ECONOMIC POLICIES OF THE BRITISH

1. Background

• The major difference between the British colonists in India and earlier invaders was that none of the earlier invaders made any structural changes in the Indian economy or drained away India’s wealth as tribute.
• British rule in India caused a transformation of India’s economy into a colonial economy, i.e., the structure and operation of the Indian economy were determined by the interests of the British economy.
• According to historians, at the beginning of the 18th century, India had some 23 per cent of the world economy.
• This share came down to some 3 per cent when India got independence.

2. One-Way Free Trade

• Cheap and machine-made imports flooded the Indian market after the Charter Act of 1813 allowing one-way free trade for the British citizens.
• On the other hand, Indian products found it more and more difficult to penetrate the European markets.
• Tariffs of nearly 80 per cent were imposed on Indian textiles so that Indian cloth could no longer be cheap. After 1820, European markets were virtually closed to Indian exports.
• Cheap British-made cloth flooded the Indian market.
• The newly introduced rail network helped European products reach the remotest corners of the country.
• From being a net exporter, India became a net importer.

• The loss of traditional livelihood was not accompanied by a process of industrialisation in India, as had happened in other rapidly industrialising countries of the time.
• This resulted in the deindustrialisation of India at a time when Europe was witnessing a reintensified Industrial Revolution.
• This happened at a time when Indian artisans and handicraftsmen were already feeling the crunch due to the loss of patronage by princes and the nobility, who were now under the influence of new Western tastes and values.

4. Ruralisation

• Another feature of deindustrialisation was the decline of many cities and the process of ruralisation in India.
• Many artisans, faced with diminishing returns and repressive policies (in Bengal, during the Company’s rule, artisans were paid low wages and forced to sell their products at low prices), abandoned their professions, moved to villages, and took to agriculture.
• This resulted in increased pressure on land.
• An overburdened agriculture sector was a major cause of poverty during British rule and this upset the village's economic set-up.

5. Impoverishment of Peasantry

• The government, only interested in maximization of rents and in securing its share of revenue, had enforced the Permanent
• Settlement system in large parts.
• Transferability of land was one feature of the new settlement which caused great insecurity to the tenants who lost all their traditional rights in land.
• There was little spending by the government on the improvement of land productivity.
• The zamindars, with increased powers, resorted to summary evictions, demanded illegal dues and ‘begar’ to maximize their share in the produce and, as such, had no incentive to invest in the improvement of agriculture.
• The overburdened peasants had to approach the moneylenders to be able to pay their dues to the zamindars.
• The moneylender, who was often also the village grain merchant, forced the farmer to sell the produce at low prices to clear his dues.
• The powerful moneylender was also able to manipulate the judiciary and law in his favour.

6. Emergence of Intermediaries, Absentee Landlordism, Ruin of Old Zamindars

• By 1815, half of the total land in Bengal had passed into new hands—merchants, moneylenders, and other money classes living in towns.
• The new zamindars, with increased powers but with little or no avenues for new investments, resorted to land grabbing and sub-infeudation.
• The increase in the number of intermediaries to be paid gave rise to absentee landlordism and increased the burden on the peasants.
• Since the demand for land was high, prices went up and so did the liabilities of the peasants. With no traditional or benevolent ties with the tenants, the zamindar had no incentive to invest in the improvement of agriculture.
• The interests of the zamindars lay only in the perpetuation of British rule and in opposing the national movement.

7. Stagnation and Deterioration of Agriculture

• The cultivator had neither the means nor any incentive to invest in agriculture.
• The zamindar had no roots in the villages, while the government spent little on agricultural, technical, or mass education.
• All this, together with the fragmentation of land due to sub-infeudation, made it difficult to introduce modern technology, which caused a perpetually low level of productivity

8. Destruction of Industry and Late Development of Modern Industry

• Indian industry was steadily destroyed. The destruction of textile competition in India is a glaring example of the deindustrialisation of India.
• The British stopped paying for Indian textiles in pounds, choosing instead to pay from the revenue gained from Bengal and at very low rates, thus impoverishing the peasants further.
• A thriving ship-building industry was crushed.
• Surat and Malabar on the western coast and Bengal and Masulipatnam on the eastern coast were known for their shipbuilding industries.
• The British ships contracted by the Company were given a monopoly over trade routes, while even the Indian merchant ships plying along the coast were made to face heavy duties.
• In 1813, a law by the British parliament prohibited ships below 350 tonnes from sailing between India to Britain; this effectively put a large proportion of Bengalbuilt ships out of commission on the Indo-British trade routes.

9. Nationalist Critique of Colonial Economy

• The early intellectuals of the first half of the 19th century supported British rule under the impression that it would modernize the country based on the latest technology and capitalist economic organization.
• After the 1860s, disillusionment started to set in among the politically conscious and they began to probe into the reality of British rule in India.
• The foremost among these economic analysts was Dadabhai Naoroji, the ‘Grand Old Man of India’, who after a brilliant analysis of the colonial economy put forward the theory of economic drain in Poverty and un-British Rule in India.
• Other economic analysts included Justice Mahadev Govind Ranade, Romesh Chandra Dutt (The Economic History of India), Gopal Krishna Gokhale, G. Subramania Iyer, and Prithwishchandra Ray.
• The essence of 19th-century colonialism, they said, lay in the transformation of India into a supplier of foodstuffs and raw materials to the metropolis, a market for metropolitan manufacturers and a field for investment of British capital.
• These early nationalist analysts organized intellectual agitations and advocated a complete severance of India’s economic subservience to Britain and the development of an independent economy based on modern industries.