Read this article to learn about the effects of railway development on India’s transport system under British Rule.

Starting its career on 16 April 1853, when the first railway passenger train was opened, India’s railway system expanded rapidly to become, by 1910, the fourth largest in the world.

This huge railway network altered India’s transport system. As a result, transport costs were greatly reduced thereby permitting new opportunities for profit.

Regional specialisation began to occur and trade (both domestic and foreign) flourished. India became a nation with its local centres linked by rail to each other arid to the world.


Railways made possible the establishment of a well-knit market. Railways, by establishing these links, had an impact throughout the economy. Karl Marx observed that the railway system in India would become “truly the forerunner of modern industry”.

“It was believed that railways would assist the economic development of India and help the import and distribution of manufactures and the collection and export of raw materials and agricultural produce. The official view was that the “the benefits covered by railways were at all-time great.”

But nationalists lambasted against this official claim and pinpointed that it was the railway which was responsible for the eclipse of some important industries of India. Despite massive investment in the nature of a ‘big push’ in railways rather than irrigation, ‘take off’ stage was hard-to come by. But this was too much for nationalists. Railways did certainly help the process of industrialisation.

The railway system in India became the forerunner of limited industrial development. This, in its turn, brought about a social revolution. It brought “social advancement of the people” of India. Let us see how did railways affect India’s overall development.


The impact of railways was felt in all sectors of the Indian economy. Both people and goods made an extensive use of the railways. Vera Anstey, the distinguished British authority on economic development of India, argued that the construction of railways in India undoubtedly extended and revolutionised trade—both internal and external.

Before the advent of the railways in India, only a very small proportion of agricultural output was exported as agriculture was carried on only for subsistence. But railways transformed its very nature by commercializing it. Railways made India’s agriculture internationally competitive and, as a result, a floodgate of exports of agricultural products such as wheat, rice, jute oilseeds, and cotton was opened up.

As an example, before the construction of railways, India exported no wheat at all, but, by 1886, she was supplying 23 p.c. of Britain’s imports of wheat. In real terms, the value of exports rose phenomenally by 230 p.c. between 1862 and 1929. The value of imports of mainly manufactured items such as cotton textiles, yarn, and capital goods rose by 350 p.c. as against exports of 230 p.c. during the same time period.

“By the 1880s Britain had become both ‘India’s largest customer and the source of fully three-quarters of the sub-continent’s imports. Railways, therefore, not only reshaped the pattern of India’s foreign trade but helped tie India to the British economy.” 


If external trade expands, can internal trade be far behind! Actually, railways gave strong stimulus to internal trade. In doing so, railways were instrumental in transforming the structure of prices in India. The more direct effect of railways extension was the leveling of prices between different regions.

Before railways came into being, price differences were pronounced between regions as prices of agricultural products fluctuated randomly with the change in local supply conditions. Every expansion in railways brought down interregional differences in prices dramatically. Thus, because of the falling costs of import, “markets were not only widening but were becoming national markets”.

Railways led to increased agricultural output, export of food-grains, widening of markets, commercialization of agriculture, and, hence, cropping pattern. As railways widened the markets for the agricultural sectors, Indian agriculture became linked to the world trade cycles. Farmers now became price responsive while determining their cropping pattern.

Prices set in the international markets and reduced transport costs induced Indian farmers to cultivate commercial crops or non-food crops such as jute, cotton, oilseeds, and groundnuts. Thus agriculture began to become commercialized.

And, commercialisation of agriculture brought far-reaching changes in the countryside. As preference for cash crops on the part of the cultivators rose, demands for land also rose greatly which, in turn, created land market and brought about higher land prices, rents and taxes.

All these brought in prosperity of the rural people, of course at the expense of the poor cultivators. It did also open up employment opportunities, especially for agricultural labourers. But because of lack of data, we cannot draw any firm conclusion.

Finally, commercialisation of agriculture caused mainly by an elaborate transport network broke the self-sufficient age-old isolation of the village economy.

Coming to the employment aspect in the non-agricultural sector, one finds that the reduced transport costs caused output and employment in certain occupations to expand and to contract in others, particularly to the people of alternative means of long distance transport who found themselves unable to compete with the railways. Within the modern sector of the economy, railways became the single largest employer.

In the manufacturing sector, the multiplier effects of railways’ investment on output and employment were equally mixed. It is true that railways played a vital role in the growth of modern industry. But, in terms of employment, this growth was extremely limited. This is evidenced by the fact that the percentage of total workforce employed in industry remained almost stationary before the Second World War. However, there was an absolute increase in labour force.

One of the injurious effects of railway expansion was the destruction of local indigenous industries. As an example, handloom industry, which was basically an employment-oriented industry before the railway age, wilted under pressure.

Some argue that railways led to the flooding of the Indian market with foreign machine-made goods at prices lower than local weavers charged. This forced many to crowd into the agricultural sector. But, to some people, market position of handloom cloth was actually strengthened by the railways clue to the availability of low-priced factory-made yarns and that the number of weavers did not decline.

“It is certainly possible that inputs brought in by rail assisted small-scale and cottage industries by lowering costs: If this is true, the losses in employment in traditional industries may have been small and offset by the gains in modern industries.” But one thing that can be said with certainty is that the occupational pattern did show almost a stationary growth despite expansion in railways and India remained predominantly an agricultural country. Thus one sees the absence of basic structural changes of the Indian economy partly due to the lack of linkages—both forward and backward—that resulted from the way the railways were built and operated.

