Indian economy on the eve of British rule
Ancient India was a rich and prosperous county. It had been nicknamed as the ‘Golden Sparrow.’ Wealth of India was considered to be abundant. The standard of living of Indians was very high. Foreign travellers to Indian frequently reported a general prosperity. India had achieved a high industrial development. India’s industrial skill was admired everywhere. Even Roman Empire used to purchase large quantities of Indian luxury fabrics. Romans used to pay India in gold and silver for there commodities. At one time the Muslin of Dacca, the beautiful woolen shawls of Kashmir, the fine lines, calicos and the brocades of Delhi were famous throughout the World. India had a well developed metal industry also. The famous iron pillar at Delhi is a standing testimony to it. The ship building industry was also in a prosperous state. In addition a number of handicrafts flourished both in the rural and the urban areas. The Britishers ruled over India for about 200 years. During this period a policy of systematic exploitation and loot of the Indian economy was followed. As a result, the old economic organisation of India broke down, industrial structure collapsed, burden on agriculture mounted, and hence the poverty increased.
In all fairness to the British Government in India we can discuss the effects of the British rule in India under two heads, viz.,
(a) Constructive role of the British rule, and (b) Destructive role of the British rule.
Constructive Role of the British Rule
There was a silver lining to the British rule in India, inspite of the fact that the Britishers had always been prompted by their narrow interest.
The Britishers did the following favours to the Indian society—
(i) By destroying the old social order the Britishers laid down the material basis for a new social order. The new social order is a precondition for economic growth.
(ii) The new social order helped break the rigidities of the caste system.
(iii) The anglicised education was imposed. It opened to the great stream of English democratic and popular inspiration. It laid the seeds of Indian Nationalism and found expression in such movements as Swadeshi.
(iv) The Britishers introduced the railway system and a vast network of transportation and communications. These became the forerunner of the industrial development of India.
(v) Above all, the political and economic unification of the country was achieved for the first time under British rule.
(vi) The Britishers developed the most modern and efficient system of communication. The first telegraph line was operated in 1853 between Calcutta and Agra. The first postage stamp was released in 1852. Adequate improvements were made in the postal service. They made it possible to avail postal facility at a uniform rate throughout the country. Development of the post and telegraphs helped the integration of the different regions and accelerated the process of economic growth by facilitating the development of trade, commerce and industry.
Destructive Role of British Rule
It is for its destructive role that the British rule in India is remembered. The destructive role of the British rule can be put under the following heads—
Decay of Indigenous Industries
Before the British rule, India had a well organised industry. With the arrival of the British, Indian industry began to decline. The process of decline began as early as the end of 18th century. It became very steep towards the middle of 19th century. Following causes were responsible for the decline—
(a) The disappearance of the native Indian Court : Urban organised industry in India produced chiefly luxury and semi-luxury articles. These were generally purchased by aristocrats. Aristocracy consisted of native Rajas, Nawabs and their courtiers. With the establishment of the British rule in India, native rulers began to disappear. Their courtiers and officials were thrown into the background. Their disappearance meant the closure of the main source of demand for the products of these industries. The abolition of the courts meant that the fine articles which were in demand by the nobles for state occasions were no longer required. Hence began the decline of so many handicrafts and art.
(b) Lack of patronage from the new upper class : As the old aristocracy and courts vanished, their position was now occupied in the towns by two classes—the European officials and the new educated class. The European officials and the European tourists demanded the local products merely as souvenirs and. As such they wanted goods at cheap prices. The demand tended to lower the artistic value of the goods produced. In many cases artisans were forced to copy European designs and patterns. They worked hard to satisfy their customers. The products occasionally were bad copies of the originals.
The new class of educated Indians was proud to copy European fashions. They hated every thing Indian. They blindly imitated the western ways to please their masters. Apart from this slavish mentality sometimes some unwritten rule or convention also forced these Indians to behave like that. Thus the decay of the embroidered shoe industry was brought about by a strange convention. This convention permitted an Indian to retain a pair of leather shoes on stockinged feet only. It also required him to put off shoes of native make when in the presence of a superior. Lack of patronage and demand for this new class accelerated the decline of indigenous industries.
