History of India : 1707-1950
UNIT 8 ECONOMIC IMPACT OF
COLONIAL RULE
Structure
8.0 Objectives
8.1 Introduction
8.2 First Stage of Colonialism
8.3 Second Stage of Colonialism
8.4 Third Stage of Colonialism
8.5 The Economic Critique of Colonialism by the Nationalists
8.6 Economic Effects of Colonial Rule
8.6.1 De-industrialization
8.6.2 Famines in Colonial India
8.6.3 Commercialization of Agriculture
8.6.4 Impact of Commercialization on Rural Society
8.7 Modern Industry and Indian Capitalist Class
8.8 Let Us Sum Up
8.9 Key Words
8.10 Answers to Check Your Progress Exercises
8.0 OBJECTIVES
After reading this unit, you will be able to explain:
●● how the British rule subordinated Indian economy for its own interests,
●● about different stages of colonialism and methods of exploitation, and
●● about the economic impact on Indian agriculture, industry etc. during
the colonial period.
8.1 INTRODUCTION
Colonialism created a society which was neither capitalist as in Britain nor
was it pre-colonial or pre-capitalist. Thus, for example, India under British
rule neither resembled capitalist Britain nor was it basically similar to
Mughal India. The development of agrarian relations in India makes this
aspect quite clear. For example, landlordism in both zamindari and ryotwari
areas of British India was something new; it did not exist in Mughal India.
It was the creation of British rule. It was the result of the colonial rulers’
efforts to transform Indian agriculture. Indian agriculture was not capitalist
but it had many capitalist elements; for example, property relations were
capitalist. Land was now a private property which was freely bought and
sold on a large scale.
The same capitalist process which produced economic development in
England and made it an advanced capitalist country produced and maintained
underdevelopment in India. Colonialism uproots old society and economy,
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but the new colonial society and economy is as much a barrier to modern Economic Impact of Colonial
economic development as is the old, pre-capitalist economy and society. The Rule
economic surplus in the colonial India is produced in many different ways
from traditional agriculture to plantations to modern mining and factory
production. But the essence of colonialism is appropriation of this surplus
by various classes of the imperialist country England.
Colonialism may be divided into three distinct stages which were related
to distinct forms of exploitation. Consequently, each stage represented a
different pattern of subordination of colonial economy, society and polity.
8.2 FIRST STAGE OF COLONIALISM
This is described as the Period of Monopoly Trade and Direct Appropriation
(or the Period of East India Company’s Domination, 1757-1813). During
the last half of the 18th century, India was conquered by a monopoly
trading corporation– the East India Company. The Company had two basic
objectives at this stage.
i) The first was to acquire a monopoly of trade with India. This meant
that other English or European merchants or trading companies
should not compete with it in purchase and sale of Indian products.
Nor should the Indian merchants do so. This would enable the East
India Company to buy Indian products as cheaply as possible and
sell them in world markets at as high a price as possible. Thus India
was exploited through monopoly trade. The English competitors were
kept out by persuading the British Government to grant the East India
Company through a Royal Charter a monopoly of the right to trade
with India and the East. Against the European rivals the Company had
to wage long and fierce wars on land and the sea. To acquire monopoly
against Indian traders and to prevent Indian rulers from interfering
with its trade, the Company took advantage of the disintegration of
the Mughal Empire. After political conquest, Indian weavers were
also employed directly by the Company. In that case, they were forced
to produce cloth at below market prices.
ii) The second major objective of colonialism at this stage was to directly
appropriate or take over governmental revenues through control
over state power. The East India Company required large financial
resources to wage wars in India and on the seas against European
rivals and Indian rulers and to maintain naval forces, forts and armies
around their trading posts, etc. East India Company did not possess
such resources. The much needed financial resources had, therefore,
to be raised in India from the Indian people.
Indian money was also needed to purchase Indian goods. The British
produced hardly any goods which could be sold in India in competition
with Indian products. British industrial products could not compete with
Indian handicraft products till the beginning of the 19th century. British
Government; heavily influenced by mercantilist theories, was also unhappy
with the export of gold and silver from Britain. Appropriation of government
revenue would also, of course, increase the profits of the East India Company
and dividends of its shareholders. Both the objectives - the monopoly of
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History of India : 1707-1950 trade and appropriation of government revenues - were rapidly fulfilled with
the conquest first of Bengal and parts of South India and then over the years
of the rest of India. The East India Company now used its political power
to acquire monopolistic control over Indian trade and handicraft products.
