The Indian economy under the British Raj describes the economy of India during the years of the British Raj, from 1858 to 1947. During this period, according to British economist Angus Maddison, India's share of the world economy collapsed from 24.4% in 1700 to 4.2% in 1950. India experienced deindustrialization. Compared to the Mughal Era, India during the British colonial era had a lower per-capita income, a large decline in the secondary sector, and lower levels of urbanisation.
The subject of the economic impact of British imperialism on India remains disputable. The issue was raised by British Whig politician Edmund Burke who in 1778 began a seven-year impeachment trial against Warren Hastings and the East India Company on charges including mismanagement of the Indian economy. Contemporary historian Rajat Kanta Ray argues the economy established by the British in the 18th century was a form of plunder and a catastrophe for the traditional economy of Mughal India, depleting food and money stocks and imposing high taxes that helped cause the famine of 1770, which killed a third of the people of Bengal. In contrast, historian Niall Ferguson argues that under British rule, the village economy's total after-tax income rose from 27% to 54% (the sector represented three quarters of the entire population)  and that the British had invested £270 million in Indian infrastructure, irrigation and industry by the 1880s (representing one-fifth of entire British investment overseas) and by 1914 that figure had reached £400 million. He also argues that the British increased the area of irrigated land by a factor of eight, contrasting with 5% under the Mughals.
P. J. Marshall argues the British regime did not make any sharp break with the traditional economy and control was largely left in the hands of regional rulers. The economy was sustained by general conditions of prosperity through the latter part of the 18th century, except the frequent famines with high fatality rates. Marshall notes the British raised revenue through local tax administrators and kept the old Mughal rates of taxation. Marshall also contends the British managed this primarily indigenous-controlled economy through cooperation with Indian elites.
Historians have questioned why India did not undergo industrialisation in the nineteenth century in the way that Britain did. In the seventeenth century, India was a relatively urbanised and commercialised nation with a buoyant export trade, devoted largely to cotton textiles, but also including silk, spices, and rice. India was the world's main producer of cotton textiles and had a substantial export trade to Britain, as well as many other European countries, via the East India Company. Yet as the British cotton industry underwent a technological revolution during the late 18th to early 19th centuries, the Indian industry stagnated and deindustrialized. India also underwent a period of deindustrialization in the latter half of the 18th century as an indirect outcome of the collapse of the Mughal Empire.
Even as late as 1772, Henry Patullo, in the course of his comments on the economic resources of Bengal, could claim confidently that the demand for Indian textiles could never reduce, since no other nation could equal or rival it in quality. However, by the early nineteenth century, the beginning of a long history of decline of textile exports is observed.
A commonly cited legend is that in the early 19th century, the East India Company (EIC), had cut off the hands of hundreds of weavers in Bengal in order to destroy the indigenous weaving industry in favour of British textile imports (some anecdotal accounts say the thumbs of the weavers of Dacca were removed). However this is generally considered to be a myth, originating from William Bolts' 1772 account where he alleges that a number of silk spinners had cut off their own thumbs in protest at poor working conditions.
Several historians have suggested that the lack of industrialization was because India was still a largely agricultural nation with low wages levels, arguing that wages were high in Britain so cotton producers had the incentive to invent and purchase expensive new labour-saving technologies, and that wages levels were low in India so producers preferred to increase output by hiring more workers rather than investing in technology. Several economic historians have criticized this argument, such as Prasannan Parthasarathi who pointed to earnings data that show real wages in 18th-century Bengal and Mysore were higher than in Britain. Workers in the textile industry, for example, earned more in Bengal and Mysore than they did in Britain, while agricultural labour in Britain had to work longer hours to earn the same amount as in Mysore. According to evidence cited by the economic historians Immanuel Wallerstein, Irfan Habib, Percival Spear, and Ashok Desai, per-capita agricultural output and standards of consumption in 17th-century Mughal India was higher than in 17th-century Europe and early 20th-century British India.
