The Impact of British Colonization in India - Essay Example

The British East Indian Company was founded as The Company of Merchants of London Trading into the East Indies by a coterie of enterprising and influential businessmen, who obtained the Crown's charter for exclusive permission to trade in the East Indies for a period of fifteen years. The Company had 125 shareholders, and a capital of 72,0001. The Company was led by one Governor and 24 directors who made up the Court of Directors. They were appointed by, and reported to, the Court of Proprietors. The Court of Directors had ten committees reporting to it. Traders were frequently engaged in hostilities with their Dutch and Portuguese counterparts in the Indian Ocean. A key event providing the Company with the favour of Mughal emperor Jahangir was their victory over the Portuguese in the Battle of Swally in 1612. Perhaps realizing the futility of waging trade wars in remote seas, the English decided to explore their options for gaining a foothold in mainland India, with official sanction of both countries, and requested the Crown to launch a diplomatic mission. In 1615, Sir Thomas Roe was instructed by James I to visit the Mughal emperor Jahangir (who ruled over most of the subcontinent, along with Afghanistan). The purpose of this mission was to arrange for a commercial treaty which would give the Company exclusive rights to reside and build factories in Surat and other areas. In return, the Company offered to provide to the emperor goods and rarities from the European market. This mission was highly successful. The company, under such obvious patronage, soon managed to eclipse the Portuguese, who had established their bases in Goa and Bombay (which was later ceded to England as part of the dowry of Catherine de Braganza). It managed to create strongholds in Surat (where a factory was built in 1612), Madras (1639), Bombay (1668) and Calcutta (1690). By 1647, the Company had 23 factories and 90 employees in India2. The major factories became the walled forts of Fort William in Bengal, Fort St George in Madras and the Bombay Castle. In 1634, the Mughal emperor extended his hospitality to the English traders to the region of Bengal (and in 1717 completely waived customs duties for the trade). The company's mainstay businesses were by now in cotton, silk, indigo, saltpeter and tea. All the while, it was making inroads into the Dutch monopoly of the spice trade in the Malaccan straits. In 1711, the Company established a trading post in Canton (Guangzhou), China, to trade tea for silver3. In 1657, Oliver Cromwell renewed the charter of 1609, and brought about minor changes in the holding of the Company. The status of the Company was further enhanced by the restoration of monarchy in England. By a series of five acts around 1670, King Charles II provisioned it with the rights to autonomous territorial acquisitions, to mint money, to command fortresses and troops and form alliances, to make war and peace, and to exercise both civil and criminal jurisdiction over the acquired areas. The Company, surrounded by trading competitors, other imperial powers, and sometimes hostile native rulers, experienced a growing need for protection. The freedom to manage its military affairs thus came as a welcome boon and the Company rapidly raised its own armed forces in the 1680s, mainly drawn from the indigenous local population. By 1689, the Company was arguably a "nation" in the Indian mainland, independently administering the vast presidencies of Bengal, Madras and Bombay and possessing a formidable and intimidating military strength. From 1698 the company was entitled to use the motto "Auspico Regis et Senatus Angliae" meaning, "Under the patronage of the King and Parliament of England"4. The efforts of the company in administering India emerged as a model for the civil service system in Britain, especially during the 19th century. Deprived of its trade monopoly in 1813, the company wound up as a trading enterprise. In 1858, the Company lost its administrative functions to the British government following the 1857 uprising which began with the Company's Indian soldiers called the Sepoy Mutiny or Indian Rebellion of 1857. The rebellion had diverse political, economic, military, religious and social causes. Indians were unhappy with the heavy-handed rule of the Company which had embarked on a project of rather rapid expansion and westernisation. This included the outlawing of many religious customs, both Muslim and Hindu, which were viewed as uncivilized by the British. This included a ban on sati (widow burning) though it should be noted that the Sikhs had long ago abolished sati and the Bengali reformer Ram Mohan Roy was campaigning against it5. These laws caused outrage in some quarters, particularly amongst the population of Bengal. The British abolished child marriage, and claimed to have ended female infanticide, but this claim is doubtful without accompanying demographic data. The suppression of Thuggee was a less controversial reform, although the true nature of Thuggee (whether it was truly a widespread religious cult, or simply dacoity) is still disputed. British imperialism was more pragmatic than that of other colonial powers. Its motivation was economic, not evangelical. There was none of the dedicated Christian fanaticism which the Portuguese and Spanish demonstrated in Latin America and less enthusiasm for cultural diffusion than the French (or the Americans) showed in their colonies. For this reason they westernized India only to a limited degree. British interests were of several kinds. At first the main purpose was to achieve a monopolistic trading position. Later it was felt that a regime of free trade would make India a major market for British goods and a source of raw materials, but British capitalists who invested in India, or who sold banking or shipping service there, continued effectively to enjoy monopolistic privileges. India also provided interesting and lucrative employment for a sizeable portion of the British upper middle class, and the remittances they sent home made an appreciable contribution to Britain's balance of payments and capacity to save. Finally, control of India was a key element in the world power structure, in terms of geography, logistics and military manpower. The British were not averse to Indian economic development if it increased their markets but refused to help in areas where they felt there was conflict with their own economic interests or political security6. Hence, they refused to give protection to the Indian textile industry until its main competitor became Japan rather than Manchester, and they did almost nothing to further technical education. They introduced some British concepts of property, but did not push them too far when they met vested interests. As far as the mass of the population were concerned, colonial rule brought few significant changes. The British educational effort was very limited. There were no major changes in village society, in the caste system, the position of untouchables, the joint family system, or in production techniques in agriculture. British impact on economic and social development was, therefore, limited. Total output and population increased substantially but the gain in per capita output was small or negligible. The biggest change the British made in the social structure was to replace the warlord aristocracy by an efficient bureaucracy and army. The traditional system of the East India Company had been to pay its servants fairly modest salaries, and to let them augment their income from private transactions. This arrangement worked reasonably well before the conquest of Bengal, but was inefficient as a way of remunerating the officials of a substantial territorial Empire because (a) too much of the profit went into private hands rather than the Company's coffers, and (b) an over-rapacious short-term policy was damaging to the productive capacity of the economy and likely to drive the local population to revolt, both of which were against the Company's longer-term interests. In 1785, Cornwallis created a professional cadre of Company servants who had generous salaries, had no private trading or production interests in India, enjoyed the prospect of regular promotion and were entitled to pensions7. All high-level posts were reserved for the British, and Indians were excluded. Cornwallis appointed British judges, and established British officials as revenue collectors and magistrates in each district of Bengal. One of the most significant things the British did to Westernize India was to introduce a modified version of English education, although the education system which developed was a very pale reflection of that in the UK. Three universities were set up in 1857 in Calcutta, Madras and Bombay, but they were merely examining bodies and did no teaching. Higher education was carried out in affiliated colleges which gave a two-year B.A. course with heavy emphasis on rote learning and examinations. Drop-out ratios were always very high. They did little to promote analytic capacity or independent thinking and produced a group of graduates with a half-baked knowledge of English, but sufficiently Westernized to be alienated from their own culture. It was not until the 1920s that Indian universities provided teaching facilities and then only for M.A. students. Furthermore, Indian education was of a predominantly literacy character and the provision for technical training was much less than in any European country. Education for girls was almost totally ignored throughout the nineteenth century. Because higher education was in English, there was no official effort to translate Western literature into the vernacular, nor was there any standardization of Indian scripts whose variety is a major barrier to multi-lingualism amongst educated Indians. Primary education was not taken very seriously as a government obligation and was financed largely by the weak local authorities. As a result, the great mass of the population had no access to education and, at independence in 1947, 88 per cent were