East India Company

East India Company
• Necessity of East India Company

• Shifting of East India Company from Trading body to a Territorial
Power
• Impact on Indian
• Economy‐ agriculture,
• Industry and trade.
East India Company
• In the late 1500s, European explorers started sailing east for trading
purposes.
• The Spanish and the Portuguese were originally dominant on these
new sailing routes, but after the destruction of the Spanish Armada in
1588 the British and Dutch were able to take more of an active role in
trade with the East Indies.
• The Dutch initially took a lead in this, focusing mainly on spices and in
particular the trade of peppercorns.
East India Company
• Concerned that the English were falling behind to the Dutch on these
new trading routes, on the 31st December 1600 Queen Elizabeth I
granted over 200 English merchants the right to trade in the East
Indies.
• One of these groups of merchants called themselves Governor and
Company of Merchants of London Trading into the East Indies, later to
become simply The East India Company.
East India Company
Sir James Lancaster VI commanded the first East India Company
voyage in 1601
• As the name suggests, the Company’s humble origins was as a small

group of investors and businessmen looking to capitalise on these
new trading opportunities.
• Their first expedition left for Asia in 1601 with four ships commanded
by James Lancaster.
• The expedition returned two years later with a cargo of pepper
weighing almost 500 tons!
Red Dragon, Captain Lancaster, in the Strait
of Malacca, Anno 1602
Sir James Lancaster VI
• Lancaster's voyage to the Indies from 1601 to 1603 on behalf of the
East India Company excited investors and the English government
alike.
• He seemed to find willing customers and traders in Asia who were
keen to break the Portuguese monopoly on their wares.
• However, the EIC would not be able to capitalise on this initially
successful voyage due to the Dutch East India Company which had
access to more capital and who ran their own ruthless campaign to
keep out competitors.
East India Company
• Although these initial voyages turned out to be extremely profitable
for the shareholders, increased competition in the mid-1600s made
trading much more difficult.
• Wars, pirates and lower profit margins forced the Company to grow
into new markets where competition was less fierce.
• It was during this time that the Company also decided that it could
not compete with the more powerful Dutch East India Company in
the trading of spices, so instead turned its attention to cotton and silk
from India.
East India Company
• British East India Company played a significant yet strange part in the
Indian.
• It was, at its inception, a commercial venture in the history of The
British Empire, which was established in the year 1600 in the
subcontinent.
• The main reason for entering the subcontinent was trade, making
money and importing spices from South Asia.
East India Company
• What actually happened was that Indians lost the monopoly of goods
upon the entrance of this company and instead the Portuguese, who
now had hold of trading spices and other valuable things, gained this
monopoly.
• It was the competition that these Portuguese faced by the English
investors and the other main merchants, which led to their merger in
the year 1708 when they united together as England trading with the
East Indians.
East India Company
• When the East India Company first visited the Mughal court in the
early 17th century, it was as supplicants attempting to negotiate
favourable trading relations with Akbar’s successor, Emperor Jehangir.
• The company had initially planned to try and force their way into the
lucrative spice markets of south-east Asia, but found this trade was
already dominated by the Dutch.
• After EIC merchants were massacred at Amboyna (in present day
Indonesia) in 1623, the company increasingly turned their attention to
India.
East India Company
• With Emperor Jehangir’s permission, they began to build small bases,
or factories, on India’s eastern and western coasts.
• From these coastal to holds, they orchestrated the profitable trade in
spices, textiles and luxury goods on which their commercial success
was predicated, dealing with Indian artisans and producers primarily
through Indian middlemen.
East India Company
• Meanwhile, the ‘joint stock’ organisation of the company [in which
ownership was shared between shareholders] spread the cost and
risk of individual voyages between investors.
• The company grew in both size and influence across the 17th and
18th centuries.
• Although always volatile, EIC shares became an important bellwether
(the leading sheep of a flock, with a bell on its neck.) of the British
economy and the company emerged as one of London’s most
powerful financial institutions.
In 1615, Sir Thomas Roe, an English emissary of King James I reached out to the
court of the then Mughal emperor Jahangir (1605-1627), in order to get a farman to
establish a factory at Surat
An East India Company official riding on an elephant, with an escort
of foot soldiers and mounted Indian retainers, portrayed in an 18th-
century
East India Company
• A PLAYER IN POLITICS
• Initially a junior partner in the Mughal empire’s sophisticated
commercial networks, in the 18th century, the EIC became
increasingly involved in sub continental politics.
• They grappled to maintain their trading privileges in the face of
declining central Mughal authority and the emergence of dynamic
individual successor states.
• European competitors also began to have an increased presence on
the subcontinent, with France emerging as a major national and
imperial rival
East India Company
• This particularly increased the strategic importance of the EIC’s Indian
footholds, and the country’s coastline became crucial to further
imperial expansion in Asia and Africa.
• As well as maintaining a large standing army consisting primarily
of sepoys (Indian mercenary soldiers trained in European military
techniques), the EIC was able to call on British naval power and crown
troops garrisoned in India.
East India Company
• Such military advantages made the EIC a powerful player in
local conflicts and disputes, as did the financial support
offered by some local Indian merchants and bankers, who
saw in the EIC’s increasing influence an unmissable
commercial opportunity.
• After military victories at the battles of Plassey (1757) and
Buxar (1764), the EIC was granted the diwani of Bengal –
control over the administration of the region and the right to
collect tax revenue.
East India Company
• At the same time, the company expanded its influence over local
rulers in the south, until by the 1770s the balance of power had
fundamentally changed.
• Expansion continued and rivals such as the Maratha people in
western India and Tipu Sultan of Mysore were defeated.
• By 1818, the EIC was the paramount political power in India, with
direct control over two thirds of the subcontinent’s landmass and
indirect control over the rest.
The Mughal emperor Shah Alam hands a scroll to Robert Clive, the
governor of Bengal, which transferred tax collecting rights in
Bengal, Bihar and Orissa to the East India Company.
East India Company
Robert Clive meeting with Mir Jafar after the Battle of Plassey.
East India Company
Shah Alam, the Mughal Emperor conveying the grant of the Diwani rights of
Bengal to Lord Clive.
RYOTWARI SYSTEM
• The ryotwari system, instituted in some parts of British India, was one
of the two main systems used to collect revenues from the cultivators
of agricultural land.
• These revenues included undifferentiated land taxes and rents,
collected simultaneously.
• Where the land revenue was imposed directly on the ryots -- (the
individual cultivators who actually worked the land)—the system of
assessment was known as ryotwari.
RYOTWARI SYSTEM
• Under the Ryotwari System every registered holder of land is
recognised as its proprietor, and pays direct to Government.
• He is at liberty to sublet his property, or to transfer it by gift,
sale, or mortgage.
• He cannot be ejected by Government so long as he pays the
fixed assessment, and has the option annually of increasing
or diminishing his holding, or of entirely abandoning it.
RYOTWARI SYSTEM
• In unfavourable seasons remissions of assessment are granted for
entire or partial loss of produce.
• The assessment is fixed in money, and does not vary from year to
year, in those cases where water is drawn from a Government source
of irrigation to convert dry land into wet, or into two-crop land, when
an extra rent is paid to Government for the water so appropriated;
nor is any addition made to the assessment for improvements
effected at the Ryot's own expense
RYOTWARI SYSTEM
• Payment of the land tax in cash, rather than in kind, was instituted in
the late 18th century when the British East India Company wanted to
establish an exclusive monopoly in the market as buyers of Indian
goods.
• The requirement of cash payments was ruinous to the cultivator,
exposing him to the demands of moneylenders as an alternative to
the loss of his land and starvation when crops failed.
• They also asserted that lean years resulted in regional famines, as the
cultivators could not accumulate capital or invest in the productive
development of their landholdings.
In Bengal and Northern India the zamindari
system was as follows:
• In Bengal and Northern India the zamindari system was as follows:
• To collect tax from a land, the British had zamindars bid for the highest tax rates; i.e.,
zamindars quoted a tax rate that they promised to obtain from a particular land.
• The highest bidder was made the owner of the land from which they collected the taxes.
• The farmers and cultivators who owned the land lost their ownership and became
tenants in their own land.
• They were to pay the landlords/zamindars the tax for the land only in the form of cash
and not in kind.
• If a zamindar was not able to collect the quoted amount of tax, he lost the ownership.
• By comparison, this is the way taxes had been collected by the king:
• The tax could be paid either in cash or in kind.
system was as follows:
• Payments in kind were mostly in the form of land which was given to
the king.
• The king never made use of those lands, which could be bought back
by the farmers after they got back some money.
• The farmer owned his land.
• Tax rates were reduced in case of a famine, bad weather or other
serious event.
system was as follows
• The differences are these:
• 1. Since the farmer had to pay only in cash under the new system, he
could only sell it to a fellow farmer who started using the land for
cultivation of a different crop and therefore was not willing to return it.
• 2. The farmer eventually lost some part of his land to someone else and
consequently retained a highly awkward remnant of land for cultivation.
• 3. This led to excessive marketing of land, which lost its sentimental grip
on the farmer.
• The land became merely a commodity.
Mahalwari
• The Mahalwari system is one of the three major land tenure systems
implemented by the British in India.
• The other two systems were the Permant Settlement of Bengal and the
Ryotwari system. During the 1800s, they tried to consolidate their position.
• Thus, they established their control over the administrative machinery of
India.
• The System of Land Revenue acted as a chief source of income of the British.
• Land was one of the most important source of income for the British.
• Thus, they used land to control the entire Revenue system, strengthening
their economic condition in India.
Mahalwari
• The word Mahalwari which means house, district, neighborhood or quarter.
• This system consisted of landlords or Zamindars claiming to represent entire
villages or even groups of villages.
• Along with the village communities, the landlords were jointly responsible
for the payment of the revenues. But, individual responsibility was always
there.
• The land included under this system consisted of all land of the villages,
even the forestland, pastures etc.
