British Rule in India: Stages and Consequences | History of Indian Economy

Read this article to learn about the British Rule in India:- 1. Stages of British Rule 2. Consequences of British Rule.

Stages of British Rule in India:

The British interference in Indian politics and economy started from 1757 and since then, for roughly two centuries, she stood as the main base of the British Empire. The net outcome was the utter exploitation of India.


The history of the exploitative role of British-India can be conveniently grouped into three periods:

(i) The first is the period of ‘merchant capital’ dating from 1757 to 1813. This ‘mercantilist’ phase was marked by direct plunder and the EIC’s monopoly trade functioning through the investment of surplus revenues in the purchase of Indian finished goods for export to England and Europe.

(ii) The second is the period of ‘industrial capital’ dating from 1813 to 1858. This period saw the classic age of free trader industrial capitalist exploitation. The entire pattern of trade underwent a dramatic change under the mighty impact of England’s industrial revolution.

During this period, India was converted rapidly into a market for British textiles and a great source for raw materials. Traditional handicrafts were thrown out of gear—a period when the ‘homeland of cotton was inundated with cotton’ (Karl Marx).

(iii) The third period is the period of ‘finance capital’ starting from the closing years of the 19th century and continuing till independence. During this phase, finance-imperialism began to entrench itself through the managing agency firms, export-import firms, exchange banks, and some export of capital.

However, this sort of periodization of the colonial exploitation is somewhat arbitrary and over-schematic as Rajani Palme Dutt himself believed.

Period of Merchant Capital:


Immediately after the Battle of Plassey (1757), Britain started establishing her control over India to serve her own interests. At that time the Indian economy was basically feudal. R. P. Dutt and Pundit Nehru believed that the seeds of capitalist development that existed in India had been robbed by the Britishers. It is true that the British rule in India, at least in economic sphere, was essentially destructive rather than constructive in character.

The colonial form of exploitation started almost from 1757 when the East India Company, hitherto a corporation of merchants, made its appearance as a political power in India to promote the interests of the metropolis. The way this merchant class used its power in the second half of the 18th century stands out in history as a “particularly painful example of organised greed untrammeled by any moral norms.” The EIC’s ingenious methods of exploitation were of the following nature.

In the first place, the only aim of the EIC was to make a profit by establi­shing monopoly trade in the goods and products with India and the East Indies. The EIC intended to sell its products in the Indian market at high prices and purchase products of India and East Indies (especially spices, cotton goods, and silk goods) at low prices so that the largest profit can be netted in. But the problem was that Britain at that stage of development had almost nothing to offer to this country in exchange of goods it purchased.

However, the problem was initially solved by offering precious gold and silver bullion and their coins to buy Indian goods. But such a course of action did not please the merchants as: Involved a huge drainage of gold and silver from Britain to India as well as was painful and repugnant to the whole system of mercantile capitalism.


However, the position went in favour of the Britishers after the Battle of Plassey. During this time, British capitalism made a great headway. To ­make Britain the ‘workshop of the world’, she needed huge capital for investment in industries. In this respect, Britain was poor and, on the contrary, India at that time was reputed to be rich. India had been considered as the best hunting ground for capital by the EIC to develop industrial capitalism in Britain.

When Bengal and South India came under political sway of the EIC in the 1750s and 1760s, the objective of monopoly of trade was fulfilled. As a result, “the margin between trade and plunder” became thin and the political power enabled it to secure maximum goods for minimum payment. When, in 1765, the administration of revenues passed into the hands of the EIC, the EIC came in a position to grab the accumulated limitless wealth of the Indian rulers, nobles and zamindars. In other words, such revenue administration opened up a new field of direct plunder coupled with profits of trade.

Secondly, the colonial form of exploitation was vividly marked in the land revenue administration. In 1793, the Permanent Settlement was granted and the land revenue was fixed at £3,400,000 to be spent for administration or public welfare. Unfortunately, such did not happen.

The Company administration succeeded in generating huge surpluses which were repatriated to England, and the Indian leaders linked this problem of land revenue with that of the ‘drain’. They pointed out that the evil of heavy assessment was intensified by a large part of it being siphoned off the country and not ‘fructifying’ within India.


