).
• Global Vulnerability: India’s increasing integration into global markets has made it susceptible to external shocks, with insufficient internal buffers (Rodrik, 2006; Rao, 2022).
• Neglect of Technological Modernization: While India has shown strength in IT services, industrial digitization and innovation have been sporadic (Mehta & Singh, 2023).

 

Gaps in the Literature

Despite the breadth of existing research, several gaps persist:

1. Empirical Longitudinal Studies: Most literature focuses on short-term policy impacts. There is a need for longitudinal studies tracing industrial performance over multiple policy cycles.
2. Regional Analysis: Economic outcomes differ vastly across Indian states. Comparative studies on industrial responses to central policies in states like Gujarat, Tamil Nadu, and Bihar are limited.
3. Interplay of Politics and Economics: The political motivations behind industrial policies are underexplored. Understanding populist agendas and electoral cycles can reveal why certain industrial reforms are delayed or diluted.
4. Technology and Resilience: There is limited literature on how digital technologies and AI can buffer industries from policy failures or global shocks. Research in this direction can bridge the policy-technology gap.

 

From post-independence state control to contemporary liberalization and globalization, India's industrial sector has navigated a complex web of political decisions and policy shifts. This review demonstrates that leadership mistakes—be it in the form of delayed reforms, poor execution, corruption, or lack of vision—have repeatedly triggered economic setbacks. Although initiatives like GST, “Make in India,” and Atmanirbhar Bharat were ambitious, their flawed implementation highlights the critical role of governance.

Going forward, addressing the identified gaps—through rigorous empirical studies, regional analyses, and a focus on technology and innovation—will be vital. These insights are not only academic in nature but offer real-world implications for policymakers tasked with ensuring that future leadership decisions do not repeat historical mistakes.

 

Historical Context: 1929–1991

Colonial Legacy and Post-Independence Challenges

The colonial period left India with a fragmented industrial base, primarily serving British interests. Post-independence, the government adopted a mixed economy model, emphasizing heavy industries and import substitution. However, bureaucratic red tape and the 'License Raj' stifled private enterprise, leading to inefficiencies and slow growth.

The License Raj Era

The period between 1951 and 1991, known as the License Raj, was characterized by stringent regulations that required businesses to obtain licenses for operations, expansions, and even product changes. This system led to monopolies, discouraged innovation, and created an environment ripe for corruption.

 

Economic Liberalization and Its Aftermath: 1991–2025

The 1991 Reforms

Facing a balance of payments crisis, India initiated economic liberalization in 1991, reducing tariffs, deregulating markets, and encouraging foreign investment. While these reforms spurred growth, they also led to increased income disparities and regional imbalances.

Regional Disparities

·         Tamil Nadu: Leading with 15.66% of India's factories and 15% of industrial employment, Tamil Nadu has attracted major international companies by integrating itself into global supply chains and leveraging a diverse range of manufacturing activities, including labor-intensive industries. Financial Times

·         Gujarat: Contributing around 20% to India's industrial production and merchandise exports, Gujarat has become a pharmaceutical hub with a 33% share in drug manufacturing and 28% in drug exports. Wikipedia

·         Maharashtra: With 10.44% of India's factories and 12.84% of industrial employment, Maharashtra's industrial landscape is diverse, including sectors like automotive, textiles, and chemicals.

·         Uttar Pradesh: The Noida-Greater Noida-Yamuna Expressway belt has become a hub for IT/ITES and electronic manufacturing firms, contributing significantly to mobile manufacturing in the country. Wikipedia

·         Karnataka: Home to major public sector industries and multinational companies, Karnataka has evolved as a manufacturing hub, particularly in aerospace, electronics, and automotive sectors. Wikipedia

·         Odisha: Through the 'Make in Odisha' initiative, the state has attracted investments worth over ₹2 lakh crore, focusing on sectors like IT, petrochemicals, food processing, and textiles. Wikipedia

·         Punjab: With nearly 194,000 small-scale industrial units, Punjab's industrial landscape includes manufacturing of scientific instruments, agricultural goods, textiles, and sports goods. Wikipedia

·         West Bengal: Once a leading industrial state, West Bengal's share of India's GDP has declined from 10.5% in 1960-61 to 5.6% in 2023-24, indicating a significant economic downturn. Reddit

·         Madhya Pradesh:
Madhya Pradesh, often referred to as the "heart of India," is steadily emerging as a competitive industrial state with a focus on textiles, garments, agriculture-based processing units, auto components, and pharmaceuticals. The state offers low-cost land, abundant water, and power availability, making it attractive for investment.

o    Cities like Indore, Pithampur, Dewas, Mandideep, and Bhopal serve as industrial hubs. Indore in particular is now a growing IT and startup ecosystem.

o    Through Invest Madhya Pradesh and the Global Investors Summit, the state has drawn both domestic and international investors.

o    The Garment Park in Indore, Food Processing Clusters, and Medical Device Parks are key projects promoted by the government.

o    The MP Industrial Development Corporation (MPIDC) is actively supporting industrial infrastructure and single-window clearance for ease of doing business.

o    Despite these positives, challenges remain such as bureaucratic delays, lack of high-speed logistics, and a skills gap in some rural regions.
(source: mpidc.mp.gov.in, invest.mp.gov.in)

 

Political Motivations and Industrial Policies

Political agendas have often influenced industrial policies, sometimes at the expense of economic rationality.

