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