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Economic Impact of British Rule in India

Transformation of Indian Economy

• The British conquest had a profound economic impact on India, affecting nearly every aspect of its economy.
• Under British rule, India's economy underwent rapid transformation into a colonial economy, shaped primarily by the needs of the British economy.
• This differed significantly from previous foreign conquests where economic structures remained largely unchanged.

Disruption of Traditional Economic Structure

• Prior conquerors had primarily replaced political powers without altering the economic structure.
• The traditional self-sufficient village economy, where peasants, artisans, and traders led similar existences, remained largely intact.
• However, the British completely disrupted this structure, imposing their own economic system.

Foreign Exploitation

• The British were distinct in their role as conquerors, remaining foreigners in India and exploiting its resources for the benefit of British trade and industry.
• They extracted wealth from India, essentially treating the country as a source of tribute.

Subordination of Indian Economy

• The economic policies enforced by the British subordinated the Indian economy to the interests of British trade and industry.
• This led to a range of consequences for India, both positive and negative.

Resulting Consequences

• Erosion of traditional economic practices and structures.
• Development of an export-oriented economy, with India primarily serving as a supplier of raw materials to British industries.
• Displacement of indigenous industries due to competition with British manufactured goods.
• Introduction of new forms of exploitation, such as land revenue systems and taxation, which heavily burdened Indian peasants and workers.
• Creation of infrastructure primarily serving British interests, such as railways for transportation of raw materials to ports.
• Imposition of colonial trade policies that restricted Indian industrial growth and perpetuated dependency on British imports.

This comprehensive transformation under British rule laid the groundwork for the economic challenges and disparities that persisted in India even after independence in 1947.

Ruin of Artisans and Craftsmen

Collapse of Urban Handicrafts

• The collapse of India's urban handicrafts, renowned for centuries, was swift and decisive.
• This collapse was primarily driven by competition from cheaper imported machine-made goods from Britain.
• British policies, particularly the imposition of one-way free trade after 1813, facilitated the influx of British manufactured goods, especially cotton textiles.
• Indian handicrafts, reliant on traditional and primitive techniques, couldn't withstand the competition posed by mass-produced goods from British steam-operated machines.

Impact of Railways

• The construction of railways further accelerated the ruin of Indian industries, particularly rural artisan industries.
• Railways facilitated the penetration of British manufactured goods into even the remotest villages, undermining traditional industries.
• As D. H. Buchanan described, the railways effectively pierced the armor of isolated self-sufficient villages, leading to the decline of their economic vitality.

Affected Industries

• The cotton weaving and spinning industries were among the hardest hit by foreign competition.
• Industries such as silk, woolen textiles, iron, pottery, glass, paper, metals, shipping, oil-pressing, tanning, and dyeing also suffered a similar fate.

Factors Contributing to Ruin

• In addition to foreign competition, other factors stemming from British conquest exacerbated the decline of Indian industries.
• The oppression inflicted by the East India Company and its agents on craftsmen in Bengal during the latter half of the 18th century played a significant role.
• Forced to sell their goods below market price and accept wages below prevailing rates, many craftsmen were compelled to abandon their traditional occupations.

The ruin of Indian artisans and craftsmen, a consequence of British economic policies and industrial advancements, had far-reaching implications for India's economy and social fabric. It marked the demise of centuries-old crafts and skills, contributing to the transformation of India into a colonial economy heavily reliant on British imports.

Impact on Indian Handicrafts

Oppressive Policies

• The encouragement given by the East India Company to export Indian handicrafts did not benefit artisans due to oppressive policies.
• High import duties and restrictions imposed on Indian goods in Britain and Europe after 1820 virtually closed off European markets to Indian manufacturers.
• The disappearance of Indian rulers and their courts, who were major customers of Indian handicrafts, further exacerbated the decline.
• For example, the production of military weapons, crucial for Indian states, shifted to British suppliers, undermining local craftsmen.
• British officials and military officers, replacing Indian rulers, patronized British goods, reducing demand for Indian handicrafts.
• Additionally, the British policy of exporting raw materials raised prices, increasing the cost of production for Indian artisans.