Reckless raising of land revenues became more significant after acquiring the ‘Dewani’ rights for the civil administration by the EIC. In the name of agricultural development, the Company mercilessly increased land revenue —resulting in the ruination of peasants. The land tenure system introduced by Cornwallis in 1793—under the name of Permanent Settlement—turned out to be exploitative.

A long chain of intermediaries grew who made the revenue system a tortuous one. “The heavy exploitation of the peasantry by English merchants’ capital after it had displaced a section of the indigenous ruling class provided resources that helped to sustain the process of industrialisation in the metropolis.”

Thirdly, the officials of the Company amassed substantial wealth extorted from Indian merchants, zamindars, etc., and sent them in England. Bulk of revenues was spent for its own benefit and for that of its employees and for financing its further expansion in India. Between 1765 and 1770, the Company repatriated nearly 33 p.c. of its net revenue in the form of goods.

Above all, the officers of the Company were unscrupulous and corrupt. Keeping this in mind, a British M.P. in 1858 commented: “I do most confidently maintain that no civilized government ever existed on the face of this earth which was more corrupt, perfidious and more rapacious than the Government of East India Company from 1765 to 1784.”

The wealth drained out of India in this period of ‘merchant capital’ or the direct plunder of India played a pivotal role in financing Britain’s capitalist development. It is said that it constituted nearly two per cent of Britain’s national income at that time.

Fourthly, at the same time, the monopolistic control over Indian trade and production by the Company was thrown out in a calculated way. Artisans were forced to surrender their products at a cheap rate and ultimately adopted agriculture as the prime occupation. No basic changes had been made in the realm of administration, the judicial system, the methods of agricultural and industrial production, transport and communication, educational or intellectual field, and so on. The only concern to the Company at this stage was to generate economic surplus and the Company very smartly succeeded in this game.

Period of Industrial Capital:

British rule in India entered the second phase under the impact of the industrial revolution in Britain. British industries were led by Indian capital drained out of India during the age of ‘merchant capital’. In other words, the path of Britain’s capitalist development became smooth in this age of direct plunder. The industrial revolution bred a new social class—the capitalist industrialist class who became the dominant elements in the British economy.

These capitalist classes enjoyed tremendous blessings of the colonial adminis­tration and policy. Actually, the policies of the British Government were intended to serve the interests of the British capitalist class as a whole. And the new phase of exploitation by the British capitalist class may be dated from 1813 when the British manufacturers succeeded in destroying the monopoly of the EIC in trade with India.

British industrialists needed converting India rapidly into a market for Manchester textiles and a source of raw materials for the British industries. In other words, “Britain now wanted India as a subordinate trading partner, as a market to be exploited and as a dependent colony to produce and supply the raw materials and foodstuff Britain needed.”

They argued that what was good for England was also good for India. This was the essence of the 19th century colonialism when it could not function through the crude tools of direct plunder, tribute and mercantilism. But there was one important problem which had been tackled by the British rule in an unashamed manner.

To sub-serve the interests of the foreign ruler it was necessary that India must export some products to Britain. Traditional handicraft industries were at its height at that time while British manufactured products were both inferior and costly. In order to protect rising textile industry in England, the British, very systematically, did not allow India to export Indian goods by levying heavy import duties on Indian goods.

In this way, a room was created for the export of raw materials and other non- manufactured articles. Consequently, the whole pattern of India’s foreign trade underwent a dramatic change. The change was, obviously, good for England, but not for India. Being a traditional exporter of cotton textiles and handicraft products, India was converted into an importer of machine-made cotton textiles and an exporter of cotton and other raw materials. In view of this, it is said that this new state of exploitation was far more systematic, calculated, and intense than the first phase of haphazard plunder of India.

The basic economic philosophy as well as the policy that centred during this stage was the policy of “free trade” championed by Adam Smith. But peculiarity of the period was that it was a one-way free trade i.e., free entry for British consumer goods into India but tariffs against the entry of Indian goods into Britain. England—which had imposed high import duties on Indian cotton and silk goods—now began to preach the gospel of free trade to India.

