How British colonized India and exploited in the name of trade. Economic conditions of India at the time of Independence

1. Colonialism and
Underdevelopment
Prof. Mahendra Kumar Ghadoliya
RNB Global University, Bikaner
www.ghadoliyaseconomics-mahendra.blogspot.in
Vasco da Gama lands at Calicut
20th May, 1498

2. Colonialism vs Imperialism
• Colonialism vs Imperialism
Colonialism and imperialism are often used interchangeably, but
they are two different words having different meaning. As both
colonialism and Imperialism means political and economic
domination of the other, scholars often find it hard to differentiate
the two.
Colonialism is a term where a country conquers and rules over
other regions. It means exploiting the resources of the conquered
country for the benefit of the conqueror.
• Imperialism means creating an empire, expanding into the
neighbouring regions and expanding its dominance far.

3. How did the British Colonise India?
• Britain came in the 1600s (with Sir Thomas Roe) when India was under
the rule of Jahangir. India was a stronger nation back then. So, the
British were contended to be traders.
• However, Nadir Shah's (of Iran) invasion of India in 1738, changed the
picture. The Mughal rulers were badly defeated and that signalled to
the world that India was very weak.
• The East India company took the advantage.
• The Aurangzeb's rule was quite bitter for non-Muslims and the Hindus
were tired of Islamic rule. This gave rise to many Hindu kings (such as
the Marathas). The East India Company rightly used this period to
increase the divisions with their divide and rule policy.

4. At the Battle of Plassey on 23 June 1757, fought between the British under the
command of Robert Clive and the Nawab of Bengal, Mir Jafar's forces betrayed
the Nawab and helped British to defeat him. Another victory in 1764 in Battle
of Buxar consolidated the Company power.
East India company under the leadership of ‘Clive’ had operated a 'dual'
system, i.e. Company power and a puppet Nawab.
Warren Hastings displaced the Nawab and took over direct administration but
retained Indian officials.
Finally, in 1785, Cornwallis created a professional cadre of Company servants
with good salaries but no other interest. All high posts were reserved for British
people.
After 1833 company appointed civil servants through competitive examinations
with very high salary and political power. This made the system very powerful.
After 1858, India became officially a British colony as British crown took
control of India from East India Company.

5. British interests in India were of several kinds:
• British imperialism was more pragmatic than that of other colonial
powers. Its motivation was economic, not evangelical.
• to achieve a monopolistic trading position.
• India as major market for British goods,
• Employment to British upper middle class .
• Remittances to Britain
• Strategic location

6. The British were not against the economic development of India so long
it serves their economic interest or political security. The main changes
which the British made in Indian society were:
They replaced the wasteful warlord aristocracy by a bureaucratic-
military establishment, carefully designed by utilitarian
technocrats, which was very efficient in maintaining law and order.
The greater efficiency of government permitted a substantial reduction
in the fiscal burden, and a bigger share of the national product was
available for landlords, capitalists and the new professional classes.
Some of this upper class income was siphoned off to the UK, but the bulk
was spent in India.
The savings were used in investment in agriculture and industries
in India.

7. Establishment of a New Westernized Elite
The new elite established a Western life-style using the English language
and English schools. New towns and urban amenities were created with
segregated suburbs and housing for them. Their habits were copied by the
new professional elite of lawyers, doctors, teachers, journalists and
businessmen. Within this group, old caste barriers were eased and social
mobility increased.
Too much profit went in the hands of private hands.
As far as the mass of the population were concerned, colonial rule brought
few significant changes.

8. From the 1820s to the 1850s the British demonstrated a strong urge
to change Indian social institutions, and to Westernize India.
• There were no major changes in village society, in the caste system,
the position of untouchables, the joint family system, or in
production techniques in agriculture.
• Stopped infanticide
• Ritual burning of widows (sati). They legalized the remarriage of
widows
• Abolished slavery
• Eliminated dacoits from the highways.
• Hindu were converted to Christianity

9. • They took steps to introduce a penal code (the code was actually
introduced in 1861) based on British law, which helped inculcate
some ideas of equality.
• 'Under his old Hindu law, a Brahmin murderer might not be put to
death, while a Sudra who cohabited with a high-caste woman
would automatically suffer execution.
• Under the new law, Brahmin and Sudra were liable to the same
punishment for the same offence

10. Westernize India through Education System:
• "I have travelled across the length and breadth of India and I have not
seen one person who is a beggar, who is a thief. Such wealth I have
seen in this country, such high moral values, people of such calibre,
that I do not think we would ever conquer this country, unless we
break the very backbone of this nation, which is her spiritual and
cultural heritage, and, therefore, I propose that we replace her old
and ancient education system, her culture, for if the Indians think
that all that is foreign and English is good and greater than their own,
they will lose their self-esteem, their native culture and they will
become what we want them, a truly dominated nation."
Lord T. B. Macaulay's address to British Parliament, dated the 2nd
February 1835.

