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- 1. Indian Economy Reference: Duttand Sundaram
- 2. Unit I Indian Economyon the Eve of Independence Features Economic consequences of the British rule Colonial Exploitation : forms and consequences Case for protection of Indian industries of Drains: pros and cons
- 3. Indian Economy inPre British Period • Self sufficient • Practiced handicraft • Size of market was very small • No proper transportation • No proper communication • Hence trade was not developed much • In order to understand Pre British period properly, we will learn about; a) Structure and Organization of villages b) Structure and character of town c) Industries and handicrafts in pre British India
- 4. a) Structure andorganization of villages • Division of labour was followed • Farmers, goldsmith, washermen, cobbler, carpenter, etc. • Occupations were hereditary, passed on to generations • Crop produced in village were consumed by villagers it self • Goods and services of villagers were self sufficient for each other, no or less foreign relation • Villagers sometimes paid portion of agriculture produce between 1/6th or 1/3rd of total produce to the Hindu kings/ Nawabs as land revenue
- 5. • Market inbig villages • Weekly basis • Markets held near temples, organized to satisfy basic needs of villagers
- 6. • 3 distinctclasses in villages Agriculturists i. Land owners ii. tenants Village artisans Village officials • Labour and capital needed for production was either supplied by the producer themselves or by Money Lenders • Often these land owners, money lenders used to provide credit to small peasants, artisans, small land owner at a very high interest rate • Hence small producers were exploited, but they had no other credit source • Village artisans or Menials were regarded as servants of the village • Artisans often includes basket weavers, potters, cobblers, black smith
- 7. • Most villageshad Panchayats, or bodies of village elderly to settle village disputes • Panchayats were regarded as “Courts of Justice” • Villages were also affected by wars, political disputes, extortions. But were saved due improper transport and communication and help from Central Government
- 8. B) Structure andcharacter of the town 1. Towns were places of pilgrimages - Example : Allahabad, Banaras, Gaya, Puri, Nasik 2. Towns were seat of Courts - Example : Delhi, Lahore, Poona, Lucknow, Tanjore 3. Towns were trading or commercial centers - Mirzapur, Bangalore, Hubli Life in towns was much more advanced than that of villages Vast opportunities for various occupations, professions and trades
- 9. C) Industries andhandicrafts in pre British India • Main industry throughout the country was Textile Handicrafts • Indian muslin could pass through finger ring, and required six months to be produced • Famous textile of India were, muslin of Dacca, calicos of Bengal, sarees of Banaras, chintzes of Lucknow, dhotis and dhopattas of Ahmedabad, silk bordered cloth of Nagpur and Murshidabad, shawls of Kashmir, Amritsar and Ludhiana • India was also famous for marble work, stone carvings, jewelry, brass, copper, wood carvings • India also exported it fine handicraft goods to foreign countries • India mainly exported cotton and silk fabrics, calicos, artistic wares, pepper. cinnamon, opium, indigo • Europe used to import goods from India
- 18. Economic Consequences ofBritish Conquest • Topic divided into 3 parts • 1.Decline of Indian handicrafts and progressive ruralization of the Indian economy • 2. Land system during 1793-1850 • 3. Process of Industrial transition in India
- 19. Economic Consequences ofBritish Conquest • INTRODUCTION • India was ruled by many rulers before British • Persians, Arabs – Muhammad bin Qasim first Muslim to conquer Hindu land, he marked the beginning of Muslim rule in India, Mongolians, Mughals ( Babur founded Mughal empire), Iranians • Theses rulers tried to Indianize themselves • While the British tried create difference and discrimination between them and the colonies • British tried to westernize their colonies
- 20. • The Britishrule can be divided into two eras • First Rule was from 1757 to 1858 (East India Company) • East India Company was founded in 1600 • Second Rule from 1858 to 1947 (British Government in India) • British rule was established over a lengthy period, it was slow , took hundred of years • Battle of Plassey (1757)
- 22. Battle of Plassey •Fought between East India Company and Nawabs of Bengal • Under the leadership of Robert Clive and Nawab Siraj-ud-Daulah (last independent Nawab on West Bengal) • Battle took place in Palashi ( West Bengal) • Result : Victory of British, they got complete control over Bengal and other regions • After the victory, the British started their expansion in India
- 23. • Industrial Revolutionin England (1750) • Industrial revolution new machines, new techniques of production • This machines were bought in India in order to replace handicraft textile • Inventions and innovations • The British invasion led to new land revenue system and process of commercialization of agriculture • both lead to extreme exploitation and frequent famines • Great Bengal Famine of 1770 1 to 10 million people died • Chalisa famine (1783-1784) 11 million people died • Agra famine (1837-1838) 8,00,000 people died • Great famine 1876-1878 5.5 million people died • Indian Famine of 1896-1897 5 million people died
- 26. Railways Education Better irrigation Development ofpost and telegraphs Development of ports Developed industrial sector Positive Contribution made by British rule in India :
