India's De-Industrialization Under British Rule

Discussion in 'Economy & Infrastructure' started by blank_quest, Oct 26, 2012.

  1. blank_quest

    blank_quest Senior Member Senior Member

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    India was a major player in the world export market for textiles in the early 18th century, but by the middle of the 19th century it had lost all of its export market and much of its domestic market. Other local industries also suffered some decline, and India underwent secular de-industrialization as a consequence. While India produced about 25 percent of world industrial output in 1750, this figure fell to only 2 percent by 1900.:shocked: We use an open, specific-factor model to organize our thinking about the relative role played by domestic and foreign forces in India's de-industrialization. The construction of new relative price evidence is central to our analysis. We document trends in the ratio of export to import prices (the external terms of trade) from 1800 to 1913, and that of tradable to non-tradable goods and own-wages in the tradable sectors going back to 1765. With this new relative price evidence in hand, we ask how much of the de-industrialization was due to local supply-side influences (such as the demise of the Mughal empire) and how much to world price shocks (such as world market integration and rapid productivity advance in European manufacturing), both of which had to deal with an offset the huge net transfer from India to Britain before 1815. Whether the Indian de-industrialization shocks and responses were big or small is then assessed by comparisons with other parts of the periphery.

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    Last edited: Oct 26, 2012
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  3. The Fox

    The Fox Regular Member

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  4. Hari Sud

    Hari Sud Senior Member Senior Member

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    If you have time then read the following my paper. You will get the idea,

    How Did Historically Prosperous India Get so Poor in the First Place


    By: Hari Sud
    May 20, 2007
    Views expressed here are author’s own and not of this website. Full disclaimer is at the bottom.

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    Related articles:
    Good Things, the British Left Behind in India
    How Did India Get so Poor
    Benefits of the British Rule in India
    Drain of Wealth during British Raj
    India Shining and the British Media



    Part 1 – Historical Indian Economy

    India was not poor, not thru the known history of mankind. It has been lush green with skills to administer itself, technology to cloth itself and landmass to grow food to feed itself. It is in the last 150 years before independence, that India became a basket case. Its blame lies on itself for not being prepared to defend itself against the imperial ambitions of the Europeans and quarrelsome tendencies, within, which invite the outsides.

    Surrounded by impenetrable obstacles on all sides India did not need to develop high skills in warfare. Early warfare ended as soon as Aryans managed to establish their hegemony over the peninsula. Buddha’s message (600 BC) of turning the other cheek was the last straw which turned otherwise brave Indians into pussycats. When Alexander came (325 BC), unlike what the western historians tell you, all his land conquest was followed by money grab. His Persian conquest resulted in trainloads of money and goods being transferred to Greece. He attempted the same in Turk’s land (north of Afghanistan) but retreated. There were no plum pickings there. Instead he turned his attention towards India.

    In one tactical move across Indus, he got victory and money from the Jhelum king. The point is that India had always been prosperous. Outsiders always wished to steal it. Hence they kept coming in next two thousand years. Some took the money and left, others made it a home. Lack of military skills had made India an easy target for conquest.

    Indian Economy 1000 BC till 1000 AD
    Indian economy of this era was based on agriculture, textiles and animal husbandry. Cotton and cotton spun cloth together with grain were the main items of internal trade. Farming and land ownership were the main occupations, followed by craftsmanship and trade. Herodotus the Greek historian, found cotton in India and took it to Europe. He loved it and called it the wool, which grows in the fields. Prior to that Greek as well as rest of the Europe, dressed in animal hides.

    King Ashoka is believed to have ruled ten million subjects and had maintained an army of one hundred thousand men. Towards the later part of his rein, his conversion to Buddhism spelled disaster. But the impenetrable walls on all sides prevented any outside interference for a thousand year (Alexander was a distant memory after the flight of his remaining garrison from India). Hence India was safe and its economy secure (Jataka Tales).