·         Populism: Governments have frequently resorted to populist measures, such as loan waivers and subsidies, to garner electoral support, leading to fiscal imbalances.

·         Policy Inconsistencies: Frequent changes in policies and lack of long-term vision have deterred investments and hampered industrial growth.

 

Technological Integration and Industrial Resilience

The advent of digital technologies and artificial intelligence (AI) presents opportunities to enhance industrial resilience.

·         AI Adoption: Integrating AI can optimize manufacturing processes, predict market trends, and improve supply chain management.

·         Digital Infrastructure: Investments in digital infrastructure can bridge regional disparities, enabling remote areas to participate in the industrial economy.

 

Statistical Analysis

An analysis of industrial output, employment rates, and investment patterns across states reveals significant disparities:

·         Industrial Output: Gujarat contributes approximately 17.72% to India's industrial output, while Tamil Nadu accounts for 9.97%.

·         Employment: Tamil Nadu leads with 15% of industrial employment, followed by Maharashtra (12.84%) and Gujarat (12.62%).

·         Investment Patterns: States with stable policies and robust infrastructure, like Gujarat and Tamil Nadu, attract more investments than states like Bihar.

 

Conclusion

India's industrial journey from 1929 to 2025 underscores the critical impact of policy decisions and political motivations on economic outcomes. Addressing the identified gaps in literature—such as the need for longitudinal studies, regional analyses, and integration of technology—can provide a more comprehensive understanding of industrial development. Policymakers must adopt nuanced, region-specific strategies that prioritize sustainable growth, technological integration, and inclusive development to ensure a resilient industrial economy.

 

Critical Analysis of Ruler Mistakes and Economic Breakdown in India (1929–2025)

Industrial Policy Perspective

No.	Year(s)	Ruler / Government	Situation / Policy	Mistake / Critique	Industrial Impact
1	1929	British Raj	Lack of support during the Great Depression	No economic stimulus or support for Indian industry	Collapse of small and cottage industries
2	1944	British Raj	Ignored Bombay Plan by Indian industrialists	Missed chance to prepare industrial framework pre-independence	Delayed industrial modernization
3	1947–52	Nehru Government	Mixed economy model initiated	Heavy reliance on public sector, neglect of private entrepreneurship	Inhibited private industrial growth
4	1956	Nehru	Second Five-Year Plan	Over-emphasis on heavy industry, neglect of agriculture	Imbalanced development, food shortages
5	1966	Indira Gandhi	Devaluation of Rupee under US pressure	Hasty move without export competitiveness	Inflation & industrial slowdown
6	1969	Indira Gandhi	Bank nationalization	Political motivation over reform logic	Risk-averse industrial credit environment
7	1975–77	Indira Gandhi (Emergency)	Command economy tightening	Political interference in business decisions	Fear & withdrawal of private sector
8	1980–84	Indira Gandhi (2nd term)	Permit Raj intensification	License controls choked new industrial entrants	Stifled innovation and efficiency
9	1984–89	Rajiv Gandhi	Computer & telecom push, but no SME linkage	Focused on elite sector, ignored job-rich industries	Unbalanced tech-industrial spread
10	1991	Narasimha Rao	Liberalization Policy	Sudden removal of protection hurt PSUs	Many public industries collapsed
11	1993	Manmohan Singh (FM)	Disinvestment begins	Lack of proper valuation and transparency	Undervalued sales of key PSUs
12	1997	I.K. Gujral	South Asia-focused industrial diplomacy	Ignored domestic manufacturing revival	Poor FDI inflow and trade imbalance
13	1998–2004	Vajpayee Government	Golden Quadrilateral project	Great infrastructure push but no MSME focus	Industrial corridor underutilization
14	2005	Manmohan Singh	SEZ Act passed	Land acquisition without proper rehab	Farmer protests, SEZ misuse
15	2008	UPA-II	Stimulus post-Global Crisis	No reform in industrial finance or tech upgradation	Short-term boost, no long-term impact
16	2011	UPA-II	2G and Coal scams	Crony capitalism in industrial allocation	Investor confidence weakened
17	2013	UPA-II	National Manufacturing Policy	Poor implementation, no state alignment	Underwhelming industrial revival
18	2014–15	Modi Govt.	"Make in India" launch	Too much branding, little execution support	Foreign investment without local skill base
19	2016	Modi Govt.	Demonetization	Sudden cash withdrawal hit informal manufacturing	MSME sector collapsed
20	2017	Modi Govt.	GST implementation	Complex, unprepared for small industries	Compliance burden on SMEs
21	2019	Modi Govt.	Corporate tax cut for big industries	Ignored demand-side boost & MSMEs	Jobless growth persisted
22	2020	Modi Govt.	Aatmanirbhar Bharat	Lacked coordination with industrial clusters	Overlap of schemes, execution lag
23	2021	Modi Govt.	PLI scheme introduced	High entry barriers for small industries	Only large firms benefited
24	2022	Modi Govt.	Labour Code reforms delayed	Industry remained under outdated labour laws	Unattractive for manufacturing FDI
25	2023–25	Modi Govt.	Digital India & Start-up focus	Neglected core industrial base & R&D	Service-led, not manufacturing-led growth

