TOPIC 5.5 ECONOMIC AND COMMERCIAL POLICY
1.Impact on India
1. Drain of Wealth
The concept of "Drain of Wealth" refers to the transfer of Indian resources and wealth to Britain.
The term was popularised in the late 19th century, particularly by Dadabhai Naoroji in his work “Poverty and Un-British Rule in India” (1871).
2. Introduction of the Permanent Settlement Act
This act fixed land revenues and created a class of landlords who collected revenue but had little interest in land improvement.
Introduced in 1793 by Lord Cornwallis.
3. Destruction of Traditional Industries
British policies led to the collapse of traditional Indian industries such as textiles and handicrafts due to competition with British manufactured goods.
This decline was prominent during the 19th century, especially after the 1850s.
4. Deindustrialization of India
India’s traditional industries were systematically dismantled in favour of British industrial products.
The process began in the late 18th century and continued throughout the 19th century.
5. Imposition of High Taxes and Revenue Extraction
The British administration imposed high land taxes on Indian peasants, leading to widespread impoverishment.
Intensified after the implementation of the Permanent Settlement in 1793.
6. Development of Infrastructure for British Benefit
The British built railways, ports, and roads primarily to facilitate the extraction and export of Indian resources.
The railway network expansion started in 1853 and was largely completed by the early 20th century.
7. Commercialization of Agriculture
Agriculture was redirected towards cash crops like indigo and cotton for British markets, causing food shortages.
This trend began in the early 19th century and intensified by the mid-19th century.
8. Famine and Food Shortages
Economic policies led to frequent famines and food shortages in India, exacerbating suffering.
Major famines include the Great Famine of 1876-78 and the Bengal Famine of 1943.
9. Introduction of British Legal and Financial Systems
The British introduced their legal and financial systems, which were unfavourable to Indian business practices and landholding systems.
Major legal reforms occurred during the 19th century, including the establishment of British courts and banking systems.
10. Economic Exploitation during World Wars
The British exploited Indian resources and manpower during World War I (1914-1918) and World War II (1939-1945) for their war efforts, leading to economic strain in India.
World War I had severe economic repercussions, and the impact of World War II was particularly devastating, leading to inflation and shortages.
2.Phases of Economic Policy
The gradual development of Economic and Commercial Policy has been traced through Four Phases of British colonialism by RP Dutta.
1.Early Phase (1600-1757)
The East India Company was purely a trading company, dealing with import of goods and precious metals into India and export of spices and textiles.
2.Mercantile Phase (1757-1813)
They imposed their own prices and had no relation with the cost of production. The company used its political power and monopolised trade and dictated terms to the weavers of Bengal. The Company used revenue from Bengal to finance exports of Indian goods.
3.Industrial Phase (1813-1858)
The British mercantile Industrial capitalist class exploited India. Charter Act of 1813, allowed 'one way free trade' for British citizens resulting in Indian markets flooded with cheap and machine made imported goods from Britain. Indians not only lost their foreign markets but their Indian markets also.
4.Finance Imperialism Phase (1858 Onwards)
The phase saw export of capital from India and also chains of British controlled Banks, export import firms and managing agency houses. Exploitation through railways is the best example of finance Imperialism.
Drain of Wealth Theory
"Drain of Wealth" refers to a portion of the National Product of India, which was not available for consumption of its own people.
Dadabhai Naoroji first cited the drain of wealth theory in his book titled ‘Poverty and Un-British Rule in India’.
RC Dutt blamed British policy for Indian economic ills in his book Economic History of India.
Drain of wealth began in 1757 after the Battle of Plassey. In 1765, the company acquired the diwani of Bengal and began the purchase of Indian goods out of the revenue of Bengal and exported them. These purchases were known as Company's investments.
How the British pulled off a $45 trillion heist in India
Utsa Patnaik, an economic historian, set about to find the answer and published her research in 2017 establishing that the British colonial regime looted nearly $45 trillion from India from 1765 to 1938. The amount is 15 times the annual GDP of the UK today. Even if it wants, it still can't return India the money it looted to not only build itself as a major global power but also fund much of the development in the today's developed world.