    At about 1000 AD, before the Muslim invasion across Hindukush Mountains, India had prosperity comparable to China. The latter had similar successes through out the ancient history. They benefited more with silk trade. India lost the cotton monopoly when the west learnt to grow and spin it. Chinese guarded its silk know-how well and retained the advantage. With trade and technology India & China were the economic powerhouses. Rest of the Europe was passing through the Dark Ages.

    Economy During the Muslim Rule (1200 AD till 1700 AD)
    Politically, 1100 AD to 1700 AD was not a stable time as the Muslim invaders looking for money (Mahamud Gaznavi & Ghori) invaded India. They looted treasuries and then inflicted untold atrocities on the people. Still the economy prospered. Afghans and Turks who ruled India had no penchant for economy. They left it to the Indian merchants, financiers and landowners of their own. Invaders got their money either by brute force or by taxing the land.

    During the Akbar’s rule (1560 AD) the first land reform took place. He wished to stabilize the Turkish rule and hired local Lala Toddar Mull to reform the system. Toddar Mull, initiated “Patwari” system, which is still in existence today. He organized the merchants and wholesalers and established well-organized “Mandis” for trade and exports. As a moneylender himself, Toddar Mull organized recognition of lender’s right for interest in lieu of capital borrowed. Prior to that, interest payments were not well organized.

    All these reforms lead to an explosive growth in Indian economy. Akbar ruled 50 million prosperous subjects and a huge economy. At that time India and China together accounted for 50% of the world’s GNP.

    A major economic catastrophe occurred when Nadir Shah (1739), a Persian buccaneer invaded Delhi and decamped with booty of $1 billion in today’s money. He was so happy with the take that he remitted all taxes of the Iranian people for next five years. Much of the royal gold, silver and precious stones were lost forever. Still, within 20 years India bounced back. Unencumbered economy accumulated wealth very quickly.

    In come the Portuguese, the British and the French
    Major plunder of India began with the arrival of the European powers in the Indian Ocean. Portuguese came first looking for spices (1500 – Vasco de Gama). They had discovered the sea route via Cape of Good Hope. They asked for an innocuous looking trade agreement to trade together with trading posts. British could not let the Portuguese and the Dutch have monopoly and they followed next (Sir Thomas Roe –1616).

    Trade was beneficial for all sides. Indian merchants not knowing the Portuguese, Dutch and the British business practices asked for settlement in gold & silver. All these powers had abundance of gold; all looted from the Americas. They very willingly made that settlement. India in about 150 years of trade with the west (circa 1750) had accumulated a huge horde of gold & silver.

    British wished to grab that gold & silver back. They waited and found their opportunity. Mogul Empire was breaking apart. India was unable to protect itself. Hence they initiated their first conquest in Bengal. Battle of Plassey (1757) was fought. It was never a battle in the real military terms. It was a battle of wits and intrigues. British bribed one of the opposing sides general and carried the day.

    In the process, British seized from the Bengal King, a monstrous booty of Pound Sterling 20 million. In today’s terms it is worth $500 million. The most important aspect of this victory was not only the money grab but grabbing the prime minister ship of the state (Diwani). As a prime minister they now had a hold on future revenues, commerce, trade and livelihood of the people.

    They repeated the same story, when they grabbed Avadh province, where the loot was twice as big. Other parts of India suffered the same fate. Sikh kingdom in Punjab lost its treasury and the prized Koh-e-Noor. Transfer of cash and precious metals by British back to England towards the beginning of 19th century reached tremendous proportions. It was all happening at the expense of Indian economy. But that was not all; the biggest damage was yet to come.

    Part 2 – Damage British Inflicted on the Indian Economy
    British Rule & Economic Misery They Inflicted on India -- Muslims are not to be blamed for mismanaging Indian economy from 1200 AD onwards. They allowed it to prosper. They got their share with hard-nosed attitude and kept away from the intricacies of trade, commerce, finance and ownership. Prosperity was all around. British were inheriting a strong and a prosperous nation.

