Impact of British Rule on Indian Economy: Deindustrialization, Ruralization and Impoverishment- (Part 01)

During British rule in India, the economy faced severe setbacks, particularly in industries like handicrafts. While Western countries thrived due to industrialization, India experienced deindustrialization, which devastated traditional crafts and forced many workers into agriculture. British policies, including free trade and the imposition of high tariffs, significantly contributed to this decline.

Impact of British Rule on Indian Economy

Deindustrialisation—Ruin of Artisans and Handicraftsmen

• De-industrialization in India (19th Century): During the first half of the 19th century, and extending until around 1880, India encountered a peculiar economic phenomenon. 
  • While Western nations were actively undergoing industrialization, India, in stark contrast, grappled with a pronounced period of industrial decline. 
  • This process is commonly referred to as “de-industrialization.”
• Contrasting Industrialization and Decline: The traditional handicraft industry in India suffered a decay so profound that recovery seemed nearly impossible. 
  • This decline in Indian handicrafts coincided with the establishment of the Industrial Revolution in England, and England exerted a considerable influence over the intricate threads of the Indian economy.
  • Throughout the 19th century, India’s deindustrialization was characterized by a diminishing vitality in its traditional handicraft sector, standing in stark opposition to the concurrent industrialization and progress witnessed in Western countries, particularly during the heyday of the Industrial Revolution.

• Several factors contributing to deindustrialization are as follows:

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• • Impact of Industrial Revolution: In Western countries, the Industrial Revolution led to the growth of factory-based industries, which could produce goods more efficiently and at a larger scale. 
    • In contrast, India’s traditional handicraft industry couldn’t compete with these modern factories.
  • British Control: The decline of Indian handicrafts was concurrent with British control over India’s economy. 
    • The British, with their colonial policies, changed the nature of Indian society and economy, which had a detrimental impact on traditional crafts.
  • Change in Trade Dynamics: India’s role in trade shifted. While it had been primarily an exporting country, it started importing more from England. 
    • British-made textiles, especially cotton, began to flood Indian markets, leading to the ruin of the Indian weaving industry.
  • Impact of English Education: The rise of an English-educated professional class in India led to the imitation of European standards and a preference for Western-made products over traditional Indian ones.
  • Political Power: The British government used its political power to influence and stifle Indian handicrafts. 
    • Policies such as British free trade in India, high duties on Indian manufactures in England, export of raw materials from India, transit and custom duties, and special privileges for British manufacturers in India further decline.

• Regional Decline and Resilience of Indian Handicrafts: It’s important to note that the decline of Indian handicrafts was not uniform across all regions of India. with distinct periods marking the downturn in different regions. 
  • Impact of Railways on Handicrafts in Rajasthan: This diversity in timelines is evident in the case of Rajasthan, where the impact of railways, introduced after 1911, played a pivotal role in triggering the decline. 
  • Resilience of Indian Handicrafts in Rural Communities: Despite facing substantial challenges, Indian handicrafts persevered, sustained by rural communities entrenched in poverty and traditional values. 
  • Adoption of Khadi and Locally Crafted Agricultural Tools: The adoption of comparatively affordable khadi cloth and locally crafted agricultural tools, such as iron and wooden ploughs, by the rural populace, contributed to the resilience of these crafts.
• Limited Impact of Modern Industry on Deindustrialization: The rise of modern industry in India after World War I did not fully compensate for the deindustrialization process. 
  • The percentage of the working population engaged in industry continued to decrease, while the percentage engaged in agriculture increased.
• Debate on British Exploitation: While some Western scholars have challenged the notion of British exploitation, Indian national writers and publicists have argued that British colonial rule inhibited Indian industrial development by focusing on infrastructure developments like railways, ports, and irrigation that served British economic interests. 
  • This led to a rallying cry during India’s freedom struggle against “deindustrialization” and the perception of British indifference to Indian industrial growth.