British control of trade, and exports of cheap Manchester cotton are cited as significant factors, though Indian textiles had still maintained a competitive price advantage compared to British textiles until the 19th century. Several historians point to the colonization of India as a major factor in both India's deindustrialization and Britain's Industrial Revolution. British colonization forced open the large Indian market to British goods, which could be sold in India without any tariffs or duties, compared to local Indian producers who were heavily taxed. In Britain protectionist policies such as bans and high tariffs were implemented to restrict Indian textiles from being sold there, whereas raw cotton was imported from India without tariffs to British factories which manufactured textiles. British economic policies gave them a monopoly over India's large market and raw materials such as cotton. India served as both a significant supplier of raw goods to British manufacturers and a large captive market for British manufactured goods.
There is no doubt that our grievances against the British Empire had a sound basis. As the painstaking statistical work of the Cambridge historian Angus Maddison has shown, India's share of world income collapsed from 22.6% in 1700, almost equal to Europe's share of 23.3% at that time, to as low as 3.8% in 1952. Indeed, at the beginning of the 20th century, "the brightest jewel in the British Crown" was the poorest country in the world in terms of per capita income.
According to British economist Angus Maddison, India's share of the world economy went from 24.4% in 1700 to 4.2% in 1950. India's GDP (PPP) per capita was stagnant during the Mughal Empire and began to decline prior to the onset of British rule. India's share of global industrial output also declined from 25% in 1750 down to 2% in 1900. At the same time, the United Kingdom's share of the world economy rose from 2.9% in 1700 up to 9% in 1870, and Britain replaced India as the world's largest textile manufacturer in the 19th century. Mughal India also had a higher per-capita income in the late 16th century than British India had in the early 20th century, and the secondary sector contributed a higher percentage to the Mughal economy (18.2%) than it did to the economy of early 20th-century British India (11.2%). In terms of urbanization, Mughal India also had a higher percentage of its population (15%) living in urban centers in 1600 than British India did in the 19th century.
A number of modern economic historians have blamed the colonial rule for the dismal state of India's economy, with investment in Indian industries limited since it was a colony. Under British rule, India experienced deindustrialization: the decline of India's native manufacturing industries. The economic policies of the British Raj caused a severe decline in the handicrafts and handloom sectors, with reduced demand and dipping employment; the yarn output of the handloom industry, for example, declined from 419 million pounds in 1850 down to 240 million pounds in 1900. Due to the colonial policies of the British, the result was a significant transfer of capital from India to England leading to a massive drain of revenue, rather than any systematic effort at modernisation of the domestic economy.
|Year||PPP GDP per Capita of India (as % of UK)|
The Indian economy grew at about 1% per year from 1880 to 1920, and the population also grew at 1%. The result was, on average, no long-term change in income levels. Agriculture was still dominant, with most peasants at the subsistence level. Extensive irrigation systems were built, providing an impetus for growing cash crops for export and for raw materials for Indian industry, especially jute, cotton, sugarcane, coffee and tea. Agricultural income imparted the strongest effect on GDP. Agriculture grew by expanding the land frontier between 1860 and 1914; this became more difficult after 1914.
The entrepreneur Jamsetji Tata (1839–1904) began his industrial career in 1877 with the Central India Spinning, Weaving, and Manufacturing Company in Bombay. While other Indian mills produced cheap coarse yarn (and later cloth) using local short-staple cotton and cheap machinery imported from Britain, Tata did much better by importing expensive longer-stapled cotton from Egypt and buying more complex ring-spindle machinery from the United States to spin finer yarn that could compete with imports from Britain. The effect of industry was a combination of two distinct processes: a robust growth of modern factories and a slow growth in artisanal industry, which achieved higher growth by changing from traditional household-based production to wage-based production.
In the 1890s, Tata launched plans to expand into heavy industry using Indian funding. The Raj did not provide capital, but aware of Britain's declining position against the U.S. and Germany in the steel industry, it wanted steel mills in India so it did promise to purchase any surplus steel Tata could not otherwise sell. The Tata Iron and Steel Company (TISCO), now headed by his son Dorabji Tata (1859–1932), opened its plant at Jamshedpur in Bihar in 1908. It became the leading iron and steel producer in India, with 120,000 employees in 1945. TISCO became India's proud symbol of technical skill, managerial competence, entrepreneurial flair, and high pay for industrial workers.