To demonstrate the absence of linkage effect of railway development, let us consider locomotive industry. India was capable of producing competitively low priced locomotives. Between 1865 and 1941, she produced as many as only 700 locomotives while the British firms were allowed to export 12,000 locomotives at least to India. Britain enjoyed spread effects at the cost of India. The only exception was, however, the coal industry.

As railways were the major users of coal, railways stimulated coal production. Such minimal linkages were also felt by the engineering industry, India’s financial market, and labour market. In brief, the Indian economy had been influenced little by the railways-industry- financial-and-labour markets linkage.

Impact of railways on industries was not an unmixed blessing. First, building up of a railway network even in the remotest regions, it accelerated the decline of traditional indigenous industries. Railway expansion, instead of providing vertical take-off of the Indian economy, had gradually transformed into an “agricultural colony” of England. Bal Gangadhar Tilak commented that building up or railways and other allied infrastructural facilities like roads, telegraphs, etc. was just like ‘decorating another’s wife’.

The upshot of the above discussion is that railways had never been coordinated to the country’s industrial needs. Instead of ushering in industrial revolution, it created a solid foundation for commercial revolution. Nationalists pointed out that the spread effects of railway expansion or the benefits of railway construction in terms of encouragement to the iron and steel industry and to capital investment—or the so-called backward and forward linkages—had been garnered by Britain and not, of course, India. G. V. Joshi remarked that expenditure on railways was to be reconsidered “as an Indian subsidy to British industries”.

Railways had never been thought of as a promoter of industries by the British authorities. Rather, its expansion would ease supply of raw materials to England and help the marketing of British manufactures in India. The expansion of Indian railways undoubtedly created demand for steel (in constructing railway lines, bridges and other infrastructures), engines and wagons, etc.: “Since these were in the country’s import list there were very little or no linkage effects in India. Thus the rapid explosion of Indian railways failed to create an environment for ‘take-off of the Indian economy’. It failed to grow as a ‘leading sector’ of the Indian economy.

Railway construction stimulated, on a very limited scale, some industries like the engineering industries, financial markets, and the labour markets through migration as the country imported most of the inputs required for railway construction before the World War I.

It is true that railway workshops were built for the purposes of producing and repairing parts needed for railways. But that too was developed on a limited scale. Most probably, coal mining stood as the important case of backward linkage of the railways. Again, for basic metal industries the railways came as a source of demand between the two World Wars. The most classic example was the Tata Steel.

However, financial markets being rudimentary and fragmented in this country did not act as linkage whatsoever. But as far as labour migration was concerned, railways not only absorbed migrant labour for its various jobs but also facilitated ‘the major channels of labour migration into the cities and plantations’.

However, Dr. Ansety was not the taker of this view and argued that railways, by themselves, could not be held responsible for the destruction of cottage industries. But at the same time it cannot be simply dismissed as the ‘price’ of industrialisation.

It is true that railways gave necessary stimulus to some important industries like cotton and woolen textile mills, sugar factories, leather and tanneries, etc. But, unfortunately, railways were built for strategic and commercial reasons.

It stimulated European rather than Indian industry. Railway expansion initiated by private domiciled companies with State guarantees and State-backing aided and stimulated British industry as the colonial government was committed to bolster Britain’s industrial development, but not India’s. “Indeed the Government of India urged companies to ‘buy British’.” The classic example in this case is the locomotives.

However, such is not the complete story since the ruling class clamored that “government meant development”. The necessity of fuel for railways made coal industry a growing industry. Railways not only created demand for Indian coal (by 1900 roughly 30 p.c. of the coal produced was used by railways) but also made coal available in the far-flung areas of the country.

It is true that though the needs of the railways stimulated coal production the railways did not provide the demand to the coal industry that they did in other countries. In fact, high rates were responsible for the import of British coal though India had enough coal reserves. Thus ‘railway expansion caused a reduction in transport cost’ is a myth. Because of high transport costs, prices of coal shot up.

All this suggests that the spread-effects from the increased production of coal were deficient in strength. Actually, the high price of coal consequent upon a complex system of rates and fares had an especially dampening effect on various industries using coal as a source of energy. “But whether for coal or other inputs or for finished goods, the relatively high level of transport costs was a major factor in the slow growth of industry in India.” Coupled with this, the nefarious one-way free trade policy with a strong bias towards the purchase of British goods for the railways failed to usher in industrialization in India.

Further, railway expansion helped increase in the drain of wealth from India since Indian railways were built with foreign capital and administered by foreign employees. Such arrangements involved remittance of money in the form of interest and profit and other variety of payments. Thus, the potential benefits of railways were far from actual benefits due to increased drain of wealth.

Now, we conclude our discussion. In the ‘limited economic development’ that India experienced under British rule, the single biggest event was the railway building. Railways brought about economic specialization in agriculture. Railways released the latent potentialities of India for industrial advance.

In the process, some modern industries were born while some important industries eclipsed. New jobs were created while many lost’ their traditional jobs. Other numerous economic changes took place. Some of these changes, especially unfavorable changes, were really the “inevitable price” of railway expansion. Had the foreign government been more benevolent some of the injurious effects of railroadisation could have been minimised. Problem lay not in the railway construction, but the manner in which it was brought about.

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