One-Way Free Trade

• Impact of the Charter Act of 1813: The period following the Charter Act of 1813, which allowed one-way free trade for British citizens, had significant economic consequences for India. 
  • This policy facilitated the influx of cheap and machine-made imports into the Indian market. 
  • Simultaneously, Indian products faced increasing difficulty in accessing European markets. 
• Several key factors contributed to this change in trade dynamics:
  • Imposition of Tariffs: European countries, especially Britain, imposed high tariffs, reaching nearly 80 percent, on Indian textiles. 
    • These high tariffs made Indian cloth more expensive for European consumers, leading to a decline in Indian textile exports to Europe.
  • Limited Access to European Markets: After 1820, European markets effectively closed their doors to Indian exports. 
    • This restriction on Indian goods in European markets hindered India’s ability to compete internationally.
  • Influx of Cheap British Cloth: Cheap British-made cloth began to flood the Indian market. 
    • The availability of these machine-made textiles from Britain, coupled with their competitive prices, led to a decline in the demand for traditional Indian textiles.
  • Expansion of Rail Network: The newly introduced rail network in India further facilitated the distribution of European products across the country. 
  • It helped these imported goods reach even the remotest areas of India.

• Shift from Exporter to Importer and the Decline of Indian Textiles:

• • As a result of these changes, India transitioned from being a net exporter to becoming a net importer. 
  • The shift in trade dynamics had a detrimental impact on India’s traditional industries, especially its textile sector. 
  • The influx of cheap British textiles and the decline in demand for Indian textiles played a significant role in the deindustrialization of India during this period.

Fewer Steps Taken for Modern Industrialisation

• Lack of Industrialization: The loss of traditional livelihoods in India during the 19th century, especially in the context of declining handicrafts, was not accompanied by a corresponding process of industrialization. 
  • This situation was quite distinct from the experiences of other rapidly industrializing countries in Europe and elsewhere. 

• Several Factors Contributed to This Phenomenon

• • Absence of Industrialization: While Europe was undergoing a robust phase of industrialization, India did not experience a comparable surge in modern industrial sectors. 
    • The Industrial Revolution that had transformed Europe’s economic landscape did not have a similar parallel in India during this period.
  • Deindustrialization: The decline in traditional handicrafts and the absence of modern industries led to a process of deindustrialization in India. 
    • This meant that as traditional craft industries withered away, they were not replaced by modern industrial enterprises. 
    • This loss of economic diversity was detrimental to the Indian economy.
  • Changing Patronage: Traditional Indian artisans and handicrafts men, who had relied on patronage from princes and nobility, found themselves in a difficult situation. 
    • With the influence of new Western tastes and values, the support for traditional Indian art and crafts declined. 
    • This shift in patronage further weakened the traditional industries.

• Consequences of Industrial Stagnation: The absence of modern industrialization and the continuation of agrarian and traditional handicraft-based economies left India in a precarious position. 
  • While Europe was reaping the benefits of industrialization and economic diversification, India was experiencing the Consequences of Industrial Stagnation without a corresponding development of modern industries. 
  • This had long-lasting consequences for India’s economic landscape and its path toward industrialization.

Ruralisation

• • Ruralization of the Indian Economy: The shift from urban manufacturing to rural agriculture became a dominant trend, often referred to as ruralization or peasantization, which defined India’s economic landscape during the colonial period.
    • Unemployment in Manufacturing Sectors: The process of de-industrialization in India led to a growing emphasis on agriculture within its economy. 
      • Numerous workers from the manufacturing sector in industrial hubs such as Dacca, Murshidabad, Surat, and other locations found themselves unemployed, prompting a migration from urban areas to rural regions in search of livelihoods. 
    • Increased Reliance on Agriculture: With the decline of traditional industries, there was a growing emphasis on agriculture for sustenance, leading to a disproportionate focus on agricultural production over industrial development.
    • British Characterization of India as Agrarian: British writers during the 19th and 20th centuries often took pride in characterizing India as inherently an agrarian nation. 