• This system was prevalent in the parts of Uttar Pradesh, the North Western
province, parts of Central India and Punjab
Economic system
• The British restructured the indigenous economic system of India to
suit their objective of maximum exploitation is attempted.
• It could be seen that it was a mindless wreckage of a sound and
flourishing system that ensured the prosperity of all the people
particularly the large masses of the population living in the rural
areas- villages-of India.
Economic system
• The East India Company (EIC) was the pioneering transitional
company par excellence.
• In 1727 the EIC Governor declared that every
• "Company servant" was permitted to improve his fortune in any way
that he chose.
• The British monopoly in rice trade gave them a clear 900 per cent
profit.
Economic system
• The devastation and improvement which the British accomplished in
Bengal, legalised by the British Parliament's licence to loot, was
rapidly expanded to the rest of India, and continued till 1947.
• Within the next half century after Clive, it was estimated that
between £500 and 1,000 million was transferred to Britain by
thousands of men who came out as paupers and turned Into
multimillionaire within a few years.
Economic system
• Numerous lndiari rulers were deposed and puppets installed in their
place with each of the latter paying "compensation" to the British.
• The British demanded such wealth which they claimed they would
have otherwise had from the plunder of each particular territory.
• Many of India's rulers preserved their people and territories from
British rule by agreeing to pay this tribute.
Economic system
• Others, yet to be disposed, were made to pay for the British armed
forces used to keep them in bondage.
• When they had impoverished themselves due to these extractions,
the rulers were loaned money by British officers and others, with
interest of around 50% per annum.
• Such payments forced the rulers to raise tax rates or to surrender
portions of their land to the lenders
Economic system
• A whole series of measures were employed to legalise trickery.
• The British set up a mint in Calcutta and, as Adam Smith revealed, the
gold coins it produced were "rated too high for the value which it
bears in the market of Bengal.
• In 1835, the EIC introduced its silver rupees as the standard coin in
British-occupied India, there in by demonetizing all Indian currencies.
• The constant manipulation's of the currency of India in the interests
of Britain, once more foreshadows the machinations of the WB and
IMF today when they insist upon the devaluation of our currencies
Economic system
• Taxation
• In 1758, a tax of 10% on the produce of the landed estates in Bombay
was imposed by the EIC to meet its extravagant expenses, to build
fortifications and other works for maintaining its war with the French
in India, and for extending its occupation here.
• In 1765, the EIC forcibly obtained the "right" to collect land revenue in
Bengal.
• The profits from this enabled them to further increase their armed
strength and to monopolise the production and marketing of
commodities.
Economic system
• The EIC levied a tax on all salt produced in India, obtaining a revenue
of more than 1 million per year, during the last years of its rule.
• This excessive tax compelled impoverished millions to reduce the
quantity of salt consumed to less than one-half the amount declared
by the medical authorities to be absolutely necessary for health, if not
for life itself.
• The British imposed or enhanced taxes on land, trades, occupations
and commodities.
Economic system
• In South India, the taxes were raised from 12 to 16% of the gross
agricultural produce to 50%.
• The tax was calculated on what the farmer obtained in a good
agricultural year.
• If, for any reason, he had a bad crop he would almost surely make a
loss because the amount of tax remained fixed
Economic system
• Such oppressive taxes led to the decay of the excellent traditional
• agricultural, industrial and trading systems.
• The taxation policies of the British served to enrich the rich and
impoverish the poor-as most such policies still do today.
• There were several other processes by which Britain enriched itself
and impoverished India: the destruction of artisans industries so that
Britain could sell her industrial products, purchases made in Britain
that could have been made in India, making India bear the burden of
supporting a huge army to keep itself under subjugation, employing it
s own countrymen in all the well-paid jobs
Economic system
• When the EIC was "nationalized" by the British Parliament in 1858,
plunder by the hundreds of EIC servants was replaced by the burden of
high salaried and pensioned bureaucrats, probably making it the most
expensive administration in the world.
• Nearly all high officials were British living in palatial buildings. surrounded
by dozens of servants to do everything from keeping them cool with
punkhas (hand operated ceiling fans) to looking after their children while
they attended innumerable parties.
• The British in India imported their clothes and their horses, and even the
houses they liked in were constructed with wood and iron brought from
Europe.
Economic system
• Indians paid for the maintenance of the army that oppressed them.
• In 191 8, an Excess Profits Tax was imposed to pay in part only in part-
for the "defence of India.
• That's army was much larger than anything required for the defence
of the country, the only possibility of attack coming from other
European armies
Economic system
• India had been conquered by other foreign powers before the British,
but the invaders settled in India.
• The difference of the British conquest lies in the fact that it led to the
emergence of a new political and economic system whose interest
were rooted in a foreign soil and whose policies were guided solely by
those interests.
• Whereas the early invaders Indianized themselves, the British tried to
keep a distance between them and the Indian people and thus
created the distinction erstwhile unknown to Indian history-the
concept of foreign rulers and the Indian subjects
Economic system
• The British conquest led to the disintegration of the village community
partly by the introduction of the new land revenue system and partly by the
process of commercialisation of agriculture.
• The new land system and the commercial agriculture meant untold
exploitation of the Indian peasantry and the country was consequently
plagued by frequent famines
• The British were not interested in developing India as such.
• The growth of railways or the spread irrigation or the expansion of
education or the creation of revenue settlements were all initiated with one
supreme goal, i.e. to accelerate the process of economic drain from India.
Economic system
• To understand the economic consequences of the British conquest, it
would be convenient to study them under the following heads:
• (1) Decline of lndian Handicrafts and progressive ruralisation or the
lndian economy;
• (2) growth of the new land system and the commercialisation of
Indian agriculture.
Economic system
• The principal causes that led to the decay of handicrafts were as follows:-
• (a) Disappearance of Princely Courts. The growth of quite a number of
industries and towns was possible owing to the patronage of Nawabs,
Princes, Rajas and Emperors who ruled in India.
• The British rule meant the disappearance of this patronage enjoyed by
the handicrafts.
• Cotton and silk manufacturers suffered especially.
• Besides, the artisans who manufactured specially designed articles for
display and decoration of courts also suffered because of a decline in the
demand for works of art.
Economic system
• The British were always guided by their own interests, and never
bother effects of their policies on the people of India in terms of
unemployment, human suffering, famines, etc.
• They formulated certain policies, and propagated them but when
conditions changed in England they were quick to reverse them
• By the time, England had developed industrially to such an extent that
unrestricted competition of British manufactures with Indian
handicrafts led to their decline
Economic system
• The destruction of Indian handicrafts had far-reaching economic
consequences. It led to unemployment on a vast scale.
• Since textile industry was the worst sufferer in this process, the weavers
were hit the most.
• Lord William Bentinck reported in 1834: " the misery hardly finds a
parallel in the history of commerce
• Another consequence of the decline of handicrafts was the compulsory
back to the land movement.
• The British destroyed the institution of Indian handicrafts but did not
care to provide an alternative source of employment
Economic system
• The unemployed craftsmen and artisans shifted to agriculture and
increased the proportion of population dependent on land.
• This trend of the growing proportion of the working force on agriculture is
described as 'progressive ruralisation' or 'deindustrialization of India'.
• Thus, the increased pressure of population on land was responsible for
progressive sub-division and fragmentation of holdings.
• It led to an increase in land-rents charged from tenants.
• It meant an increase in the number of landless labourers.
• Thus the crisis in handicrafts and industries seriously crippled Indian
agriculture.
Agriculture
• Commercialisation of Indian Agriculture
• Another noteworthy change in Indian agriculture was its
commercialisation that spread between 1850-1947.
• Commercialisation of agriculture implies production of crops for sale
rather than for family consumption.
• At every stage of the economic history of the nation, a part of the
agricultural output has been is produced for the market.
• It was as deliberate policy worked up under pressure from British
Agriculture
• British manufacturer industrialist and merchant to acquire more and
more of raw materials for the British Industries.
• By offering a higher bait of market price, the peasants were induced
to substitute commercial crops for food crops as the former were
more paying than the latter.
• Consequently, the peasants shifted to industrial crops and in some
districts, the movement for commercial agriculture became so strong
that the peasants started buying foodstuffs from the mandis for their
domestic needs.
Agriculture
• This led to fall in the production of food ant1 consequently this period
is marked by the occurrence of most terrible famines and this
happened for the first trine in the economic history of India.
• Commercial agriculture was also, to some extend, the result of the
mounting demands of land revenue by the state and excessive rent by
the landlords from the peasantry.
Agriculture
• Urban marketing centres and thus Indian agriculture began to
produce for world markets.
• Large quantities of wheat from Punjab jute from Bengal and cotton
from Bombay poured in for export to England.
• The same railways which carried commercial crops from the various
parts of the country, brought back the foreign machine made
manfactures to India.
Agriculture
• Thus, railways, and link-roads connecting the hinder-land of the
country with commercial and trading centres were instrumental in
intensifying commercial agriculture on the one had and sharpening
competition of machine-made goods with Indian handicrafts, on the
other.
• These factors led to the ruin of Indian industries
The Nature of Famines in India
• Before the advent of modem means of transport, especially railways,
the famines in India were localised scarcities of food in those regions
where the crops shrunk on account of bad rains etc.
• Both the construction of railways and the growth of trade after 1860
brought about a radical change in the nature of famines. previously, a
famine meant extreme hunger and the population had to undergo
suffering on account of lack of food because there were no means of
transporting the surplus food grain even it' it was available in other
parts of the country.
• The position after 1860 was that the rapid means of transport made it
possible to carry food from one region the other without much loss of
time.
• But periods of famine were invariably periods of high food prices and
extensive agricultural unemployment.
• Therefore the mass of the poor people found it impossible to
purchase food.
• Consequently, the earlier famines were described as food shortages
hut later once are more appropriately described as purchasing power
famines.
• The Famine Commission (1889) made it abundantly clear when it
emphasized that food was "always purchasable in the market though at high
prices and in some remote places at excessively high prices" two factors
were responsible for pushing up food prices, despite the favourable effect of
railways in moving food grains rapidly.
