Indian Economic and Political

History
2014
Session 2
Rajesh Bhattacharya
rb@iimca
l.ac.in
Indian Institute o !ana"ement
#alcutta 1
$he decline o the !u"hal
em%ire
1 $he !u"hal em%ire colla%sed
&ithin a e& decades ater
'uran"(eb)s death.
2 Rise o re"ional %o&ers*+a&abs o
,udh and Ben"al- !arathas in the
.est- +i(am in the South.
3 East India #om%any becomes the ruler
o Ben"al ater the Battle o Plassey
1/0/.
4 'ter the 'n"lo1!aratha .ars- the
East India #om%any emer"ed as the
su%reme territorial %o&er.
Indian Institute o !ana"ement #alcutta
2
Sta"es o #oloni(ation2
1/0/11300
1
st
sta"e 4second hal o the 15
th
century6 2 !ercantilist %hase
mar7ed by direct %lunder and the East India #om%any)s
mono%oly trade- unctionin" throu"h the 8in9estment) o
sur%lus land re9enues in the %urchase o- at lo& %rices- o
Indian :nished "oods or e;%ort to En"land and Euro%e
2nd Sta"e 4:rst hal o the 13
th
century62 Industrial Re9olution
in En"land dramatically chan"es the %attern o trade-
transormin" India rom a %roducer and e;%orter o
manuactured "oods to a %roducer o ra& materials or
En"lish actories. <eindustriali(ation. #ontradictions
bet&een e;traction o tribute and creation o mar7et or
En"lish "oods.
=
rd
sta"e 4second hal o the 13
th
century62 British ca%ital
%ours in. Rail&ays- commerciali(ation o a"riculture and
urther de9elo%ment o India as the source o ra&
materials and the mar7et or En"lish manuactured "oods
4ca%ital "oods as &ell as consumer "oods6.
Indian Institute o !ana"ement #alcutta
=
EI# ater 1/0/2
E;traction o
'"ricultural Sur%lus in
Ben"al
1 Diwani ri"hts in Ben"al*$he EI# could no& raise
land re9enue.
2 Pressure on zamindars and re9enue1armers
4hi"hest bidders or re9enue arms in auctions6 to
increase re9enue.
3 >amine o 1//02 7illed one1third o the %o%ulation
o Ben"al* almost 10 million.
4 $he 1301 >amine #ommission ound that t&el9e
amines and our ?se9ere scarcities? too7 %lace
bet&een 1/@0 and 1505.
5 $he last bi" amine in British India &as the Ben"al
>amine o 134=. 'ter inde%endence amines
disa%%eared- des%ite treblin" o %o%ulation.
6 'martya Sen a"ued that the amines in the British
era &ere due to the absence o democracy.
Indian Institute o !ana"ement #alcutta
4
!a;imi(ation o Aand
Re9enue
1 1/532 $otal sur%lus o Ben"al &as Rs. =.20 crore-
o &hich the #om%any e;tracted Rs 2 crore - the
rest &as or zamindars and others.
2 Permanent Settlement o 1/3= conerred
o&nershi% ri"hts on zamindars in e;chan"e or a
%ermanently settled re9enue obli"ation to the
state.
3 $o be"in &ith- the zamindar)s condition
&orsened. His share &as :;ed at one1ele9enth
%art o the land re9enue.
4 Zamindari ri"hts &ere oten sold oB or
auctioned to ban7ers and merchants.
Indian Institute o !ana"ement #alcutta 0
Aand Re9enue and the
8tribute)
1 Entire land re9enue &as treated as
"ross %ro:ts o the #om%any. <educt
e;%enses necessary or maintainin"
"o9ernment and army- la& and order
and "et +et Pro:ts.
2 $he net %ro:ts &ere then used or the
%urchase o Indian commodities.
111)In9estments)
3 !ono%oly %o&ersC buy chea% and sell
dear.
Enlar"ement o Pro:t beore the
8tribute) &as recei9ed in En"land.
Indian Institute o !ana"ement #alcutta
@
British $rade &ith India
1 Im%orts rom India as a share o
British im%orts increased rom 12
D in 1/00101 to 24D in 1/3/135.
2 British e;%orts to India increased
rom @.4 D to 3 D.
3 $he coloni(ers &ere not loo7in" or
mar7ets or their "oods. $hey &ere
loo7in" or colonial commodities
&hich had mar7ets &orld&ide.
Indian Institute o !ana"ement #alcutta
/
$he si(e o the 8tribute)
'ccordin" to Iran Habib- in 1501- at
a crucial sta"e o Britain)s industrial
re9olution- drain or unreEuited
transers to Britain rom India
re%resented about 3D o the F+P o
the British territories in India- 2D o
the F+P o Britain and =0D o British
domestic sa9in"s a9ailable or
ca%ital ormation in Britain.
Indian Institute o !ana"ement #alcutta
5
Industriali(ation in
En"land
1 ,ne 9ie& is that industriali(ation &as an
endo"enous %rocess in En"land*technolo"ical
ad9ancements- scienti:c s%irit- %ro%erty ri"hts and
contract la&s etc.