    I will quote the British Governor General Lord McCauley’s speech to the British Parliament on Feb 2, 1835

    "I have traveled across the length and breadth of India and I have not seen one person who is a beggar, who is a thief. Such wealth I have seen in this country, such high moral values, people of such caliber, that I do not think we would ever conquer this country, unless we break the very backbone of this nation, which is her spiritual and cultural heritage, and, therefore, I propose that we replace her old and ancient education system, her culture, for if the Indians think that all that is foreign and English is good and greater than their own, they will lose their self-esteem, their native self-culture and they will become what we want them, a truly dominated nation".

    Lord McCauley did institute school system in India, which for 150 years produced clerks.
    As soon as the British gained the Diwani of Bengal in 1757, they set about the task of dismantling the Indian economic structure. Textiles in Bengal were the first to be dealt the deathblow. Other commercial segments came one after the other. Wherever they defeated a king, economic hardship was instituted. A complete breakdown of local economic structure was precipitated. From 1857 onwards, the British crown ruled over India. Each Viceroy’s main task was to transfer money to England. Since all state treasuries had already been looted, other means had to be developed to transfer the money to England.

    Just about the Battle of Plassey, Industrial Revolution had begun in England. Manufacturing on larger scale had replaced cottage industry & farming. Factories had to be kept humming and products sold at profit. The best place the British could find to export their manufactured goods was India. Hence, India’s commercial, manufacturing and agricultural sectors, which had existed for thousands of years, were to be completely dismantled. This they went about with great finesse. First they removed artisan from the manufacturing base, then they denied the critical raw materials and finally taxed any product, which still managed to come to the market. Life was made miserable all around.

    What was the shape of Indian Economy in 1800?
    In 1750s, prosperous Indian economy became the backbone of international trade. A Dutch, British or French ship owner could borrow money from Indian Banyan or Seth (my forefathers included) on the going interest rate, load his ship with merchandise in Surat, Cochin or Madras, take it to China, Indonesia or Japan and trade his goods at profit. Return to Surat, pay the Banyan or Seth the money he owed, and reload for an onward journey to Europe or East. In a few voyages, the ship owner and his crew had made enough money to pay off all debts in England or Holland and become rich.

    There was no central bank; hence the concept of Jagat Seth (Universal Money Lender) existed. He was the master banker. Lesser bankers turned to him when in trouble. He also had high connections with the king, hence maintained a fair arrangement between the king and the commerce. Each geographical area had a Jagat Seth.

    Indian economy although almost all of it privately owned, was a hallmark of prosperity. Decline began soon after the success of Industrial Revolution in England. This impact started to be felt, as British factories were kept busy at the expense of Indian cottage industry. All Indian produced goods were heavily taxed. This was done to promote European goods. European voyages of the trading ships multiplied several fold. They carried Indian raw materials and brought back finished goods. All the forgoing was good for England and bad for India.

    Trade balance began to shift heavily in England’s favor. In 50 years after Plassey, Indian economy just began to rot away. British had very cleverly blocked French & Dutch from India; hence all gains were British only.

    Hence a population base of about 100 million, in 1800, previously prosperous had suddenly found themselves at the mercy of a double-edged sword. One edge represented the declining authority of Mughal Empire and other edge represented British who were slowly dismantling the economic structure in India. Worst of all, there was no help in sight. British completed their conquest in 1857; by that time India was set up as a basket case. It received finished goods from England at high price. In return sold raw materials at throw away prices. The whole society was moving into poverty. Next 100 years were the classic case of systematic looting of the nation.

    British Crown Era Begins in 1857 and So Began the Dramatic Rise in Poverty Thirty years after British conquest of India, the period 1870 to 1900 is known to be the golden age of Queen Victoria in England and rightfully so. Her representative (Viceroy) in India was doing a fine job of transferring wealth from India to England. Smart as they are, the British set about documenting all their Indian holdings on the lines of Dooms Day Book of William the Conqueror in 1086. They called it “ The Imperial Gazetteer” of 1881. It was revised again as British penetration in the far-flung areas was completed. It is a 25-volume exhaustive description of India. Its 3rd Volume gives all possible details of economy, trade, balance of payment, census etc. I give you a few quotes from this volume.