• First, an impending storage of food meant hoard and speculation which
helped to push up the price level very fast.
• Secondly, government did not allow any decrease in the export of food
grains even in the lean years.
• Consequently, speculator and the Government both accentuated the gravity
of the problem
Causes of Famines
• There is no doubt that the immediate cause. of famines was the
failure or the unreasonableness of rains.
• It is common knowledge that the means of irrigation were
undeveloped and rainfall played a crucial role in agricultural
production.
• Famines were a common occurrence in the dry regions and areas with
a rainfall varying between 15 and 60 inches.
• The areas affected most by famines were Bihar, West Bengal, Orissa,
Rajasthan. Tamil Naidu, Maharashtra, Andhra Pradesh and Karnataka.
Causes of Famines
• Failure of rains caused an absolute deficiency which resulted in great
famines but reasonableness of rainfall also proved destructive to
crops and, there created food scarcity.
• A country wholly or mainly depending on rainfall, rain can be
considered as the most dominant factor determining agricultural
production.
• The real factors which led to the occurrence of famine again and
again in India while they were banished after 1850 from Europe-it is
quite desirable to understand the economic and sociological
transformation that took place during the British rule
The New Land System
• The British created a class of landlords so as to affix responsibility for
land revenue, but the British left the process of rent fixation to the
free market mechanism.
• The increasing demand for land for a growing agricultural population
led to an exorbitant increase in rents, Land was transformed in this
process to an attractive capital asset.
• Thus there was a great desire among the money lending classes to
acquire land.
• The rise in prices of land enhanced the value of the security in the
form of land against which peasants could borrow.
The New Land System
• This led to increase in agricultural debt of the Indian peasantry,
repeatedly exposed to uncertainties.
• The high rates of interest charged by the moneyed classes made it
impossible for the peasants to repay their debts. Gradually lands
passed on to the money lending classes.
• The dispossession of the peasantry by the moneylenders added to the
process of pauperisation of the cultivating classes.
The New Land System
• Thus the new land relations which embodied the creation of a class of landowners
and a class of cultivators (whether on a tenancy basis or a daily wage) separated
ownership from cultivation.
• The landlords were interested in extracting high rents, leaving a pittance with the
cultivators.
• The investment on land fell sharply because the cultivators had to part off with a
major portion of the produce in the form of rent of land to the landlords and interest
to the moneylenders.
• This created in Indian agriculture a built-in depressor.
• Thus, the new agrarian relations were disincentive-ridden and helped only to effect
agricultural production adversely and retarded the process of agricultural
development.
The Impact of Colonial Rule
• Colonialism had a deep impact on the repeated occurrence of famines in India.
• The destruction of the Indian handicrafts increased unemployment in the rural
areas.
• Whereas in England, surplus labour from rural areas was quickly absorbed in
new industries created in the process of industrialisation, nothing of this kind
happened in India.
• The industrialisation of the Indian economy would have deprived England of a
ready market for its goods and so the colonial interests were opposed to the
development of industries in India.
• Thus labour thrown out of employment in traditional industries could only
burden a subsistence agriculture.
Poverty of the Masses and the Economic
Exploitation
• Dadabhai Naoroji. a distinguished Indian economist, in his classic
paper on the 'Poverty of India' (1876), emphasized that the drain of
wealth and capital from the country which started after I757 was
responsible for absence of development of India.
• According to Dadabhai Naoroji "The drain consists of two elements -
first, that arising from the remittances by European officials of their
savings, and for their expenditure in England for their various wants
both there and in India: from pensions and salaries paid in England:
and second that arising from remittances by non-official Europeans'.
Exploitation
• This implies that India had to export much more than she imported in
order to meet the requirements of the economic drain.
• During the period of the East India Company, an outright plunder in
the form of gift exactions and tributes was carried out. Dadabhai
Naoroji, Y.S. Pandit and S.B. Saul have estimated the annual drain for
various periods.
• Taking the estimates based on the balance of payments alone, Saul's
figure for 1880 amounts to 4.14.0 of the Indian national income.
Exploitation
• Irfan Habib, therefore, writes: "The fact that India had to have a rate
of savings of 4% of its national income just to pay the Tribute must be
borne in mind when economists speak of the lack of internal
capacities for development, or the low per capital income base, from
which the British could not lift the Indian's however, much they
tried".'
Exploitation
• The economic drain of wealth prevented the process of capital
creation in India but the British brought back the drained out capital
and set up industrial concerns in India owned by British nationals.
• The government protected their interests and thus the British could
secure almost a monopoly of all trade and principal industries.
• The British component of industries established in India further
drained off Indian wealth in the form of remittances of profits and
interests.
Exploitation
• Moreover, the British firm dominated the Indian industrial scene and
stifled the growth of Indian enterprise in industry.
• Thus, the economic drain which commenced right from the inception
of the British rule acted as a drag on economic development till 1947.
• Leaving the bird's-eye-view of affairs obtained from these snapshots,
let us examine the situation at closer range.
Exploitation
• We find the old-time skilled handicraftsman and artisans have lost
their trade, and no industry has replaced them, but these men have
been driven back to the land to eke out a precarious living with a
slightly increased population.
• Part of the year they work, but when the dry season sets in, they are
left idle.
• The relative increase in population during the last century is very
much lower in India than it has been in Europe.
Exploitation
• 'There has been a large number of famines, and these more devastating
ones in the last half a century than throughout the past of India's long
history
• Everywhere the administration appears to be practically in the hands of
European officers who naturally work with their return passage in their
pockets.
• Their interests are not identified with the interests of those who in they
govern, nor are they responsible to them.
• Their feet indeed rest on Indian soil, but their laces are turned homeward.
The sons of the soil who were once the administrators have been reduced to
an ill-paid community clerks
Exploitation
• The British economists have always held the view that the
backwardness of the Indian economy and its failure to modernize
itself was largely due to the value: system, i.e., spiritualism,
asceticism, the caste system, joint family, etc.
• Similarly, the British economists have always argued that Indian
capital was proverbially shy, it always sought safe avenues of
investment and thus lacked the basic quality of adventure, which is an
essential condition for dynamic entrepreneurship.
Exploitation
• Dr. Bipin Chandra who has examined the impact of colonial rule in
modernizing India rejected both these arguments for absence of
modernization as mere shibboleths.
• He wrote "It is a historical fallacy to assume that India these under
British ride did not undergo a fundamental transformation, or that it
remained basically traditional".
• But the modernization of India was brought within the political
parameters of a colonial economy.
Exploitation
• Thus, the colonial links between India and Britain resulted in the
progress of the Industrial Revolution in Britain while it meant the
modernization of those sectors of the Indian economy which
strengthened the process of integration of the Indian economy with
British capitalism.
• "It was, therefore, not an accident nor was it historically exceptional
that India was integrated in to world capitalism, without taking part in
the industrial revolution. It was modernized and underdeveloped at
the same time".
Exploitation
• A close look at the economic changes of India during the British period would
reveal that when ever India's colonial economic links in terms of foreign trade
and inflow of foreign capital were disrupted, Indian economy made strides in
industrial development.
• During the 20‘ century, the colonial economic links were interrupted thrice: first,
during the First World War (I914- 18),
• Second, at the time of the Great Depression (1929-34) and third during the
Second, World War (1939-45).
• In other words, free flow of foreign trade and capital meant economic stagnation
in India, while their absence (partial or total) provided an opportunity for Indian
capital to open up avenues of industrial growth in areas choked off by import.
Exploitation
• The British rule was a long story of the systematic exploitation by an
imperialistic government of a people whom they had enslaved by
their policy of divide and rule.
• The benefits of British rule were only accidental and incidental, if any.
• The main motive of all British policies was to serve the interests of
England.
• Thus, in 1947 when the British transferred power to India, we
inherited a crippled economy with a stagnant agriculture and a
peasantry steeped in poverty.
East India Company
• The English East India Company, with the aim of understanding how
the doorstep conditions were met in England.
• The English Company is notable in the broader literature because it
paved the way for Britain’s colonization of India starting in the mid-
18th century.
• But for more than a century prior it was a privileged company with a
monopoly over all trade between England and Asia.
East India Company
• The East India monopoly is an excellent example of limited access.
• The Company gave the monarch added tax revenues through special
customs duties and a share of the prizes from captured ships.
• It also provided defense against other European nations in Asia.
• In return, the Company got the right to earn profits from its
MONOPOLY PRIVILEGES.
• This partnership was made explicit by the original charter in 1600 and
those that followed.
East India Company
• The East India Company was founded in 1600 through a charter
granted by Queen Elizabeth.
• Management was in the hands of a governor and a board of directors.
• Shareholders with a minimum number of shares elected the governor
and directors.
• The Company was given a monopoly over all trade and traffic from
the Cape of Good Hope to the Straits of Magellan—an area
encompassing much of the world’s population
East India Company
• The East Indian trade was not unique in being organized around
monopoly
• Most of these companies were granted a monopoly over trade with a
particular region like the East Indies.
• Monopoly was common because it offered the monarchy added tax
revenues, a source of loans in times of emergency, and assistance in
governing at home and abroad.
East India Company
• In the East Indian context, there is an argument that monopoly was
also selected because of the efficiency benefits to directors and
employees due to the violent trading environment in Asia, and the
challenges of corporate governance in an age with poor
communication.
• The monopoly was mainly selected because it suited the needs of the
monarch.
East India Company
• The Company’s trading monopoly survived the late eighteenth
century.
• However, the monopoly could have ended earlier as the Company’s
charter expired in 1781 and 1791.
• The monopoly was renewed several times.
• In this period, it is important to point out that the environment was
quite different because the Company gained significant territorial
possessions in India for the first time.
East India Company
• Robert Clive, originally a company official and later a commander in
the British Army, led a war against the Nawabs of Bengal in 1757.
• The end result was the Company gained political control over Bengal,
including its tax revenues by 1765.
• The new territorial revenues were vast and led to corruption and
abuse by Company officials
East India Company
• A secure East Indian monopoly only emerged in the mid-18th century
when political stability and fiscal capacity increased.