2 $he other 9ie& is that $he En"lish "ot crucial
a%%renticeshi% in te;tiles industry and trade throu"h
%artici%ation in the "lobal trade in Indian cotton
te;tiles.
3 $echnolo"ical brea7throu"hs*In9entions by Games
.att- Samuel #rom%ton- Games Har"rea9es- Richard
'r7&ri"ht in the second hal o the 15
th
century.
4 $he #alico 'cts 41@30H1/216 banned the im%ort o
te;tiles into En"land ollo&ed by the restriction o
sale o most cotton te;tiles.
5 $ariB on Indian "oods stee%ly raised in En"land
bet&een 1/3/ and
1514. I. .hyJ
Indian Institute o !ana"ement #alcutta
3
End o !ono%oly o EI#
1 Industriali(ation in Britain-
ma7in" India a %otential mar7et
or British Foods.
2 !ono%oly obsolete*the 9icious
critiEue o 'dam Smith in Wealth
of Nations 41//@6
3 !ono%oly o EI# abolished in
151=- e;ce%t #hina $rade.
4 'll mono%oly ri"hts o EI# &ithdra&n
in 15==.
Indian Institute o !ana"ement #alcutta
10
E;%orts o British #otton
%iece "oods
Kear
Euro%e and
LS
Lnderde9elo%
ed ,ther
.orld #ountries
1520 @0.4 =1.5 /.5
1540 23.0 @@./ =.5
15@0 13.0 /=.= /./
1550 3.5 52.0 5.2
1300 /.1 5@.= @.@
E.G.Hobsba&m- industry and Empire- Pen"uin- Harmonds&orth-
13@5- P". 14@
Indian Institute o !ana"ement #alcutta
11
<eindustriali(ation
4contd.6
1 Lrban artisans &ere hit hardest
because o decline o traditional
aristocratic class and the e;%ort
mar7et. Karkhanas declined.
2 $he ne& rulin" class &as the British
&ho consumed British lu;ury "oods
and the Indian elite*landlords-
%roessionals &ho imitated the British.
$hus decline o urban demand or
Indian manuactures.
3 'bsolute decline in urban %o%ulation
in Eastern India- e;ce%t #alcutta
&hich- bein" the ca%ital o British
India- "re& ast.
Indian Institute o !ana"ement #alcutta
12
$he decline o merchants and
ban7ers
1 $he Indian merchants and ban7ers &ere not %olitically
%o&erul under the !u"hals*because the state &as
not de%ended on them. $he !u"hal state had its o&n
&ell1or"ani(ed treasury and im%erial hea9ily "uarded
con9oys.
2 $hey became %o&erul durin" the decline o the
!u"hal em%ire or ser9icin" the :nancial needs or
re"ional %o&ers.
3 's India %assed into the hands o EI#- there &as
once a"ain a decline o indi"enous ban7ers and
merchants.
4 Entry o com%any ser9ants and %ri9ate British
traders into inland trade.
5 $he introduction o common com%any le"al tender-
%ostal ser9ice and district treasuries led to the
decline o the indi"enous ba7ers and :nanciers.
Indian Institute o !ana"ement #alcutta
1=
<eindustriali(ation
4contd.6
1 $raditional shi%1buildin" industry "oes
do&n.
2 'lon"side the cotton "oods- En"lish
e;%orts to India o iron "oods- 4bar
and bolt as &ell as cast and &rou"ht6-
to"ether &ith hard&are and cutlery-
"uns- "lass- and MmachineryM-
increased enormously throu"hout the
nineteenth century- causin" a slum%
in the corres%ondin" crats in India-
includin" rural India.
3 $he artisans and &ea9ers in the rural
hinterland &ere hurt much later- ater
the %enetration by rail&ays.
Indian Institute o !ana"ement #alcutta
14
#ontradictions in EI#)s
objecti9es
1 $he im%ortance o tribute &as
undiminished.
2 Aand re9enues continued to be
e;tracted at a 9ery hi"h rate
throu"hout lar"e %arts o India- e9en
in ryotwari and mahalwari re"ions.
3 $he tribute traditionally too7 the orm
o e;%ort o Indian commodities.
4 But deindustriali(ation closed that
route.
5 #otton and Indi"o only %ro9ided short1
term solutions as 'merican cotton &as
more suited to the British te;tile
machinery and .est Indian indi"o
%roduction out1com%eted Indian
indi"o.
Indian Institute o !ana"ement #alcutta
10
,%ium
1 $he solution &as ound in ,%ium.
2 ,%ium- %roduced in India- &as e;%orted to
#hina. #hina &ould in return urnish tea and
sil7. In 1500- En"land consumed tea and sil7
o #hina to the 9alue o 5.0 million %ounds-
&hile e;%ortin" a mere 1 million &orth o
"oods to that country. $he balance &as
sheer "ain obtained throu"h Indian e;%orts
o o%ium- &hich in 1500 amounted to @.2=
million %ounds.