- 27. • But allthese development activities were not done for the betterment of the subcontinent • Rather their goal was to drain maximum revenue from the country • Railways were developed to move finished goods from Britain to India • Roads were developed in order to help movement of British Army within India • Ports were developed to export raw material and import finished goods • Communication was developed to maintain law and order
- 28. 1. DECLINE OFINDIAN HANDICRAFTS AND PROGRESSIVE RURALISATION OF THE INDIAN ECONOMY • Before industrial revolution, the East India Company focused on exporting manufactured goods, textiles, spices, etc. to Europe where these goods had maximum demand • Industrial revolution reversed the character of foreign trade • Due to increasing invention and innovations taking place in Britain, there was great demand for raw materials • Raw materials were available in colonies at low cost • In order to get this raw material, first step taken was to crush the Indian manufactures • Secondly, agriculture was highly commercialized to get more raw material
- 30. • Hence Indianhandicraft textile was got affected first • The main causes that led to the decline of handicraft were as follows; • A) Disappearance of Princely courts • During the rule of Nawabs, kings, Rajas, prince; the handicraft artists enjoyed patronage (financial support) • These artisans also use to work for nawabs and kings, with British rule there was decline in their art demand • B) Hostile policy of the East India Company and British Parliament • The British designed rules only for their own betterment • They would put tariffs on silk and woolen manufactures in colonies in order to protect their producers • Example of such situation in today’s world in import tariff put on imported goods in order to protect the domestic producers • They would increases revenues in order to fund wars • Period between 1882-1894 was complete trade free
- 31. • C) Competitionof machine made goods • With the extensive usage of machines, the cost of production declined to large extent • The machine made goods competed with the products of Indian industries and handicraft • This led to decline • The British focused on free import of machine made goods and thus hand made products lost its value • Development of roads, and other means of transport intensified the gap • As handicraft industry was declining, the gap was filled by British • British officers started owning many farms cultivating Cotton in their colonies. • Indian Handicraftsmen had buy same cotton for very high prices , increased the prices of finished products • high tariffs and banning of Indian fabric destroyed overseas markets of Indian finished goods
- 32. • D) Thedevelopment of new form as pattern of demand as a result of foreign influence • With the development in education, there emerged a new class in India • They were keen on imitating the western fashion, manners in order to identify with British officials • Due to change in taste and preferences the demand also changed for different goods • Indian goods went out of fashion and western goods wee demanded • Loss of demand from royals and nawabs • Indian culture and Indian goods were affected • Destruction of handicrafts led to unemployment
- 33. Mass unemployment Craftsmen had to return to villages This caused massive deurbanization ,destroyed big cities , trade centers Craftsmen who returned to villages had to relay upon Agriculture Agriculture became so over employed This was called as “Progressive ruralization” or deindustrialization Stagnant agricultural development results were poverty , massive famine , deprivation of industrial skills Factories were destroyed thus no other source of employment
- 34. 2. The LandSystem during 1793-1850 • Land revenue was a principle source of finance • Land settlement started in 1793 • Permanent settlement was caused due to extract maximum land revenue from India • Permanent settlement was called as Zamindari System • Introduced by Cornwallis in 1793, also called as Permanent Settlement System or Permanent System Act • Called permanent as land revenue was fixed, could not be changed • Causes for this system : creation of private property system • If farmers could not pay land revenue due to low production, famine, etc. • Hence the Government would take away land and sell it to, hence private properties were created
- 35. • Creating socialclass which would be loyal to company, hence all zamindars were in favor of EIC • Zamindars were made owners of land where they previously collected taxes, it was hereditary rule. They had only one job to collect taxes and pay to Govt. • Zamindar is someone who collected tax • Ryotwari System • This system was introduced in Madras, Assam and other parts of north India • Introduced by Alexander Reid in 1792 and improvised by Thomas Munroe • Excessive land tax was extracted • Ownership rights were given to peasants, direct tax payers to Govt. • Absentee landlord interested in collecting high taxes rather than actually cultivating
- 36. • High population more demand for land high taxes extracted • At such high land revenue, peasants were forced to sell their lands to absentee landlord or money lenders • Hence the system gave power to these land lords and money lenders • Depressed agriculture and peasantry Peasants Zamindars British Govt. Zamindari System Peasants British Govt. Ryotwari System
- 37. • Picture ofSil family during British Rule . Sil family was a very well established Zamindar family of Bengal
