Economic Impact Of British Rule In India

Introduction

From the establishment of British colonial rule in the mid-19th century until independence in 1947, India underwent significant changes in its economic structure and development. The economic impact of British rule included those related to trade, taxation, land ownership, and industrialization, profoundly influenced India’s economy. The Britishers made structural changes in the Indian Economy and drained its wealth through various policies.

Economic Impact of British Rule in India

• Deindustrialisation: The economic impact of British rule included the ruin of Artisans and Handicraftsmen
  • One-Way Free Trade: British citizens benefited from it after the Charter Act of 1813.
  • High Tariff on Textiles: Indian textiles faced 80% tariffs and lost competitiveness in European markets.
  • Net Importer: Railways facilitated an influx of European products; India transitioned from exporter to importer.
  • Loss of Livelihood: Traditional livelihoods were lost without industrialization.
  • India’s deindustrialisation contrasted with Europe’s intensified Industrial Revolution.
  • Artisans lost patronage from the prince.
  • Many cities declined due to deindustrialisation.  
  • Ruralisation: Artisans now moved to villages and engaged in agriculture. This increased pressure on land led to overburdened agriculture due to the economic impact of British rule in villages.
• Impoverishment of Peasantry
  • Rents Maximization: With the economic impact of British rule, the Government maximized rents, and enforced Permanent Settlement, causing insecurity for tenants.
  • Exploitation by Zamindars: Demanded illegal dues, evicted tenants, and lacked incentive for agricultural improvement.
  • Peasants were forced to borrow from moneylenders, and sell produce at low prices.
  • Triple Burden: Government, zamindar, and moneylender exploitation lead to increased peasant hardships.
• Emergence of Intermediaries, Absentee Landlordism, and Ruin of Old Zamindars
  • Merchants, and moneylenders became new zamindars, resorting to land grabbing.
  • Increase in intermediaries led to absentee landlordism.
  • New zamindars opposed the national movement, perpetuating British rule.
• Stagnation and Deterioration of Agriculture
  • Cultivators: They lacked means and incentives for agricultural investment.
  • Zamindars: They had no roots in villages, and no incentive for agricultural improvement.
  • Government Spending: Little government spending  on agricultural, technical, or mass education.
• Famine and Poverty: Famines resulted from poverty unleashed by colonial forces. Between 1850 and 1900, about 2.8 crore people died in famines.
• Commercialisation of Indian Agriculture [UPSC 2018]
  • In the latter half of the 19th century, agriculture shifted from a way of life to a business enterprise which resulted in the economic impact of British rule. 
  • Cotton, jute, groundnut, and others were grown for national and international markets.
  • Forced process for Indian peasants, led to heavy indebtedness, famines, and agrarian riots.
  • Factors Encouraging Commercialisation: The spread of the money economy, competition replacing tradition, unified national market, improved communication, and British finance capital.
• Destruction of Industry and Late Development of Modern Industry
• • Collapse of Indian Textile: The British stopped paying for Indian textiles in pounds, leading to the destruction of Indian textile competition due to the economic impact of British rule. 
  • Impact on Indian Shipping Industry: British ships were given monopoly, Indian ships faced heavy duties; laws restricted  Indian-built ships.
  • Restrictions on Indian Steel Imports: Restrictions were on Indian steel imports, forcing higher standard production for British use.
  • Indian traders, moneylenders, and bankers played a role in British colonial exploitation.
  • Late Emergence of Modern Machine-Based Industries: Modern machine-based industries began in the second half of the 19th century, mostly foreign-owned.
  • First Cotton Textile Mill: It was established (1853) in Bombay by Cowasjee Nanabhoy. Also, the first jute mill was built in 1855 in Rishra, Bengal.

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Colonial Economy as Criticized by the Nationalists

• Evolution of Intellectual Perspectives: Early 19th Century Intellectuals, initially supported British rule for modernization and capitalist economic organization. 
  • There was disillusionment after the 1860s, as politically conscious individuals started probing the reality of economic impact of British rule in India.
• The Pioneering Analysts as economic critique were:
  • Dadabhai Naoroji (Poverty and UnBritish Rule in India), 
  • Justice Mahadev Govind Ranade, 
  • Romesh Chandra Dutt (Economic History of India), 
  • Gopal Krishna Gokhale, G. Subramania Iyer, and Prithwishchandra Ray. [UPSC 2015] 

British Policies and Economic Critique

• India as Supplier: Critics argue that colonialism transformed India into a supplier of raw materials and foodstuffs, a market for British manufacturers, and a field for British capital.
• Intellectual Agitation for Economic Independence: Nationalist analysts organize intellectual agitations for economic independence. 
• Assertion: The economic impact of British rule made India poor and caused economic backwardness.
• Addressing Poverty as a National Issue: Poverty was seen as a national issue, requiring a solution through raising productive capacity and national development.
• Development through Industrialization: Industrialization, equated with development, was to be based on Indian capital, not foreign capital.
• Economic Drain: The suppression of Indian capital by foreign capital caused an economic drain by strengthening British control.
• Critique of Trade and Railways
  • Import of Finished Goods: Foreign trade patterns favoured the import of finished goods and the export of raw materials.
  • Railway development: It was to be coordinated with India’s industrial needs, leading to a commercial rather than an industrial revolution.
  • Railways enabled foreign goods to outsell indigenous products, benefiting British interests.
• One-Way Free Trade and Tariff Policy
  • Impact: One-Way Free Trade led to the ruination of Indian handicrafts due to unequal and unfair competition.
  • Guided Tariff Policy: This policy was influenced by British capitalist interests and resulted in extensive economic impact of British rule. 
  • Finance and Taxation burden the poor, spare British capitalists and bureaucrats.
  • Reduction of land revenue, abolition of salt tax, imposition of income tax, and excise duties was on consumer goods consumed by the rich middle classes.
• Consequence of Economic Drain 
  • India suffered the depletion of its productive capital due to economic drain. 
  • Magnitude of the Nationalist Estimates: During that era highlighted the extensive economic drain, surpassing key financial indicators of; 
    • More than the total land revenue or;  
    • Half the total government revenue or;  
    • One-third of the total savings (equivalent to 8% of the national product).
• Economic Issue as a Stimulant to National Unrest
• • Nationalist agitation on economic issues challenged the belief that foreign rule benefited Indians. 
  • This stimulated intellectual unrest and the spread of national consciousness during the moderate phase of the freedom struggle (1875–1905). 

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Conclusion

• The economic impact of British rule transformed the country into a supplier of raw materials and a market for British goods while hindering the development of indigenous industries. 
• Policies such as the Permanent Settlement and one-way free trade further marginalize Indian farmers and artisans. 
• Despite some modernization efforts, the overall legacy of  economic impact of British rule was one of economic exploitation and stagnation, leaving a lasting imprint on India’s economy that continues to shape its development today.

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