• The Company’s trading privileges were renegotiated only after the
terms of the charter expired, and not according to the dictates of
politics and finance.
• However, the liberalization of the market had to wait several more
decades.
• Monopoly remained stable because of the Company’s strong political
connections
East India Company
How the British East India Company managed to colonise India for nearly
200 years
• With the closure of the 18th century, the actual rule of the Mughal emperor
was confined only to a limited area around the city of Delhi, the capital.
• The weakness of the empire led the regional powers to assert their
authority.
• The regional power who rebelled and had an autonomous kingdom were
the Marathas, the Sikhs, the Jats of Bharatpur and the Afghan kingdoms of
Farukhabad and Rohilkhand.
• Apart from the successor states and the rebel states, there were also a few
principalities, like the Rajput kingdoms, Mysore and Travancore, which
already enjoyed considerable amount of autonomy in the past and now in
the eighteenth century became completely independent
East India Company
• The foundation of EIC was laid in a royal charter from Queen Elizabeth
I on December 31, 1600, as a joint stock company of London
merchants uniting to fight Dutch competition trade.
• It had the monopoly of all trade from England to the East, and was
permitted to carry bullion out of the country to finance its trade.
• In 1608, the company's first ship arrived at Surat.
• In 1615, Sir Thomas Roe, an English emissary of King James I reached
out to the court of the then Mughal emperor Jahangir (1605-1627), in
order to get a farman to establish a factory at Surat.
East India Company
• With the farman, the English started the full-fledged trade in India but
soon the trading interest clashed with other European countries: the
Portuguese, French, Dutch and the Spaniards.
• This led to some conflicts in order to secure trading monopoly in
markets India, China and Southeast Asia among the European trading
companies.
• In 1623, the EIC found themselves driven out of Indonesia as the
Dutch East Indies had gained a strong foothold in the region.
• Defeated by Dutch and losing hope of trading in Indonesia, the
Company moved onto trading with India.
East India Company
• Under the Mughal patronage, the British gradually ousted the Portuguese trading
venture of Estado da India, which had a massive control of trading in India.
• This was followed by the setting up of the first factory in Surat by the British,
which was then followed by the acquisition of Madras in 1639, Bombay in 1668,
and Calcutta in 1690.
• It is interesting to note that the settlement of Bombay was gained as dowry to
Charles II from his bride who received it from the Portuguese crown in 1661 and
was handed over to the East India Company.
• In 1687, Bombay become the headquarters of the west coast, shifting from Surat.
• Setting up numerous posts along the eastern and western coast, the most
important trading ports were established around Calcutta, Bombay, and Madras.
East India Company
• The three ports, allowed the East India Company to have monopoly
over the trade routes over the Indian Ocean.
• Steadily, the company started trade in cotton, silk, indigo, saltpetre,
and an array of spices.
• In 1711, the company established itself in China, and initiated
commerce of tea in exchange for silver.
• By the end of 1715 trading activities of the company established base
and expanded trade around the Persian Gulf, Southeast and East Asia.
East India Company
• Towards complete monopoly and conquest
• With European competitors in the sub-continent and France emerging
as a national as well as imperial rival through the War of Austrian
Succession and the Seven Years War, in the 1740s, the animosity
between the two nations reached extremes, as the conditions in
Europe had an effect on the Indian battleground.
• Between 1756 and 1760 the British finally ousted the French threat,
with Governor General Robert Clive leading the British army.
East India Company
• There was greater importance given to EIC's Indian foothold,
especially in the country’s coastline, which was pivotal for colonial
expansion in Asia and Africa.
• A major role in this expansion was played by the large standing army
consisting of sepoys who were soldiers trained in European military
techniques.
• The EIC called them 'British naval power' and 'crown troops' stationed
in India.
East India Company
• With many military advantages on their side, EIC became a powerful
player in the local polity as it was involved in local disputes.
• All the more, the company was offered financial help from many
merchants and bankers like Jagat Seth.
• The Mughals, taking stock of the British fortifying Calcutta’s Fort
William, attacked them.
• Even though the Mughals were victorious in 1756, it was short-lived.
East India Company
• The British recaptured Calcutta later the same year.
• The EIC went onto defeat the local royal representatives Siraj ud-
Daulah with the help of merchants like Jagat Seth, and bribing Mir
Jafar at the battle of Plassey in 1757.
• Then came the battle of Buxar in 1764, which was followed by the
Mughal emperor signing a treaty with the company, granting
them diwani rights of Bengal – control over the administration of the
region and the right to collect tax revenue in lieu of a revised revenue
amount every year.
East India Company
• Meanwhile, with EIC's lingering influence over south, by the 1770s the
balance of power had shifted. The Maratha in western India and Tipu Sultan
of Mysore were defeated and expansion continued. By early nineteenth
century, the EIC was the dominant political power in India, with direct control
over two-thirds of the subcontinent and indirect control over the rest.
• Thus started the transformation of a mere trading company into a colonial
authority.
• A modest foundation from where the Company steadily progressed its
trading activities to other parts of India, with Bombay, Calcutta and Madras
developing by the end of the seventeenth century as three major centres of
its activities.
East India Company
• Then, the political expansion, which started in the middle of the eighteenth
century, was truly achieved in a span of hundred years, and the whole of India
was under East India Company.
• It was in control of administering the civil, judicial and revenue systems in
India.
• Furthermore, in 1858, the English deposed the last Mughal emperor Bahadur
Shah II.
• What changed the dynamics of EIC was the measures made in Bengal,
providing them direct administrative control over a region.
• Subsequently, this led to 200 years of colonial supremacy and control of India
by the British.
East India Company
• TEA, TEXTILES AND PORCELAIN
• At its outset the East India Company was interested in the commercial
opportunities offered by the spice islands of Southeast Asia rather than
India.
• However cargoes of Indian cloth sparked growing interest amongst
consumers in England.
• The Company also shipped Chinese merchandise from Canton
(Guangzhou): tea, silk, textiles and porcelain.
• Asian commodities were paid for with exported British woollens and
metals, supplemented by silver bullion.
East India Company
• FACTORIES
• The Company’s operations were underpinned by the ‘factory’ system:
when the ships returned to Europe, agents known as ‘factors’ were
left behind at trading posts to negotiate with local merchants for the
sale of current stocks of goods and the procurement of return cargoes
for the next year’s voyage.
• Company business was overseen by a central administration in
London based around the twenty-four elected members of the Court
of Directors and a number of specialized committees of the Court.
East India Company
• The directors were answerable to the Company shareholders who
met regularly at the General Court of Proprietors.
• The Company sent commercial, political and administrative
instructions on its ships to the councils established at its main
settlements in Asia, and these councils were in turn responsible for
the management of subordinate factories which included Bandar
Abbas and Basra.
East India Company
• FROM TRADING COMPANY TO MILITARY POWER
• The East India Company developed beyond a purely commercial
enterprise when war between Britain and France spread to India in
the mid-1740s.
• The Company established military supremacy over rival European
trading companies and local rulers, culminating in 1757 in the seizure
of control of the province of Bengal.
East India Company
• In 1765, the Mughal Emperor granted the Company the diwani (the
right to harvest the revenues of Bengal, Bihar and Orissa), which
provided funds to bolster the Company’s military presence in the sub-
continent. Further territorial acquisitions in India during the late
eighteenth and early nineteenth centuries cemented the change in
the Company’s role from mere trader to a hybrid sovereign power.
East India Company
• THE BOARD OF CONTROL: PARLIAMENT CURBS AUTONOMY
• Faced with this transformation and with growing concerns about
mismanagement and corruption, the British Parliament decided to
place a curb on the Company’s autonomy.
• From 1784 the Board of Control supervised the East India Company’s
administrative and political affairs, but not its commercial business
nor the exercise of patronage by the directors.
East India Company
The East India's Company Headquarters in Leadenhall Street
East India Company
• The Company’s mercantile monopoly came increasingly under attack
and its commercial operations were at first scaled down by Parliament
after years of pressure from the free trade lobby and then wound up
completely by the Charter Act of 1833.
• The Company continued in its imperial role until 1858 when, in the
aftermath of the military and civil rebellion in the north of the sub-
continent, the Government of India Act transferred its powers to
the India Office , a department of state.
• The EIC was finally dissolved on 1 June 1874, after shareholders
received compensation from Parliament.
East India Company
• Towards Complete Monopoly
• In 1694, the House of Commons voted “that all the subjects of England
had an equal right to trade to the East Indies unless prohibited by act of
Parliament.”
• Under pressure from wealthy influential tradesmen not associated with
the Company. Following this the English Company Trading to the East
Indies was founded with a state-backed indemnity of £2 million.
• To maintain financial control over the new company, existing stockholders
of the old company paid a hefty sum of £315,000. The new company could
hardly make a dent in the established old company markets.
East India Company
• The new company was ultimately absorbed by the old East India
Company in 1708. A tripartite venture was established between the
state, the old and the new trading companies under the banner
of United Company of Merchants of England Trading to the East
Indies.
• The following few decades saw a bitter tug of war between the
company lobby and the British Parliament to acquire permanent
establishment rights which the latter was hesitant to relinquish in
view of the immense profits the company brought.
East India Company
• The united company lent to the government an additional £1,200,000
without interest in exchange of renewal of charter until1726.
• In 1730, the charter was renewed until 1766, in exchange of the East
India Company lowering the interests on the remaining debt amount
by one percent, and contributed another £200,000 to the Royal
treasury.
East India Company
• In 1743, they loaned the government another £1,000,000 at 3%
interest, and the government prolonged the charter until 1783.
• Effectively, the company bought monopoly of trading in the East
Indies by bribing the Government.
• At every juncture when this monopoly was expiring, it could only
affect a renewal of its Charter by offering fresh loans and by fresh
presents to the Government
East India Company
• Takeover of the Company by the British Crown
• The brutal and rapid annexation of native Indian states by introduction of
unscrupulous policies like the Doctrine of lapse or on the grounds of
inability to pay taxes along with forcible renunciation of titles sparked
widespread discontent among the country’s nobility. Moreover, tactless
efforts at social and religious reforms contributed to spread of
discomfiture among the common people.