Consequently, it levied import duties to the extent of 70 p.c. to 80 p.c. on Indian goods. This discrimination was necessary to make Britain the ‘workshop of the world’. And for that, India, being a colony of England, had been compelled to sacrifice a lot. All these caused not only destruction of Indian manufacturing industries, but also ensured a growing market for English manufactures. The next problem was how to make India pay for the supply of raw materials and exports like hides, oil, jute, cotton, etc., required for industrial production in England. The strategy adopted by the Britishers was, no doubt, uncivilized.

The Englishmen had been allowed to acquire land and set up as planters in India. Most of them settled around indigo, rubber, tea, and coffee plantation. The merciless exploitation of indigo workers of Bengal beggars all description. Consequently, from the fourth decade of the 19th century, volume of export on the said items increased phenomenally.

Further, revenue and expenditure policies of the Britishers were also exploitative in nature, though the pattern of exploitation during this stage differed from the earlier period. Huge expenditure (expenditure on army, pensions and salaries of Englishmen, etc.) incurred by the British imperial power had been borne by Indians by paying high doses of taxes.

The new pattern of exploitation of India in the 19th century brought about a change in the nature of the Indian economy. Self-sufficiency of the village community received its mortal blow. The union of agriculture and industry disintegrated. De-industrialization was complete. India was thus, forcibly transformed into a typical agricultural colony of British manufacturing capitalism.

Period of Finance Capital:

The third stage—the stage of ‘finance imperialism’—can be said to have started from the latter half of the 19th century. Some worldwide developments caused a new development in the British policy in India. The most important development was the eclipse of Britain as the only industrial power of the world since other European nations succeeded in industrializing themselves.

This led to a massive search for exclusive colonies and sub-colonies so that exclusive control of the imperialist country could be exercised. “The struggle for division of the world into colonies was now transformed into a struggle for the re-division of the colonial world.” Obviously, Britain was placed in a disadvantageous position.

Britain, of course, kept India as her most important colony where British capital could hope to maintain a haven. For her survival, Britain decided to make massive investments in various fields (rail, road, postal system, irrigation, European banking system, and a limited field of education, etc.) in India by plundering Indian capital. It is said that ‘railway construction’ laid the foundation for a new stage of colonial exploitation, or in other words, the exploitation by British capital investment in India.

The amount of export of capital to India was insignificant. It was rather unfortunate that initially, the capital plundered from the Indian people was invested in this country as the British capital was raised in India and finally, the public debt—which was really a big hoax to raise funds.

Railway construction policy of the British led to unimaginable as well as uneconomic expenditure and the poor Indian taxpayers had been compelled to finance for the construction of railways. When political power was handed over by the EIC to the British Government in 1858, it declared that it had inherited a debt of £ 70 million from the Company.

The clever tactic of public debt system received a strong stimulus from the British Government under which the volume of public debt stood at £ 224 million in 1900. It swelled to £ 884 million before the Second World War (1939-45). Similarly, the uneconomic as well as extravagant system of railway construction also caused public debt to fan out.

All this involved a higher dose of taxation. With the opening up of the country, private capitalist investment from Britain came to knock at our doorsteps. But unfortunately, such British investment was not meant for India’s industrial development. The important point to note is that roughly 97 p.c. of the British capital invested in India before the First World War was devoted to administration, transport, plantation, and finance. The basic motive behind such investment was the commercial penetration of India, its exploitation as a source of raw materials and markets for British manufactures.

This was, in fact, one of the principal contradictions of imperialism-colonialism in India. It is true that some sort of internal development was necessary to carry on colonial exploitation, but the very process of the crafty policy of colonial exploitation definitely slackened the pace of development—thereby putting the Indian economy in a state of perpetual underdevelopment.

Consequences of the British Rule:

Britain’s supremacy in the world economy for nearly 200 years lay in the utter neglect and plunder of her most important colony—India. Her economic life was redirected towards servicing the interests of British imperial power. Internal needs of the country were of no concern to the lone colonizer of the world.

As the UK enjoyed virtual monopoly she brought tremendous social and economic deformation. She plundered India. India provided all the resources she needed for the development of the metropolitan (North) power. The North depended on the South for its imperialist expansion.

One can forcefully and without doubt argue that without its colonies, the UK would have been a ‘third-rate power’. The colonial dependence had dealt a mortal blow to Indian agriculture, industry, trade, and then to the socio-cultural fabric of the country. In brief, colonialism is not conducive to forward movement in the dependent state, as was articulated by W. Malenbaum.