Decline of Towns and Cities

• The ruin of Indian handicrafts was reflected in the decline of towns and cities known for their manufacturing prowess.
• Cities like Dacca, Surat, and Murshidabad, once flourishing industrial centers, were depopulated and laid to waste.
• William Bentinck, the Governor-General, noted the extreme misery among cotton weavers, highlighting the severity of the situation.

Deindustrialization and Dependence on Agriculture

• The collapse of traditional industries wasn't accompanied by the growth of modern machine industries, leaving handicraftsmen without alternative employment.
• Many artisans were forced into agriculture, upsetting the economic balance in villages and contributing to the destruction of the self-sufficient village economy.
• Rural crafts' destruction led to increased dependence on agriculture, with millions of peasants relying solely on cultivation.
• Between 1901 and 1941, the percentage of the population dependent on agriculture increased significantly, exacerbating poverty.

Transformation into an Agricultural Colony

• India transitioned from being a major exporter of cotton goods to an importer of British products and exporter of raw cotton.
• The country became an agricultural colony of manufacturing Britain, supplying raw materials for British industries.
• This transformation underscored the economic disparity and dependency created by British rule, particularly evident in the cotton textile industry.

The economic consequences of British conquest on Indian handicrafts were dire, leading to widespread impoverishment, urban decay, and the transformation of India into an agricultural colony of Britain. The decline of traditional industries and the subsequent reliance on agriculture perpetuated poverty and dependency, shaping India's economic landscape for decades to come.

Impoverishment of the Peasantry

Introduction

• Under British rule, the peasant in India experienced progressive impoverishment despite the cessation of internal wars.
• Various factors, including oppressive land revenue policies and exploitation by money-lenders, contributed to this decline.

Impact of Land Revenue Policies

• Early British policies, such as extracting maximum land revenue under Clive and Warren Hastings, devastated Bengal, leading to widespread poverty.
• Peasants in both Permanently and Temporarily Settled Zamindari areas suffered under exploitative zamindars who raised rents and imposed illegal dues and forced labor.
• In Ryotwari and Mahalwari areas, excessive land revenue levied by the government further burdened peasants, leading to poverty and agricultural deterioration.
• Increasing land revenue demands, coupled with rising prices, exacerbated poverty among peasants despite a decline in the proportion of total produce taken as land revenue over time.

Exploitation by Money-Lenders

• Peasants unable to meet land revenue demands often resorted to borrowing from money-lenders at high interest rates.
• Inability to repay loans led to further indebtedness, as peasants mortgaged land or fell into deceitful traps set by money-lenders.
• British legal reforms empowered money-lenders, enabling them to seize land and exploit peasants with impunity.
• Transferability of land facilitated the transfer of land from cultivators to money-lenders, exacerbating rural poverty.

Commercialization of Agriculture

• Commercialization forced peasants to sell produce immediately after harvest, leaving them vulnerable to exploitation by grain merchants.
• Grain merchants, often also money-lenders, dictated terms and purchased produce at below-market prices, further impoverishing peasants.

Resulting Social and Economic Consequences

• Deindustrialization and loss of land forced peasants into tenancy or agricultural labor at starvation wages.
• The triple burden of government taxation, zamindari exploitation, and money-lender debt left peasants with little to subsist on.
• By 1950-51, land rent and money-lender interest amounted to roughly one-third of total agricultural produce, perpetuating rural impoverishment.
• Increasing poverty and land loss contributed to the incidence of famines, leading to widespread suffering and loss of life.

The plight of the Indian peasantry under British rule epitomizes the socio-economic devastation wrought by colonial exploitation. From oppressive land revenue policies to the predatory practices of money-lenders, peasants endured a cycle of poverty that perpetuated their economic and social marginalization. The commercialization of agriculture further exacerbated their vulnerability, leaving them at the mercy of exploitative merchants and landlords. The enduring consequences of this exploitation continued to haunt India long after independence, underscoring the lasting legacy of British colonialism on the country's rural economy and society.

Ruin of Old Zamindars and Rise of New Landlordism

Ruin of Old Zamindars

• Initial decades of British rule saw the downfall of old zamindars in Bengal and Madras, notably due to policies such as auctioning revenue collection rights to the highest bidders.
• Warren Hastings' policy and the Permanent Settlement of 1793 exacerbated the situation by imposing heavy land revenue demands and ruthless collection laws.
• Many traditional zamindars faced ruin, with nearly half of Bengal's landed property transferred from old zamindars to merchants and moneyed classes by 1815.
• These new landlords, often residing in towns, showed little consideration for tenants, resorting to rack-renting and ejectment.

