Under British rule in the 19th century, India’s cottage industries and thriving trade were virtually destroyed to make way for European manufactured goods, paid for by exports of agricultural products such as cotton, opium, and tea. Beginning in the late 19th century a modern industrial area and an considerable infrastructure of railways and irrigation works were slowly built with British and Indian capital. Nevertheless, India’s economy stagnated during the last 30 or so years of British rule. At freedom in 1947 India was desperately poor, with an aging textile industry as its only major industrial sector.

no more than one-fifth of India's large labour force is employed in the so-called “organized” area of the economy ,but that small fraction generates a disproportionate share of the nation's gross domestic product, supports most of the middle- and upper-class population, and generates most of the economic growth. Much of the organized area is unionized, and strikes are frequent and often protracted. Many of the unions are affiliated with one of a number of government-recognized and regulated all-India “central” trade union organizations, several of which have membership in the millions. The more valuable of these are affiliated with national political parties. Apart from rank-and-file labourers, the organized area engages most of India's professionals and virtually all of its large pool of scientists and technicians.