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Economic Impact of British Rule in India

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The economic impact of British rule under the East India Company (1755-1857), also known as the process of colonization of Indian economy, may be understood under the following heads:

  1. Disruption of Traditional Economy
  2. Ruin of Peasantry and Agriculture
  3. Ruin of Old Zamindars and Rise of New Landed Classes
  4. Ruin of Artisans and Craftsmen, De-Industrialisation and Ruralisation of Indian Economy
  5. Commercialization of Agriculture
  6. Drain of Wealth
  7. Poverty and Famines
  8. Rise of Modern Industries under the British
  9. Rise of New Indian Bourgeoisie

Disruption of Traditional Economy

The rise of British supremacy led to the subordination of Indian economy as per the needs and interests of the British rulers whose main interests lay in exploitation of Indian resources and enrichment of their own people at the cost of Indian people. British economic policies such as new land revenue policies, discriminatory trade restrictions, the domination of markets and continuous conquests had an adverse impact on almost all classes of Indian people from peasants and artisans upto the ruling class. The British policies brought about a ruin of Indian agriculture, trade and industry and resulted in a complete breakdown of the traditional economic structure. The self-sufficiency of the villages was destroyed and the Indian economy was rapidly transformed into colonial economy. The ruin of Old Zamindars and Rise of New Landed Classes The old zamindars were replaced by a new class of landlords, particularly under the land revenue settlements of Warren Hastings. By 1815, nearly all great zamindars of Bengal were ruined and replaced by merchants and moneyed classes who lived in towns (absentee landlordism), had no permanent interest in land and tried to extort as much revenue as possible during the period of their contract. Clearly such a system further accelerated the impoverishment of the peasantry, impoverishment of land and stagnation and deterioration of agriculture. De-industrialization and Ruralisation of Indian Economy De-industrialisation refers to the process of continued and marked industrial decline. With reference to India, it refers to the destruction of traditional Indian craft industries as one of the earliest consequences of British rule in India. The cotton-weaving and cotton-spinning industries were the worst hit. Strangely, while India’s traditional manufacturing sector was being steadily weakened under the Company; in the same period, Britain had begun its Industrial Revolution and was rapidly expanding its own industries. Wealth from India (Plunder of Bengal 1757) played a significant role in the accumulation of capital in England needed for industrialization (1760). Various causes of de-industrialisation under British rule are listed as follows:

  • Misuse of political power: The British used political power to bully the weavers and artisans of Bengal into selling their products at low and dictated prices, even if they incurred a loss. This forced many of them to leave their profession. The Khatbandi System which virtually reduced the weavers to the status of indentured or bonded laborers.
  • Creation of a buyers’ market: The British created a buyers’ market where the buyer can dictate the price, (the buyer here being the English Company and its servants) at the cost of the seller (the seller being the India peasant and artisan).
  • Destruction of regional powers and their courts: The princely states were the biggest buyers of handicraft, luxury commodities, and military weapons. Their decline gave a big blow to these industries.
  • Westernization of Indian educated middle class: This class imitated European standards and scorned on everything Indian.
  • Import restrictions: This ruined the foreign market of Indian artisans.
  • Forced policy of British Free Trade with India: Far from providing protection to Indian industries, the British opened the Indian market to British manufactured goods, thus ruining the home market of Indian artisans. Many indigenous industries faced unequal competition with imported machine-made goods and perished.
  • Development of railways: Besides other things, the railway policy of the government discriminated against Indian goods such that the transportation of Indian goods was costlier than that of British goods.
  • Lack of government support: The British government extended no support, financial or otherwise too heavy or capital goods industry (First steel in India was produced as late as in 1913!) and to technical education.
  • Import of cheap synthetic dyes destroyed the dying industry of Indian villages.
  • Export of raw materials from India.
  • Grant of special privileges to British manufacturers in India. The ruin of Indian industries was reflected in the ruin of once-famous industrial centres like Dhaka, Surat and Murshidabad. Destruction of the handicraft industry ruined the independence of villages, forced artisans to leave their profession and become laborers and made the economy predominantly agrarian. This increasing dependence of the population on agriculture for subsistence and increasing tendency to produce agricultural goods and raw materials, to the neglect of industrial development, has been described by historians as the trend towards ruralization or peasant nation of Indian economy. The change was the most glaring in the cotton textile industry-India that had been for centuries the largest exporter of cotton goods in the world, was now transformed into an importer of cotton goods and exporter of raw cotton! This was a direct result of deindustrialization and comprised yet another impact of British rule on the Indian economy. During the National Movement, Britain’s role in the de-industrialization of India and its callous indifference towards the development of modern industry became a rallying point against colonial rule. Several efforts were made to revive indigenous industries, particularly by Congress and Gandhiji. Gandhi formed the All India Spinners Association and All India Village Industry Association.

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