 

References

• Bardhan, P. (1999). The Political Economy of Development in India. Oxford University Press.
• Bardhan, P. (2019). Political Economy of India: A Historical Perspective. Cambridge University Press.
• Chakrabarty, K. (2015). Make in India: A Policy Review. Economic and Political Weekly, 50(30), 33–41.
• Jha, R. (2010). Economic Reforms and the Financial Crisis: A Critical Review. Journal of Asian Economics, 21(4), 341–356.
• Jha, R. (2016). Economic Reforms in India: The Role of Political Leadership. Oxford University Press.
• Kohli, A. (2004). State-Directed Development: Political Power and Industrialization in the Global Periphery. Cambridge University Press.
• Kumar, A. (2018). The Decline of Indian Manufacturing: Policy Failures and Future Directions. Indian Journal of Industrial Relations, 54(1), 1–15.
• Kumar, A. (2020). GST and Its Impact on Small Enterprises: A Critical Analysis. Journal of Economic Policy, 12(3), 45–67.
• Mehta, S., & Singh, R. (2023). The Electric Vehicle Industry in India: Policy Gaps and Opportunities. International Journal of Industrial Economics, 15(1), 78–92.
• Rao, P. (2022). Global Economic Integration and Its Impact on Indian Industries: A Review. Economic and Political Weekly, 57(12), 34–41.
• Rodrik, D. (2006). The Global Governance of Trade: The Challenges of the 21st Century. World Trade Organization.
• Sharma, V. (2021). Corruption and Economic Growth in India: A Sectoral Analysis. Journal of South Asian Studies, 14(2), 102–120.
• Singh, A., & Batra, V. (2024). Industrial Automation in India: Bridging the Policy Gap. Indian Journal of Innovation and Technology, 16(2), 56–73.
• Singh, R., & Sharma, M. (2023). Political Cronyism and Industrial Resource Misallocation: An Indian Perspective. Journal of Public Policy Research, 10(1), 89–105.
• Srinivasan, R. (2020). COVID-19 and the Indian Economy: A Sectoral Analysis. Indian Economic Review, 55(2), 123–145.

 Other References

1.      Annual Survey of Industries 2022-23.

2.      "Can India reverse its manufacturing failure?" Financial Times. Reddit+2Financial Times+2Drishti IAS+2

3.      "Economy of Gujarat." Wikipedia. The Times of India+16Wikipedia+16Wikipedia+16

4.      "Economy of Uttar Pradesh." Wikipedia. Matribhumisamachar+4Wikipedia+4Wikipedia+4

5.      "Economy of Karnataka." Wikipedia. Wikipedia

6.      "Make in Odisha." Wikipedia. Wikipedia

7.      "Economy of Punjab, India." Wikipedia. Wikipedia

8.      "Modi Seeks to Consolidate Power in India Election—and Change the Country's Future." The Wall Street Journal. WSJ

9.      "India's IndoSpace to dial up investment in Tamil Nadu state to meet warehouse demand." Reuters. Reuters

10.  "Win with warehouses." The Times of India. The Times of India

11.  "Kinfra mini industrial park launched at Thonnakkal." The Times of India. The Times of India

12.  "ET Digital UP Conclave: UP is becoming data centre hub of North India, says Nandi." The Times of India. The Times of India

13.  "Pvt investment, industrial growth twin engines for state's progress: CM." The Times of India. The Times of India

14.  "Jangal Sundari Karmanagari." Wikipedia. Wikipedia

15.  "In the mid-20th century, West Bengal was the pride of India’s economic landscape." Reddit. Reddit

References / Sources

1.      Government of India Archives & Planning Commission Reports

2.      Bombay Plan (1944), authored by Indian industrialists

3.      Economic Survey of India (various years)

4.      RBI Reports & Budget Speeches

5.      Academic sources like T. N. Srinivasan, Amartya Sen, Arvind Panagariya

6.      Books: India After Gandhi (Ramachandra Guha), India Unbound (Gurcharan Das)

7.      Reports from NITI Aayog, World Bank, IMF on Indian economy and industrial policy