(c) Weakening of the guilds : The British rule affected handicrafts in another way also. Urban artisans and craftsmen were organised in the form of guilds. The guilds supervised the quality of the products. They also regulated the trade. With the entry of British traders these guilds lost their power. As soon as supervising bodies were removed many evils began to appear. These were, for example, the adulteration of materials, shady and poor workmanship etc. This at once led to a decline in the artistic and commercial value of the goods produced.
(d) Competition with machine made goods : The competition from the European manufactures was responsible for the decline of the local industry. The construction of roads and railways made it possible to distribute the goods to every nook and corner of the country. Opening of the Suez Canal reduced the physical distance between England and India. English goods in large quantities were sent for sale in India. Among these goods textiles was the most important item. The quality of these clothes was definitely poor as compared to Indian clothes. But they were cheap. They were within the reach even of the poor man. Hence, these imported clothes and other machine made goods came to be demanded in large quantities. Local handicrafts lost their demand.
Destructive role of the British Government in India
The British Government in India was more interested in the development of industries at the home. Thus Government sacrifice all the interests of the local industries. The policies adopted by the Government were very harmful for indigenous industries. For example, British goods were allowed to come to Indian without any duty or barrier. On the other hand Indian exports of manufactured goods had to pay heavy customs duties. An unfair competition was result. Many such instances of the British policy can be quoted. The simple consequence of this policy was that Indian industries suffered. Ultimately many of them closed down for good.
Such was the fate of Indian industries at that time. It looks very ironical. Just imagine the following situation. Industrial Revolution was booming in England and other western countries. It was the same western countries which were considered backward in relation to India. But simultaneously in the rich India, industries began to decline. In other words process of deindustria-lisation of India began. The industrial labour was rendered unemployed. It began to fall back upon agriculture. It increased the pressure on land. Land was divided and subdivided into small holdings. Agricultural productivity fell down and agriculture thus became a backward industry. This process of decline continued till the end of World War I. After the War the Britishers realised the significance of a developed industrial economy in India from the military point of view. A developed industry in India could have easily helped them keep running the supply lines during the War. But by then great harm and already been done to the indigenous industry.
(a) Decay of old towns—Growth of new cities : Another impact of the British rule in India was the movement of population from the old towns to the new trading centres. These trading centres were situated in the cities. Thus many new cities developed. But at the same time many important towns began to decay. Among these important towns were Mirzapur, Murshidabad, Malda, Santipore, Tanjore, Amritsar, Dacca etc. Among the important cities that developed were Delhi, Bombay, Calcutta, Madras, Banglore, Nagpur, and Karachi, Lahore (now in Pakistan) Chitagong (Bangladesh) Rangoon (Burma) etc. These cities grew in importance as great commercial towns.
(b) The decay of Urban handicrafts : The decay of urban handicrafts following the disappearance of the royal courts brought about a decreases in the population of the old Indian towns. As the craftsmen lost their occupations, they turned to agriculture. They shifted to villages.
(c) Diversion of Trade Routes : Introduction of railways in Indian by the Britishers opened up new means of transportation. Some of the old towns were prosperous because they were located on some important trade routes. For example, Mirzapur was an important trading centre because of its location on the Ganga. With the introduction of railways, old routes and old means of transportation lost their importance. Hence, the old towns also began to lose their significance.
(d) Epidemics and insanitary conditions in old towns : Most of the old towns had become stagnant. These were vulnerable to diseases. Frequent outbreak of epidemics like plague and cholera was a common feature. Such epidemics took a heavy toll of the urban population. These, therefore, also drove a large population from the urban areas.
In this way many old towns lost their importance. But simultaneously commerce and trade encouraged the growth of new cities. Some of the important factors that were responsible for the growth of new cities were as follows :
(a) Concentration of trade in big cities : The biggest single cause of the rise of big cities is the concentration of trade. It means the most of the producers, distributors etc. open offices in big cities. It is because of the fact that big cities offer better marketing facilities to the traders. Traders are attracted to these places from small towns and rural areas. This is what happened during the British rule. The British promoted trade and commerce in our country. This was concentrated only in a few cities. These cities grew in importance.