- 38. 3. Commercialization ofAgriculture (1850-1947) • Production of crops for sale rather than consumption • By the middle of 19th century, industrial revolution had completed in England • The Industrial Revolution, also known as the First Industrial Revolution, was a period of global transition of the human economy towards more widespread, efficient and stable manufacturing processes • Occurred during the period from around 1760 to about 1820–1840
- 39. Colonial Exploitation: Formsand consequences A) Exploitation through trade policies a) Exploitation through trade policies b) Exploitation through company agents (Gomastas) c) Exploitation through manipulation on Import and export B) Exploitation through export of British Capital to India • British encouraged Investment in India due to the following reasons Control and administration, transport and communication was essential Generation of electricity and water for proper exploitation of natural resources To promote foreign trade, raw materials brought to Mandis, exported to Britain with developed railways and bringing finished goods back
- 40. • Major fieldof Direct Foreign Investment included Railways, ports, shipping, electricity generation, water and road works, communication for promoting mining of coal, gold, petroleum Commercial agriculture in tea, coffee, rubber plantation Cotton, jute, textiles, paper, tobacco, sugar Baking, insurance, trade, Machine building, engineering and chemical industries • Major Forms of investment a. Direct foreign private investment in coal mining, jute mills, tea coffee, rubber, sugar b. Loans given to British Govt. in India in public and semi public sectors to mak e investment in railways, ports, electricity
- 41. C) Exploitation throughfinance capital via the managing agency system D) Exploitation through payments for the costs of British Administration
- 42. Case for protectionof Indian industries of Drains: pros and cons • There was “Drain” of resources from India to England, this is considered as major economic consequence of British rule, which began in middle 18th century • Dadabhai Naoroji, Romesh Dutt, M. G. Ranade, Lala Lajpat Rai, G.K. Gokhale were the prime advocates who were against drain of wealth
- 43. • According tothem drain of wealth was major cause for Poverty in India • Drain refers to “One way flow, one directional flow”; in case of Economic Drain it will refer to “ one way flow of economic resources without getting returns” • Home Charges- Expenditure incurred in England by Secretary of the State on behalf of India • It included- expenses on Indian offices which were established in London, pensions and salaries to British officers in India, Payment to British war office, funds used to support Indian offices in London, funds used to pay salaries and pensions to British personnel in India, interest on loans by Indian Govt. in England • 1/4th of total revenue generated from India was sent to England in the form of Home Charges, and this had no returns to India, nor it contributed towards economic development of India • There was drain of human skills as well, people were forced to use traditional agricultural methods • Concept of Brian Drain
- 46. Protection of IndianIndustries • After World War I (1914-1918), Indian Govt. provided some protection to Indian industries to promote growth, but protection was limited to few industries only • The British Govt. did not wanted the Indian industries to develop due to the fear of Competition, hence the amount of investment done in industrial sector was very low • Money could have utilized efficiently if not have been used in surplus in other sectors • Fiscal Policy – followed Laissez Faire ( minimum Govt. interference) an was not interested in promoting cotton industry, removed import duty as putting import duty might have benefitted Indian industries. Thus not favorable • Industrial Protection- Industrial Commission was appointed in 1916, which suggested to protect Indian Industries, after Swadeshi Movement (1905) the real growth of industrial sector began. The number of cotton mills increased from 36 to 64 from 1900-1914 time period, 2 more mining industries came, TISCO(1907) was established in same era.
- 48. • Growth ofIndian Industrial sector was slow due to ; 1. Demand from Indians was low, due to lower per capita income 2. Majority were poor, not interested in buying luxury or high priced goods 3. From supply side (producer) all raw materials were exported to Britain, hence only labour(cheap) was left 4. No incentive for the producer to upgrade to modern technology 5. Discriminating Protection put forward by Fiscal Commission (Oct 1921)- protection given to selected industries which applied for it and fulfilled minimum conditions mentioned 6. Triple formula of the Commission Industry must have natural advantages that is cheap labour, raw material, cheap power supply, and increasing demand for its product The industry not in the position to develop on its own that is without protection The industry must be able to face international competition with any protection
- 49. Effects Of Protection(pros and cons) • Positive effect on production with respect to iron and steel, paper, sugar, metal and cement • No sufficient increase in production, employment and national income • All discrimination, no protection was given to the industries which required the most • Discrimination in Triple Condition of Protection • More benefits to British goods industries rather than Indian industries • Neglect of industries like ship building, automobiles, aero planes and electrical goods