• Factors Contributing to the Ruralization or Peasantization of the Indian Economy

• • • Migration from Urban to Rural Areas: Traditional artisans and craftsmen faced deteriorating conditions and declined incomes due to the loss of patronage and increased competition from cheap British-made goods. 
      • Many of them abandoned their urban professions. They moved from cities like Dacca, Murshidabad, and Surat to rural areas in search of alternative livelihoods, primarily in agriculture.
    • Increased Pressure on Land: The influx of people from urban areas into the countryside placed added pressure on India’s agricultural sector. 
      • With more individuals turning to agriculture, there was greater competition for land and its limited resources. 
      • This resulted in more intensive land use, which often led to diminishing returns and increased poverty in the agricultural sector.
    • Overemphasis on Agriculture: Deindustrialization meant that the Indian economy increasingly relied on the production of agricultural goods and raw materials. 
      • As traditional industries declined, India’s economic emphasis shifted more towards agriculture, making it the dominant sector of the economy. 
      • British policies favored this shift as they aimed to extract agricultural products and raw materials for the benefit of the British economy.
    • British Economic Policies: British policies played a significant role in the ruralization of the Indian economy. 
      • These policies deliberately undermined India’s traditional handicraft industries, forcing many skilled workers to transition to agriculture. 
      • Simultaneously, the British encouraged the development of India as an agricultural supplier to meet the raw material needs of industrialized Britain.

• Long-term Implications of Ruralization and Agricultural Reliance
  • Agricultural Sector Challenges: This shift towards ruralization and the increased reliance on agriculture had long-term implications for the Indian economy. It contributed to the problems faced by the agriculture sector, such as land pressure, diminishing returns, and poverty. 
  • Exacerbation of Economic Disparities: British economic policies further exacerbated these challenges and aimed to ensure India’s role as an agricultural supplier to meet Britain’s industrial needs. 
  • Transformation into an Agricultural Farm for Britain: India’s transformation into an “agricultural farm” for Britain was realized through these policies that systematically undermined India’s traditional industries and contributed to the ruralization of its economy.
  • Impact of British Economic Strategy: The British strategically reinforced India’s role as an exporter of raw materials, ensuring that India’s industrial potential remained stifled in favor of supporting British economic interests. 
  • This stunted India’s growth as an industrial nation and prolonged its economic dependency on Britain.

Impoverishment of Peasantry

The impoverishment of the Indian peasants during the colonial period was a consequence of various economic and administrative policies implemented by the British government. 

Factors Contributing to the Worsening Conditions of the Peasantry

• Permanent Settlement System: The imposition of the Permanent Settlement system in large parts of India led to increased insecurity for tenants. 
  • Under this system, the land revenue was fixed, and landlords, often absentee British landlords or wealthy local elites, were responsible for collecting revenue from peasants. 
  • This system led to high rents and exploitation of peasants by landlords, as there was no incentive for landlords to invest in agriculture or protect the interests of tenants.
• Transferability of Land: The ability to transfer land under the Permanent Settlement system led to the loss of traditional rights for tenants. 
  • Landlords could sell or transfer land without considering the interests of the peasants working on the land. 
  • This led to increased insecurity for the tenants, making them vulnerable to eviction and exploitation.
• Zamindars’ Exploitation: Zamindars, who were intermediaries between the British government and peasants, often resorted to illegal practices to maximize their share of the agricultural produce. 
  • They imposed illegal dues and forced labor (begar) on peasants, further increasing the burden on the already impoverished farmers. 
  • Zamindars had no incentive to invest in agricultural improvement as their focus was on extracting maximum revenue from the peasantry.
• Exploitation by Moneylenders: Peasants burdened with high rents and illegal demands from landlords often had to borrow money from moneylenders to meet their financial obligations. 
  • Moneylenders, who were often also village grain-merchants, manipulated the situation to force farmers to sell their produce at low prices. 
  • The indebtedness of peasants to moneylenders further exacerbated their economic woes.
• Manipulation of Judiciary: The powerful moneylenders were able to manipulate the legal system in their favor. 
  • Peasants who sought legal recourse often found themselves facing biased judgments, which favored the moneylenders and landlords, perpetuating the cycle of poverty and exploitation.
• Impact of Famine and Scarcity: During times of famine and scarcity, the plight of the peasants worsened. 
  • Crop failures and food shortages led to increased poverty and desperation among the farming communities, making it even more challenging for them to repay debts and sustain their livelihoods.

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Conclusion

The British colonial policies caused widespread impoverishment among the Indian peasantry, leading to increased debt and exploitation. 

• The shift towards an agrarian economy, combined with the decline of handicrafts, left India struggling economically. 
• This period of deindustrialization and economic hardship had long-lasting effects on India’s development.

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