Indian traders were gradually replaced and ruined, while the weavers and
other craftsmen were compelled either to sell their products at uneconomic
rates or to work for the Company at low wages. The weavers were, for
example, not ruined at this stage by British imports but because of the
Company’s monopoly and their exploitation by being forced to produce
for the Company under uneconomic conditions. Moreover, both Company
and its servants extorted illegally immense wealth from Indian merchants,
officials, nobles, rulers and zamindars. Gradually, a large number of highly
paid British officials were appointed in India and their salaries and pensions
became a form of surplus appropriation.
8.3 SECOND STAGE OF COLONIALISM
This was a period of exploitation through trade and is also termed as
‘Colonialism of Free Trade’ during the 19th century. Immediately after the
East India Company became the ruler over most parts of India, an intense
struggle broke out in Britain to determine whose interests the newly acquired
colony would serve. Britain was after 1750 undergoing the Industrial
Revolution. The newly developing industrial capitalists began to attack the
East India Company and the forms of its exploitation of India. They did not
gain much from a monopoly trade in Indian products or from the Company’s
control over Indian revenues. They wanted India to serve as a market for their
ever-increasing output of manufactured goods, especially textiles. They also
needed India’s raw materials, especially cotton, and food grains. Moreover,
India could buy more British goods only if it earned foreign exchange by
increasing its exports. The existing economic, political, administrative and
socio-cultural setting was to be transformed for achieving this objective.
The British Indian Government set out to do so after 1813. In the economic
field this meant integrating India’s colonial economy with the British and
world capitalist economy. The chief instrument of this was the introduction
of free trade. All import duties in India were either totally removed or
drastically reduced to nominal rates. Thus India was thrown open to British
manufactures. Free entry was also now given to British capitalists to develop
tea, coffee and indigo plantations, and trade, transport, mining and modern
industries in India. The British Indian Government gave active state help to
these capitalists.
The agrarian structure of India was sought to be transformed in a capitalist
direction through the Permanent Settlement and the Ryotwari systems. The
large-scale imports and their sale in land and even more the large-scale
export of the bulky raw materials and their gathering at the ports from long
distances inside the country required a cheap and easy system of transport
and communications. The Government, therefore, improved rivers and
canals, encouraged the introduction of steamships on the rivers and improved
the roads. Above all, during latter half of the 19th century, it encouraged
and financed a large network of railways linking India’s major cities and
markets to its ports. By 1905, nearly 45,000 kms. of railways had been
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built. Similarly, a modern postal and telegraph system was introduced to Economic Impact of Colonial
facilitate economic transactions. The earlier forms of exploitation continued Rule
during this phase. This, plus the costly administration, plus the efforts at
economic transformation led to a steep rise in taxation and in the burden
on the peasant. Because of the constant needs of colonial administration for
funds to maintain military and civil administration and for construction of
railways, and its large reliance on taxation of land, which had its own limits,
colonial administration suffered from constant financial constraint.
8.4 THIRD STAGE OF COLONIALISM
This is described as the Era of Foreign Investments and International
Competition for Colonies. A new stage of colonialism was ushered in India
from about 1860s. This was the result of several major changes in the world
economy:
i) Spread of industrialization to several countries of Europe, the United
States and Japan with the result that Britain’s industrial supremacy in
the world came to an end.
ii) There was intensification of industrialization as a result of the
application of scientific knowledge to industry. Modern chemical
industries, the use of petroleum as fuel for the internal combustion
engine and the use of electricity for industrial purposes developed
during this period.
iii) There was further unification of the world market because of revolution
in the means of international transport.
The new industries in many industrialized countries consumed immense
quantities of raw materials. Rapid industrial development also led to
continuous expansion of urban population which needed more and more
food. There now occurred an intense struggle for new, secure and exclusive
markets and sources of agricultural and mineral raw materials and foodstuffs.