Here Daniel Thorner’s observation is worth producing: “Had the British never come to India, the great likelihood is not that India would by now have transformed itself into a leading economic power, but rather that there would have been an even slighter degree of industrialisation. As things did happen, India’s development under the British had been strangely lopsided. Amidst a general landscape characterized by backwardness and perhaps even retrogression, there stand out a few substantial achievements.”

On Agriculture:

India in the 18th century was a great manufacturing as well as a great agricultural country. But to accelerate the pace of industrialization in England, the British rule wanted to make India an agricultural appendage of Britain in the latter part of the 18th century and the earlier part of the 19th century. Before 1858, India was transformed into a classic agrarian economy wherein a vast number of people tied their fortunes. From 1860 onwards, colonialism appeared with its ugly head.

Agricultural policy at that time had been directed towards ‘commercialization of agriculture’ which was sometimes hailed as the signs of ‘modernization’. However, modernisation in the name of commercialization of agriculture was a big joke, since India had been allowed to prosper as a selling market for British manufactures at the expense of agriculture.

India was, no doubt, exposed to the national and international markets for her agricultural goods as a result of commercialisation. But, at the same time, a new class of merchants appeared as a distinct social force. These merchant classes were, so to say, parasites in relation to agriculture and, ultimately, became agents of colonial exploitation. They carried the entire surplus agricultural production of the colonial economy to the metropolis via big cities and ports.

It is true that the results of commercialization are bound with the structure of land relations established by British revenue and tenancy policies. British agrarian policies were geared towards earning more revenue. It created two major land revenue and tenurial systems—the Zamindari System and the Ryotwari System.

As a result, a new class of rural capitalists and landlords and an extortionate class of middlemen had emerged in the countryside. These two forms of land ownership only strengthened feudal exploitation in rural India and choked all incentives to ‘modernize’ agriculture. This system turned landlords into estate owners. And these landlords did not pay attention to the development of agriculture to any extent.

On the other hand, they used to charge exorbitant revenues from peasants. Peasants were forced to pay many illegal and unspecified dues charged by their landlords. This brought in total chaos and disorder in the agrarian system. Peasants were made paupers. Intermediaries turned to be feudal landlords rather than agricultural entrepreneurs.

However, for all practical purposes, the government occupied the position of landlord, and feudal exploitation in the countryside fanned out. Despite the lowering of the revenue rates in 1901, these reactionary elements of the Indian society— zamindars, jagirdars, etc.,—could not appease the poor peasant cultivators to any extent.

The crux of the matter is that agricultural surplus went into landlords pockets. Agricultural resources were sucked in without any quid pro quo, thereby subjecting it to an internal drain of capital. Instead of investing such surplus in land, these classes relied on rack-renting. Above all, government’s lack of interest on improving agriculture also brought misery in this crucial sector.

It is to be remembered that the two processes—commercialisation and, hence, monetization or extension of trade and money relations—were forced and not natural in India. Soon a group of moneylenders appeared as an influential economic and political force in the country.

Exorbitant revenues and various illegal dues charged by landlords forced the poor cultivators to pay taxes by borrowing. Taking advantage of the situation, borrowers and moneylenders adopted all the chicanery and the cunning to keep the poor peasants in a classic debt trap. Receiving all kinds of patronage from the government, moneylenders thus emerged as an indispensable tool in the whole system of exploitation. Thus, the merchant capital and usurious capital were the two wings of the same eagle —that of colonial exploitation of India.

The land relations developed under the British regime constituted a new economic element but that was extremely regressive. As a result, agriculture became a rickety child. Further, there emerged two distinct social classes—the landlords, intermediaries and moneylenders at the top, and the other was the tenants-at-will, sharecroppers and agricultural labourers at the bottom of the ladder.

These two classes had, obviously, antagonistic interests. The first group was created by the British Government to exploit India. As a result of the policy of colonial exploitation pursued by the government, the first social class flourished while the poor multiplied who painfully struggled forward in India. This new pattern, in fact, was neither capitalism nor feudalism. Under this new structure, colonialism evolved. It could be dubbed as “semi-feudal” and “semi- colonial” in character.

