The Drain Of Wealth, Railways, Factory & Banking - The Economic Impact of British Rule in India | IBPS PO Prelims & Mains Preparation - Bank Exams PDF Download

THE DRAIN OF WEALTH

• India had emerged as industrial workshop of the world before the advent of the Europeans. Despite her predominantly agricultural economy, a variety of other industries also flourished in India.
• Even the Industrial Commission (1918) observed, “At a time when the west of Europe, the birth place of modern industrial system, was inhabited by uncivilized tribes, India was famous for the wealth of her rulers and the high artistic skill of her craftsmen. 
  And even at a much later period, when the merchant adventures from the West made their first appearance in India, the industrial development of this country was, at any rate, not inferior to that of the more advanced European nations.
• The British manufacturers put pressure on their government to restrict and prohibit the sale of Indian goods in England. By 1720 laws had been passed forbidding the wear or use of printed or dyed cotton cloth.
• Before the acquisition of Diwani of Bengal in 1765, the East India Company had begun to exercise considerable political influence in Bengal, Bihar and Orissa.
• The Company had obtained a farman from Mughal emperor Farrukh Siyar by which the company got the exemption from payment of transit duties on the inland movement of goods.Farrukh Siyar
• The servants of the Company began to sell dastaks or permits, certifying their ownership of goods belonging to any party to pass duty-free.
• The Indian merchants freely purchased these dastaks to escape payment of duties to the State.
• The foreign trade of Bengal which, at that time was the richest part of India, became the monopoly of the Company, while internal trade in more important commodities like raw cotton was monopolized by superior servants of the company in their personal capacity.
• Whereas the aggregate duty on cotton piece-goods manufactured in India worked out in 1813 at 17 per cent ad valorem, the duty on the imported cloth fixed under the Charter Act of 1813 was only 2.5 per cent ad valorem.
• The British historian Wilson remarked, it was stated in evidence (before the Select Committee in 1813) that the cotton and silk goods of India could be sold for a profit in British market at a price from 50 per cent lower than those fabricated in England. It consequently became necessary to protect the latter by duties of 70 to 80 per cent on their value or by positive prohibition.
• From 1765 to 1770, the Company sent out in the form of goods nearly four million pounds or about 33 per cent of the net revenue of Bengal.
• Lord Ellenborough admitted in 1840 that India was “required to transmit annually to this country (Britain), without any return except in the small value of military stores, a sum amounting to between two and three million sterling.”Lord Ellenborough
• The Act of 1833 threw open the door to expansion of trade and investment of British capital in India. But though upto the middle of 19th century British citizens were in possession of plantations, shares in commercial and banking enterprises and rupee loans of the Government of India, the actual flow of British capital into India till the Revolt of 1857 remained very small.
• The private investor was hesitant and was not willing to risk his funds in an unfamiliar land without assurance about the safety of invested capital and the state guarantee of reasonable returns on investment.

RAILWAYS

• Several schemes of construction of railway in India were put forward in 1845, and in 1848 two companies, namely, the East India Railway Company and the Great India Peninsular Company, were given guarantee of interest of 5 per cent per annum on capital invested by them in the railway construction in India. But it was not till 1853 that the first railway line in India was opened to traffic. 

• The earliest suggestion to build a railway in India was made in Madras in 1831. But the wagons of this railway were to be drawn by horses. Construction of steam-drive railways in India was first proposed in 1834 in England.

FACTORY

• A beginning in the establishment of factory industries in India was made in the middle of the 19th century. The first cotton mill was started at Broach in the Bombay Presidency in 1853, and the first jute mill was established by George Aukland at Rishra in Bengal in 1855.
• The construction of East India Railway which passed through the Raniganj coal-fields led to the development of coal-mining.
• The iron and steel industry may be said to have really common into existence with the establishment of Tata Iron and Steel Company in 1907.    The company started working in 1911, while steel was first produced in 1913.

Protection of Indian Industries

• The ‘Fiscal Autonomy Convention’ paved the way to the adoption of the policy of ‘protection’ of Indian Industries in place of free trade that had been the rule earlier.
• A fiscal commission under the presidentship of Sir Ibrahim Rahimatullah was appointed in October, 1921.Sir Ibrahim Rahimatoola
• The commission recommended the adoption of the scheme of ‘discriminating protection’ under which protection was to be granted after proper enquiry into each individual case to those industries which applied for it and which satisfied certain minimum conditions laid down by the commission.
• The Government of India accepted these recommendations and protection was granted, in the inter-war period, to iron and steel, cotton textiles, paper, matches, sugar and heavy chemical industries.

BANKING

• Banking institutions modelled on European lines were first established in Bengal by the European merchants to finance European trade in 1870’s.
• The General Bank was started in 1786; the Bengal Bank was in existence in 1784 but when it was first established is not known; Hindustan Bank was the earliest among them in the field.
• The first Indian enterprize in the field of banking based on the joint stock limited liability principle was the Oudh Commercial Bank started in 1881.
• The beginning of the modern Indian joint-stock banking may, therefore, be traded back to the establishment of the Punjab National Bank in 1894 and the People’s Bank in 1901, both started by Lala Harkishan Lal Gauba.
• The Indian joint-stock banks made rapid progress after the establishment of the Reserve Bank of India in 1935.