Moreover, the development of trade and industry at home and extended
exploitation of colonies and semi-colonies produced large accumulations
of capital in the capitalist countries. Simultaneously there occurred
concentration of capital in fewer and fewer corporations, trusts and cartels
and merger of banking capital with industrial capital. Outlets had to be found
for this capital. This led to large scale export of capital. The strengthening of
colonial rule over India was essential to keep out the rivals, to attract British
capital to India and to provide it security. After 1850, a very large amount of
British capital was invested in railways, loans to the Government of India,
trade and to a lesser extent in plantations, coal mining, jute mills, shipping
and banking in India.
Check your Progress 1
1) Briefly describe the Merchant Capital or Free Trade stage of
colonialism.
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History of India : 1707-1950 2) Discuss in about 100 words the basic forms of surplus extraction
or exploitation during the second and third stages of colonialism in
India.
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8.5 THE ECONOMIC CRITIQUE OF COLONIALISM
BY THE NATIONALISTS
The nationalists in India in their scholarly and polemical writings
offered a sharp and telling criticism of the colonial economic impact
on India. Through the works of Dadabhai Naoroji, Mahadev Gobind
Ranade, Romesh Chandra Dutt and many others who developed a school
of Economic Nationalist analysis which highlighted some important
features of India’s experience under British Rule.
i) The concept of Drain of Wealth evolved in the writings of Naoroji
and Dutt. To them it meant the transfer of wealth from the late
18th century in the form of plunder and loot and illicit gains by
servants of the East India Company and in the form of Home
charges, i.e. the expenses incurred by the Government of India
in England out of its income derived mainly from the taxation of
the Indian people and finally, in the form of interests and profits
and capital transfer from India to England on private account.
This drain in forms impoverished this country and increased the
economic gap between India and England.
ii) They also pointed out how British regime brought about the
destruction of the small-scale industries of India.
iii) The idea of Free Trade and laissez faire, nationalists contended,
led to a tariff and industrial policy which stifled the possibilities
of growth of industries in British India. Consequently, India
became “the agricultural farm” of industrial England, i.e. a
source of raw materials and food-grains, dependent totally on
industrial supplies from England.
iv) The rate of taxation of agriculture was also criticised by R.C. Dutt
who felt that the burden of land revenue was excessive in areas
which were subjected to periodical temporary settlements. This,
in his opinion, was the cause of frequent recurrence of famines in
British India. Wealth of the countryside was drained away through
the revenue collection machinery, making the economic viability
of farming so precarious that the farmer could not withstand any
natural calamity.
v) Finally, an important part of the nationalist analysis of British
economic policy in India was their criticism of government
expenditure on the army, the police and other apparatus
of government. The expenditure was so excessive that
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developmental investments were neglected. For example, the Economic Impact of Colonial
low expenditure on irrigation works contrasted sharply with the Rule
generous expenditure on the British Indian army, the railways,
etc.
8.6 ECONOMIC EFFECTS OF COLONIAL RULE
You have read about the various stages of colonialism in the earlier
sections. But how did these stages affect the Indian economy? The
artisan, peasant, worker and merchant – practically all sections of the
Indian society – were affected by colonial policies. In this section we
shall deal with the concrete economic impact of colonialism.
8.6.1 De-industrialization
The destruction of traditional Indian industries was one of the earliest
consequences of colonialism to be noticed and documented in India.
In that early stage of mercantile capitalism the source of profit of the
East Indian Company was the difference between the cost prices in
India and the sale prices in England of the Indian Industrial products
like cotton and silk textiles. This price difference, i.e. the profit rates
of the English East India Company, could be increased if the Indian
cost price, at which East Indian Company purchased goods from the
Indian artisans, could be lowered. So long as the English East Indian
Company was competing in the Indian market with other Companies
of the French or the Dutch and with other merchants of Indian and
Asian origin, the Indian artisans were in a good bargaining position.
But in the last decades of the eighteenth century the British gradually
eliminated most of their competitors, in particular the French and
the Dutch. Moreover, by virtue of their military power and, in some
regions (e.g. Bengal from 1765), their political and administrative
position, the British established a hegemony which allowed them to
become monopolists in the market.
