Friday, 23 August 2013

Impact of colonialism on Indian economy



Colonial rule in India by its inherent nature worked for benefit of England and in turn impoverished India. Agriculture was the main source of livelihood for most of the people of India. However, agrarian relations i.e relations between the peasant and the state changed drastically under the British. Earlier system of Jagirdari prevalent under the Mughals was done away with. In this system, the King, the jagirdar and peasant had different rights on land and although there were some instances of land being sold or bought this was not the usual practice. The British introduced three types of land settlements, Permanent, Ryotwari and Mahalwari. In the first revenue settlement was made with the Zamindars, in the second directly with the peasants and in the third with the village communities. In the zamindari system, zamindar was recognized as the owner of the land and left free to extract maximum revenue from the cultivators leaving the peasantry impoverished and at the mercy of the zamindar. In other cases, the absence of zamindars did not bring any relief to the peasantry as revenue was fixed at exorbitant rates leaving the peasants in very deprived state.

Second impact of colonial policies was commercialization of agriculture in some areas where the peasants grew cash crops primarily cotton, jute, tobacco, sugarcane, indigo etc most of which served as raw material for British industries. However, commercialisation proved beneficial only for the rich peasants and the moneylenders. It paved the way for usury and the poorer peasants depended heavily on the local moneylender for advance of credit, marketing of crops, loans during the lean seasons and paying land revenue. The moneylender who was usually the village merchant also acted as the agent for buying the produce of the peasant and for introducing and selling western manufactured goods like Manchester cloth. Poorer peasants virtually hypothecated their produce in advance to the moneylender. A large number of them remained in debt throughout their lives and many of them lost their lands. This resulted in de-peasanting in which a number of peasants lost their lands and were forced to become landless labourers.

Commercialization of agriculture meant that some land which was used earlier for growing food grains was now being used to grow cash crops. This required that food grain production in remaining areas should have increased to meet the demands of the country. However, no attention was paid to this aspect. The production of food grains either declined or did not grow to keep pace with the growth of population. During the period 1891-1947 population increase was .67% per annum while food grain production was .11% per annum. Primary reason for this was that the Government did not make any effort to improve agriculture. This task was left to the peasantry, who being in an impoverished state was not able to do much. The normal rate of production was already at subsistence level and whenever an area was affected with droughts and crop failure, it resulted in famine. There were about thirty four famines during the period 1898 to 1908 in which total loss of life was about 1.5 crores.

If the condition of agriculture in the colonial rule was bad, the condition of industry was worse. The country suffered what has been termed as de-industrialization. When the British came to India, India was manufacturing all the goods it needed and Britain had almost nothing which it could export to India. On the other hand Indian goods were valuable items of commerce having a reasonable market in England. Hence India had a favourable balance of trade. At that time, the East India Company was facing competition from other trading companies of Europe particularly the French and the Dutch as well as the Indian merchants. This placed the craftsmen in a better bargaining position. However, the Company soon eliminated this competition and acquired a monopoly in trading of these goods. Now the artisans and craftsmen had no option but to sell their goods to the Company and its servants at lower rates. Apart from hardships to the artisans, this also reduced the possibility of capital accumulation and improvement in technology. On the other hand capital accumulation took place in England where it was used to power the Industrial Revolution.  Industrial revolution ended the British market for Indian products as it was not possible for artisans to compete with economic large scale factory production. Soon these industrial products found their way to India and the Indian market for artisans was destroyed as well.  

R.C.Dutt and Madan Mohan Malviya in their note of dissent to the Indian Industrial Commission pointed out that export of finished industrial products greatly increased in the British rule; for example value of import of Manchester cloth increased from 96 lakh sterling in 1860 to 27 crore sterling in 1900.This increase could have been possible only due to wiping out of indigenous weaver’s cloth. The census figures also pointed out to the decline in industrial activities. As per the census figures, the male work force in agriculture increased from 65% in 1881 to 72% in 1931 while the proportion in industry declined from 16% to 9%.

The theory of de-industrialization has got a mixed response from European authors. Some imperial apologists like Lord John Maynard Keynes have accepted that India was de-industrialized but have stated that this was in the interest of both Britain and India in which Britain focused on production of industrial goods while India focused on agricultural products. This view was in keeping with the international division of labour in which the metropolis was to produce industrial and high value goods while the colony was to produce agricultural and low value goods. Obviously this was discriminatory and unfavourable to the colony.

However some other writers have contested the fact the India suffered deindustrialization. For example Morris David Morris attributes the increase in import of Manchester cloth to the increase in population and changed consumption habits and also states that this increase did not displace indigenous weaver’s cloth. Similarly Daniel Thorner, after analyzing the data of census from 1881 to 1931 points out that the deindustrialization was nominal. According to him increase in agriculture and related activities for the said period was about 2% and decline in industry and trade was about 3%. However, even Thorner does not deny the fact that the Indian industry has already suffered substantial damage by 1881 when the first reliable all India census was conducted.

Despite all the odds Indian industry found ways to establish itself though in a very small way. The Indian trading class which had accumulated some capital made efforts to venture in the industrial field. Initial attempts were in cotton textiles and the first Indian textile mill “The Bombay Spinning Mill” was set up in Bombay in 1854 (a textile mill was set up earlier at Fort Gloster near Kolkata in 1818 but it was a failure). However since then up to the time of First World War, the growth of Indian industry was extremely slow. The Government relaxed some control during war period due to its war time requirements. The fledgling industry took advantage of the situation and made rapid progress during the two world wars and in the inter war period. However, despite all these efforts the growth was very slow even in the last years of the colonial rule. As per an estimate, ratio of industrial sector’s share to the net domestic product was 12.7% in 1900-04, 13.6% in 1915-19 and 16.7% in 1940-44. Thus India remained predominantly agrarian. During all this period Britain profited from this de-industrialization of India. This was evident in the per capita income of two countries. In 1860s Dadabhai Naroji calculated India’s per capita income to be Rs.20 per annum. In England in 1870, the per capita income was 24.4 sterling which was equivalent to Rs.568/-.


All over the world, Industrial revolution ended the role of individual artisans. However, in England and other European countries the loss of craftsmen was compensated by the growth of industry and factory system. In India, the colonial policies did not allow the industry to grow freely and hence India could not become a fully industrialized country. It did not remain pre-capitalist as its artisan based mode of industrial production shattered and neither could it become industrialised. It became something in between; subordinate and heavily dependent on the British economy. 

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