The British Raj invested heavily in infrastructure, including canals and irrigation systems in addition to railways, telegraphy, roads and ports. The Ganges Canal reached 350 miles from Haridwar to Cawnpore, and supplied thousands of miles of distribution canals. By 1900 the Raj had the largest irrigation system in the world. One success story was Assam, a jungle in 1840 that by 1900 had 4,000,000 acres under cultivation, especially in tea plantations. In all, the amount of irrigated land multiplied by a factor of eight. Historian David Gilmour says:
British investors built a modern railway system in the late 19th century—it became the then fourth largest in the world and was renowned for quality of construction and service. The government was supportive, realising its value for military use, as well as its value for economic growth. All the funding and management came from private British companies. The railways at first were privately owned and operated, and run by British administrators, engineers and skilled craftsmen. At first, only the unskilled workers were Indians.
A plan for a rail system in India was first put forward in 1832. The first train in India ran from Red Hills to Chintadripet bridge in Madras in 1837. It was called Red Hill Railway. It was used for freight transport only. A few more short lines were built in 1830s and 1840s but they did not interconnect and were used for freight transport only. The East India Company (and later the colonial government) encouraged new railway companies backed by private investors under a scheme that would provide land and guarantee an annual return of up to five percent during the initial years of operation. The companies were to build and operate the lines under a 99-year lease, with the government having the option to buy them earlier. In 1854 Governor-General Lord Dalhousie formulated a plan to construct a network of trunk lines connecting the principal regions of India. Encouraged by the government guarantees, investment flowed in and a series of new rail companies were established, leading to rapid expansion of the rail system in India.
In 1853 the first passenger train service was inaugurated between Bori Bunder in Bombay and Thane, covering a distance of 34 km (21 mi). The route mileage of this network increased from 1,349 km (838 mi) in 1860 to 25,495 km (15,842 mi) in 1880 – mostly radiating inland from the three major port cities of Bombay, Madras, and Calcutta. Most of the railway construction was done by Indian companies supervised by British engineers. The system was heavily built, in terms of sturdy tracks and strong bridges. Soon several large princely states built their own rail systems and the network spread to almost all the regions in India. By 1900 India had a full range of rail services with diverse ownership and management, operating on broad, metre and narrow gauge networks.
During the First World War, the railways were used to transport troops and grain to the ports of Bombay and Karachi en route to Britain, Mesopotamia, and East Africa. With shipments of equipment and parts from Britain curtailed, maintenance became much more difficult; critical workers entered the army; workshops were converted to making artillery; some locomotives and cars were shipped to the Middle East. The railways could barely keep up with the increased demand. By the end of the war, the railways had deteriorated badly. In the Second World War the railway's rolling stock was diverted to the Middle East, and the railway workshops were converted into munitions workshops. This crippled the railways.
Headrick argues that both the Raj lines and the private companies hired only European supervisors, civil engineers, and even operating personnel, such as locomotive engineers. The government's Stores Policy required that bids on railway contracts be made to the India Office in London, shutting out most Indian firms. The railway companies purchased most of their hardware and parts in Britain. There were railway maintenance workshops in India, but they were rarely allowed to manufacture or repair locomotives. TISCO could not obtain orders for rails until the 1920s.
Christensen (1996) looks at of colonial purpose, local needs, capital, service, and private-versus-public interests. He concludes that making the railways a creature of the state hindered success because railway expenses had to go through the same time-consuming and political budgeting process as did all other state expenses. Railway costs could therefore not be tailored to the timely needs of the railways or their passengers.
In 1951, forty-two separate railway systems, including thirty-two lines owned by the former Indian princely states, were amalgamated to form a single unit named Indian Railways. The existing rail systems were abandoned in favor of zones in 1951 and a total of six zones came into being in 1952.