• The sorry state of Indian soldiers and their mistreatment compared to
their British counterparts in the armed forces of the Company provided
the final push towards the first real rebellion against the Company’s
governance in 1857.
East India Company
• Known as the Sepoy Mutiny, what began as soldiers protest soon took epic
proportions when disgruntled royalties joined forces. The British forces were
able to curb the rebels with some effort, but the munity resulted in major
loss of face for the Company and advertised its inability to successfully
govern the colony of India.
• In 1858, the Crown enacted the Government of India Act, and assumed all
governmental responsibilities held by the company.
• They also incorporated the Company owned military force into the British
Army.
• The East India Stock Dividend Redemption Act was brought in effect on
January 1, 1874 and the East India Company was dissolved in its entirety.
East India Company
• Legacy of the East India Company
• Although the East India Company’s colonial rule was hugely detrimental to the interest of the
common people due to the exploitative nature of governance and tax implementation, there is
no denying the fact that it brought forward some interesting positive outcomes as well.
• One of the most impactful of them was a complete overhaul of the Justice System and
establishment of the Supreme Court.
• Next big important impact was the introduction of postal system and telegraphy which the
Company arguably established for its own benefit in 1837.
• The East Indian Railway Company was awarded the contracts to construct a 120-mile railway
from Howrah-Calcutta to Raniganj in 1849.
• The transport system in India saw improvements in leaps and bounds with the completion of a
21-mile rail-line from Bombay to Thane, the first-leg of the Bombay-Kalyan line, in 1853.
Agriculture
• Agriculture The colonial government made institutional changes in
agriculture by transforming traditionally circumscribed property rights
into something more closely resembling the unencumbered private
property characteristic of Western capitalism.
• The beneficiaries of these new rights varied in different parts of India.
The top layer of Moghul property, the jagir, was abolished (except in
the autonomous princely states), and the bulk of the old warlord
aristocracy was dispossessed.
• Their previous income from land revenue, and that of the Moghul
state, was now appropriated by the British as land tax.
Agriculture
• However, in the Bengal presidency (i.e. modern Bengal, Bihar, Orissa and
part of Madras) the second layer of Moghul property rights belonging to
Moghul tax collectors (zamindars) was reinforced.
• All zamindars in these areas now had hereditary status, so long as they paid
their land taxes, and their judicial and administrative functions disappeared.
• In the Moghul period the zamindars had usually kept a tenth of the land
revenue to themselves, but by the end of British rule their income from
rents was a multiple of the tax they paid to the state.
• In Bihar, for instance, five-sixths of the total sum levied by 1950 was rent
and only one-sixth revenue
Agriculture
• However, zamindars were not really the equivalent of Western
landowners.
• Dominant families in each village remained as their ‘tenants-in-chief’
and continued to enjoy many of the old customary rights, i.e. they
could not be evicted, their rights were heritable and their rental
payments could not be raised easily.
• Lower-caste families were usually sub-tenants of the tenants-in-chief,
rather than direct tenants of the zamindars.
• Often there were several layers of tenancy between the actual
cultivator and the zamindar.
Agriculture
• Sub-tenants had less security and less defence against rack-renting
than tenants-in-chief.
• It is worth noting that when zamindari rights were abolished around
1952 and the old zamindar rental income was converted into state
revenue, the amount involved was only about 2 per cent of farm
income in the relevant areas of India.
• This suggests that by the end of the colonial period, the zamindars
were not able to squeeze as much surplus out of their chief tenants as
is sometimes suggested.
Agriculture
• The typical zamindari estate at the end of British rule seems to have
been very different from that at the end of the eighteenth century.
• In Bengal the total “number of landowners which did not exceed 100
in the beginning of Hasting's administration in 1772, rose in the
course of a century to 154,200”.
• In 1872 there were 154,200 estates of which “533, or 0.34 per cent,
only are great properties with an area of 20,000 acres and upwards;
15,747, or 10.21 per cent, range from 500 to 20,000 acres in area;
while the number of estates which fell short of 500 acres is no less
than 137,920, or 89.44 per cent, of the whole
Agriculture
• Zamindari properties to the fact that they could be inherited or sold
freely, whereas the Moghul state wanted to keep the number small
because zamindars had administrative functions under the Moghul
Empire.
• Under the British, transfers became much more frequent, particularly into
the hands of moneylenders.
• The moneylenders are frequently presented as squeezing out poor
peasants and tenantry and thus promoting the concentration of wealth,
but the evidence of what happened to zamindar estates suggests that
village moneylenders may also have helped to break up concentrations of
wealth.
Agriculture
• In the Madras and Bombay Presidencies, which covered most of
Southern India, the British dispossessed many of the old Moghul and
Mahratta nobility and big zamindars, and vested property rights and
tax obligations in individual 'peasants'.
• This settlement was known as the ryotwari (peasant tenure) system.
• However, the term peasant is misleading, because most of those who
acquired land titles belonged to the traditionally dominant castes in
villages.
• Lower-caste cultivators became their tenants.
Agriculture
• Thus there was no change in social structure at the village level,
except that the new ownership rights gave greater opportunities for
sale and mortgage, and the security of the tenant was less than it had
been under the previous system.
• The change in legal status was limited by several factors.
Agriculture
• First of all, illiterate peasant did not always understand the new situation,
and there were strong social ties in the joint family and the caste
panchayats to prevent major deviations from old habits
• Secondly, the new administration was rather remote from individual
villages (with a district officer responsible for over a thousand villages),
and many British administrators had a personal bias in favour of
customary tenant rights because by maintaining them they could avoid
political trouble.
• At a later stage, the government itself introduced a good deal of
legislation to protect customary rights in response to peasant
disturbances.
Agriculture
• Land policy was, therefore, another instance of British policy of half
Westernization.
• The British were more concerned with arrangements which would
guarantee their revenue and not provoke too much political
disturbance rather than in increasing productivity or introducing
capitalist institutions.
Agriculture
• The Utilitarians who dominated the Company from 1820 to 1850 would have
liked to push in this direction, but they were displaced at mid-century by the
paternalist conservatives f the Imperial raj.
• Nevertheless, there were some economic consequences of the new legal
situation.
• Because of the emergence of clear titles, it was now possible to mortgage land.
• The status of moneylenders was also improved by the change from Muslim to
British law.
• There had been moneylenders in the Moghul period, but their importance
grew substantially under British rule, and over time a considerable amount of
land changed hands through foreclosure
Industry
• Industry Several Indian authors have argued that British rule led to a
de-industrialization of India.
• “India in the eighteenth century was a great manufacturing as well as
a great agricultural country, and the products of the Indian loom
supplied the markets of Asia and Europe.
• It is, unfortunately, true that the East India Company and the British
Parliament, following the selfish commercial policy of a hundred years
ago, discouraged Indian manufacturers in the early years of British
rule in order to encourage the rising manufactures of England.
Industry
• Their fixed policy, pursued during the last decades of the eighteenth
century and the first decades of the nineteenth, was to make India
subservient to the industries of Great Britain, and to make the Indian
people grow raw produce only, in order to supply material for the looms
and manufactories of Great Britain”.
• “the real picture of modern India is a picture of what has been aptly called
“de-industrialization”- that is, the decline of the old handicraft industry
without the compensating advance of modern industry. The advance of
factory industry has not overtaken the decay of handicraft.
• The process of decay characteristic of the nineteenth century has been
carried forward in the twentieth century and in the post-war period
Industry
• There is a good deal of truth in the deindustrialization argument.
• Moghul India did have a bigger industry than any other country which
became a European colony, and was unique in being an industrial
exporter in pre-colonial times.
• A large part of the Moghul industry was destroyed in the course of
British rule.
• However, it is important to understand precisely how this
deindustrialization came about and to try to get some idea of its
quantitative significance in different periods.
Industry
• Oversimplified explanations, which exaggerate the role of British
commercial policy and ignore the role of changes in demand and
technology, have been very common and have had some adverse
impact on post-independence economic policy
• Between 1757 and 1857 the British wiped out the Moghul court, and
eliminated three quarters of the warlord aristocracy (all except those
in princely states).
• They also eliminated more than half of the local chiefs (zamindars)
and in their place established a bureaucracy with European tastes.
Industry
• The new rulers wore European clothes and shoes, drank imported beer, wines
and spirits, and used European weapons.
• Their tastes were copied by the male members of the new Indian 'middle
class' which arose to act as their clerks and intermediaries.
• As a result of these political and social changes, about three-quarters of the
domestic demand for luxury handicrafts was destroyed.
• This was a shattering blow to manufacturers of fine muslins, jewellery, luxury
clothing and footwear, decorative swords and weapons.
• It is not known how important these items were in national income, but my
own guess would be that the home market for these goods was about 5 per
cent of Moghul national income.
Industry
• The export market was probably another 1.5 per cent of national income,
and most of this market was also lost.
• There was a reduction of European demand because of the change in
sartorial tastes after the French revolution, and the greatly reduced price of
more ordinary materials because of the revolution of textile technology in
England.
• The second blow to Indian industry came from massive imports of cheap
textiles from England after the Napoleonic wars.
• In the period 1896-1913, imported piece goods supplied about 60 per cent
of Indian cloth consumption and the proportion was probably higher for
most of the nineteenth century.
Industry
• Home spinning, which was a spare-time activity of village women, was greatly
reduced.
• A large proportion of village hand-loom weavers must have been displaced,
though many switched to using factory instead of home-spun yarn.
• Even as late as 1940 a third of Indian piece goods were produced on hand
looms.
• The new manufactured textile goods were considerably cheaper and of better
quality than hand-loom products, so their advent increased textile
consumption.
• At the end of British rule, there can be no doubt that cloth consumption per
head was substantially larger than in the Moghul period.
