Read this article to learn about the changing composition of economic policy during British rule in India:

From 1757 to 1857, the British followed various economic policies to enhance trade privileges and more importantly to exploit Indian economic resources.

R.P Dutt a Marxist dialectician and scholar have analysed three periods in the history of imperialist rule in India. This duration is usually divided into three phases.

The first phase or the mercantile phase (1757-1813) was one when the East India Company completely monopolized trade and used its political power to dictate terms to the artisans of Bengal who were forced to sell their products at cheaper rates.

Consult ICE: Transforming Enterprise Policy

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The essence of mercantile capitalism was buying cheap and selling at higher prices, which the Company successfully achieved in these years.

The second phase was that of Industrial Capitalism or Free trade (1813-1857). The Industrial revolution in England completely transformed Britain’s economy and its relations with India. In this phase, India became the chief exporter of raw materials to British industries and also served as the main market to manufacture British goods.

The industrial needs were the basic guide of British com­mercial policy. The Indian goods faced tough competition from machine made goods in this phase. The third and final phase of British plunder is called the era of Financial Capitalism (1860 onwards).


The British introduced roadways, railways, post and telegraph into India for their own commercial and political needs. As a result of the various investments made, the burden of public debt on India in­creased. India became a colony of the British in the true sense. Wealth drained from India played an important role in financing British capitalist development.

Volume and Direction of Trade:

The economic policies followed by the British led to the rapid transformation of India’s economy into a colonial economy whose nature and structure were determined by the needs of the British economy. India’s foreign trade in the latter half of the 19 century, was benefitted by a few factors, the opening of the Suez Canal, the introduction of steel made steamships and the construction of railways inside the country.

The nature of exports and imports also changed. Instead of the finished products of industry India now exported jute, wheat, cotton, oilseeds, tea, etc. whereas the imported the goods of European manufacture.

In the twentieth century the Indian trade increased with other countries, like Germany, the United States of America and Japan. In nature, the proportion of manufactured goods gradually increased and their import declined.


In trade with other countries, India import maintained a favourable balance. But this balance was used for paying off various kind of ‘dues’ charged on India by Britain. The dues were collectively called ‘Home Charges’ and they drained a huge amount of money every year from India to Britain.

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