Modern History Notes : Chapter-28 : Economic Consequences of British Colonialism in India (Arora IAS Class Notes)

Chapter-28

Economic Consequences of British Colonialism in India

Arora IAS Class Notes

 

Deindustrialization

• Shift from Colonial Economy:British rule transformed India into a colony serving British interests.
• India’s Decline:Share of global economy dropped from 23% (18th century) to 3% (independence).

Destruction of Traditional Industries

• One-Way Free Trade (Post-1813):
  • British goods flooded Indian markets with low tariffs.
  • High tariffs (80%) on Indian exports (textiles) restricted market access.
• Cheap British Imports:
  • Machine-made British goods undercut Indian handicrafts.
  • Railways facilitated distribution of British products throughout India.
• Deindustrialization:
  • Loss of traditional livelihoods for artisans and handicraftsmen.
  • No significant industrialization to replace lost jobs.
  • Decline of patronage from royalty adopting Western tastes.

Ruralization

• Artisans to Agriculture:Displaced artisans migrated to villages for farming.
• Increased Pressure on Land:More people relying on agriculture strained resources.
• Poverty and Upset Village Economy:Overburdened agriculture led to poverty and instability.

 

Impoverishment of Peasantry

Land Systems and Exploitation

• Permanent Settlement:
  • Focused on maximizing revenue for the British.
  • Land transferable, insecurity for tenants.
  • Little investment in improving land productivity.
• Increased Zamindari Power:
  • Summary evictions of tenants.
  • Demanded illegal dues and forced labor.
  • No incentive to invest in agriculture.

Debt and Exploitation by Moneylenders

• Peasants forced to borrow to pay zamindars.
• Moneylenders also controlled grain markets.
• Low prices for crops, high interest on loans.
• Manipulation of judiciary by moneylenders.

Triple Burden and Impoverishment

• Peasants burdened by:
  • Government revenue demands.
  • Zamindari exactions.
  • Moneylender debt.
• Worsened during famines and scarcities.
• Loss of land and impoverishment. (This happened under all land systems – Zamindari, Ryotwari, Mahalwari)

 

Emergence of Intermediaries and Ruin of Old Zamindars

• Land Transfer (by 1815):
  • Half of Bengal’s land in new hands (merchants, moneylenders).
• New Zamindars:
  • Increased power, limited investment opportunities.
  • Resorted to land grabbing and sub-infeudation.
• More Intermediaries:
  • Absentee landlordism due to multiple layers of collectors.
  • Increased burden on peasants.
• Rising Land Prices:
  • High demand for land pushed prices up.
  • Increased peasant liabilities.
• No Investment in Agriculture:
  • New zamindars lacked traditional ties to the land.
  • Focused on maintaining British rule and opposing Indian nationalism.

 

Stagnation and Deterioration of Agriculture

• Low Productivity:
  • Peasants lacked resources and incentive to invest.
  • Zamindars had no interest in improvement.
  • Government spending on agriculture was minimal.
  • Land fragmentation hindered modernization.
• Famines and Poverty:
  • Frequent famines due to poverty, not just food shortage.
  • Estimated 28 million deaths due to famine (1850-1900).

Commercialization of Indian Agriculture

• Shift from Subsistence to Market-Oriented:
  • Cultivation of cash crops for national and international markets.
  • Examples: cotton, jute, sugarcane, etc.
• Factors Enabling Commercialization:
  • Spread of money economy.
  • Growth of national market and internal trade.
  • Improved transportation (railroads, roads).
  • International trade with British investment.
• Impact on Peasants:
  • Little opportunity for investment due to existing poverty.
  • Vulnerable to price fluctuations in international markets.
  • Example: Cotton boom followed by bust (1860s-1870s) led to debt, famine, and riots.
  • Overall, limited benefits for cultivators.

Destruction of Traditional Indian Industry

• Textile Industry:
  • British stopped paying fair prices for Indian textiles.
  • Weakened Indian producers and impoverished peasants.
• Shipbuilding Industry:
  • Thriving industry on both coasts of India.
  • British restricted Indian ships through regulations and duties.
  • Limited Indian participation in trade routes.
• Steel Industry:
  • British restricted growth of Indian steel production.
  • Limited Indian production to higher quality steel for British use.
  • Stifled production of lower quality steel needed for domestic market.

Late Development of Modern Industry

• Limited Role for Indian Entrepreneurs:
  • Indian traders and financiers as junior partners to British capital.
  • Facilitated revenue collection and product movement.
  • Hindered development of independent Indian industrial class.
• Foreign Domination of Modern Industry:
  • Rise of machine-based industries in late 19th century.
  • Mostly foreign-owned and controlled (British managing agencies).
  • Influx of foreign capital due to:
    • High profit potential.
    • Cheap labor and raw materials.
    • Large domestic and regional markets.
    • British government support.
    • Export opportunities for some Indian goods.
  • Challenges for Indian-Owned Industries:
    • Difficulty securing credit.
    • Lack of government tariff protection.
    • Unequal competition from foreign companies.
    • Opposition from British capitalists with stronger infrastructure.
  • Uneven Development:
    • Neglect of core industries and power generation.
    • Focus on certain regions led to regional disparities.
    • Lack of investment in technical education.
  • Social Impact:
    • Emergence of an industrial capitalist class and working class.