Industry
• We do not know how big an increase in textile consumption occurred,
but if per capita consumption of cotton cloth doubled (which seems
quite plausible), then the displacement effect on hand-loom weavers
would have been smaller than at first appears.
East India Company
• Economic Impact of the British Rule in India
• 1. Disruption of the Traditional Economy
• 2. Ruin of Artisans and Craftsmen
• 3. Impoverishment of the Peasantry
• 4. Ruin of Old Zamindars and Rise of New Landlordism
• 5. Stagnation and Deterioration of Agriculture
• 6. Development of Modern Industries
• 7. Poverty and Famines.
East India Company
• DISRUPTION OF THE TRADITIONAL ECONOMY:
• The economic policies followed by the British led to the rapid
transformation of India’s economy into a colonial economy whose nature
and structure were determined by the needs of the British economy.
• In this respect the British conquest of India differed from all previous
foreign conquests.
• The previous conquerors had overthrown Indian political powers, but
had made no basic changes in the country’s economic structure; they
had gradually become a part of Indian life, political as well as economic.
East India Company
• The peasant, the artisan and the trader had continued to lead the
same type of existence as before.
• The basic economic pattern that of the self-sufficient rural economy,
had been perpetuated.
• Change of rulers had merely meant change in the personnel of those
who appropriated the peasant’s surplus.
• But the British conquerors were entirely different.
• They totally disrupted the traditional structure of the Indian economy.
East India Company
• 2. Ruin of Artisans and Craftsmen:
• There was a sudden and quick collapse of the urban handicrafts industry
which had for centuries made India’s name a byword in the markets of the
entire civilized world.
• This collapse was caused largely by competition with the cheaper imported
machine made goods from Britain.
• We know the British imposed a policy of oneway free trade on India after
1813 and the invasion of British manufactures, in particular cotton textiles,
immediately followed. I
• ndian goods made with primitive techniques could not compete with goods
produced on a mass scale by powerful steam-operated machines.
East India Company
• The ruin of Indian industries, particularly rural artisan industries,
proceeded even more rapidly once the railways were built.
• The railways enabled British manufactures to reach and uproot the
traditional industries in the remotest villages of the country.
• The cotton-weaving and spinning industries were the worst hit.
• Silk and woolen textiles fared no better and a similar fate overtook
the iron, pottery, glass, paper, metals, guns, shipping, oil-pressing,
tanning and dyeing industries.
East India Company
• Apart from the influx of foreign goods, some other factors arising
from British conquest also contributed to the ruin of Indian industries.
• The oppression practiced by the East India Company and its servants
on the craftsmen of Bengal during the second half of the eighteenth
century, forcing them to sell their goods below the market price and
to hire their services below the prevailing wage, compelled a large
number of them to abandon their ancestral professions.
• In the normal course, Indian handicrafts would have benefited from
the encouragement given by the Company to their export, but this
oppression had an opposite effect.
East India Company
• The high import duties and other restrictions imposed on the import
of Indian goods into Britain and Europe during the eighteenth and
nineteenth centuries, combined with the development of modern
manufacturing industries in Britain led to the virtual closing of
European markets to Indian manufacturers after 1820.
East India Company
• The British purchased all their military and other government stores
in Britain.
• Moreover, Indian rulers and nobles were replaced as the ruling class
by British officials and military officers who patronized their own
home-products almost exclusively.
• This increased the cost of handicrafts and reduced their capacity to
compete with foreign goods.
• The ruin of Indian handicrafts was reflected in the ruin of the towns
and cities which were famous for their manufacture.
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• Cities which had withstood the ravages of war and plunder failed to
survive British conquest.
• Dhaka, Surat, Murshidabad and many other populous and flourishing
industrial centres were depopulated and laid waste.
• By the end of the nineteenth century, urban population formed barely
10 per cent of the total population.
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• “The misery hardly finds a parallel in the history of commerce. The
bones of the cotton-weavers are bleaching the plains of India.”
• The tragedy was heightened by the fact that the decay of the
traditional industries was not accompanied by the growth of modern
machine industries as was the case in Britain and western Europe.
• Consequently, the ruined handicraftsmen and artisans failed to find
alternative employment.
• The only choice open to them was to crowd into agriculture.
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• Moreover, the British rule also upset the balance of economic life in the
villages.
• The gradual destruction of rural crafts broke up the union between
agriculture and domestic industry in the countryside and thus
contributed to the destruction of the self- sufficient rural economy.
• On the one hand, millions of peasants, who had supplemented their
income by part-time spinning and weaving, now had to rely
overwhelmingly on cultivation; on the other, millions of rural artisans lost
their traditional livelihood and became agricultural labourers or petty
tenants holding tiny plots. They added to the general pressure on land.
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• Thus British conquest led to the de-industrialisation of the country
and increased dependence of the people on agriculture.
• No figures for the earlier period are available but, according to Census
Reports, between 1901 and 1941 alone the percentage of population
dependent on agriculture increased from 63.7 per cent to 70 per cent.
• This increasing pressure on agriculture was one of the major causes of
the extreme poverty in India under British rule.
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• In fact, India now became an agricultural colony of manufacturing
Britain which needed it as a source of raw materials for its industries.
Nowhere was the change more glaring than in the cotton textile
industry.
• While India had been for centuries the largest exporter of cotton
goods in the world, it was now transformed into an importer of British
cotton products and an exporter of raw cotton.
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• 3. Impoverishment of the Peasantry:
• The peasant was also progressively impoverished under British rule.
• Although he was now free from internal wars, his material condition
deteriorated and he steadily sank into poverty.
• In the very beginning of British rule in Bengal, the policy of Clive and
Warren Hastings of extracting the largest possible land revenue had
led to such devastation that even Cornwallis complained that one-
third of Bengal had been transformed into “a jungle inhabited only by
wild beasts”.
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• Nor did improvement occur later. In both the Permanently and the
Temporarily Settled Zamindari areas, the lot of the peasants remained
unenviable.
• They were left to the mercies of the zamindars who raised rents to
unbearable limits, compelled them to pay illegal dues and to perform forced
labour or beggar and oppressed them in diverse other ways.
• The condition of the cultivators in the Ryotwari and Mahalwari areas was no
better.
• Here the government took the place of the zamindars and levied excessive
land revenue which was in the beginning fixed as high as one-third to one-
half of the produce.
East India Company
• Heavy assessment of land was one of the main causes of the growth
of poverty and the deterioration of agriculture in the nineteenth
century.
• Many contemporary writers and officials noted this fact.
• For instance, Bishop Heber wrote in 1826:
• Neither Native nor European agriculturist, I think, can thrive at the
present rate of taxation.
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• Half of the gross produce of the soil is demanded by government. … In
Hindustan [Northern India] I found a general feeling among the King’s officers…
that the peasantry in the Company’s Provinces are on the whole worse off,
poorer and more dispirited than the subjects of the Native Provinces; and here
in Madras, where the soil is, generally speaking, poor, the difference is said to
be still more marked.
• The fact is, no Native Prince demands the rent which we do.
• Even though the land revenue demand went on increasing year after year—it
increased from Rs. 15.3 crore in 1857—58 to Rs. 35.8 crore in 1936—37—the
proportion of the total produce taken as land revenue tended to decline,
especially in the twentieth century as the prices rose and production increased.
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• No proportional increase in land revenue was made, as the disastrous consequences
of demanding extortionate revenue became obvious.
• But by now the population pressure on agriculture had increased to such an extent
that the lesser revenue demand of later years weighed on the peasants as heavily as
the higher revenue demand of the earlier years of the Company’s administration.
• Moreover, by the twentieth century, the agrarian economy had been ruined and the
landlords, moneylenders and merchants had made deep inroads into the village.
• The evil of high revenue demand was made worse because the peasant got little
economic return for his labour.
• The government spent very little on improving agriculture.
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• It devoted almost its entire income to meeting the needs of the British-Indian
administration, making the payments of direct and indirect tribute to England,
and serving the interests of British trade and industry.
• Even the maintenance of law and order tended to benefit the merchant and
the moneylender rather than the peasant.
• The harmful effects of an excessive land revenue demand were further
heightened by the rigid manner of its collection.
• Land revenue had to be paid promptly on the fixed dates even if the harvest
had been below normal or had failed completely.
• But in bad years the peasant found it difficult to meet the revenue demand
even if he had been able to do so in good years.
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• Whenever the peasant failed to pay land revenue, the government
put up his land on sale to collect the arrears of revenue.
• But in most cases the peasant himself took this step and sold part of
his land to meet the government demand.
• In either case he lost his land.
• More often the inability to pay revenue drove the peasant to borrow
money at high rates of interest from the moneylender. He preferred
getting into debt by mortgaging his land to a moneylender or to a rich
peasant neighbour to losing it outright.
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• He was also forced to go to the moneylender whenever he found it
impossible to make both ends meet.
• But once in debt he found it difficult to get out of it.
• The moneylender charged high rates of interest and through cunning
and deceitful measures, such as false accounting, forged signatures
and making the debtor sign for larger amounts than he had borrowed,
got the peasant deeper and deeper into debt till he parted with his
land.
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• The moneylender was greatly helped by the new legal system and the
new revenue policy.
• In pre-British times, the moneylender was subordinated to the village
community.
• He could not behave in a manner totally disliked by the rest of the
village.
• For instance, he could not charge usurious rates of interest.
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• In fact, the rates of interest were fixed by usage and public opinion.
• Moreover, he could not seize the land of the debtor; he could at most
take possession of the debtor’s personal effects like jewellery, or part
of his standing crop.
• By introducing transferability of land the British revenue system
enabled the moneylender or the rich peasant to take possession of
the land.
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• Even the benefits of peace and security established by the British
through their legal system and police were primarily reaped by the
moneylender in whose hands the law placed enormous power; he
also used the power of the purse to turn the expensive process of
litigation in his favour and to make the police serve his purposes.
• Moreover, the literate and shrewd moneylender could easily take
advantage of the ignorance and illiteracy of the peasant to twist the
complicated processes of law to get favourable judicial decisions.