All this did not augur well for India. The result was prolonged stagnation in agricultural output. The devastation became so severe that the deterioration in the position of peasant cultivators fore-bode an agrarian revolution in India. However, such did not happen. In Europe, enterprising landlords came forward in making investments and improvements in land. In India, the land-owning classes were rent-receiving absentee businessmen who purchased land in search for profitable investment of their surplus funds. They had little concern for the improvement of agriculture.

Our conclusions can be established from the following statistics. First, one notices increasing dependence on agriculture. The percentage of the population engaged in agriculture increased from 61 p.c. in 1891 to 72.2 p.c. in 1911 and to 73 p.c. in 1921. On the other hand, the percentage of population dependent on industry declined from 5.5 p.c. in 1911 to 4.9 p.c. in 1921.

Secondly, George Blyn’s research showed that per capita agricultural production declined by 0.72 p.c. per annum during the period 1911-47. Per capita food-grain output during the same period declined by 29 p.c., i.e., at the rate of 1.14. p.c. per year. Taking 1893-96 as the base period, the decennial average of crop output for 1936-46 was 93 for food crops as against 185 for non-food crops and 110 for agricultural production as a whole. Between 1892-93 and 1919-20, the area under food crops increased by 7 p.c. whiles the area under non-food crops rose by 43 p.c.

Again, between the average for the five years 1910-11 to 1914-15 and 1934- 35, the area under non-food crops increased as much as 54 p.c. as against an increase of 12.4 p.c. in case of food crops. The ratio of non-food to food production increased from 1: 5 in 1893-94 to 1: 2 in 1945-46. Amiya Begchi’s estimate shows that the value of commercial crops per acre increased marginally from Rs. 36.7 to Rs. 37.9 while that of food crops fell from Rs. 25.4 to Rs. 22.7.

These figures reveal that agriculture under the British rule stagnated and even deteriorated over the years. In fact, the growing dependence on agriculture and the increasing emphasis on non-food crops as exportable is the direct consequence of the British imperialist policy, thereby making India as a market and source of raw materials. Thus, the colonial structure as a whole constituted a ‘built-in-depressor’ for India’s agrarian economy.

On Industry:

India had never been an industrial country in the modern sense. She had highly sophisticated handicraft industries. Thanks to the policy of the British Government, some modern capitalist industries were developed in India. Nonetheless, to foster British interests, the British Government systematically destroyed India’s traditional indigenous industries and went on for the rise of some modern industries.

Once industrial revolution took shape in England, it became necessary on the part of the British Government to transform India from an exporter of manufactured goods to an importer of machine-made goods. To serve its own interests, it created a wider transport system. Railways built by the Britishers served English capitalists in many ways.

By building railways, it created a market in India for Britain’s newly developed iron and steel and engineering industries. Above all, it greatly facilitated the transportation of raw materials from far-flung areas to the ports for export to Britain and of machine made manufactured goods of England to distant places of India. All these pushed India into the world market.

Simultaneously, the policy of reduction or destruction of indigenous industries put the Indian economy out of gear. Millions of artisans and workers were thrown out of employment. Revenue arrangements were so harsh that millions of cultivators lost their rights to cultivate. All these made them hired workers at nominal wages. Thus, the two basic ingredients of modern industry—the all India market and the cheap abundant supply of labour—were met.

The establishment of modern industries then became easier since the second-half of the 19th century. Since then and up to the World War I the country witnessed a massive investment of British capital in cotton and jute textiles, tea plantations, banking, insurance, and so on.

Other industries-cotton gins and presses, jute presses, paper mills, sugar mills, petroleum refineries, engineering and leather workshops, salt, mica, etc.—were developed but not on a sufficient scale. Frankly speaking, India’s industrial structure exhibited the absence of capital or producers’ goods industries (like machinery and machine tools).

The two important indices of paltriness of industrialisation are the share of industry in national income and the proportion of workforce engaged in manufacturing. Industry contributed 3.8 p.c. towards national income in 1913.

The figure marginally rose to 7.5 p.c. in 1946. This suggests that modern industry hardly compensated for the displacement of handicraft industries. In 1911, 12.2 p.c. work-forces were engaged in manufacturing industry. It declined to 11.9 p.c. at the time of independence. This is suggestive of de-industrialisation.