The English Company’s purchase together with the purchases of the
servants of that company in their private capacity accounted for a very
large portion of the marketed textiles of superior quality in Bengal.
As we all know, a monopolist can influence the market to his own
advantage. In the last three decades of the eighteenth century this was
the advantage which enabled the English traders to reduce the prices
paid to the indigenous artisans in India and thus to reap high profits
from sale in the European market. This excessive exploitation of Indian
artisans weakened the very basis of our handicraft industries by reducing
the artisan to a low level of income. It also destroyed the possibility of
accumulation of resources to invest in the industry and to improve its
technology. As we know, accumulation of capital and a technological
revolution occurred in England in the last decades of the eighteenth
and early decades of the nineteenth century. This Industrial Revolution
first of all wiped out the market for India’s artisans in Europe. It was
impossible for artisanal products to compete with factory products. By
the beginning of the 19th century the staple industrial exports, cotton
textiles, began to decline and soon they ceased to be exported. Some
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History of India : 1707-1950 other items, e.g. indigo and raw silk continued to be exported though
from 1813 it was no longer the East India Company but private trade
which became the agency for exports. Not only was the export market
of the Indian artisans taken away by the foreign factories, but the home
market began to be invaded by imported factory products.
Here we may pay attention to the debate that has taken place on the
question of destruction of handicrafts in India in course of the 19th century.
Romesh C. Dutt and Madan Mohan Malviya (in his note of dissent to
the Indian Industrial Commission) used the statistics of import to prove
their point. They showed, for example, that import of Manchester cloth
increased in value from 96 lakh sterling in 1860 to 27 crore sterling in 1900
in India. Some recent authors, particularly Morris David Morris, argue
that this evidence is not decisive. They argue that under British rule the
population increased, the per capita income increased, the sale of cloth
increased due to change in consumption habits, and thus it was possible
for Indians to buy more foreign cloth, leaving the market for indigenous
artisans unaffected. In short, Morris’s argument is that the market
expanded so that it was possible to accommodate both Manchester and
Indian Weaver’s produce. Manchester cloth, Morris maintained, did not
displace indigenous weaver’s cloth. This view of Morris is unacceptable
because he does not produce any evidence to prove increase in population
and per capita income during the 19th century. There is plenty of evidence
put forward by recent economic historians like Sarda Raju for Madras,
N.K. Sinha for Bengal, A.V. Raman Rao for Andhra, R.D. Choksey for
Maharashtra and A.K. Bagchi for Bihar, etc. which lends support to the
de-industrialization thesis. In the middle Gangetic region, according to
Bagchi’s estimate, the industrial decline can be measured with some
accuracy: the weight of industry in the livelihood pattern of the people
was reduced by half from 1809-13 to the census year 1901.
Did the growth of new industrial activities in the last decade of the
19th century restore the balance? Daniel Thorner has put forward the
controversial thesis that the census statistics available from 1881 do not
suggest that de-industrialization was in progress from 1881 to 1931. At first
sight, the census figures indicate that the male work-force in agriculture
increased from 65% in 1881 to 72% in 1931, while the proportion in
industry declined from 16% in 1881 to 9% in 1931. But Thorner believes
that this categorisation was erroneous and one should lump together
agricultural work force with another category, general labour and likewise
aggregate industrial work-force with ‘Trade’. If that is done, the picture
looks different. The increase in the compounded categories appears to be
far less in the primary sector (only about 2% growth between 1881 and
1931). Similarly the decline in industry and trade put together is also much
less (only about 3% decline in 1881-1931). Further, Thorner dismisses
the data on female labour force on the ground that the data collected were
inaccurate in the opinion of census officials. In this way Thorner arrives at
the conclusion that the 1881-1931 censuses do not show any evidence of
substantial de-industrialization or destruction of indigenous industries.
