Economic Impact of British Rule

Notes

British economic policy passed through three phases that changed India's economy to serve British interests.

Phases

Mercantilist phase (1757-1813): the Company's monopoly, plunder of Bengal, export of Indian goods (textiles) and revenue used to buy goods; the beginning of the drain.
Free trade / industrial capitalism (1813-1858): the Charter Act of 1813 ended the monopoly; India became a market for British manufactured goods and a source of raw materials; Indian handicrafts declined.
Finance imperialism (after 1858): investments by British capital in railways, plantations, mines, banking with guaranteed returns; the burden of Home Charges.

Effects

Deindustrialisation: collapse of textile and handicraft centres (Dhaka muslin, Murshidabad, Surat); artisans pushed to agriculture (ruralisation). The share of the population dependent on agriculture rose to about 70-75%.
Land and agriculture: heavy land revenue, indebtedness, and commercialisation of agriculture: cotton, jute, indigo, opium, tea, sugarcane and oilseeds, often forced (the Tinkathia system in Champaran; Indigo Revolt, 1859-60). Cash crops benefited traders and moneylenders, not peasants.
Famines: Bengal (1770), 1876-78, 1896-97, 1899-1900 and the Bengal famine of 1943. The Famine Commission (1880, Richard Strachey) and the Lyall Commission (1901) recommended relief measures.
Railways: the first line Bombay-Thane (1853), under Dalhousie; built on a guarantee system (a 5% return) to serve British trade, military and raw materials; freight rates favoured imports and exports. Indian industries gained little (steel, rolling stock were imported).
Modern industry: slow and limited: Bombay cotton mill (1854, Cowasjee Davar), Ahmedabad (1861), Rishra jute mill (1855), TISCO (1907) by Jamsetji Tata at Sakchi (Jamshedpur). Tariff policy favoured Britain: the cotton import duty was abolished in 1882 and an excise duty was levied on Indian cotton in 1894.
Other: irrigation canals (Ganga Canal 1854; Punjab canal colonies), postal and telegraph services, banking, and a modern administrative system, mostly built for imperial needs.
Poverty: Dadabhai Naoroji estimated per capita income at about ₹20 a year (1867-70) in his book Poverty and Un-British Rule in India. India's share of world GDP is estimated to have fallen sharply between 1700 and 1950 (Angus Maddison).

Key Points

Three phases: mercantilism, free trade, finance imperialism.
Deindustrialisation and ruralisation; commercialisation of agriculture.
Frequent famines; Famine Commissions (1880, 1901).
First railway Bombay-Thane (1853); guarantee system.
First Indian cotton mill Bombay (1854); TISCO (1907).

MCQs

Q1. The first cotton mill in India was established in Bombay in: (a) 1818 (b) 1854 (c) 1861 (d) 1907 Ans: (b). By Cowasjee Davar.

Q2. The first railway line in India ran between: (a) Calcutta and Delhi (b) Bombay and Thane (c) Madras and Bangalore (d) Bombay and Pune Ans: (b). 1853.

Q3. The Famine Commission of 1880 was headed by: (a) Richard Strachey (b) Lord Lytton (c) Sir Antony MacDonnell (d) Lord Curzon Ans: (a).