Whatever industrial development took place in India during this period, full credit must not be given to foreign capitalists. During this time, indigenous enterprises made a rapid stride. The most notable was the establishment of the Tata Iron and Steel Company at Jamshedpur in 1907 by J. N. Tata’s son Dorabji— a Parsi industrialist.

However, these British and indigenous enterprises often collaborated with each other in some cases and in most cases their behaviour reflected the colonial patterns. It is true that, in the post-War I period, weak Indian capitalism took a spurt forward. It is argued also that the firm foundations of Indian capitalism were laid during this period. But, Bipan Chandra very rightly argues that Indian capitalism could not exploit this situation “because of another basic weakness structured into it by its colonial integration with British capitalism,—namely, the lack of machine-making industries. The same war that opened up opportunities for growth also choked off the imports of mill-machinery and other accessories. Consequently, the pent- up pressure for industrial growth found expression in frenzied company promotion immediately after the war.”

The most notable event of the post-War situation was the policy of protection enforced in a discriminatory fashion. Some of the Indian industries no doubt performed well under the protective umbrella but the policy did nothing to set the country firmly on the path of industrialisation.

Being a colonial country, India had to pay a large sum for the industrialisa­tion scheme of England. India supplied huge raw materials for the development of industries in England. On the other hand, in the name of industrialisation, British capitalists were allowed to strengthen their grip. In fact, the basis of prosperity of England rested on her largest and richest colony—India.

The result of this step-motherly attitude was the lopsided industrial development rather than industrial revolution. For tactical reasons, the British Government did not make any effort to develop heavy, basic and capital goods—the sound basis of industrialisation. Modern industries like engineering and metallurgical indus­tries were almost non-existent. In the field of technology, she had to depend completely on the imperialist world.

Another related aspect of industrial development during this period was the growth of foreign capital which, till late 1930s, dominated the industrial and financial fields. Further, foreign capital controlled both foreign and internal trade. Above all, the process of industrialisation was spearheaded by giant multinational corporations.

The need for industrialisation through Indian capital had been denied by the imperialist rulers. Truly speaking, instead of encouraging and augmenting the participation of indigenous capital, foreign capital replaced and suppressed it mostly. This amounted to the drain of capital from India. Growing participation of foreign capital simply strengthened the sway of the British Raj over the Indian economy.

Unfortunately, in the name of foreign investment, capital from the outside world did not come in significantly in India. “It was far less than the unilateral transfer of capital or the ‘drain’ from India.” This foreign investment firstly contributed to ‘the guided underdevelopment’ of India by giving an exclusive attention on the production and export of raw materials and foodstuff.

Secondly, foreign investment served external market but not the home market. Last but not the least, the multiplier effects of this foreign investment on income, employment, capital, technical knowledge, and growth of external economies of these investments were largely exported back to the developed countries.

So we can conclude that India underwent a “commercial revolution” but not an “industrial revolution” since the efforts at industrialisation was negligible as well as unsympathetic. Railways ushered in a commercial revolution, and it had not been coordinated with the country’s industrial needs. It was the commercial revolution that further colonized the Indian economy.

The trend was towards a dependent and underdeveloped economy. What was more was that Britain’s industrial as well as tariff policies were responsible for askewed and haphazard growth of industries. The present problem of concentration of industries in some regions and cities can be traced back to the days of British rule.

In the words of Bipan Chandra, we can conclude our present discussion: “The major spurts in Indian industrial development took place precisely during those periods when India’s colonial economic links with the world capitalist economy were temporarily weakened or disrupted. On the other hand, the strengthening of these links led to backwardness and stagnation.”

On Trade:

India’s backwardness and stagnation in agriculture and industry are partly the effect of its external trade (e.g., low value of exports). Under the influence of colonialism, India underwent a commercial transformation which integrated it with the world market but reduced it to a subordinate position. Britain engineered her policies in such a way that India became an exporter of raw materials and foodstuff.

Her precious exportable now stood as the main importable. This happened during the days of the East India Company. And the situation took a serious turn after 1857. Some British authorities however cited that trade expansion during this period on a significant scale meant growing prosperity of the country.