    1903-04 Data is Lakh Rupees (Rupees of that Era)

    Items Imports /Exports
    Apparels 172/ 16
    Raw Cotton 5/ 2438
    Cotton Goods 31288/ 10
    Wool Items 215/ 27

    The above is mostly textile related data. India sent to England raw cotton. In return, imported manufactured goods made out of that cotton. India paid 31,680 Lakh Rupees to import textiles. In return a meager, 2, 491 Lakh Rupees were paid for its raw material supplied. Hence it was 13 times advantage, Briton.

    The story was repeated for metals and minerals the same way.
    Items Imports Exports
    Metals Wrought Iron 992/ 30
    Hardware /Machinery 1189/ 5
    Dyes & Chemicals 484/ 13
    Precious Stones 152/ 9

    In the above category, British advantage was 50 times. The story got repeated year after year for one product category after another. India had advantage only in Jute production and manufacture of Jute goods. British did not wish that industry in its midst.

    A rough estimate, in many references indicates that about a Billion dollars in today’s dollars was transferred to Britain every year for about a hundred years. With this much drain over such a long period of time India was turning into a poor man. And when the British left, there was nothing else left for them to loot. If they wished to continue with their ways, then cost of transferring this amount of monies may exceed the cost of containing the independence movement, which was already afoot. Hence they left.

    How Did Gandhi Break Some of These British Monopolies?
    Gandhi understood all the British machinations. First he tackled the British in the textile industry. It was a crime to spin cotton into yarn and weave yarn into cloth in India. It hurt factories in Manchester. Gandhi en-mass began spinning “Charkha” and forced the British to relent.

    Second the metal working business. India never had any serious metal working skills other than gold & silver smithy. Steel works were unknown. In order to encourage steel / wrought iron industry, he persuaded major expansion of iron making in India (Jamshedpur). British did not like it, but two wars in the 20th century, made them to relent. Still they prevented any superior steel making skill transfer to India; least it hurt Birmingham & Sheffield.

    Third, the British had monopolized the salt quarry business. Realizing its importance, they had banned any salt making accept the quarries, which they owned. This very important ingredient of living in hot climate was their way to maintain control on the teeming masses. Gandhi broke that monopoly by organizing a Dandi March and picking up salt from the sea. Later British relented and gave up their monopoly.

    Gandhi thought and carefully implemented economic successes. These endeared him to the people. He later used his prestige and popularity to gain full independence in 1947.

    When the British left in 1947, How was the Economy
    India was already very poor and on top of it, suffered the trauma of partition. It had 350 million souls and an economy of $55 Billion in 1947. Famines visited often. British always blamed it on the inept Indians. British never wished to be reminded that India’s predicament was their creation and if they are rich, it is all India’s money they have.

    India began the slow task of rebuilding. In 60 years, economy is reaching a trillion dollar mark. It is a slow growth, but it is moving in the right direction. The over-burden of population is slowly turning into a blessing. The younger workforce is much sort after. India may not catch the Europeans and the Americans economically, but it will be in their midst, sooner or later. They still have the technology monopoly, but not for long.

    Conclusion
    Genesis of India’s poverty lay in the sunset days of Moghul Empire. Outsiders, mostly British came to loot and they did a fine job for themselves. Now, India’s success will be heralded when it reaches reasonably close to the West in standard of living and breaks their technology monopoly. One thing is certain, India has to keep its powder dry and gun barrels clean, least another power tries to sneak in.