illiterate8. Progress was accelerated from the 1930s onwards, but at independence only a fifth of children were receiving any primary schooling. Agriculture During the period of British rule, agricultural production grew substantially in order to feed a population which grew from 165 million in 1757 to 420 million in 19479. The new system of land ownership offered some stimulus to increase output, and there was substantial waste land available for development. The colonial government made some contribution towards increased output through irrigation. The irrigated area was increased about eightfold, and eventually more than a quarter of the land of British India was irrigated. Irrigation was extended both as a source of revenue and as a measure against famine. A good deal of the irrigation work was in the Punjab and Sind. The motive here was to provide land for retired Indian army personnel, many of whom came from the Punjab, and to build up population in an area which bordered on the disputed frontier with Afghanistan. These areas, which had formerly been desert, became the biggest irrigated area in the world and a major producer of wheat and cotton, both for export and for sale in other parts of India. Apart from government investment in irrigation, there was a substantial private investment, and by the end of British rule private irrigation investment covered nearly 25 million acres of British India10. Improvements in transport facilities (particularly railways, but also steamships and the Suez canal) helped agriculture by permitting some degree of specialization on cash crops. This increased yields somewhat, but the bulk of the country stuck to subsistence farming. Plantations were developed for indigo, sugar, jute and tea. These items made a significant contribution to exports, but in the context of Indian agriculture as a whole, they were not very important. In 1946, the two primary staples, tea and jute, were less than 3.5 per cent of the gross value of crop output11. Thus the enlargement of markets through international trade was less of a stimulus in India than in other Asian countries such as Ceylon, Burma or Thailand. Little was done to promote agricultural technology. There was some improvement in seeds, but no extension service, no improvement in livestock and no official encouragement to use fertilizer. Statistics are not available on agricultural output for the first century and a half of British rule, but all the indications suggest that there was substantial growth. We do not know whether output rose faster or more slowly than population, but it seems likely that the movements were roughly parallel. British rule reduced some of the old checks on Indian population growth. The main contribution was the ending of internal warfare and local banditry. There was some reduction in the incidence of famine. The death rate was also reduced to some degree by making ritual suicide and infanticide illegal. The British contributed to public health by introducing smallpox vaccination, establishing Western medicine and training modern doctors, by killing rats, and establishing quarantine procedures. As a result, the death rate fell and the population of India grew by 1947 to more than two-and-a-half times its size in 175712. Industry Several Indian authors have argued that British rule led to a de-industrialization of India. R.C. Dutt argued, "India in the eighteenth century was a great manufacturing as well as a great agricultural country, and the products of the Indian loom supplied the markets of Asia and Europe. It is, unfortunately, true that the East India Company and the British Parliament, following the selfish commercial policy of a hundred years ago, discouraged Indian manufacturers in the early years of British rule in order to encourage the rising manufactures of England. Their fixed policy, pursued during the last decades of the eighteenth century and the first decades of the nineteenth, was to make India subservient to the industries of Great Britain, and to make the Indian people grow raw produce only, in order to supply material for the looms and manufactories of Great Britain"13. R. Palme Dutt, writing forty years later, argued that the process had been continuous: "the real picture of modern India is a picture of what has been aptly called "de-industrialization"- that is, the decline of the old handicraft industry without the compensating advance of modern industry. The advance of factory industry has not overtaken the decay of handicraft. The process of decay characteristic of the nineteenth century has been carried forward in the twentieth century and in the post-war period"14. There is a good deal of truth in the deindustrialization argument. Moghul India did have a bigger industry than any other country which became a European colony, and was unique in being an industrial exporter in pre-colonial times. A large part of the Moghul industry was destroyed in the course of British rule. However, it is important to understand precisely how this deindustrialization came about and to try to get some idea of