Instead of having any expansionary or multiplier effect on the economy, it strengthened the forces causing stagnation. What is more, India’s foreign trade was not natural and free but was artificially bolstered to serve imperialism.

Another significant aspect of India’s foreign trade during the British rule was the favourable balance of trade, i.e., excess of exports over imports. Theoretically, it implies a great advantage. But our foreign ruler was rather in an averse mood to confer any benefits to India.

Practically, export surplus represented a drain of India’s wealth and resources. Britain habitually maintained export surplus because India had to make considerable payments to Britain for which no visible return was made.

These payments included Home Charges (comprising interest on public debt, civil and military expenditure, interest and profits on private foreign capital, service charges for using foreign banking, insurance, and shipping business, etc.). Thus the drain facilitated the penetration and exploitation of India by foreign capital. This drain exposed the exploitative nature of the foreign ruler.

On Indian Social Groups and Classes:

Our discussion so far on the structure of colonial economic and political domination created a host of numerous conflicts between imperialism and a major section of Indian population, as well as between various groups or classes within Indian society itself. The British-Indian history indicates that many Indian social groups were agents of colonial exploitation.

But, at the same time, a vast majority of the Indian people quickly realised the exploitative and destructive role of the British rule often carried through the beneficiaries and agents of colonial exploitation—the zamindars, the princes, the moneylenders, etc. The drain theory as articulated by the nationalists was understandable even to the illiterate peasants, landlords, moneylenders, lawyers, priests.

These people understood the mechanics of exploitation. They learnt that money was being siphoned off this country to England. This aroused national awakening and consequently liberation movement gathered momentum as time rolled on. They believed that colonialism was the root cause of all economic, social, cultural, and political ills.

The worst sufferer of the British colonial policy was the peasantry. The introduction of colonial spirit in Indian agriculture was made possible through new land tenurial and land revenue systems. The most powerful instrument in this process was the collection of land revenue and other taxes in cash which threw peasants into the clutches of landlords and moneylenders.

The destruction of handicraft industries and continuous increase in land revenues forced many millions of artisans and cultivators out of employment. Consequently, they took a very active part in the anti-imperialist struggle. At least 77 peasant uprisings involving violence for the entire period took place in India.

But these movements could not uproot the British Government though some of them could definitely be labelled as powerful anti-imperialist movements in India. Lenin once remarked, “real politics begin where the masses are”, or in the words of E. H. Carr, “numbers count in history”.

The reality was that all movements against the British Government and their local agents like the zamindars, moneylenders, etc., had been thwarted by the British ruler in the name of law and order. The entire machinery (police, judiciary, etc.,) had been set up by the colonial government to further British colonial imperialist interests.

With the development of modern factories, mines and plantations during the second half of the 19th century was born a new class — the industrial working class. But due to the slowness of industrialisation the labour problems became a grave one from the beginning of the 20th century. In fact, this class experienced ruthless exploitation. Tragically, on its sweat and toil the edifice of India’s industrial structure rested.

Living and working conditions of the working class were every bit unsatisfactory. Working day of 15, 16 or even 18 hours a day remained extremely common despite the existence of Factory Acts of 1881 and 1891 which theoretically stipulated the working hours a day less than the actual working hours. Housing conditions were pitiable. Till the first half of the current century no effort had been made to improve the housing conditions of the industrial workers. Slave labour conditions in the tea plantations were the symbol of oppression. There was no provision for social security benefits as it is understood today.

Standard of living of workers can be guessed from the wage data. However, in this respect we were poor till the beginning of the present century. Between 1870 and 1895 there was very little increase in the rate of wages. This is corroborated by Dr. Kuczynski’s data. He pointed out that, between 1880 and 1905, money wages index increased from 82 to 107 (1900 = 100)—i.e., a rise of only 30 p.c.

On the other hand, due to inflationary rise in prices, cost of living indices shot up from 77 to 91—i.e., an increase of 18. Thus, real wage index during this time recorded a marginal rise from 106 to 119—i.e., a nominal increase of 11. But between 1905 and 1914 real wages declined by 17. Only during the inter-war period (1919-1938) real wages recorded a significant rise. Thanks to the militant’ labour movement, real wages rose during the 1930s.