(b) Higher Wages in big cities : New and big cities generally offer more job opportunities. With the growth of trade and commerce job opportunities in big cities were increasing. At the same time large number of artisans and craftsmen were being thrown out of their jobs in semi-urban areas. These unemployed artisans, village craftsmen and landless agricultural workers were shifting to big cities in search of jobs. It was because agriculture had already become crowded. Thus big cities attracted large labour force.
(c) Centralisation of administration : The Britishers adopted a new system of administration. Government offices came to be located in big cities. These places were known as district head quarters. These cities grew at the expense of small towns in the districts. These Government offices were also a good source of jobs. A large part of the urban population came to depend on the government services for their living. It let to the migration of population to these cities. This resulted in growth of cities. In other countries growth of cities was always encouraged by establishment of industries. In India on the other hand influence of industry has been totally lacking. This was because that old industries were dying out at that time; new industries were not coming forth. Growth of trade and commerce was in the interest of the Britishers. Therefore, trade and commerce had more influence on the decay of towns and cities.
Introduction of Railways—a trade and military oriented net work
India is a vast country. It extends from Kanyakumari in the south to Kashmir in the north. For such a large country means of transportation and communication play a crucial role. Political, social and economic integration of the country depends to a large extent on the availability at cheep and easy means of transportation and communication.
In this sense only, the Britishers made a significant contribution to the economic progress of India. They introduced railways in the country. First railway train ran from Bombay to Thane a distance of 21 miles—on 16th April, 1853. The advantages of railways from the economic point of view are very clear. Railways have made it possible to fight famines and food scarcities even in distant regions. Growth of trade and commerce always depends on railways. Railways also make it possible to make better use of resources like raw materials etc. lying at different places. They help in the movement of population. The growth of towns, port development etc. are possible because of railways.
However, during the British rule railways did not make much headway towards the economic development of the country. As a matter of fact, the Britishers never wanted railways to act as an agent of economic progress. The motive behind railways construction was never industrial and economic development of the country. The motive was to open up India more completely, so that the far flung areas should be easily accessible. That would make it easy for the Britishers to exploit the resources of the country in the better way for their own interests. Following reasons explain why the Britishers accepted the scheme of railway construction in India. These throw light on their real motives also.
(i) Transportation of raw materials : Industrial Revolution started in England around the beginning of the 19th century. A number of large industries, especially cotton textiles had been established in England. The wheels of these industries were fed up by raw materials supplies from English Colonies. India was a rich source of supply of raw cotton to the British industries. The raw cotton bales were carried by bullock carts. These carts delivered cotton to big centres. These used to cover long distances. It was submitted by the cotton traders and manufacturers in England that when cotton was transported by bullock cart dirt used to get mixed with it. The Lancashire textile mills wanted good, clean cotton for their use. Only railway transport could meet their need.
(ii) Market of manufactured goods : Another essential require-ment of the Industrial Revolution in England was that there must be profitable sources of sale for manufactures goods. England in itself is a small country. Large quantity of manufactured goods could not be sold there. India on the other hand could offer them a very large market. For that it was essential that the country should be opened up. Far flung areas should be made accessible by easy and cheap means of transportation. Railway served the purpose.
(iii) Military Considerations : The Britishers were a foreign power. They were ruling over India. India is spread far and wide. It was necessary for the Britishers to join different corners of the country. Their strength and power was often challenged and put to test by the local people in one region or the other. The Britishers had to meet this challenge by mobilising troops and military stores. No other means of transportation could make fast mobilisation possible. Only railways did that.
In short the Britishers had their own selfish interest in construction of railways in India. The military and trade considerations prompted them to do this. They were never interested in industrial and economic needs of India. Same was with the railways also. Railways have contributed much to economic progress especially after independence. We do acknowledge our debt to the Britishers for this gift. However, during the British rule railways contributed more to the destruction of our economy rather than its construction. The adverse effects of railway construction were innumerable.
Adverse effects of Railways in India
(i) Decline of urban handicrafts : One of the most serious consequences of railway construction in India was the decline of urban handicrafts. With the growth of railways, the mills of Lancashire and Manchester entered in a big way in Indian markets. The mill made goods posed a serious challenge of the local handicrafts. These handicrafts could not stand ‘cost price warfare.’ They ultimately decayed out.