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• Gradually the cultivators in the Ryotwari and Mahalwari areas sank
deeper and deeper into debt and more and more land passed into the
hands of moneylenders, merchants, rich peasants and other moneyed
classes.
• The process was repeated in the zamindari areas where the tenants
lost their tenancy rights and were ejected from the land or became
subtenants of the moneylender.
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• The process of transfer of land from cultivators was intensified during periods
of scarcity and famines.
• The Indian peasant hardly had any savings for critical times and whenever
crops failed he fell back upon the moneylender not only to pay land revenue
but also to feed himself and his family.
• By the end of the nineteenth century, the moneylender had become a major
curse of the countryside and an important cause of the growing poverty of
the rural people.
• In 1911 the total rural debt was estimated at Rs 300 crore. By 1937 it
amounted to Rs 1800 crore.
• The entire process became a vicious circle.
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• The pressure of taxation and growing poverty pushed the cultivators into debt, which
in turn increased their poverty.
• In fact, the cultivators often failed to understand that the moneylender was an
inevitable cog in the mechanism of imperialist exploitation and turned their anger
against him as he appeared to be the visible cause of their impoverishment.
• For instance, during the Revolt of 1857, wherever the peasantry rose in revolt, quite
often its first target of attack was the moneylender and his account books.
• Such peasant actions soon became a common occurrence.
• The growing commercialization of agriculture also helped the moneylender-cum-
merchant to exploit the cultivator. The poor peasant was forced to sell his produce
just after the harvest and at whatever price he could get as he had to meet in time
the demands of the government, the landlord and the moneylender.
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• This placed him at the mercy of the grain merchant, who was in a position
to dictate terms and who purchased his produce at much less than the
market price.
• Thus a large share of the benefit of the growing trade in agricultural
products was reaped by the merchant, who was very often also the village
moneylender.
• The loss and overcrowding of land caused by de-industrialisation and lack
of modern industry compelled the landless peasants and ruined artisans
and handicraftsmen to become either tenants of the moneylenders and
zamindars by paying rack-rent or agricultural labourers at starvation
wages.
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• Thus the peasantry was crushed under the triple burden of the
government, the zamindar or landlord, and the moneylender.
• After these three had taken their share not much was left for the
cultivator and his family to subsist on.
• It has been calculated that in 1950-51 land rent and moneylenders’
interest amounted to Rs 1400 crore or roughly equal to one-third of the
total agricultural produce for the year.
• The result was that the impoverishment of the peasantry continued
along with an increase in the incidence of famines. People died in
millions whenever droughts or floods caused failure of crops and scarcity
East India Company
• 4. Ruin of Old Zamindars and Rise of New Landlordism:
• The first few decades of British rule witnessed the ruin of most of the old zamindars
in Bengal and Madras.
• This was particularly so with Warren Hastings’ policy of auctioning the rights of
revenue collection to the highest bidders.
• The Permanent Settlement of 1793 also had a similar effect in the beginning.
• The heaviness of land revenue—the government claimed ten-elevenths of the rental
—and the rigid law of collection, under which the zamindari estates were ruthlessly
sold in case of delay in payment of revenue, worked havoc for the first few years.
• Many of the great zamindars of Bengal were utterly ruined and were forced to sell
their zamindari rights.
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• By 1815 nearly half of the landed property of Bengal had been transferred
from the old zamindars, who had resided in the villages and who had
traditions of showing some consideration to their tenants, to merchants and
other moneyed classes, who usually lived in towns and who were quite
ruthless in collecting to the last pie what was due from the tenant irrespective
of difficult circumstances.
• Being utterly unscrupulous and possessing little sympathy for the tenants,
these new landlords began to subject the latter to rack-renting and ejectment.
• The Permanent Settlement in north Madras and the Temporary Zamindari
Settlement in Uttar Pradesh were equally harsh on the local zamindars. But
the condition of the zamindars soon improved radically.
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• In order to enable the zamindars to pay the land revenue in time, the authorities
increased their power over the tenants by extinguishing the traditional rights of
the tenants.
• The zamindars now set out to push up the rents to the utmost limit. Consequently,
they rapidly grew in prosperity.
• In the Ryotwari areas too the system of landlord-tenant relations spread gradually.
As we have seen above, more and more land passed into the hands of
moneylenders, merchants and rich peasants who usually got the land cultivated by
tenants.
• One reason why the Indian moneyed classes were keen to buy land and become
landlords was the absence of effective outlets for investment of their capital in
industry.
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• Another process through which this landlordism spread was that of subletting.
• Many owner-cultivators and occupancy tenants, having a permanent right to
hold land, found it more convenient to lease out land to land-hungry tenants
at exorbitant rent than to cultivate it themselves.
• In time, landlordism became the main feature of agrarian relations not only in
the zamindari areas but also in the Ryotwari ones.
• A remarkable feature of the spread of landlordism was the growth of
subinfeudation or intermediaries.
• Since the cultivating tenants were generally unprotected and the overcrowding
of land led the tenants to compete with one another to acquire land, the rent
of land went on increasing.
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• The zamindars and the new landlords found it convenient to sublet
their right to collect rent to other eager persons on profitable terms.
• But as rents increased, sub-leasers of land in their turn sublet their
rights in land.
• Thus by a chain-process a large number of rent-receiving
intermediaries between the actual cultivator and the government
sprang up.
• In some cases in Bengal their number went up to as high as fifty!
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• The condition of the helpless cultivating tenants who ultimately had to bear the
burden of maintaining this horde of superior landlords was precarious beyond
imagination.
• Many of them were little better than slaves.
• An extremely harmful consequence of the rise and growth of zamindars and
landlords was the political role they played during India’s struggle for
independence.
• Along with the princes of protected states, many of them became the chief political
supporters of the foreign rulers and opposed the rising national movement.
• Realising that they owed their existence to British rule, they tried hard to maintain
and perpetuate it.
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• 5. Stagnation and Deterioration of Agriculture:
• As a result of overcrowding in agriculture, excessive land revenue demand, growth of
landlordism, increasing indebtedness and the growing impoverishment of cultivators,
Indian agriculture began to stagnate and even deteriorate resulting in extremely low
yields per acre.
• Overall agricultural production fell by 14 per cent between 1901 and 1939.
• The overcrowding in agriculture and increase in subinfeudation led to subdivision and
fragmentation of land into small holdings most of which could not maintain their
cultivators.
• The extreme poverty of the overwhelming majority of peasants left them without any
resources with which to improve agriculture by using better cattle and seeds, more
manure and fertilisers, and improved techniques of production.
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• Nor did the cultivator, rack-rented by both the government and the landlord, have
any incentive to do so. After all, the land he cultivated was rarely his property and
the bulk of the benefit which agricultural improvements would bring was likely to
be reaped by the horde of absentee landlords and moneylenders.
• Subdivision and fragmentation of land also made it difficult to effect
improvements.
• In England and other European countries, the rich landlords often invested capital
in their land to increase its productivity with a view to sharing in the increased
income.
• But in India the absentee landlords, both old and new, performed no useful
function.
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• They were mere rent-receivers who had often no roots in the land and who
took no personal interest in it beyond collecting rent.
• They found it possible and therefore preferred to increase their income by
further squeezing their tenants rather than by making productive
investments in their lands.
• The government could have helped in improving and modernising
agriculture. But the government refused to recognise any such
responsibility.
• A characteristic of the financial system of British India was that, while the
main burden of taxation fell on the shoulders of the peasant, the
government spent only a very small part of it on him.
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• An example of this neglect of the peasant and agriculture was the
step motherly treatment meted out to public works and agricultural
improvement.
• While the Government of India had spent by 1905 over 360 crore of
rupees on the railways which was demanded by British business
interests, it spent in the same period less than 50 crores of rupees on
irrigation which would have benefited millions of Indian cultivators.
Even so, irrigation was the only field in which the government took
some steps forward.
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• At a time when agriculture all over the world was being modernized
and revolutionised, Indian agriculture was technologically stagnating;
hardly any modern machinery was used.
• What was worse was that even ordinary implements were centuries
old.
• For example, in 1951, there were only 930,000 iron ploughs in use
while wooden ploughs numbered 31.8 million.
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• The use of inorganic fertilisers was virtually unknown, whereas a large part
of animal manure, i.e. cow-dung, night-soil and cattle bones, was wasted. In
1922—23, only 1.9 percent of all cropped land was under improved seeds.
By 1938-39, this percentage had gone up to only 11 per cent. Furthermore,
agricultural education was completely neglected.
• In 1939 there were only six agricultural colleges with 1306 students.
• There was not a single agricultural college in Bengal, Bihar, Orissa and Sind.
• Nor could peasants make improvements through self-study.
• There was hardly any spread of primary education or even literacy in the
rural areas.
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• 6. Development of Modern Industries:
• An important development in the second half of the nineteenth
century was the establishment of large-scale machine-based
industries in India.
• The machine age in India began when cotton textile, jute and coal-
mining industries were started in the 1850s.
• The first textile mill was started in Bombay by Cowasjee Nanabhoy in
1853, and the first jute mill in Rishra (Bengal) in 1855.
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• These industries expanded slowly but continuously.
• In 1879 there were 56 cotton textile mills in India employing nearly 43,000
persons.
• In 1882 there were 20 jute mills, most of them in Bengal, employing nearly
20,000 persons.
• By 1905, India had 206 cotton mills employing nearly 196,000 persons.
• In 1901 there were over 36 jute mills employing nearly 115,000 persons.
• The coal-mining industry employed nearly one lakh of persons in 1906.
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• Other mechanical industries which developed during the second half of the
nineteenth and the beginning of the twentieth centuries were cotton gins
and presses, rice, flour and timber mills, leather tanneries, woolen textiles,
sugar mills, iron and steel works, and such mineral industries as salt, mica
and saltpeter.
• Cement, paper, matches, sugar and glass industries developed during the
1930s.
• But all these industries had a very stunted growth.
• Most of the modern Indian industries were owned or controlled by British
capital. Foreign capitalists were attracted to Indian industry by the prospect
of high profit.