    Hari Sud

    http://www.ivarta.com/columns/ol_070520.htm
     
    Last edited: Oct 26, 2012
  5. average american

    average american Senior Member Senior Member

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    Think you all are going to have to look else where for the blame for India;s problems then UK. Look at Russia, Germany, Japan, much of Europe almost totally destroyed in World War II and look at where they are today.... The British played a considerable part in enlarging Indian economy, amplifying industry, and introducing the country into world trade, especially with the production of raw materials and cash crops like cotton, jute, iron, steel, coal, brass, and indigo. The government helped extend irrigation and thus broaden agriculture, India's main source of economy. Furthermore, railroad construction, the establishment of a postal service, and the telegraph increased the speed of communication and transportation. British social policy benefited the country with education, labor regulation, and famine relief. The British improved schooling for both men and women, deeming Indian instruction a great priority. Naoroji states, "Education, both male and female, though yet only partial, [is] an inestimable blessing as far as it had gone, and leading gradually to the destruction of superstition, and many moral and social evils." English rule increased the literacy rate by providing education in the Indian languages and by 1859, there were eleven universities established in Calcutta, two in Bombay, and one at Madras; the British established thirteen government colleges, four aided colleges, and sixteen colleges for special subjects as well. These social reforms did not exclude female education, and The British and Foreign School Society established twenty-three girls' schools in Calcutta. Moreover, the Government passed various laws to protect workers in the burgeoning industry. Child Labor Laws issued in July 1881 determined that no child under seven could be employed, and children under the age of twelve could work for no more than nine hours. The government passed more Labor Acts in 1891, 1911, 1922, and 1934, including amendments to Child Labor Laws and revised work hours. Lastly, the Famine Commission of 1880 compiled a Famine Code to help the country in a time of national crisis. It asserted that the government had the responsibility to institute railway lines to convey food to places of shortage, provide labor for which wages were decided according to need, fix food prices, and freely distribute seed to those in need. Over the course of British rule, the English government instituted many beneficial reforms in India and helped modernize their crown colony.

    The British Military protected India from invasion and conquest from surrounding countries.

    The British also ended slavery, human sacrfices to Indian Gods on daily basis, and the practice of Suti. 200 years ago, a boy was killed every day at a Kali temple in Calcutta

    Read more: Killing for Kali: Hinduism's cult fringe - TIME
     
  6. ant80

    ant80 Regular Member

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    Every Indian should read this summary.
     
  7. The Messiah

    The Messiah Bow Before Me! Elite Member

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    Interesting....
     
  8. opesys

    opesys Regular Member

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    All those social dogmatic practices weren't practiced throughout India and that too on a regular basis...Yes,socially British did help India...but at the same time a lot of Indians also were against those social dogmatic practices...Taking some of the isolated examples and showing it as a mainstream practice only shows your bad attitude...

    You don't believe India on its own wouldn't have solved its problems ? Do you think Europe was perfect right form the beginning ? What about the US, do you think the US was perfect either ?

    Don't remember the dark ages of Europe ?
    ..................
    Treatment of Illness
    Illness was regarded as the consequence of sin. This was formalised by the Fourth Lateran Council of 1215, which forbade doctors, under threat of excommunication, to treat a sick patient who had not first confessed his sins.

    The imposition of hands, exorcism of evil spirits and prayer were the major, approved methods used by Christian doctors. Plagues were fought by means of processions around the town and services of intercession.
    All died young. Great plagues and epidemics surged across Europe unhindered. Most people died prematurely from tuberculosis, plagues, disease, cold and starvation.

    The Church’s Prolonged Preoccupation with Controlling People’s Sexuality
    Sex and love were controlled too. Sex was only for the purpose of maintaining the population. (SEX was a sin, and so European children must be baptized to wash away the circumstances of their sinful birth, even now.)

    Read more here :

    Europe's Dark Shame

    Human sacrifices in the US.
    Human Sacrifice In The US

    Witch hunt persecutions:
    http://law2.umkc.edu/faculty/projects/ftrials/salem/witchhistory.html

    Now coming back to the main topic of this thread which was economics..
    How about hearing it your own accent ? will you understand atleast now ?

    https://www.youtube.com/watch?v=y3-FPdZii3k
     
    Last edited: Oct 27, 2012
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  9. civfanatic

    civfanatic Retired Moderator

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    The article overall is good, but this part is complete BS. No offense.

    @OP the British de-industrialization of India is a well-known and well-documented fact of history, yet few people are aware of it.
     