11. Macaulay argued,
• “It is impossible for us, with our limited means to attempt to
educate the body of the people. We must at present do our best to
form a class who may be interpreters between us and the millions
whom we govern; a class of persons, Indian in blood and colour,
but English in taste, in opinions, in morals, and in intellect. To that
class we may leave it to refine the vernacular dialects of the
country, to enrich those dialects with terms of science borrowed
from the Western nomenclature, and to render them by degrees fit
vehicles for conveying knowledge to the great mass of the
population”
• Quoted from the text as given in M. Edwardes, British India 1772-1947, Sidgwick and Jackson,
London, 1967.

12. Westernize India
• In 1835 Macaulay introduced a modified version of English
education. This is a classic example of a Western rationalist approach
to Indian civilization.
• Higher education was largely religious and stressed knowledge of
Arabic and Sanskrit before Macaulay decided to introduced English
education in India.
• After 1857 the Crown took over the direct responsibility and the
moto of westernization came to a standstill.
• Three universities were set up in 1857 in Calcutta, Madras and
Bombay, but they were merely examining bodies and did no teaching.
• It was not until the 1920s that Indian universities provided teaching
facilities and then only for M.A. students. Education for girls was
almost totally ignored throughout the nineteenth century.

13. • Primary education was not taken very seriously as a government
obligation and was financed largely by the weak local authorities. As a
result, the great mass of the population had no access to education and,
at independence in 1947, 88 per cent were illiterate.
• Progress was accelerated from the 1930s onwards, but at independence
only a fifth of children were receiving any primary schooling.
• Education could have played a major role in encouraging social
mobility, eliminating religious superstition, increasing productivity, and
uplifting the status of women. Instead it was used to turn a tiny elite
into imitation Englishmen and a somewhat bigger group into
government clerks.

14. • The striking thing about the British raj is that it was operated by
so few people. There were only 31,000 British in India in 1805
• In 1911, there were 164,000 British
• In 1931, there were 168,000 British
• Small size of administration, Taxes were very low because of
minimal government.
• Most of the benefits of the lower fiscal burden were felt by
landlords, and were not passed on to the mass of the population.

15. Three phases-
• The period of Merchant Capital- till the end of 18th century
• The period of Industrial Capital-till the end of 19th century
• The period of finance capital- starting from the late 19th century
till independence.

16. The period of Merchant Capital- till the end of 18th century
• Direct plunder under the guise of trade –East India Company
(EIC) had hardly any thing to pay for goods purchased from India.
The EIC was given authorisation to pay in gold & silver bullion.
After Battle of Plassey EIC captured political power and started
using its power for transferring the wealth to Britain.
• Land Revenue as an instrument to plunder the peasantry-
• Land tenure system
• Zamindari – i) Permanent settlement , ii) temporary settlement
• Mahalwari
• Ryotwari
• High rent, No interest in the development of land, surplus income was left
with zamindar.

17. Agricultural Sector
• Agrarian Economy 85% of the population dependent on
agriculture directly or indirectly.
• Stagnant economy with low productivity.
• Low levels of technology
• Lack of irrigation and fertiliser
• Commercialisation of agriculture for the benefit of British
• Partition of India- Jute producing area went to East Pakistan
(now Bangladesh)

18. The period of Industrial Capital-till the end of 19th century
• Deindustrialised India- destroyed the traditional Handicraft sector.
• India was exploited by the British by exporting raw material.
• Market for Machine made goods. British government levied heavy
custom duty of 78% on imports of Indian products. British goods
imported in India was however duty free.
• Development of Jute Industry and plantations- No interest in
developing manufacturing industries in India.
• Revenue and expenditure policies of the British- Large expenditure on
army. High salaries and pension of the officers was paid from India.
• Investment in Railways, Plantations, British capital in other
sectors was charged

19. Industry
• R.C. Dutt argued, “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.
• British discouraged Indian manufacturers and made India subservient
to the industries of Great Britain, and to make the Indian people grow
raw produce only.
• Between 1757 to 1857 British wiped out the old warlord aristocracy
and the zamindari system and changed the consumption pattern
towards European goods. Import of cheap duty free textiles. The first
textile mill was started in the 1850s and the first Jute mill was started
in the year 1854. Coal mining was started in India and first steel mill
was started in 1911.