its quantitative significance in different periods. Oversimplified explanations, which exaggerate the role of British commercial policy and ignore the role of changes in demand and technology, have been very common and have had some adverse impact on post-independence economic policy. Between 1757 and 1857 the British wiped out the Moghul court, and eliminated three-quarters of the warlord aristocracy (all except those in princely states)15. They also eliminated more than half of the local chiefs (zamindars) and in their place established a bureaucracy with European tastes. The new rulers wore European clothes and shoes, drank imported beer, wines and spirits, and used European weapons. Their tastes were copied by the male members of the new Indian 'middle class' which arose to act as their clerks and intermediaries. As a result of these political and social changes, about three-quarters of the domestic demand for luxury handicrafts was destroyed. This was a shattering blow to manufacturers of fine muslins, jewellery, luxury clothing and footwear, decorative swords and weapons. The second blow to Indian industry came from massive imports of cheap textiles from England after the Napoleonic wars. In the period 1896-1913, imported piece goods supplied about 60 per cent of Indian cloth consumption and the proportion was probably higher for most of the nineteenth century16. Home spinning, which was a spare-time activity of village women, was greatly reduced. A large proportion of village hand-loom weavers must have been displaced, though many switched to using factory instead of home-spun yarn. Even as late as 1940 a third of Indian piece goods were produced on hand looms In time, India built up her own textile manufacturing industry which displaced British imports. The first textile mills were started in the 1850s by Indian capitalists who had made their money trading with the British and had acquired some education in English. Cotton textiles were launched in Bombay with financial and managerial help from British trading companies. India was the first country in Asia to have a modern textile industry, preceding Japan by twenty years and China by forty years. Cotton mills were started in Bombay in 1851, and they concentrated on coarse yarns sold domestically and to China and Japan; yarn exports were about half of output. Coal mining, mainly in Bengal, was another industry which achieved significance. Its output, which by 1914 had reached 15.7 million tons, largely met the demands of the Indian railways17. In 1911 the first Indian steel mill was built by the Tata Company at Jamshedpur in Bihar. However, production did not take place on a significant scale before the First World War. The Indian steel industry started fifteen years later than in China, where the first steel mill was built at Hangyang in 1896. The first Japanese mill was built in 189818. In both China and Japan the first steel mills (and the first textile mills) were government enterprises. Until 1898 India, like most Asian countries, was on the silver standard. In the 1870s the price of silver began to fall and the rupee depreciated against sterling. This led to some rise in the internal price level, but it helped to make Indian exports more competitive with those of the UK, e.g. in the Chinese textile market. In 1898, India adopted a gold exchange standard which tied the rupee to sterling at a fixed value of 15 to 119. This weakened her competitiveness vis-a-vis China which remained on a depreciating silver standard, but its potential adverse effects were mitigated because Japan went on to the gold exchange standard at the same time. During the First World War, when the sterling exchange rate was allowed to float, the rupee appreciated. Unfortunately, when sterling resumed a fixed (and overvalued) parity in 1925, the rupee exchange rate was fixed above the pre-war level. This overvaluation eased the fiscal problems of government in making transfers to the UK and enabled British residents in India, or those on Indian pensions in the UK, to get more sterling for their rupees, but it made it necessary for domestic economic policy to be deflationary (in cutting wages) and greatly hindered Indian exports, particularly those to or competing with China and Japan20. As a result, Indian exports fell from 1913 to 1937, a poorer performance than that of almost any other country21. The Second World War gave a fillip to Indian industrial output, but there was not much increase in capacity because of the difficulty of importing capital goods and the lack of a domestic capital goods industry. Indian industrial efficiency was hampered by the British administration's neglect of technical education, and the reluctance of British firms and managing agencies to provide training of managerial experience to Indians. The small size and very diversified output of the enterprises hindered efficiency. The basic limitations on the growth of industrial output were the extreme poverty of the rural population, and the fact that a large proportion of the elite had a taste for imported