Economic Policy and Development in the 1860s

Economically, this was an era of increased commercial�agricultural production, rapidly expanding trade, early�industrial development, and severe famine. The total cost of�suppressing the Revolt of 1857-1859, which was equivalent to�a normal year’s revenue, was charged to India and paid off from�increased revenue resources in four years. The major source�of government income throughout this period remained the�land revenue, which, as a percentage of the agricultural yield�of India’s soil, continued to be “an annual gamble in monsoon�rains.” Usually, however, it provided about half of British India’s�gross annual revenue, or roughly the money needed to support�the army.�The second most lucrative source of revenue at this time�was the government’s continued monopoly over the flourishing�opium trade to China; the third was the tax on salt, also jealously�guarded by the Crown as its official monopoly preserve. An�individual income tax was introduced for five years to pay off�the war deficit, but urban personal income was not added as a�regular source of Indian revenue until 1886.

Despite continued British adherence to the doctrine of�laissez-faire during that period, a ten percent customs duty was�levied in 1860 to help clear the war debt, though it was reduced�to seven percent in 1864 and to five percent in 1875. The abovementioned cotton import duty, abolished in 1879 by Viceroy�Lytton, was not reimposed on British imports of piece goods�and yarn until 1894, when the value of silver fell so precipitously�in the world market that the Government of India was forced�to take action, even against the economic interests of the home�country (i.e., textiles manufacturers of Lancashire), by adding�enough rupees to its revenue to make ends meet. Bombay’s�textile industry had by then developed more than 80 power�mills, and Jamsetji Tata’s huge Empress Mill was in full operation�at Nagpur, competing directly with Lancashire mills for the�vast Indian market. Britain’s mill owners again demonstrated�their power in Calcutta by forcing the Government of India�to impose an “equalising” five percent excise tax on all cloth�manufactured in India, thereby convincing many Indian mill�owners and capitalists that their best interests would be served�by contributing financial support to the fledgling national�movement.

Growth of the Railway Network

Britain’s major contribution to India’s economic development�throughout the era of Crown rule was the railroad network�that spread so swiftly across the subcontinent after 1858 , when�there were barely�320�km�of track in all of India. In 1845, two�companies, the East Indian Railway Company operating from�Calcutta and the Great Indian Peninsular Railway (GIPR)�operating from Bombay were formed. The first train to be�commissioned to service was on December 22, 1851 for hauling�of construction material in Rourkee. But the first passenger�train started operations on April 16, 1853 between Bori Bunder,�Bombay and Thane covering a distance of�34�km. It marked the�beginning of railways in India.

Because financial difficulties were hampering further�investment in the railways, the British government tried to�inspire private entrepreneurs to set up rail links under a plan that�would provide them with an assured return of�5%�during the�initial years of operation. But once the rail link was completed,�the ownership would pass on to the government, though the�concerned company could operate the rail link. (This could be�termed an early form of public private partnership). By 1869�more than 8,000 km of steel track had been completed by British�railroad companies, and by 1900 there were some�40,000�km�of rail laid. By the start of World War I the total reached 56,000�km, almost the full growth of British India’s rail net.�In 1901 the British constituted the Railway Board. It worked�under the department of Commerce and Industry. For the�first time after the railway board was constituted the railway�started making profit. By 1907 all the railway companies were�taken over by the Government. By 1920 the network of Indian�railway had increased to�61,220�km. Realising a need for a�central management, the government took over the functioning�of the railways and detached the finances of the railways from�other governmental revenues. Between 1920 and 1929 the�railways witnessed enormous growth, but were severely crippled�afterwards by the great depression and Second World War. By�1946 all rail links were taken over by the government.

Initially, the railroads proved a mixed blessing for most�Indians, since by linking India’s agricultural, village-based�heartland to the British imperial port cities of Bombay, Madras,�and Calcutta, they served both to accelerate the pace of rawmaterial extraction from India and to speed up the transition�from subsistence food to commercial agricultural production.�Middlemen hired by port-city agency houses rode the trains’�inland and induced village headmen to convert large tracts of�grain-yielding land to commercial crops.

Large sums of silver were offered in payment for raw�materials when the British demand was high, as was the case�throughout the American Civil War (1861-65); however, but�after the Civil War ended, restoring raw cotton from the southern�United States to Lancashire mills, the Indian market collapsed.�Millions of peasants weaned from grain production now found�themselves riding the boom-and-bust tiger of a world-market�economy. They were unable to convert their commercial�agricultural surplus back into food during depression years, and�from 1865 through 1900 India experienced a series of protracted�famines, which in 1896 was complicated by the introduction of�the bubonic plague (spread from Bombay, where infected rats�were brought from China). As a result, though the population of�the subcontinent increased dramatically from about 200 million�in 1872 (the year of the first almost universal census) to more�than 319 million in 1921, the population may have declined�slightly between 1895 and 1905.

The spread of railroads also accelerated the destruction�of India’s indigenous handicraft industries, for trains filled�with cheap competitive manufactured goods shipped from�England now rushed to inland towns for distribution to�villages, underselling the rougher products of Indian craftsmen.�Entire handicraft villages thus lost their traditional markets of�neighbouring agricultural villagers, and craftsmen were forced�to abandon their looms and spinning wheels and return to the�soil for their livelihood. By the end of the 19 th century a larger�proportion of India’s population (perhaps more than threefourths) depended directly on agriculture for support than at�the century’s start, and the pressure of population on arable�land increased throughout this period. Railroads also provided�the military with swift and relatively assured access to all parts�of the country in the event of emergency and were eventually�used to transport grain for famine relief as well.�The rich coalfields of Bihar (now located in Jharkhand)�began to be mined during this period to help power the�imported British locomotives, and coal production jumped�from roughly 500,000 tons in 1868 to some�6,000,000�tons in�1900 and more than�20,000,000�tons by 1920 . Coal was used�for iron smelting in India as early as in 1875, but the Tata Iron�and Steel Company, which received no government aid, did not�start production until 1911, when, in Bihar, it launched India’s�modern steel industry. Tata grew rapidly after World War I, and�by World War II it had become the largest single steel complex�in the British Commonwealth. The jute textile industry, Bengal’s�counterpart to Bombay’s cotton industry, developed in the wake�of the Crimean War (1853-1856), which, by cutting off Russia’s�supply of raw hemp to the jute mills of Scotland, stimulated�the export of raw jute from Calcutta to Dundee. In 1863 there�were only two jute mills in Bengal, but by 1882 there were 20 ,�employing more than 20,000 workers.

The most important plantation industries of this era were�tea, indigo, and coffee and the important features of plantation�industries are given here.

  • British tea plantations were started in north India’s Assam�Hills in the 1850s and in south India’s Nilgiri Hills some�20 years later.
  • By 1871 there were more than 300 tea plantations,�covering in excess of 12,000 hectares and producing�some 3,000 tons of tea.
  • By 1900 India’s tea export to Britain, was greater than�that of China.
  • The flourishing indigo industry of Bengal and Bihar was�threatened with extinction during the “Blue Mutiny”�(violent riots by cultivators in 1859-1860), but India�continued to export indigo to European markets until the�turn of the century, after which synthetic dyes gradually�made that natural product obsolete.
  • Coffee plantations flourished in south India from 1860�to 1879, after which disease blighted the crop and sent�Indian coffee into a decade of decline.

Written by princy

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