3 ,%ium .ars.4 13=3113426 and 4130@1@06
4 ,%ium became the %remier article o e;%ort
o India- accountin" or nearly a third o the
total 9alue o Indian e;%orts.
Indian Institute o !ana"ement #alcutta
1@
#ro&n Rule and the third
%hase o coloni(ation in
the 13
th
century
1 Lnder the ne& re"ime the em%hasis
shited rom the le9y o direct tribute
throu"h land re9enue to the e;%loitation o
India as a mar7et and as a source o ra&
materials and a destination or British
ca%ital.
2 $he transormation o zamindars into true
landlords*the ally o the British #ro&n-
scared ater the Se%oy !utiny.
3 'bout the middle o the nineteenth
century- actory %roduction &as e;tended
to all industries in Britain.
4 Search or ne& %ro:table outlets or
British ca%ital.
Indian Institute o !ana"ement #alcutta
1/
British orei"n
in9estment and
de9elo%ment o
rail&ays
1 British Mnet orei"n in9estmentM &as
eEual to 42D %er cent o the net
domestic ca%ital ormation in :;ed
assets durin" 15@01@3C 50D %er cent
durin" 1550153 and %ea7ed at 114D
durin" 1300114.
2 British ca%ital %ourin" into rail&ays
construction in India. >antastic
e;%ansion o rail&ays in India- &ith
a "uaranteed rate o return o 0 D
by the Fo9ernment o British India.
Indian Institute o !ana"ement #alcutta
15
E;%ansion o the mar7et or
British
commodities
Hi"her inNo& o im%orts rom Britain as
the rail&ays o%ened u% mar7ets.
#otton te;tiles- sil7 "oods- &ool
manuactures- metal manuactures-
machinery tools- eEui%ment and rollin"
stoc7 or rail&ays e;%anded tremendously.
's modern Indian industries emer"e- all the
machinery "oods bein" to be im%orted
rom Britain.
Indian e;%orts also e;%anded. .estern
Indian cotton- Punjab .heat- Ben"al jute-
'ssam $ea- South Indian oilseeds and
hides and s7ins etc. ,%ium alls behind.
Indian Institute o !ana"ement #alcutta
13
$he 8tribute)
1 India)s tribute in this %eriod till :rst &orld &ar be"an to be
realised thou"h a multilateral tradin" %attern2
1) India "enerated an e;%ort sur%lus &ith countries in the
Euro%ean continent- Ga%an- the LS and other countries by
e;%ortin" lar"e Euantities o ood and ra& materials.
2) Britain had a hu"e e;%ort sur%lus &ith India e;%ortin"
te;tiles and other manuactured "oods -includin" rail&ay
stoc7 -to India.
3) Britain- ho&e9er had de9elo%ed a massi9e balance o %ayment
de:cit &ith the rest o the &orld lar"ely because o the massi9e
in9estments it &as ma7in" "lobally includin" in the LS and the
&hite colonies.
2 British e;%orts to the ne&ly industrialisin" countries o Euro%e
and the LS &ere be"innin" to decline because o %rotectionist
%olicies in these countries under"oin" industriali(ation.
3 In this situation- Britain used its e;%ort sur%lus &ith India and
India)s tribute to adjust her balance o %ayment de:cit &ith
the rest o the &orld.
Indian Institute o !ana"ement #alcutta
20
Flobal im%lications o the
8tribute)
1 >lo& o in9estment rom mother
countries to the colonies o Euro%ean
settlement o9erseas.
2 '%art rom the returns earned rom that
No& o in9estments- the out&ard No&
rom Britain su%%orted the lar"est No&
o mi"rants 4rom Euro%e6 in the late
nineteenth century- &hich not only
brou"ht in hi"h returns because o the
abundance o land and natural
resources in the settler colonies- but
also hel%ed im%ro9e the li9in"
conditions o the Euro%eans let behind
and the rise o LS' as the &orld)s
richest country.
Indian Institute o !ana"ement #alcutta
21
$he 8$ribute) 4#ontd.6
1 $he burden o EI#)s Aondon establishment and o
di9idends to its shareholders &as re%laced ater 1505
by the costs o Secretary o
State)s India ,Oce- &hile the India <ebt in En"land-
already considerable due to the #om%any)s military
ad9entures and the e;%enses or su%%ressin" the
!utiny- &as shar%ly enhanced &hen the
com%ensation to #om%any shareholders &as added to
its account.
2 Home char"es also included %ensions to British Indian
oOcials and army oOcers- military and other stores
%urchased in En"land- costs o army trainin"-
trans%ort and cam%ai"ns outside India but char"ed on
Indian :nances and the "uaranteed interest on
rail&ays.
3 In 1301102- Home char"es came to 1/.= million
%ounds*rail&ay interest @.4 million %ounds- interest
on India debt- = million %ounds- army e;%enses 4.=
million %ounds- store %urchases 1.3 million %ounds-
%ensions 1.= million %ounds.
Indian Institute o !ana"ement #alcutta
22