(ii) Growth of colonial character of out trade : Railways contributed to the expansion of trade in our country. But this expansion of trade was more of the colonial character. Railways made it possible to arrange for mass distribution of manufactured goods of England. They also made it possible to collect agricultural raw materials even from the remote corners of the country for supply to England. Thus the composition of trade that emerged was as follows. India used to import manufactured goods and export raw materials—a really colonial character of foreign trade.
In short railways were used as a tool of economic exploitation by the Britishers. It failed to act as an agent of growth during that period of history. It served the trade and military interests of the Britishers.
Drainage of National Wealth The Britishers were tempted by the immense wealth of India. They took to large scale plunder of it. They began to carry its capital and wealth to England on such a large scale that many historians and economists correctly labelled it as the Economic Drain. Among them the name of Dadabhai Naoroji, and C.N. Vakil are worth mentioning.
This process of wealth and capital drain from India continued unchecked almost for 200 years. Even the richest nation would have been ruined when such inhuman treatment was given to its India too could not survive these constant onslaughts. When the Britishers left India in 1947 Indian economy was completely shattered. It was thrown out of balance. The rich and prosperous land of India had been “converted into a country of hewers of wood and drawers of water.”
Economic Effects of Drain
The drain was the very fountain head of all economic evils in India. Some of the important economic consequences of the drain were :
(i) The most important evil attributed to the drain was that of impoverishing the country, Dadabhai Naoroji declared the drain to be the real, the principal and even the sole cause of the ills, the sufferings and the poverty of India. He believed all other reasons and causes to be “only red herrings drawn across the path.”
(ii) Nearly one half of India’s net annual revenue flowed out of the country. This resulted in the reduction of national product and was a major evil of the drain.
(iii) Transfer of national wealth abroad had an important and harmful impact on income and employment with in the country. The drain represented not only the spending abroad of a certain portion of national income but also the further loss of employment and income that would have been generated inside the country of that amount had been spent inside it.
(iv) The drain made possible the luxurious living on the part of the foreigners. What foreigners consumed in India cause a partial loss to the people of India because it represented the “eating up a goods and services which, Indians would have otherwise consumed.”
(v) The drain was injurious because accumulation of capital was being checked and retarded by the removal of large part of its currently accumulating capital to foreign land.
(vi) The drain by producing shortage of capital in the country bantered industrial development on which depended the economic salvation of India. The chief responsibility for the slow growth of modern industry in India lay at the head of the drain.
(vii) The drain facilitated the penetration and exploitation of India by foreign capital. This it did in two ways :
(a) By preventing the accumulation of capital with in India and by this prostrating internal capital, the drain permitted foreign capitalists to exploit the country without having to face any indigenous competition. It helped the foreign capital to monopolise and reap all the advantages of India’s internal resources, and
(b) The drain acted as the chief source of the accumulation of foreign capital invested in India, for a large part of the drain was brought back to India as foreign capital.
(viii) The drain primarily represented the impoverishment of the peasantry. The drain was mainly paid out of the land revenue.
(ix) The drain produced the secondary injury of worsening India’s terms of trade with foreign countries. Because the drain involved the maintenance of an export surplus. It tended to give compulsory character of India’s exports. India had to export or perish. Consequently India had to depress the price level of its exports to persuade the foreign purchasers to buy them. In other words as a result of the drain, the terms on which India exchanged its exports for imports were turned against it.
Famines
Famine means non-availability of the bare minimum food for subsistence. Such a situation arises when wide spread drought conditions prevail in a country. Before the arrival of the Britishers in India the Indian villages were self-sufficient and they also catered to the food requirements of the urban population. The Britishers gave a new turn to the village set up and as a result of that the economic life in India became more stagnant. Recurrence of famines became a normal and regular phenomenon. About 22 major famines were reported from all over the country during 1770-1900. The most severe of them was the famine of Bengal in 1770. It took a toll of 35 percent population of Bengal. In another major famine of western Uttar Pradesh in 1860-61 about 2 lakh people lost their lives. The most devastating was the famine of Bengal in 1943 which took a heavy toll of over 30 lakh human lives.