goods or exported their purchasing power. The government eventually provided tariff protection but did not itself create industrial plants, sponsor development banks, or give preference to local industry in allotting contracts. The banking system gave little help to industry and technical education was poor. Most of these things changed when India became independent except the first and most important, i.e. the extreme poverty of the rural population which limited the expansion of the market for industrial goods. The major burden of foreign rule arose from the fact that the British raj was a regime of expatriates. Under an Indian administration, income from government service would have accrued to the local inhabitants and not to foreigners. The diversion of upper-class income into the hands of foreigners inhibited the development of local industry because it put purchasing power into the hands of people with a taste for foreign goods. This increased imports and was particularly damaging to the luxury handicraft industries. Another important effect of foreign rule on the long-run growth potential of the economy was the fact that a large part of its potential savings were siphoned abroad. This 'drain' of funds from India to the UK has been a point of major controversy between Indian nationalist historians and defenders of the British raj. However, the only real grounds for controversy are statistical. There can be no denial that there was a substantial outflow which lasted for 190 years. If these funds had been invested in India they could have made a significant contribution to raising income levels22. The first generation of British rulers was rapacious. Clive took quarter of a million pounds for himself as well as a jagir worth 27,000 a year, but the British did not pillage on the scale of Nadir Shah, who probably took as much from India in one year as the East India Company did in the twenty years following the battle of Plassey. They were also shrewd enough to realize that it was not in their long-run interest to devastate the country. However, British salaries were high: the Viceroy received 25,000 a year, and governors 10,00023. The starting salary in the engineering service was 420 a year or about sixty times the average income of the Indian labour force. From 1757 to 1919, India also had to meet administrative expenses in London, first of the East India Company, and then of the India Office, as well as other minor but irritatingly extraneous charges24. The cost of British staff was raised by long home leave in the UK, early retirement and lavish amenities in the form of subsidized housing, utilities, rest houses, etc. Under the rule of the East India Company, official transfers to the UK rose gradually until they reached about 3.5 million in 1856, the year before the mutiny. In addition, there were private remittances. In the twenty years 1835-54, India's average annual balance on trade and bullion was favorable by about 4.5 million a year25. During the period of direct British rule from 1858 to 1947, official transfers of funds to the UK by the colonial government were called the "Home Charges". They mainly represented debt service, pensions, India Office expenses in the UK, purchases of military items and railway equipment. Government procurement of civilian goods, armaments and shipping was carried out almost exclusively in the UK. By the 1930s these home charges were in the range of 40 to 50 million a year26. Some of these flows would have occurred in a non-colonial economy, e.g. debt service on loans used to finance railway development, but a large part of the debt was incurred as a result of colonial wars. Some government expenditure was on imports which an independent government would have bought from local manufacturers. Of these official payments, we can legitimately consider service charges on non-productive debt, pensions and furlough payments as a balance of payment drain due to colonialism. There were also substantial private remittances by British officials in India either as savings or to meet educational and other family charges in the UK. In the inter-war period, these amounted to about 10 million a year, and Naoroji estimated that they were running at the same level in 188727. These items were clearly the result of colonial rule. In addition, there were dividend and interest remittances by shipping and banking interests, plantations, and other British investors; to some extent, these were normal commercial transactions, but there was a large element of monopoly profit due to the privileged position of British business in India; and, in many cases, the original assets were not acquired by remitting funds to India but by savings from income earned locally, or by purchase of property on favorable terms, e.g. the land acquisitions of plantation companies. About a third of the private profit remittances should therefore be treated as the profits of colonialism. In spite of its constant favorable balance of trade, India acquired substantial debts. By 1939 foreign assets in India amounted to $2.8 