 How did the British rule the world for nearly 200 years? How did America come to dominate the globe for the past seven decades? How has China emerged as a global power to reckon with? Behind all this is one key economic revolution, the emergence of factories where machines produce goods on a scale never seen before, what economists call manufacturing. Now how did manufacturing change the world? It made it much easier and faster to make things that people wanted to use. A single worker running a machine could now do the work of 50 people. That meant many more things could be made by the same number of workers. But as factory owners made money, they built more factories where they needed more machines and more workers. It was what is called a virtuous cycle of ever expanding production of goods, more jobs for the working classes, and more wealth for the capitalists. Of course, one secret reason behind the industrialization of the West was that they had colonies, like India for instance. Manchester cotton, which drove the industrial revolution in England, could not have flourished without the deliberate destruction of Indian cotton, which used to dominate global textile exports. Throughout the period of the Raj, the British used India as a source of raw materials, which they bought using the revenues raised from India itself. And India, like other colonies, acted as a captive market for British goods. But that is a topic for another video altogether. What is relevant for us here is that when India became independent, factory production accounted for less than 10% of our national income. That is why the Nehru government wanted to quickly build a base, which would help India industrialize rapidly. So the state took control of the economy and decided how resources and capital would be allocated instead of leaving it to private place. By the way, this system, which we have come to call Nehruvian socialism, was based on a blueprint proposed by India's top capitalists. Among them were G.D. Birla and J.R.D. Tata and several other big names. Their proposal, which has come to be known as the Bombay plan, was very similar to Nehruvian socialism. The Bombay plan asked the government to command and control the economy to ensure India could build its own industries and not have to depend entirely on imports. As I said, manufacturing accounted for just 9% of our GDP in 1950, which only went up to 14% by the 1980s. So by the mid-80s, corporates, experts, economists and babus started saying that India's socialist experiment had not worked. The manufacturing sector had grown at just 5.2% per year between 1950-51 to 1985-86 over 35 years. So Rajiv Gandhi took the first big steps to liberalize the economy by opening up more industries to the private sector, encouraging exports and international trade, and making it easier for big companies to become even bigger. And of course, the big watershed came in 1990-91, the Ram and Mohan reforms, which have come to be known as LPG. No, not cooking gas, but liberalization, privatization and globalization. It is supposed to transform India into an industrial powerhouse, turn us into another Asian tiger. We were told multinational companies will come flooding in with their capital and set up factories in India, giving jobs to millions of people. Nothing like that happened. As can be seen from this table, the share of manufacturing in total GDP increased at a steady rate before liberalization. In the 1950s, it averaged 10%, in the 1960s, that jumped to 12%, in the 1970s to 13%, in 1980s to 14%. It was increasing by about 1 percentage point every decade after the initial push. Look at the share of manufacturing in total GDP, in the post-liberalization period. And you can see that it has grown at more or less the same pace as it did in the so-called socialist period. But this is only part of the story. The real problem is that our factory output has now almost stopped growing. It has been one and a half years since India completely opened up after the COVID lockdown, and new data released by the government shows that the economy wasn't affected as badly as previous estimates suggested. In fact, even though India's overall economy shrunk by 5.8% in the COVID year of 2020-21, the factory sector actually grew by 2.9%. So not only should our manufacturing have recovered fully, it should return to its normal growth path. But here's what we see if we look at what has happened in the past five years from 2017-18 to 2022-23. In 2017-18, the manufacturing sector had produced goods worth a little over 22 lakh crore rupees. In 2022-23, this is expected to go up to a shade less than 26 lakh crore. This is real growth in value adjusted for inflation. That works out to an annual growth rate of just 3.3% per year, which is way lower than the average during the pre-liberalization period. In per capita terms, that is the value of factory output per person, the growth rate is just 2.2% per year. I've deliberately chosen a five-year period to remove the impact of annual fluctuations. But if you still think that COVID is to blame for this slowdown, then you need to know that India's manufacturing sector grew by just 5.4% in 2018-19. It contracted by 3% in 2019-20, both years before COVID hit us. And as I said earlier, factory output actually grew by 2.9% in 2020-21, the year that we had all the COVID lockdowns. And after that, there was a huge 11% jump when the economy opened up last fiscal, as consumers and businesses rushed to buy things, which they had postponed because of the lockdown. But this year, when there is no lockdown at all, our factory sector is likely to grow by just 0.6%. In per capita terms, that's a fall of half a percent. But why has this happened? That's the topic for our next video. If you want to watch that, subscribe to our channel. So that you get to know as soon as new videos drop. And if you liked this video, show it by pressing the like button. That's it for now. Until next time, goodbye.