The worldwide Great Depression of 1929 had little direct impact on India, with only slight impact on the modern secondary sector. The government did little to alleviate distress, and was focused mostly on shipping gold to Britain. The worst consequences involved deflation, which increased the burden of the debt on villagers while lowering the cost of living. In terms of volume of total economic output, there was no decline between 1929 and 1934. Falling prices for jute (and also wheat) hurt larger growers. The worst hit sector was jute, based in Bengal, which was an important element in overseas trade; it had prospered in the 1920s but was hard hit in the 1930s. In terms of employment, there was some decline, while agriculture and small-scale industry exhibited gains. The most successful new industry was sugar, which had meteoric growth in the 1930s.
The newly independent but weak Union government's treasury reported annual revenue of £334 million in 1950. In contrast, Nizam Asaf Jah VII of south India was widely reported to have a fortune of almost £668 million then. About one-sixth of the national population were urban by 1950. A US Dollar was exchanged at 4.97 Rupees.
Akaler Shandhaney (Bengali: আকালের সন্ধানে Akaler Shôndhane, lit. "In Search of Famine") is a 1982 Indian Bangla film directed by Mrinal Sen.An Essay upon the Cultivation of the Lands, and Improvements of the Revenues, of Bengal
An Essay upon the Cultivation of the Lands, and Improvements of the Revenues, of Bengal is a 1772 essay written by Henry Patullo, a British company official in India. It is most noted for containing his comments regarding the economic resources of Bengal. Patullo stated that the demand for Bengal textile manufactures in the world markets could never reduce because no other country produced textiles that could rival the Indian textiles in quality.Chittaprosad Bhattacharya
Chittaprosad Bhattacharya was a political artist of the mid-20th century. He preferred watercolor and printmaking, avoiding oil on canvas. Chittaprosad used prints to disseminate leftist ideas and propaganda.Churchill's Secret War
Churchill's Secret War: The British Empire and the Ravaging of India during World War II is a book by Madhusree Mukerjee about the Bengal famine of 1943 during British rule in India. It was published in August 2010 by Basic Books of New York, and later that month by Tranquebar Press of Chennai. The book examines the role in the famine, and subsequent partition of India in 1947, played by the policies and racial worldview of Winston Churchill, British prime minister from 1940–1945, during World War II.Mukerjee writes that the famine killed 1.5 million people according to the official estimate and three million according to most others. The book explores how, apart from the United Kingdom itself, British India became "the largest contributor to the empire's war—providing goods and services worth more than £2 billion.”Colonial India
Colonial India was the part of the Indian subcontinent which was under the jurisdiction of European colonial powers, during the Age of Discovery. European power was exerted both by conquest and trade, especially in spices.
The search for the wealth and prosperity of India led to the colonization of the Americas by Christopher Columbus in 1492. Only a few years later, near the end of the 15th century, Portuguese sailor Vasco da Gama became the first European to re-establish direct trade links with India since Roman times by being the first to arrive by circumnavigating Africa (c. 1497–1499). Having arrived in Calicut, which by then was one of the major trading ports of the eastern world, he obtained permission to trade in the city from Saamoothiri Rajah.
Trading rivalries among the seafaring European powers brought other European powers to India. The Dutch Republic, England, France, and Denmark-Norway all established trading posts in India in the early 17th century. As the Mughal Empire disintegrated in the early 18th century, and then as the Maratha Empire became weakened after the third battle of Panipat, many relatively weak and unstable Indian states which emerged were increasingly open to manipulation by the Europeans, through dependent Indian rulers.
