How the transfer of wealth from India to

Britain began well before the industrial

revolution
A look at the history of the sub-continent's de-industrialisation following Shashi Tharoor's
Oxford Union Society speech on Britain's moral obligation to pay India reparations.
Anu Kumar Aug 02, 2015 03:30 pm

Photo Credit: WIKIMEDIA COMMONS

48K
Total Views

In a debate at the Oxford Union Society on May 28, Shashi Tharoor, Congress member of
Parliament, made a case for the British paying reparations to India for the many ills caused by
colonialism, among which deindustrialisation was a major consequence.
Deindustrialisation between 1750 and 1900 stifled Indias nascent industry. It made India a
supplier of raw materials to Britain and a market for its goods, following the latters industrial

revolution. As industry suffered, labour fell back onto agriculture.

Deindustrialisation, however, is complex and contradictory, and saw various phases. The word
entered the political lexicon in the early 20th century when nationalist historians and politicians
such as Romesh Chunder Dutt and Dadabhai Naoroji mentioned it, as did Jawaharlal Nehru in
his Discovery of India.
The facts are indisputable: for instance, India had 25 percent of world industrial output in 1750,
and this dwindled to two percent in 1900. What constituted industrial output at that time was
different from now: luxury goods: fine cottons and silks, jewellery and brassware. It also
included spices and saltpetre. In fact, raw cotton of the kind produced in India, didnt find much
favour in international markets. Until the 1840s, 80 percent of British raw cotton came from
America and only 13 percent from India.
Among the first to actually quantify deindustrialisation was Amiya Bagchi in 1976. He used data
from the region around the mid-Gangetic plain collected by the British administrator Buchanan
Hamilton in the early 19th century. Bagchi then compared these to census figures of 1901.
Accounting for factors such the rate of growth, soil productivity, etc., it appears that around 18.6
percent of the population was engaged in handloom spinning and weaving in the early years, and
this dropped to 8.5 a century later.
Many phases
Despite the chaotic 18th century, provinces like Mysore saw impressive developments in
industries like metallurgy. Tirthankar Roy has described how handicrafts such as handloom
weaving, gold weaving, brassware, carpets and leatherwork adapted and found new markets in
the 18th century and later.
The economic historians Clingingsmith and Williamson (2005) denoted three phases to suggest
that deindustrialisation began well before Britains industrial revolution: Post-Mughal (1700-50);
then the merchant capital period from the 1750s, which saw net transfer of wealth and goods as
the East India Company tried to balance trade, and then after the 1850s, when British industrial
interests weighed in heavily on policy decisions of the colonial government a time when
modern industry also had its beginnings in India.
While a centralised regime like that of the Mughals was beneficial for the economy, the chaos
that followed a weakened empire saw a rise in revenue farming, when more income was drawn
from land: rents rose as high as 50 per cent and grain prices did too. Instability affected intracountry trade as well. While provinces and areas like Mysore and Dacca invested in
manufacturing through the "karkhanas", local rulers well into the 19th century were more set on
investing their gold in impressive rituals and rites, as for example described even a century later
by Vishnu Bhatt Versaikars memoirs of 1857.
It was in the early 18th century that Indias share in world trade declined. Developments in
worldwide shipping occurred mainly in the west. In these early years, when trade in the seas bent
to sheer might, they sought the help of privateers and buccaneers like William Kidd for instance,

who would trade, protect ships they were allied to, and attack and loot enemy ships. Import
tariffs came up in these years too, after 1700, when the British parliament raised duties on goods
such as fine textiles from outside.
1750s onward
The second phase followed the East India Companys acquiring the diwani of Bengal province.
Revenue collection meant not merely the net transfer of wealth but also goods bought from this
revenue out of India, without which the Companys trade could not be balanced.
The Companys merchants elbowed out the traditional gomastas, or middlemen, forced new
terms of bargaining from Bengals artisans who, as Tapan Raychaudhuri (1983) has shown,
worked under conditions of indenture. But despite the outflow, the Company could only balance
its trade only when the opium and tea trade were placed on a firm footing.
Environmental historians have also shown how incidence of famine took a different turn before
and after 1750. Vinita Damodaran, writing of the period after 1750 and later, differentiates
between famines of scarcity, or true famines, of the earlier time, and famines caused by a lack of
purchasing power. She cites the Report of the Famine Commission in 1880 to show an
immiseration of the peasantry and general populace, with rising extractions from the state:
since the East India Company took over the diwani of Bengal from 1765 to 1858, Bengal
experienced 12 famines and four periods of severe scarcities.
In the 1840s, Britain rapidly industrialised. But while manufacturing lobbies bargained hard for
concessions, the Parliament, the Board of Control in London managing Indias operations before
1858, and later, the Raj, had to balance and weigh every option. Even the introduction of
railways meant several lobbies industrial, military, welfare, merchant-capital had to be
played off against each other. But it was around this time that Indian industry too emerged and
their products competed with native cottage industry handlooms as well some historians have
in fact called this a re-industrialisation.
Entrepreneurial spirit
A part of the reason for absent or slow industrialisation in India has been ascribed by historians
to the fact that merchant traders or small-time capitalists were not able to transform themselves
into industrialists. Bombays textile mills, for example, were built with credit, technical
assistance and machines from Britain, but remained largely uncompetitive because of a shortage
of technology, skilled labour, and capital.
As Dwijendra Tripathi has shown, the manufacturing system was an exact replica of
Manchesters, and while mechanical devices more conducive to Indian conditions were
available, Indians for long favoured the technology used by British manufacturers. For instance,
the mule spindle used in Indian cotton factories was developed in Britain in 1779, when the ring
spindle developed in the 1830s in the USA would have been more efficient. But it was only in
1883 that JN Tata applied the new American cotton technology in his Empress Mill at Nagpur.

In the Economic and Political Weekly (August 1970), Amalendu Guha wrote of the
transformation of Parsi artisans into merchant-entrepreneurs during the first half of the 19th
century. A few did become wealthy as did Sir Jamsetji Jeejeebhoy (1783-1859), but in those
early years, it was not the railways but gains from the opium trade that attracted many, in the
words used memorably by Bahram Modi in Amitav Ghoshs River of Smoke. Modi, hoping to
convince his father-in-law to diversify from his ship-building business to the lucrative opium
trade, pleads thus:
Listen sassraji look at the world around us; look at how it is changing. Today the biggest
profits dont come from selling useful things: quite the opposite. The profits come from selling
things that are not of any real use... Opium is just like that. It is completely useless unless youre
sick, but still people want it. And it is such a thing that once people start using it they cant stop;
the market just gets larger and larger. That is why the British are trying to take over the trade
and keep it to themselves. Fortunately in the Bombay Presidency they have not succeeded in
turning it into a monopoly, so what is the harm in making some money from it?