Rise of New Landlordism

• Zamindars' conditions improved as authorities granted them greater power over tenants, leading to rent hikes and increased prosperity.
• In Ryotwari areas, landlord-tenant relations gradually emerged, with land passing into the hands of money-lenders, merchants, and rich peasants who leased land to tenants.
• The absence of industrial investment outlets prompted Indian moneyed classes to buy land, contributing to the spread of landlordism.
• Subletting became common, with owner-cultivators and occupancy tenants leasing land to land-hungry tenants at exorbitant rates.
• Subinfeudation of intermediaries expanded, creating numerous layers between actual cultivators and the government, with rents increasing exponentially.
• This proliferation of intermediaries burdened cultivators, many of whom lived in precarious conditions akin to slavery.

Political Role and Opposition to Independence

• Zamindars and landlords played a significant political role during India's struggle for independence, aligning themselves with foreign rulers and opposing the national movement.
• Viewing themselves as beneficiaries of British rule, they sought to maintain and perpetuate it, often acting as chief political supporters of colonial authorities.
• Their opposition to independence further entrenched their power and influence, contributing to the political challenges faced by the nationalist movement.

The transition from old zamindars to new landlords under British rule marked a significant shift in agrarian relations, with exploitative practices becoming more prevalent. The political role played by landlords during India's struggle for independence underscored their vested interests in maintaining colonial rule, highlighting the intertwined nature of economic and political power dynamics in colonial India.

Stagnation and Deterioration of Agriculture

Overcrowding and Fragmentation of Land

• Excessive land revenue demands, growth of landlordism, and increasing indebtedness led to overcrowding of agriculture and subdivision of land into small holdings.
• Peasants, burdened by poverty, lacked resources to improve agriculture with better cattle, seeds, manure, and fertilizers.
• Rack-rented by both government and landlords, peasants had little incentive to invest in agricultural improvements, as the benefits would largely accrue to absentee landlords and money-lenders.
• Subdivision and fragmentation of land further hindered efforts to implement improvements.

Absence of Productive Investments

• In contrast to Europe, where landlords invested in land to increase productivity and share in increased income, absentee landlords in India showed little interest beyond collecting rent.
• Government neglect and refusal to recognize responsibility for agricultural improvement exacerbated the situation.
• While taxation fell heavily on peasants, government spending on public works and agricultural improvement remained minimal.

Technological Stagnation

• Indian agriculture lagged behind the global trend of modernization and mechanization, with minimal use of modern machinery.
• Even basic implements were outdated, with a large reliance on wooden ploughs rather than iron ones.
• Use of inorganic fertilizers was minimal, while potential sources of organic fertilizer like cow dung and night soil were underutilized.
• Improved seed usage was low, with a lack of agricultural education and neglect of rural literacy.
• In 1939, only six agriculture colleges existed with limited enrollment, and primary education and literacy were scarce in rural areas.

The stagnation and deterioration of Indian agriculture under British rule were multifaceted, with factors such as overcrowding of land, landlord exploitation, and government neglect contributing to the decline. Absentee landlords prioritized rent collection over land improvement, exacerbating the situation. Additionally, technological backwardness and a lack of agricultural education further hindered progress. While agriculture elsewhere was being modernized and revolutionized, Indian agriculture remained stagnant, perpetuating the poverty and hardship endured by rural peasants.

Development of Modern Industries in India

Establishment of Large-scale Industries

• The second half of the 19th century saw the establishment of large-scale machine-based industries in India, including cotton textile, jute, and coal mining industries.
• The first textile mill was founded in Bombay in 1853, and the first jute mill in Rishra, Bengal, in 1855.
• By 1905, India had 206 cotton mills employing nearly 196,000 persons, and over 36 jute mills employing nearly 115,000 persons.
• Other industries such as cotton gins, presses, rice, flour, timber mills, leather tanneries, woollen textiles, paper, sugar mills, iron and steel works, and mineral industries like salt, mica, and saltpetre also emerged during this period.