In criticism of Thorner, one obvious point is that the process of de-
industrialization had already done the damage well before the census
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operations began. The first reliable all India census was that of 1881. This Economic Impact of Colonial
much Thorner is himself willing to concede. Secondly, he is perhaps wrong Rule
in dismissing the figures-regarding employment of women. These figures
for 1881-1931 show an increase in employment in Agriculture by 13% and
a decline in Industrial employment by 9%. In the Indian social context the
employment of women is quite significant, and it is likely that in case
of decline in artisan’s business the women of the household gave up
industrial work (to take up household chores or agricultural labour)
earlier than menfolk in the artisan families. Above all, there is the
question: how reliable is the sector-wise distribution of work-force as
an index of industrialization or its reverse? The crucial index is the per
capita productivity and the value of what is produced as a proportion of
national produce, i.e. ratio to national income. J. Krishnamurthy has, on
this ground cast doubts upon the use of demographic data in answering
the question, was there de-industrialization?
Lastly, we may note that there was also an important trend of imperialist
apologists which frankly admitted the de-industrialization of India as a
fact but argued that it was good for both India and Britain that the colony
specialised in the production of agricultural goods. As late as 1911 Lord
John Maynard Keynes wrote that industrializing India was neither
possible nor desirable. India could, in fact, attain greater prosperity by
exchanging agricultural products for all the industrial goods that may
be needed through imports from the West. This view goes back to the
classical theory of comparative advantage and international division of
labour, assigning to colonies like India the role of the agricultural farm
of the industrialized imperial country.
8.6.2 Famines in Colonial India
If colonialism meant destruction of old industries, did it mean the
growth of agricultural production? The answer is probably negative
on the whole. It is decidedly negative when we consider per capita
and per acre productivity in food-grains from 1898 to 1947. As for the
earlier fifty years, the repeated occurrence famines tell their own story.
From the middle of the 19th century a number of famines devastated
India. According to official estimates in these famines the total loss of
life was at least 1 crore and 52 lakhs, and the total number of famine-
affected people was 39.7 crores. These vast numbers indicate periods
of subsistence crisis. The immediate cause for this undoubtedly was
droughts and crop failure but the roots of the crises lay in what was the
“normal” rate of agrarian production. The factors that contributed to
famines were: Stagnation in agricultural technology, failure of investment
to raise yield per acre, the drain of the agriculturists’ resources into the
hands of the revenue intermediaries and money lenders and dealers in
agricultural commodities. The sparseness of government investments in
irrigation and other developmental investments, and the rapid rise in
population from 1920’s were also responsible. A significant index of the
normal situation in respect of food supply is the per capital availability
of food-grains in India. We have three estimates in this regard for the
period 1901 to 1943. In these years, according to George Blyn’s estimate
for British India, per capita food-grains availability declines from 0.23
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History of India : 1707-1950 ton to 0.16 ton. According to Shivasubramanian’s estimate for the whole
undivided India the decline was from 0.2 ton to 0.14 ton. According to
Alan Heston the decline was from ton 0.17 ton (1901) to 0.16 ton (1946).
Thus all the estimates indicate that the supply of food grains declined in
the last half-century of British rule though they differ on the extent to
which it occurred.
8.6.3 Commercialization of Agriculture
As we have already seen, the food-grain production did not improve,
but this was not true of some so-called ‘cash crops’. Both the total and
per acre output of non-food grain crops increased, and this was largely
due to increased demand and rising prices of these both in the external
and the internal market. The most dramatic increase of this sort was the
Cotton Boom of the early 1860’s which merits our special attention.
The emancipation of the black slaves by Abraham Lincoln and the
consequent Civil War in U.S.A. led to a massive short-fall in the world
supply of cotton in 1860-64. This led to the increase in cotton prices,
export of cotton from India, and the growth on cotton cultivating
acreage in India. This Cotton Boom brought the Indian peasants in
Cotton growing areas within the ambit of the world capitalist system.
The important export houses of Bombay, the wholesale traders in the
big cities, the brokers and other middlemen in cotton export trade, down
to the level of the village bania who advanced credit to the peasant for
cotton cultivation, all profited enormously from the Cotton Boom. This
profit, as well as the profit from the commercial crops developed even
earlier, viz. opium and indigo, contributed to the accumulation of capital
in the hands of some Indian businessmen. More important was the fact
that the Cotton Boom marked the recruitment of India as a supplier of
agricultural commodities and raw material needed by the industrialized
West. Thus it complemented the process of de-industrialization. The
role of the colony specialising in agriculture and of the industrialized
country in the West were demarcated clearly in the contemporary
theory of international division of labour. This was characteristic not
only of India and England, but also of other colonies and imperialist
countries.