  10. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    How British socialism created poverty and caste inequality - Analysis - DNA

    How British socialism created poverty and caste inequality.

    The role of British socialist policies in the destruction of India’s economy was well known in the nineteenth century, but this angle has been ignored in recent times. These policies caused widespread poverty and created caste inequality in the country.

    The castes were similar to the economic guilds of medieval Europe and thrived until their occupations were destroyed by the British.

    The Banias formed the trading guilds and suffered when trading activities were taken over by the British. The Shudras who formed the manufacturing guilds suffered when the British systematically destroyed the manufacturing sector. Kshatriyas lost their livelihoods when they were disarmed. Only the Brahmins could get measly clerical posts as their traditional focus on education was made the prerequisite for such jobs.


    According to John Malcolm Ludlow in his 1858 book British India, its races and its history, the policies of the Indian government resembled “the most decried theories of French socialism.” The book highlights the abolition of individual property rights and describes the system in India as “bureaucratic socialism.” It attributes the destruction of agriculture to the state becoming the universal landlord that took everything and gave next to nothing to the cultivator.

    In another book, The Sepoy Revolt: Its Causes and Consequences, which was published in 1857, the author Henry Mead blames socialism and the revenue system for destroying the aristocracy and reducing the Madras ryot to a “beggar and a slave.” According to Mead, tax was “imposed solely with reference to the amount that [could] be obtained from the people.” The book describes Lord Harris, the governor of Madras, as a socialist and quotes him as saying, “I consider that the land of a country belongs to the government, de facto, and should be held by it...” Mead’s book also points out that the British did not apply socialist policies to themselves.

    Yet another nineteenth century book, Opinions of the Press in India on the Punjab Tenancy Act, published in 1869 states, “The last and dangerously violent effort to establish [socialistic] principles was made in 1859 when Act X applied to Bengal... Hardly had that measure come into operation when the famine of 1860-61 exploded the shortsighted doctrines on which it is based.” The book mentions that socialism had “done so much wrong in Punjab” and explains that transferring the rights of the landlord to the tenants “solely in the interest of revenue and a socialistic theory” had collapsed the system.

    After the British left India, the Indian government opposed trading activities and nationalised several industries in order to align itself with socialist principles. This hurt the Shudra and Bania castes and resulted in a hierarchical class system with the bureaucrats enjoying the highest status in society. Bureaucrats were required to have a college degree and had to pass a knowledge-based test giving the traditional pursuers of knowledge an advantage in this system.

    Socialists who were responsible for the inequality in society blamed everyone but themselves for the ills in the country. They scapegoated the Brahmins for making the best of things in a bad system. They blamed Hinduism for the economic stagnation and labeled the stagnation the ‘Hindu rate of growth’ implying that socialism would have somehow worked if White people had been in control. They blamed the existence of castes for the problems as the Communist Manifesto declared that guilds were feudal setups in which the expert craftsmen oppressed the less skilled workers.

    That the socialist policies caused inequality among castes is clear from the fact that all castes enjoy equal social status in Indonesia which escaped the influence of socialism.

    Penury and social inequality were not the only contributions of socialism. It was also responsible for massive corruption. Henry Mead’s description of corruption in the nineteenth century is startlingly similar to today’s situation. He points out that the system had damaged public as well as private morals and states, “If the people have no sense of obligations, the government has no regard for rights... Where the knavery is greatest, and where poverty is most utter and desolate, the native tax gatherer will reap the greatest harvest; he will be bribed heavily for allowing the rich man to cheat and the poor man to live.”

    Mead’s prescription to fix the agriculture sector was “abstinence on the part of government from interference in the operations of agriculture.” If this suggestion is followed today in every sector of the economy and the government gives up the British socialist policies, many social and economic problems will disappear.
     
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  11. roma

    roma NRI in Europe Senior Member

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    lesssons indded to be learned - let's be sure never to repeat those mistakes again - fat chance to be dominated by brits with the uk getting some karma via scotland devolution possibility in 2014 - oh ! i wonder when chicom will get theirs ?
     

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