20. Table 1 Industrial Growth in the Last Half Century of British Rule
Small-scale enterprise Factory establishments
Employment Value added Employment Value added
(thousands) (million 1938 Rs.) (thousands) (million 1938 Rs.)
1900/1901 13,308 2,296 601 379
1945/1946 12,074 2,083 2,983 2,461
Source: S. Sivasubramonian, for employment and value added in factories. For
small-scale enterprise I assume value added to move proportionately to
employment.

21. The period of finance capital- starting from the late 19th
century till independence.
• Indian firms in industry, insurance and banking were given a boost
from 1905 onwards by the swadeshi movement, which was a
nationalist boycott of British goods in favour of Indian enterprise.
• During the First World War, lack of British imports strengthened
the hold of Indian firms on the home market for textiles and steel.
• India exported jute manufactures. Grain exports were also built up
on a sizeable scale, mainly from the newly irrigated area of the
Punjab. The tea industry was introduced to India from China and
built up on a plantation basis. Tea exports became important from
the 1860s onwards. Hides and skins and oil cake (used as animal
feed and fertilizer) were also important raw material exports.

22. Foreign Trade
• Exporter of primary Products- such as raw silk, cotton, wool, sugar,
indigo, jute, etc.
• Importer of finished goods such as cotton, silk and woollen clothes,
machinery.
• Monopoly control over India’s Foreign Trade
• India had large export surplus which was used by British to finance
their expenditure on office, war,

23. Table 2 Level of Asian Exports f.o.b. 1850-1950
(million dollars)
1850 1913 1937 1950
Ceylon 5 76 124 328
China 24 294 516 (700)
India 89 786 717 1,178
Indonesia 24 270 550 800
Japan 1 354 1,207 820
Malaya 24 193 522 1,312
Philippines n.a. 48 153 331
Figures refer to customs area of the year concerned. In 1850 and 1913 the
Indian area included Burma. The comparability of 1937 and 1950 figures
is affected by the separation of Pakistan.

24. Table 3 India's Balance on Merchandise and Bullion, 1835-1967
Balance in Balance in Per capita balance
current prices 1948-9 prices at 1948-9 prices
(annual average) (£million) (£)
1835-54 4.5 n.a. n.a.
1855-74 7.3 50.0 0.21
1875-94 13.4 80.0 0.30
1895-1913 16.8 77.6 0.26
1914-34 22.5 59.2 0.19
1935-46 27.9 66.1 0.17
1948-57 -99.9 -97.6 -0.21 (India and Pakistan)
1958-67 -472.7 -384.7 -0.67(India and Pakistan)
Source: Constant price figures for 1948 onwards deflated by the national income deflator, earlier
years by the price index of M. Mukherjee, National Income of India, Statistical Publishing Society,
Calcutta, 1969. The Indian surplus is understated, and deficit overstated because imports are
recorded c.i.f. and exports f.o.b.

25. The occupational structure of the economy at the time of
Independence-
The distribution of working people across different industries and
sectors showed very little sign of change during the British rule.
The largest workforce was in agricultural sector accounting for about
70-75% of the working people.
The manufacturing sector had 10% while the service sector
accounted for about 15- 20% of the working population.
A main feature was the growing regional variation.

26. Table -4 Occupational Distribution of working population in
India
Sector YEAR
1901 1911 1921 1931 1951
Primary 71.47 74.96 76.52 74.74 74.40
Secondary 11.70 10.77 9.66 10.25 10.56
Tertiary 16.83 14.27 13.82 15.01 15.04
Total 100 100 100 100 100

27. Author of the Estimate Year Per Capita Income at
Current Prices
Per Capita Income at
1948-49 prices
Dadabhai Naoroji 1867-68 Rs. 23.5 14.2
Atkinson 1875 24.4 17.2
Major Baring 1881 27 18.4
Horne 1891 28 15.8
Atkinson 1895 31.5 17.8
Curzon 1902 30 14.8
Giffen 1903 30 16.7
Characteristics of the Indian economy on the eve of independence:
Low Per Capita Income
Table-5 Shows the Adjusted Per Capita Income
Monu, Mukherjee, “National Income” in V. B. Singh ed. Economic History of India 1857-1956, New Delhi , 1975

29. • Poor agricultural sector with surplus labour and low productivity,
• Industrial sector was crying for modernisation, diversification and
capacity building and increased public investment.
• Foreign trade was totally dependent on Britain
• Infrastructure facility railways, road network, airports, sea ports
needed upgradation, expansion and public orientation.
• Poverty and Unemployment problems were asking for welfare
orientation.
Characteristics of the Indian economy on the eve of independence:
contd..

30. • Illiteracy
• Refuge Problem
• Inequality
• Exploitative land relations
• Exporting Primary product
• In a nutshell, the social and economic challenges before the country
were enormous.
*****
Characteristics of the Indian economy on the eve of independence:
contd..