Like, the agricultural sector, India's industrial sector could also not be built under the British rule. The colonial rule ensured that the handicraft's industry faced a downslide and no other industry was allowed to come up and flourish and take the place of the handicraft's industry. The British empire followed a policy of systematically de industrializing India with a two fold aim. The main aim was to reduce India to a country, producing just raw materials which were exported to England for their upcoming Industries. The other intention was to ensure that India turns into a big consumer of the finished goods made by the industries of England enabling a continuous expansion of the industries there.
Since the colonial rule had ensured in the decline of the indigenous handicrafts industries, many people became unemployed. Also, the demand for finished goods increased too because none was available locally. The British used this demand to import cheap industrial products from home and selling it in India.
During the second half of the 19th century, India was also affected by modern industries, though the progress was very slow. Initially, progress was made only in setting up jute and cotton textile mills. The cotton mills were dominated by the Indians and were set up in Maharashtra and Gujarat, ie mainly the western India. The jute mills were mainly in Bengal and were dominated by foreigners. It was during the beginning of the twentieth century that steel and iron mills came up. In 1907, Tata Iron and Steel Company(TISCO) was incorporated. Other industries in the filed of paper, cement, sugar etc. came up after the Second World War but were very sparse and few.
Despite this, there were almost no capital goods industries to help advance further industrialization. Capital goods industries are those industries which produce machinery and tools which are in turn used for producing articles that are consumed at present. The establishment of a few capital goods industries did not substitute the emptiness caused by the death of the traditional handicraft's industry. Another point to be noted was that the growth rate of the industries did not contribute much to Gross Domestic Product(GDP). Another major factor against the industrial sector was that the public sector had a very limited area of operation in it. It remained restricted to areas like railways, power generation, communications, port and some other departmental undertakings.