Anyway, the miserable conditions of the working classes during the British rule has been succintly put by Jurgen Kuczynski in 1938: “Underfed, housed like animals, without light and air and water, the Indian industrial worker is one of the most exploited of all in the world of industrial capitalism.”

In the rural Indian economy, a positive leadership was to be expected from the native princes, zamindars and moneylenders. These social groups brought chaos and disorder and, finally, sucked in the rural economy. They added nothing to agriculture but they joined hands with the Britishers in taking away the cream from agriculture. Unlike their British counterpart, Indian landlord classes were not so much interested in agricultural production as in making money.

The result was the stagnation in agriculture and the peasant was caught in a vicious circle of poverty and debt. Both these social classes—zamindars, etc., and peasantry—lived in the villages in the midst of mutual distrust and tension. Such a situation could have hardly established stability and peace in the rural economy but always carried the potentialities of uprisings — individual or collective.

After 1858, the country Witnessed the rise of the Indian capitalist class — the bourgeoisie. The growth in industrial entrepreneurship in India came from three major business communities—the Parsis, Gujaratis, and Marawaris. Particularly, the last business group came from trade and finally moved to manufacture. Indigenous enterprise had somewhat extended India’s narrow industrial base.

Of the Indian industries, the cotton mill industry was the biggest and, in fact, it was financed mainly by indigenous capital. Another important industry that had been established by a Parsi businessman, J. N. Tata or his son Dorabji, was the iron and steel industry.

This industry started its career in a period when foreign competition became prominent in the Indian market. But Tata came out gloriously. Under the impact of the World War I, some industries really performed well. By 1939, the proportion of capital invested in Indian enterprises controlled by Indians rose substantially.

The colonial policy, however, had caused the greatest damage to the Indian industries and, hence, the capitalist class. Strengthening of industrial base in any country requires cooperative role of the Government. This, of course, happened in other major European countries. Government machinery was instrumental in furthering industrial development in the west European countries.

But, in India, the British ruler preached one principle for the development of the industries in England, but another principle had been charted out for India by the same ruler so that the colonial dependence of the country could be perpetuated. The British pursued the policy of “one-way free trade”. Before the World War I, the Government’s policy was one of free trade.

So long as Britain enjoyed industrial supremacy, free trade was to her advantage. The same was true for India. With the emergence of formidable foreign competition in the Indian market, there had been a U-turn in the policy. She switched from free trade to protection which had been denied early to India.

However, for rapid industrialization, protection probably was not enough. Indian entrepreneurship remained weakly developed. Above all, they increasingly found themselves in open conflict rather than collaboration with the colonial economic structure.

However, in this foreign-ruled India, the most successful collaborators were the zamindars, landlords and princes. These social groups were extremely loyal to the British rule since their interests largely coincided with those of the rulers. They, along with the, foreign ruler, exploited India and the rural people of India—a complete departure from the pre-British era. In the medieval period, the landlords generally acted as the protectors of the peasantry.

But now, because of the exploitative nature of the British rule, the relations between these two classes changed. As a result, the entire edifice of the total social structure crumbled. In the process, even the social relations were not spared.

Thus it is clear that the colonial rule first removed or distorted the developmental base in the 18th century, and then strangulated the entire economy in the 19th century by the mechanism of the ‘drain of wealth’ from India to England. Neo-Marxists like Paul Baran incorporated the mechanism or imperial rule in their ‘dependency theories’. To Baran, economic drain was the consequence of Indian’s political subordination. India served the need of Great Britain’s economy and, hence, established a dependent form of development.

We conclude this section in the words of B. R. Tomlinson: “The laws, institu­tions and social structure of contemporary South Asia were thus a creation of Britain’s requirement for cheap labour and cheap export within the imperial system, and the dominant classes that have exercised control over agricultural and industrial capital for the last hundred years or so are identified as the products of this colonial transformation.

By these means Indian labour has been exploited indirectly but effectively for the sake of metropolitan capital, and successive forms of colonial and post-colonial capitalism have been created that did not need to increase productivity or wages.”

It is known that exploitation breeds contempt. The basic colonial character of the British and its telling effect on the Indian economy and the Indian masses led to the rise of the anti-imperialist movement known as the “National Movement” in the country.

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