 

Nationalist Critique of Colonial Economy

Shifting Views on British Rule

• Early 19th century intellectuals: Supported British rule for potential modernization.
• Post-1860s: Disillusionment with British economic policies.

Key Nationalist Economists

• Dadabhai Naoroji (“Grand Old Man of India”)
• Justice Mahadev Govind Ranade
• Romesh Chandra Dutt
• Gopal Krishna Gokhale
• Subramania Iyer
• Prithwishchandra Ray

India’s Role Under British Rule

• Supplier of raw materials and food for Britain.
• Market for British manufactured goods.
• Destination for British investment.

Theory of Economic Drain (Dadabhai Naoroji)

• Drain:National product unavailable for Indian consumption, diverted to Britain.
• Components of Drain:
  • Salaries/pensions of British officials.
  • Interest on loans from Britain.
  • Profits on foreign investments in India.
  • Payments for British goods and services.
• Impact:
  • Stifled capital formation in India.
  • Accelerated growth of British economy.
  • Limited income and employment opportunities in India.

British Policies Blamed for Poverty

• Core Argument:British imperialism caused and worsened Indian poverty.
• Focus on National Development:
  • Poverty seen as a national issue requiring increased productivity.
  • Industrialization as the key to development.
  • Preference for Indian over foreign capital.
• Critique of British justifications:
  • Trade:Unfavorable for India, promoting raw material exports and finished good imports.
  • Railways:Served British industry by creating markets for steel and machinery, while enabling cheaper import of British goods.

One-Way Free Trade and Tariff Policy

• Free Trade:Exposed Indian handicrafts to unequal competition from Britain.
• Tariff Policy:Favored British goods over Indian products.
• Taxation:Burdened the poor while sparing British interests.
• Government Spending:Prioritized colonial needs over development and welfare.

Impact of Economic Drain

• Drain of capital hindered India’s economic growth.
• Estimated Drain (Nationalist View):
  • More than total land revenue.
  • Half of total government revenue.
  • One-third of total savings (or 8% of national product in modern terms).
• Concept of drain resonated with Indian peasants accustomed to exploitation.

 

Economic Critique Fuels Nationalism

• Challenge to British Legitimacy:
  • Nationalist arguments exposed economic exploitation by British.
  • Undermined British claims of ruling in India’s best interest.
• Stimulant for National Consciousness:
  • Economic critique spread during the moderate phase (1875-1905).
  • Helped build national identity and demand for self-rule.
  • Figure: Dadabhai Naoroji

 

Stages of Colonialism in India (Rajni Palme Dutt)

Marxist View: Overlapping Stages of Exploitation

• Each stage builds on the previous one, with some overlap.
• Old forms of exploitation persist alongside new ones.

 

Stage 1: Merchant Capital (1757-1813)

• Goals:
  • Monopolize trade with India (against other European merchants and Indian traders).
  • Directly control Indian government revenue.
• Limited Economic Change:
  • No major changes in administration, law, infrastructure, or production methods.
  • Traditional Indian society largely left intact.
• Military and Revenue Focus:
  • Modernization of military (similar to Indian rulers).
  • Streamlining revenue collection for efficiency.
• Economic Drain:
  • Large-scale wealth transferred from India to Britain (2-3% of British national income).
  • Funded Britain’s Industrial Revolution.
  • Increased export of Indian textiles (weavers exploited by Company monopoly).

 

Stage 2: Free Trade Colonialism (1813-1860s)

• Shifting Priorities:
  • Rise of British industrial capitalists.
  • Demand for India as a market for British goods and source of raw materials.
• Integration with British Economy:
  • Free trade introduced, reducing or eliminating Indian import duties.
  • British investment in plantations, trade, transport, mining, and industry in India.
• Transforming Indian Economy:
  • Permanent Settlement and Ryotwari systems aimed to create a capitalist agrarian structure.
  • More comprehensive administration to reach rural areas for trade and resource extraction.
• Education and Law:
  • Modern education to provide cheap labor for administration.
  • Aim to change Indian society and culture:
    • Promote overall development.
    • Foster loyalty to British rule.
  • Overhaul of criminal law, contract law, and legal procedures to support commerce.
• Taxation and Burden on Peasants:
  • Increased taxes due to economic changes and expensive administration.
• Increased British Trade with India:
  • India absorbed 10-12% of British exports, including textiles.
  • Import of British machinery (engines, railways) after 1850.
• Military and Empire Expansion:
  • Indian soldiers used for British conquest in Asia and Africa.

 

Stage 3: Foreign Investment and Competition (1860s onwards)

Global Context:

• Increased competition for colonies from other industrialized nations (US, Japan, Europe).
• Rapid industrialization due to scientific advancements (e.g., internal combustion engine, electricity).
• More unified global market due to improved transportation.

British Response:

• Consolidating Control:
  • Stifling competition through “reactionary imperialist policies” (Lytton, Dufferin, Lansdowne, Curzon).
  • Attracting British capital for investment.
• Heavy Investment:
  • Railways, loans to Indian government, trade.
  • Some investment in plantations, mining, mills, shipping, banking.
• “White Man’s Burden”:
  • Self-government for India abandoned.
  • British rule as permanent “trusteeship” over immature Indians.
  • Race, culture, history used to justify continued colonial rule.