Foreign Capital Dominance

• Most modern Indian industries were owned or controlled by British capital, attracted by prospects of high profits due to cheap labor, readily available raw materials, and access to Indian and neighboring markets.
• Foreign capital overshadowed Indian capital in many industries, with British managing agencies and banks exerting significant control.
• Indian businessmen faced challenges accessing credit from banks dominated by British financiers and struggled against the dominance of British-managed agencies.

Government Policies and Discrimination

• The colonial government and officials favored foreign capital, discriminating against Indian-owned industries.
• Railway policies favored foreign imports over domestic products, making distribution of Indian goods costlier.
• India lacked heavy or capital goods industries necessary for rapid independent development, with minimal presence in steel, metallurgy, machinery, chemical, and oil sectors.

Impact on Indigenous Industries and Workers

• Indigenous industries like handicrafts continued to decay and decline, without government support for protection, rehabilitation, or modernization.
• British policy restricted and slowed down Indian industrial growth, favoring British manufacturers and discouraging industrial development in India.
• Indian industries faced uneven regional development, concentrating in a few regions and cities, leading to wide regional disparities and affecting national integration.

Birth of New Social Classes

• Modern industrial development gave rise to new social classes in Indian society: the industrial capitalist class and the modern working class.
• These classes represented new technology, economic organization, social relations, and ideas, unencumbered by traditional burdens, with an all-India outlook.
• Despite their small numbers, these classes played significant economic and political roles and were crucially interested in the industrial development of the country.

The development of modern industries in India during the colonial period was marked by domination of foreign capital, discriminatory government policies, and uneven regional development. While modern industries emerged, they were largely controlled by British capital, with Indian businesses facing numerous challenges. The impact on indigenous industries and workers was significant, leading to the decline of traditional handicrafts and the rise of new social classes. Despite the emergence of modern industries, industrial progress in India remained slow and inadequate, failing to address the country's economic needs or compensate for the decline of indigenous industries.

Poverty and Famines in Colonial India

Prevalence of Extreme Poverty

• Under British rule, extreme poverty was prevalent among Indians due to economic exploitation, decay of indigenous industries, and stagnation of agriculture.
• High taxation, wealth drain to Britain, and exploitation by various entities including zamindars, landlords, and money-lenders contributed to the impoverishment of the Indian people.
• Indigenous industries declined, and modern industries failed to adequately replace them, resulting in a stagnant colonial economy.

Impact of Famines

• A series of famines ravaged India in the second half of the 19th century, causing immense loss of life.
• Notable famines include those of 1860-61 in Western U.P., 1865-66 in Orissa, Bengal, Bihar, and Madras, and 1876-78 in Madras, Mysore, Hyderabad, Maharashtra, Western U.P., and the Punjab.
• Other major famines occurred in 1896-97 and 1899-1900, with millions of lives lost and widespread distress despite official relief efforts.
• Local famines and scarcities were also common during this period.

Recognition of Poverty by British Officials

• English officials in India acknowledged the grim reality of poverty, with some estimating that half of the agricultural population lived in perpetual hunger.
• William Hunter, compiler of the Imperial Gazetteer, conceded that forty million Indians habitually lived on insufficient food.

Economic Impact of British Rule

Economic Backwardness and Impoverishment

• India experienced economic backwardness and impoverishment under British rule, with indicators such as low per capita income and life expectancy.
• Colin Clark noted that during the period 1925-34, India and China had the lowest per capita incomes globally, with an Englishman's income five times that of an Indian.
• Despite advances in medical sciences and sanitation, the average life expectancy in India during the 1930s was only 32 years, compared to over 60 years in Western European and North American countries.

Man-made Causes of Poverty

• India's economic backwardness and poverty were attributed to foreign rule and exploitation, as well as a backward agrarian and industrial economic structure.
• The abundant natural resources of India were capable of yielding prosperity if properly utilized, but historical and social factors resulted in the paradox of a rich country inhabited by a poor population.

The impact of British rule on India's economy was profound, leading to extreme poverty, famines, and economic stagnation. Despite abundant natural resources, India suffered under colonial exploitation, resulting in widespread impoverishment and suffering for its people.