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• Labour was extremely cheap; raw materials were readily and cheaply
available; and for many goods, India and its neighbours provided a ready
market.
• For many Indian products, such as tea, jute and manganese, there was a
ready demand the world over.
• On the other hand, profitable investment opportunities at home were
getting fewer.
• At the same time, the colonial government and officials were willing to
provide all help and show all favours.
• Foreign capital easily overwhelmed Indian capital in many of the industries.
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• Only in the cotton textile industry did Indians have a large share from the
beginning, and in the 1930s, the sugar industry was developed by Indians.
Indian capitalist also had to struggle from the beginning against the power
of British managing agencies and British banks.
• To enter a field of enterprise, Indian businessmen had to bend before
British managing agencies dominating that field. In many cases even Indian-
owned companies were controlled by foreign-owned or controlled
managing agencies.
• Indians also found it difficult to get credit from banks most of which were
dominated by British financiers. Even when they could get loans they had to
pay high interest rates while foreigners could borrow on much easier terms.
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• Of course, gradually Indians began to develop their own banks and insurance companies.
In 1914, foreign banks held over 70 per cent of all bank deposits in India; by 1937, their
share had decreased to 57 per cent.
• British enterprises in India also took advantage of their close connection with British
suppliers of machinery and equipment, shipping, insurance companies, marketing
agencies, government officials and political leaders to maintain their dominant position
in Indian economic life.
• Moreover, the government followed a conscious policy of favouring foreign capital as
against Indian capital.
• The railway policy of the government also discriminated against Indian enterprise;
railway freight rates encouraged foreign imports at the cost of trade in domestic
products. It was more difficult and costlier to distribute Indian goods than to distribute
imported goods.
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• Another serious weakness of Indian industrial effort was the almost
complete absence of heavy or capital goods industries, without which
there can be no rapid and independent development of industries. India
had no big plants to produce iron and steel, or to manufacture machinery.
• A few petty repair workshops represented engineering industries and a
few iron and brass foundries represented metallurgical industries. The
first steel in India was produced only in 1913.
• Thus India lacked such basic industries as steel, metallurgy, machine,
chemical and oil. India also lagged behind in the development of electric
power.
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• Apart from machine-based industries, the nineteenth century also
witnessed the growth of plantation industries such as indigo, tea and
coffee.
• They were almost exclusively European in ownership. Indigo was used
as a dye in textile manufacture.
• Indigo manufacture was introduced into India at the end of the
eighteenth century and flourished in Bengal and Bihar.
• Indigo planters gained notoriety for their oppression over the
peasants who were compelled by them to cultivate indigo.
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• This oppression was vividly portrayed by the famous Bengali writer
Dinbandhu Mitra in his play Neel Darpan in 1860.
• The invention of a synthetic dye gave a big blow to the indigo industry
and it gradually declined.
• The tea industry developed in Assam, Bengal, south India and the hills
of Himachal Pradesh after 1850. Being foreign-owned, it was helped by
the government with grants of rent-free land and other facilities.
• In time, the use of tea spread all over India and it also became an
important item of export.
• Coffee plantations developed during this period in south India.
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• The plantation and other foreign-owned industries were of hardly any
advantage to the Indian people.
• Their profits went out of the country.
• A large part of their salary bill was spent on highly paid foreign staff.
They purchased most of their equipment abroad.
• Most of their technical staff was foreign.
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• Most of their products were sold in foreign markets and the foreign
exchange so earned was utilised by Britain.
• The only advantage that Indians got out of these industries was the creation
of unskilled jobs.
• Most of the workers in these enterprises were, however, extremely low
paid, and they worked under extremely harsh conditions for very long hours.
Moreover, conditions of near-slavery prevailed in the plantations.
• On the whole, industrial progress in India was exceedingly slow and painful.
• It was mostly confined to cotton and jute industries and tea plantations in
the nineteenth century, and to sugar and cement in the 1930s.
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• As late as 1946, cotton and jute textiles accounted for 40 per cent of all workers employed in
factories. In terms of production as well as employment, the modern industrial development
of India was paltry compared with the economic development of other countries or those
with India’s economic needs.
• It did not, in fact, compensate even for the displacement of the indigenous handicrafts; it
had little effect on the problems of poverty and overcrowding of land.
• The paltriness of Indian industrialization is brought out by the fact that out of a population of
357 million in 1951 only about 2.3 million were employed in modern industrial enterprises.
• Furthermore, the decay and decline of the urban and rural handicraft industries continued
unabated after 1858.
• The Indian Planning Commission has calculated that the number of persons engaged in
processing and manufacturing fell from 10.3 million in 1901 to 8.8 million in 1951 even
though the population increased by nearly 40 per cent.
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• The government made no effort to protect, rehabilitate, reorganize and modernize
these old indigenous industries.
• Moreover, even the modern industries had to develop without government help and
often in opposition to British policy. British manufacturers looked upon Indian textile
and other industries as their rivals and put pressure on the Government of India not to
encourage but rather to actively discourage industrial development in India.
• Thus British policy artificially restricted and slowed down the growth of Indian
industries.
• Furthermore, Indian industries, still in a period of infancy, needed protection.
• They developed at a time when Britain, France, Germany and the United States had
already established powerful industries and could not therefore compete with them.
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• In fact, all other countries, including Britain, had protected their infant industries by
imposing heavy customs duties on the import of foreign manufacturers. But India
was not a free country.
• Its policies were determined in Britain and in the interests of British industrialists
who forced a policy of Free Trade upon their colony.
• For the same reason the Government of India refused to give any financial or other
help to the newly founded Indian industries as was being done at the time by the
governments of Europe and Japan for their own infant industries.
• It would not even make adequate arrangements for technical education which
remained extremely backward until 1951 and further contributed to industrial
backwardness.
• In 1939 there were only 7 engineering colleges with 2217 students in the country.
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• Many Indian projects, for example, those concerning the construction
of ships, locomotives, cars and aero planes, could not get started
because of the government’s refusal to give any help.
• Finally, in the 1920s and 1930s under the pressure of the rising
nationalist movement and the Indian capitalist class, the Government
of India was forced to grant some tariff protection to Indian
industries.
• But, once again, the government discriminated against Indian-owned
industries.
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• The Indian-owned industries such as cement, iron and steel, and glass
were denied protection or given inadequate protection.
• On the other hand, foreign dominated industries, such as the match
industry, were given the protection they desired.
• Moreover, British imports were given special privileges under the system
of ‘imperial preferences’ even though Indians protested vehemently.
• Another feature of Indian industrial development was that it was
extremely lopsided regionally.
• Indian industries were concentrated only in a few regions and cities of
the country. Large parts of the country remained totally underdeveloped.
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• This unequal regional economic development not only led to wide regional disparities in income but
also affected the level of national integration.
• It made the task of creating a unified Indian nation more difficult.
• An important social consequence of even the limited industrial development of the country was the
birth and growth of two new social classes in Indian society—the industrial capitalist class and the
modern working class.
• These two classes were entirely new in Indian history because modern mines, industries and means
of transport were new.
• Even though these classes formed a very small part of the Indian population, they represented new
technology, a new system of economic organisation, new social relations, new ideas and a new
outlook. They were not weighed down by the burden of old traditions, customs and styles of life.
• Most of all, they possessed an all-India outlook. Moreover, both of these new classes were vitally
interested in the industrial development of the country. Their economic and political importance and
roles were, therefore, out of all proportion to their numbers.
East India Company
• 7. Poverty and Famines:
• A major characteristic of British rule in India, and the net result of
British economic policies, was the prevalence of extreme poverty
among its people.
• While historians disagree on the question whether India was getting
poorer or not under British rule, there is no disagreement on the fact
that throughout the period of British rule most Indians always lived on
the verge of starvation.
• As time passed, they found it more and more difficult to find
employment or make a living.
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• British economic exploitation, the decay of indigenous industries, the
failure of modern industries to replace them, high taxation, the drain
of wealth to Britain and a backward agrarian structure leading to the
stagnation of agriculture and the exploitation of the poor peasants by
the zamindars, landlords, princes, moneylenders, merchants and the
state gradually reduced the Indian people to extreme poverty and
prevented them from progressing.
• India’s colonial economy stagnated at a low economic level.
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• The poverty of the people found its culmination in a series of famines
which ravaged all parts of India in the second half of the nineteenth
century. The first of these famines occurred in western Uttar Pradesh in
1860-61 and cost over 2 lakhs of lives.
• In 1865-66 a famine engulfed Orissa, Bengal, Bihar and Madras and
took a toll of nearly 20 lakhs of lives, Orissa alone losing 10 lakh people.
• More than 14 lakhs of persons died in the famine of 1868-70 in western
Uttar Pradesh, Bombay and Punjab.
• Many states in Rajputana, another affected area, lost one-fourth to
one-third of their population.
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• Perhaps the worst famine in Indian history till then occurred in 1876
—78 in Madras, Mysore, Hyderabad, Maharashtra, western Uttar
Pradesh, and Punjab.
• Maharashtra lost 8 lakh people, Madras nearly 35 lakh. Mysore lost
nearly 20 per cent of its population and Uttar Pradesh over 12 lakh.
• Drought led to a country-wide famine in 1896-97 which affected over
9.5 crores of people of whom nearly 45 lakh died.
• The famine of 1899-1900 followed quickly and caused widespread
distress.
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• In spite of official efforts to save lives through provision of famine relief, over 25
lakhs of people died.
• Apart from these major famines, many other local famines and scarcities
occurred.
• William Digby, a British writer, has calculated that, in all, over 28,825,000 people
died during famines from 1854 to 1901.
• Another famine in 1943 carried away nearly three million people in Bengal.
• These famines and the high losses of life caused by them indicate the extent to
which poverty and starvation had taken root in India.
• Many English officials in India recognised the grim reality of India’s poverty
during the nineteenth century.

East India Company

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East India Company

• Necessity of East India Company

• As the name suggests, the Company’s humble origins was as a small

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