In the later 18th century Great Britain and France struggled for dominance, partly through proxy Indian rulers but also by direct military intervention. The defeat of the redoubtable Indian ruler Tipu Sultan in 1799 marginalised the French influence. This was followed by a rapid expansion of British power through the greater part of the Indian subcontinent in the early 19th century. By the middle of the century the British had already gained direct or indirect control over almost all of India. British India, consisting of the directly-ruled British presidencies and provinces, contained the most populous and valuable parts of the British Empire and thus became known as "the jewel in the British crown".Economy of India under Company rule
The Economy of India under Company rule describes the economy of those regions (contemporaneously British India) that fell under Company rule in India during the years 1757 to 1858. The British East India Company began ruling parts of the Indian subcontinent beginning with the Battle of Plassey, which led to the conquest of Bengal Subah and the founding of the Bengal Presidency, before the Company expanded across most of the subcontinent up until the Indian Rebellion of 1857.Economy of the British Empire
After the defeat of France in the Revolutionary and Napoleonic Wars (1792–1815), the British Empire emerged as the principal naval and imperial power of the 19th century. Unchallenged at sea, British dominance was later described as Pax Britannica ("British Peace"), a period of relative peace in Europe and the world (1815–1914) during which the British Empire became the global hegemon and adopted the role of global policeman. In the early 19th century, the Industrial Revolution began to transform Britain; by the time of the Great Exhibition in 1851 the country was described as the "workshop of the world".Geological Survey of India
The Geological Survey of India (GSI), founded in 1851, is a Government of India Ministry of Mines organisation, one of the oldest of such organisations in the world and the second oldest survey in India after Survey of India (founded in 1767), for conducting geological surveys and studies of India, and also as the prime provider of basic earth science information to government, industry and general public, as well as the official participant in steel, coal, metals, cement, power industries and international geoscientific forums.
GSI (geology) as well as ASI (archaeology), BSI (botany), FiSI (fisheries), FSI (forests), IIEE (ecology), NIO (oceanography), RGCCI (population survey) and language survey), SI (cartography), and ZSI (zoology) are key national survey organisations of India.Ian Stephens (editor)
Ian Melville Stephens (1903 – 28 March 1984) was the editor of the Indian newspaper The Statesman (then British-owned) in Kolkata, West Bengal, from 1942 to 1951. He became known for his independent reporting during British rule in India, and in particular for his decision to publish graphic photographs, in August 1943, of the Bengal famine of 1943, which claimed between 1.5 and 3 million lives. The publication of the images, along with Stephens' editorials, helped to bring the famine to an end by persuading the British government to supply adequate relief to the victims.When Stephens died, Amartya Sen wrote in a letter to The Times: "In the subcontinent in which Ian Stephens spent a substantial part of his life, he is remembered not only as a great editor (with amiable, if somewhat eccentric, manners), but also as someone whose hard-fought campaign possibly saved the lives of hundreds of thousands of people."Madhusree Mukerjee
Madhusree Mukerjee (born 1961) is an American writer. She is the author of The Land of Naked People: Encounters with Stone Age Islanders (2003) and Churchill's Secret War: The British Empire and the Ravaging of India during World War II (2010). She is also a contributor to the People's Archive of Rural India and an editor with Scientific American.Outline of India
The following outline is provided as an overview of, and topical guide to, India:
India – seventh-largest country by area, located on the Indian subcontinent in South Asia. India was home to the ancient Indus Valley Civilisation, and is the birthplace of four world religions—Hinduism, Sikhism, Buddhism, Jainism. India endured colonization, eventually being administered by the United Kingdom from the mid-19th century to the mid-20th century. India became an independent nation in 1947 after a struggle for independence that was mainly non-violent resistance, led by influential figures like Mahatma Gandhi, and underwent a violent partition. India is the second-most populous country with over 1.2 billion people, and is also the most populous democracy in the world.Timeline of major famines in India during British rule
This is a timeline of major famines on the Indian subcontinent during British rule from 1765 to 1947. The famines included here occurred both in the princely states (regions administered by Indian rulers), British India (regions administered either by the British East India Company from 1765 to 1857; or by the British Crown, in the British Raj, from 1858 to 1947) and Indian territories independent of British rule such as the Maratha Empire. At least 35 million people may have died in famines caused by droughts and the El Niño–Southern Oscillation phenomenon during the British rule.
The year 1765 is chosen as the start year because that year the British East India Company, after its victory in the Battle of Buxar, was granted the Diwani (rights to land revenue) in the region of Bengal (although it would not directly administer Bengal until 1784 when it was granted the Nizamat, or control of law and order.) The year 1947 is the year in which the British Raj was dissolved and the new successor states of Dominion of India and Dominion of Pakistan were established.