The statistics of agricultural production indicate a substantial increase in
non-food grains output while food grain production shows an opposite
trend. The per annum increase in population in 1891-1947 was 0.67%
while total food-grain production increased by only 0.11% in this
period. The per acre production of food-grains decreased by 0.18% per
annum. On the other hand the increased demand in the market and the
rising prices of highly commercialized non-food grain crops increased
by 0.86% per annum and their total output by 1.31% per annum. The
non-food grain crops were primarily cotton and jute but also included
tobacco, sugarcane, oilseeds etc.
8.6.4 Impact of Commercialization on Rural Society
Commercialization of agriculture paved the way for the generation
of usury and merchant capital in rural society and widened the levels
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of differentiation among the peasantry. The common cultivator’s Economic Impact of Colonial
dependence on the village bania for advance of credit increased. The Rule
peasant needed credit for the marketing of his crop, for loans during lean
seasons for subsistence increased as commercialization progressed. In
the payment of land revenue also the money lender-cum-trader played
an important role in supplying cash. Finally, the village bania was also
an agent for the penetration of the rural market by the imported industrial
consumer goods, particularly Manchester cloth.
While some of the poorer peasants were raising crops for the market
virtually hypothecated in advance to the money lender, the better-off
section of the peasantry was relatively free. The latter could store their
goods, and wait for better prices than what prevailed during the glut in
the market after harvest. They could also cart their crops to markets in
towns to obtain a better price than what the village bania or itinerant
dalal offered. Furthermore, they could make their own decision as to
which crop to grow while the poorest farmer was virtually forced to
raise crops as demanded by the village bania. In some regions, the rich
peasants themselves became money lenders to poorer peasants and thus
the process of differentiation was accentuated.
In course of this differentiation process and the operation of money-
trading capital, an increasing number of peasants began losing their
land and becoming landless labourers. It must, however, be noted that
landless labourers had existed in the pre-colonial-period too (particularly
in the south of India in substantial numbers on account of servitude of
some castes). It is the economic process of dispossession of land and the
significantly larger number of landless agriculturists which emerge as
the characteristic features of the colonial period.
According to estimates based on the 1931 census we get the following
picture of social strata in village India. At the bottom of the pyramid
were the landless agricultural labourers (including bonded labourers)
accounting for 37.8% of agriculturists. The stratum above them were
the farmers with very small holdings of below 5 acres (9%) and various
types of tenants-at-will and share croppers (24.3%). The layer above
consisted of the better-off section of farmers with land above 5 acres
in size (about 25.3%). Finally at the narrow top of the pyramid were
members of the rent receiving class, many of whom did not actually
cultivate land themselves (3.6%). The condition of the bonded labourers
was the worst: they worked all their life, and sometimes for generations,
for the ‘master’.
8.7 MODERN INDUSTRY AND INDIAN CAPITALIST
CLASS
The pattern of imperialism included an agenda of action by the colonial
state for promoting the development of an economic infrastructure for the
exploitation of the natural resources and raw materials of the colony.
We shall turn to that aspect very soon. Suffice it to say that these
infrastructural developments, particularly the railways and transport
system, created conditions of development not only for foreign capital in
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History of India : 1707-1950 some sectors (e.g. jute factories, coal mines, tea and coffee plantations)
but also for indigenous capital. The latter invested first in cotton textiles,
in the teeth of the opposition of Manchester interests and the inimical
tariff policy of the British Indian Government. From 1854 when the first
Indian mill was set up in Bombay till the World War I the progress of
Indian industrial capital was painfully slow and halting. It was the War
and the inter-war period which saw the rapid development and industrial
diversification of Indian Capital. This development was in part the story
of struggle against foreign capitalist domination (most pronounced in
eastern India). It also involved a struggle against British business interests
which exercised powerful influence on policy-making in England and
also against the unsympathetic British Indian Government. This would
explain the emergence of alliance between the Indian capitalist class and
the nationalist leadership who fully supported national capital.