billion, of which about $1.5 billion was government bonded debt and the rest represented direct investment (mainly tea, other plantations and the jute industry)28. India did not reduce its foreign debt during the First World War as many other developing countries did. Instead, there were two 'voluntary' war gifts to the UK amounting to 150 million ($730 million)29. India also contributed one-and-a-quarter million troops, which were financed from the Indian budget. The 'drain' of funds to England continued in the interwar years because of home charges and profit remittances. There was also a small outflow of British capital. In the depression of 1929-33, many developing countries defaulted on foreign debt or froze dividend transfers, but this was not possible for India. The currency was kept at par with sterling and devalued in 1931, but the decisions were based on British rather than Indian needs. Furthermore, the salaries of civil servants remained at high level, and the burden of official transfers increased in a period of falling prices30. During the Second World War, India's international financial position was transformed. The UK had enormous military expenditures for its own troops in India and also financed local costs of allied troops under Lease-Lend arrangements. Indian war finance was much more inflationary than in the UK and prices rose threefold, so these local costs of troop support were extremely high in terms of sterling, as the exchange rate remained unchanged. As a result, India was able to liquidate $1.2 billion of pre-war debt and acquired reserve assets of $5.1 billion, ending the war a large net creditor. These new assets and the disappearance of the colonial drain gave a formidable boost to post-war development policy31. There has been a good deal of controversy amongst statisticians about the rate of growth of income in India in the colonial period. The argument is politically colored and the statistics are poor. The British reduced the tax squeeze on agriculture and turned warlords into landlords, but the new order had little dynamism. A good deal of the old fuzziness about property rights remained, and landlords were still largely parasitic. The bigger zamindars copied the Moghul life-style by maintaining hordes of retainers and huge mansions, the smaller landowner's ambition was to stop working and enhance his ritual purity by establishing a seedy gentility. Very little incentive was provided for investment and almost nothing was done to promote technical change in agriculture. At the bottom of society the position of sharecropping tenantry and landless laborers remained wretched. In urban areas a new Westernized 'middle class' of Indians emerged and became the major challenge to the British raj. There were also changes in the lower class in the non-village economy. At the end of British rule there were 3 million factory workers making cheap textiles and jute sacking, whose Moghul predecessors had worked on muslins and silks, and a million railway workers who had no earlier counterpart. This lower-class urban group was probably bigger than in Moghul times, because they had displaced some of the village artisans. Within village society the social structure was probably similar to that in Moghul India, with the two top economic groups corresponding to the old dominant castes, the next group to peasant castes, and the bottom group consisting largely of untouchables. The main difference form the Moghul economy is that village proprietors and tenants-in-chief were no longer heavily squeezed by taxation and their share of national income had probably increased. Thus the main gainers from the British regime (apart from the British) were the so-called 'middle' class of Indian capitalists and professionals, and the village squirearchy. Most of these were high caste Hindus though the Parsis and Sikhs did fairly well. The main losers were the Muslims who had formed the major part of the Moghul aristocracy, officer corps, lawyers, and artisans in the luxury handicrafts. References Dinesh Bhugra and Roland Littlewood, Colonialism and psychiatry (2001) D.E.U. Baker, Colonialism in an Indian hinterland, the Central Provinces, 1820-1920 (Delhi' Oxford University Press, 1993) E. Stokes, The English Utilitarians and India (Oxford, 1959) G. Blyn, Agricultural Trends in India, 1891-1947, (University of Pennsylvania, 1966) Keay, John, The Honourable Company - A History of the English East India Company, (HarperCollins, London, 1991) M. Kidron, Foreign Investments in India (Oxford University Press, London, 1965, p. 13) Nicholas B. Dirks, Castes of mind: colonialism and the making of modern India (Princeton University Press, 1950). Ranajit Guha, Dominance without hegemony: history and power in colonial India. (Cambridge, Mass.:Harvard University Press, 1998) R. Dutt, Prosperous British India (London, 1901) p. xxv Stanley, Peter, White Mutiny: British Military Culture in India, 1825-1875 (Christopher Hurst & Co., London, 1998). V. Anstey, The Economic Development of India (Longmans Green, London, 1952) Read More