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 sector and an extensive 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 independence 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 vast labour force is employed in the so-called “organized” sector of the economy (e.g., mining, plantation agriculture, factory industry, utilities, and modern transportation, commercial, and service enterprises), 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. It is the organized sector to which most government regulatory activity applies and in which trade unions, chambers of commerce, professional associations, and other institutions of modern capitalist economies play a significant role. Much of the organized sector 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 important of these are affiliated with national political parties. Apart from rank-and-file labourers, the organized sector engages most of India's professionals and virtually all of its vast pool of scientists and technicians.