Within a colonial context the growth of national capital was obviously
subject to severe limitations. The potentials of colonial industrial
development were exceedingly limited. From Shivasubramanian’s
estimates of national income it is clear how small was the extent of
industrial growth even in the last fifty years of British rule. On the
average the ratio of industrial sector’s share to the Net Domestic Product
was 12.7% in 1900-1904, 13.6% in 1915-19, and 16.7% in 1940-44.
That India virtually remained where it was.-predominantly agricultural,
is clear from the ratio of income generated in the primary sector to the
total NDP: 63.6% in 1900-04, 59.6% in I 915-19, 47.6% in 1940-44.
The Tertiary Sector alone showed a striking increase in its share: 23.7%
in 1900-1904 compared to 35.7% in 1940-1944.
In common with many other colonial and industrially backward countries,
India was characterised by stagnation in the level of national income. In
the early years of British rule we have no index of national income. In the
1860s, according to Dadabhai Naoroji’s calculation, the per capita income of
India was Rs. 20 per annum. We have already seen how Naoroji and others
nationalists identified the Drain of Wealth from India as one of the causes
of this poverty in India. About this time, 1870 to be exact, the per capita
income in England (Mitchell and Deane’s estimate) was £ 24.4 sterling.
This was equivalent to Rs. 568.
The more recent estimates of Shivasubramanian suggest that in the last
half century of British rule per capita income in India remained almost
stagnant. In 1900-04 it was Rs. 52, in 1915-19 it was Rs. 57.3 and in
1940-44 it was Rs. 56.6 (at constant price of 1938-39). This gives us
an idea of the degree of underdevelopment and stagnation from which
colonial India suffered.
Check Your Progress 2
1) Write briefly bout the contribution of early nationalist leaders
towards an understanding of economic impact of colonialism.
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2) On what grounds do Morris David Morris and Danial Thorner Economic Impact of Colonial
attempt to disprove the hypothesis of de industrialization? Do Rule
you agree with their views?
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3) Discuss the effects of commercialization on the lives of peasants
during colonial times.
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8.8 LET US SUM UP
The nature of colonial rule and its impact on the colony have been
analysed differently by different scholars. The Indian nationalist
scholars like Dadabhai Naoroji, M.G. Ranade and R.C. Dutt spoke
mainly about the Indian context and pointed out the impactofthe British
rule on the Indian economy. They emphasised the drain of wealth and
de-industrialization as the ill-effects of the British rule. Other aspects
of colonialism in India were the commercialization of agriculture and
a slow and uneven pace of industrialization. Indian economic advance
was geared towards the requirements of colonialism and the colonial
State played an active role in shaping the Indian economy so as to serve
the imperial interests.
8.9 KEYWORDS
Capitalism: An economic and political system in which property business
and industry are privately owned and where competition is the mainstay of
the economy.
Dalal: Middleman.
Differentiation: Break-up of the peasantry into classes as a result of certain
sections prospering at the expense of others within the same class.
Demographic Data: Figures regarding population.
Mercantalist theory: A political and economic philosophy according to
which the main aim of the nation state was to maximise exports, minimise
imports and accumulate as much bullion (gold and silver) as possible.
Net Domestic Product (NDP): Cumulative National Product from
industry, agriculture and the service sector.
Output: Total volume of production.
Per Acre Production: Production divided by each acre of land under
the plough.
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History of India : 1707-1950 Per Capita Income: Net National Income divided by population.
Per Capita Production: The rate of production after being divided
by total population.
Primary Sector: Agriculture, fishery, animal husbandry and forest-
produce.
Productivity: Producing capacity.
Share croppers: A class of agriculturists who cultivated and managed
other peoples’ land and shared the crop, in return.
Tenants-at-will: The class of old peasant proprietors, now turned into
tenants on the land of newly created Zamindars who could now evict the
former at their will for failing to pay the rent.
Tertiary Sector: Service Sector including trade and transport.
Village Bania: Class of rural money lenders who also sometimes acted
as intermediaries between the cultivators and the market.
8.10 ANSWERS TO CHECK YOUR PROGRESS
EXERCISES
Check Your Progress 1
1) See Section 8.2
2) See Section 8.3 and 8.4
Check Your Progress 2
1) See Section 8.5
2) See Sub-section 8.6.1
3) See Sub-section 8.6.4
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