Causes of Famines
The main causes responsible for frequent famines during the British rule were as follows—
(i) Failure of Monsoon and other natural calamities. Indian agriculture depended fully on the monsoon. The Britishers did not make adequate arrangements for irrigation, on the other hand they neglected the development of irrigation facilities. Failure of rains was the main cause of famines. Similarly failure of crops due to other natural calamities also causes scarcity of foodgrains.
(ii) Commercialisation of agriculture and decline of self-reliance : The Britishers did a great injury to the old economic structure and destroyed it completely. In the old order the cultivators produced food grains for self consumption. They used to keep sufficient stock of food grains for facing eventualities like famines, droughts etc. under the new system the cultivation was required to pay the rent in cash. Therefore, it became obligatory for the cultivator to sell off his produce in the market and repurchase it for self consumptions. So in case of crop failure the poor cultivator had to suffer untold miseries.
(iii) Inadequate growth of means of transpiration and communication : British rulers did not care much to develop the transport system. Thus a network of railways was developed but it was only to help the Britishers to keep their stronghold on the Indian soil. Lack of the means of transportation and communication obstructed the free and quick movement of food articles from one region to another at the time of famine.
(iv) Export of Foodgrains : The policy of the British Government encouraged massive exports of foodgrains. The Britishers did not even keep buffer stocks of foodgrains. At times foodgrains were exported even when there was shortage of food articles in India.
(v) Hoarding and Profiteering : The business community further aggravated the famine conditions by indulging in hoarding black marketing and other profit making activities.
(vi) Poverty : Chronic poverty of the people was also responsible for the pathetic conditions of famines. People could not store foodgrains to provide for the emergency conditions because of their meagre money income. The Indian farmer was under heavy debt, his land holdings were small and scattered, and the average productivity of land was also very low.
Famine Commissions
The devastating effects of 1876-78 famine compelled the British Government to do something substantial to check the recurrence of famines in India. The first Famine commission was set up in 1878 under the chairmanship of Sir Richard Strachey. The commission recommended state interference in food trade in the event of famine. India witnessed another major in 1896-97. Therefore, the Second Famine Commission was set up in 1897. Under the chairmanship of Sir James Lyall. This commission recommended the development of irrigation facilities. The Third Famine commission was set up in 1901. This commission recommended that the official machinery dealing with a famine must work all the year round so that the scarcity of foodgrains could be controlled well in time. Though all the three Famine Commissions worked sincerely and vigorously but the British government was never serious in dealing with the welfare plans for the masses. Famines continued to occur and the Famine of Bengal 1943 was the most horrifying. This was the gift of the British rule of India.
The early phase of the British rule in India is characterised by direct loot and plunder of the wealth of India. Gradually this loot and plunder paved the way for more systematic colonial exploitation of the Indian economy first by the industrial capitalist and then by the finance capital. All the interests of the Indian economy were sacrificed at the alter of British interests. Indians old system which showed a fine harmony between agriculture and industry crumbled down under the weight of the British interests. India was reduced to the status of a colonial appendage of the British empire.
New Revenue Settlements
Lord Carnwallis Permanent settlement of 1793 created a number of absentee landlords. The assessment was arbitrary. No account was taken of the fertility of the soil and area of land. The Zamindars who were unable to meet their dues leased parts of their estates to middle men. The rights of the ryots were sacrificed. The permanent settlement was extended to Orissa, Banaras and to the Northern Sirkars in 1802 05.
Ryotwari settlement was adopted in Madras. The settlement was made directly with the cultivator for a period of years. A direct relationship was created between the Government and the cultivator. The ryot enjoyed free lessee as along as he paid legal dues. The system increased the security of the cultivator and removed the Zamindar the middleman.
Mahalwari or village settlement was adopted in Punjab, Oudh, Delhi. The settlement was not made with industrial landlords but with the village as such. The villagers as a whole both collectively and individually became responsible for the payment of revenue for the whole village.
Monopoly v/s Free Trade
The East India Company enjoyed monopoly trade. Its opposition came from the British manufacturers in the make of Industrial Revolution. The free traders won their victory when the Charter Act of 1813 abolished East India Company’s monopoly of trade with India. By 1830 instead of being the world’s largest exporter of cotton textile, India had been converted into a net importer of cottons from Manchester. The company which had been making much profit from Indian trade now lost it. The Charter Act of 1833 abolished the company’s monopoly of China trade also.
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