4 SOCIAL SCIENTIST
sector, on the whole, the development of producers' goods production was negligible. Moreover, even this miniscule and lop-sided industrialization which India had achieved over a period of 90 years since its first beginnings appears to have completely run out of steam by independence.
Two broad phases of this industrialization must be distinguished. Well into the twentieth century, India was virtually an open economy. The two main modern industries, cotton and jute, which developed during this period in the teeth of competition from foreign, especiallv British manufacturers, depended for their growth essentially upon the condition of the international economy. A period of high export growth or favourable terms of trade stimulated by boom conditions in the world eco-. nomy not only helped directly in stimulating industrial demand from the world market, but also indirectly. Domestic incomes rose and the domestic market expanded. What is more, public revenues also expanded and so did public spending, tied as it was to revenue in this era of balanced budgets. Higher public spending in turn had second-order effects on domestic market expansion, notwithstanding the large leakages on foreign purchases. Such a period was the decade and a half before the first world war which witnessed considerable industrial expansion stimulated in a large measure by expanding world trade and India's favourable terms of trade. Between the triennia 1900-03 and 1915-18 the average annual compound growth rate of industrial production amounted to 4.8 percent.3
With the collapse of the boom conditions after the first world war and the onset of the world agricultural crisis which preceded the Great Depression, this spurt in industrial advance gave way to a crisis. Between 1915-18 and 1928-31, the annual average industrial growth rate came down to a mere 1.5 percent. The next spurt occurred with the grant of protection in the early thirties which encouraged some import substitution. The scope of this second round of advance was necessarily restricted: the Great Depression exercised an overall dampening effect on industrial growth. Nevertheless, industries like sugar, and to a lesser extent paper, gained from the introduction of protection, and the stimulus of the domestic market in these as well as in older industries like cotton textiles caused a degree of locational diversification away from the coastal metropoHsis towards the interior of the country. While more of the home market was now available to domestic producers, this market itself was virtually stagnant.4 By the late thirties even this spurt had come to an end and established