Features of Economic Exploitation of India under British Rule

Decline of the Handicraft Industries

Before the advent of European colonialism, India was a land of extensive manufactures with Indian artisans achieving worldwide fame for their skills. In fact the reason for India’s favourable foreign trade was its excellence in indigenous production. India manufactured on a large scale a wide range of cotton and silk fabrics, jute, sugar, oil, dyestuffs, mineral and metallic products like arms, and other metal wares.

This industrial status of India was largely destroyed under colonial impact. Its beginnings can be traced to the Industrial Revolution in England. The machine-made textiles of England began to gradually replace the indigenous manufactures. India’s artisans were forced out of production. It was this pressure from the British goods, supported by the use of their political dominance, which led to the decline of traditional Indian centres of economic activity (see list below). The number of weavers and other artisans began to decline rapidly.

Major Centres of Industry in India at the Beginning of British Rule

Textile Industry- Dacca and Murshidabad – Bengal

Patna – Bihar

Surat and Ahmedabad – Gujarat

Chanderi – M.P

Jaunpur, Varanasi – U.P

Lucknow and Agra

Multan and Lahore – Punjab

Aurangabad and Visakhapatnam

Coimbatore and Madurai – Madras

Wollen manufacturers – Kashmir

Ship building – Andra and Bengal

The Phenomenon of De-industrialisation

An important thesis of nationalist historians has been that British rule precipitated the de-industrialisation of India. India had been an exporter of cotton manufacture in the precolonial era and this was how the Company started its trade. However the impact of colonial policies meant that gradually India became an importer of cotton manufactures and thus Indian artisans and craftsmen lost their livelihoods. Similarly important trading centres collapsed and pre-existing manufacturing activity was destroyed under the impact of imports of cotton manufacture almost exclusively from Britain. India, in fact, became the major importer of cotton goods from Britain in the 19th  century accounting for about forty per cent of the British exports worldwide. The decay of major and flourishing industrial centres like Dacca, Surat, and Murshidabad bore testimony to the deindustrialisation of India.

Thus the industrialisation of England was accompanied by the decline and destruction of Indian cotton manufacture. As a result from the early 19th  century onwards there was a steady decline in the population dependent on indigenous industries and a consequent increase in the dependency on agriculture. This was extremely damaging to the economy. The distress of the artisans was a significant factor in the growth of many resistance and protest movements in India. De-industrialisation stimulated patriotic sentiments among intellectuals as well as more directly, in occasional urban and rural popular explosions.

The Drain of Wealth Theory

The drain theory, as formulated by the Indian nationalists, referred to the process by which, a significant part of India’s national wealth was exported to England, and which provided India no economic returns. In other words, India was made to pay an indirect tribute to the English nation. Obviously this drain of India’s wealth to England, in the form of salaries to British officers posted in India, home-charges (the amount paid from Indian revenues under the head of military pensions and furlough charges, also civil and marine, pensions as well as the amount of the India Office salaries and associated establishment costs incurred in Great Britain) and the profits made on the British capital invested in India, benefited England and diminished the sources for investment in India.

Essentially after acquiring dominion over India, the East India Company as well as private British traders could appropriate Indian goods or tribute or profits without really paying for them. Britain no longer had to send bullion to India to balance her accounts. Instead bullion was now sent out from India either to Britain or to China, in order to pay for British imports from there.

Historians estimated that ‘external drain’ from Bengal constituted about three to four per cent of the gross domestic product of the region in that period. If expenditure on wars of the East India Company is added in this period, at least 5 to 6 per cent of resources of the land were siphoned off outside and thus eliminated from any possibility of investment.

An elementary principle of economic development is that savings generate a surplus for investment but if the surplus is siphoned off from a colony to the colonisers, the colony will get inadequate investment and remain underdeveloped. On the other hand the colonising country will have more investible resources (a form of foreign investment without any liabilities). This was the impact of external drain on the economy of India under British colonial rule starting with Bengal from the latter half of the 18th  century.

External drain, however, was only one element of British exploitation of India, closely linked with other sources of exploitation like a heavy tax burden and an unfavourable trade pattern. The British benefited immensely from the plunder and exploitation of India.


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