Economic Impact of British Raj | History(Prelims) by UPSC Toppers PDF Download

Economic impact of British Raj

Economy of India became a colonial economy:

The economy of India became a colonial economy with the advent of British power in the following ways:

• The surplus and self sufficient economy received a jolt with the advent of the British power
• All the resources of India were made subservient to the interest of the British manufacturing sector
• India became an exporter of the raw material and importer of the finished goods. The value addition from raw material to finished goods was done in Britain and thus the manufacturing sector of Britain earned huge profits
• The exorbitant land revenue and decline in manufacturing sector became the hallmark of the colonial economy
• The famines which were the result of the economic policy of the British became rampant.

Commercialization of Agriculture

• Commercialization of agriculture refers to the shift in agriculture cropping pattern from the grains, cereals etc to the cash crops like indigo, tea, coffee etc.
• Although commercialization of agriculture is considered as a sign of advancement, the result in India were catastrophic.
• In India under colonial rule it was a forced and artificial process which led to differentiation without actual growth
• The precondition for the actual growth in the commercialization of agriculture is the advance farm inputs and investment in farm sector. The colonial government never paid any attention for the improvement of the farm inputs or for the investment.
• The commercialization of agriculture increased the risk in the agriculture
• Indian peasants became vulnerable to the fluctuation in prices in the international market
• The bulk of profit was accrued by the British traders and the Indian moneylenders and not the peasants

De-industrialization

• De-industrialization is the reverse of the term industrialization.
• The term implies the decline in secondary or the manufacturing sector in the economy.
• 18^th century was a time period when industrial revolution took place in Europe. As a result, the age old traditional industries witnessed de-industrialization and in their place the modern industries grew up.
• However the trend in India was very different. Due to the economic policies of British Raj, the traditional industries declined in India like Europe, but unlike Europe the modern industries didn’t come up in India.
• India which was a manufacturing and export hub of the textiles and cotton products, witnessed a downtrend in these.
• The major reason for the decline of the traditional manufacturing sector in India was due to the dual standards adopted by British with respect to the manufacturing sector in India. It was a one sided trade. The imported goods were brought in India under the doctrine of “free trade” without import duty. On the other hand, the finished goods exported to Britain were heavily taxed.
•  The other factors responsible for the decline of traditional industries in India were:
• The forced pauperization of weavers, by forcing them into contracts whereby the finished goods were sold to Europeans at values below the cost of production
• The unequal competition with the modern industries of Britain
• East India Company used political power to remove its rivals in India, and the traditional industries were seen as rival.
• The sale of raw cotton was monopolized by the company’s servants, forcing a rise in price.

Drain of Wealth

• Drain of Wealth theory refers to a portion of national product of India which was not available for consumption to its people.
• According to this concept a portion of national product of India went outside it without any quid-pro-quo.
• The concept of Drain of Wealth was first propounded by Dadabhai Naoroji in his book “Poverty and Un-British Rule in India” (1867).
• R C Dutta in his “Economic History of India” (1901) also blamed British policies for Indian economic ills.
• The British rule in India was justified on the basis of the concept of “white man’s burden” i.e. the Asian civilizations are still premature for self rule and the onus of providing efficient governance rests on the Europeans or white. The theory of Drain of Wealth gave a serious jolt to this concept by proving that European rule is actually ruining India instead of giving efficient governance.

Constituents of drain were

• Extortion by company servants the fortunes from rulers, zamindars, merchants and common man and sending them home.Purchasing goods out of revenues of Bengal and exporting them. This was called investment.
• Duty free trade provided to the British gave them a competitive edge over Indian traders. These subsidies were financed from Indian treasury.
• Remittances or salaries and other incomes by company officials send to England.
• Home charges or cost of pensions of company officials, the costs of secretary of state’s India office etc.
• Hefty interests paid to British investors.