De-industrialisation of India under British rule leading to poverty

How the transfer of wealth from India to Britain began well before the industrial revolution

A look at the history of the sub-continent's de-industrialisation following Shashi Tharoor's Oxford Union Society speech on Britain's moral obligation to pay India reparations.

How the transfer of wealth from India to Britain began well before the industrial revolution
In a debate at the Oxford Union Society on May 28, Shashi Tharoor, Congress member of Parliament, made a case for the British paying reparations to India for the many ills caused by colonialism, among which deindustrialisation was a major consequence.

Deindustrialisation between 1750 and 1900 stifled India’s nascent industry. It made India a supplier of raw materials to Britain and a market for its goods, following the latter’s industrial revolution. As industry suffered, labour fell back onto agriculture.

Deindustrialisation, however, is complex and contradictory, and saw various phases. The word entered the political lexicon in the early 20th century when nationalist historians and politicians such as Romesh Chunder Dutt and Dadabhai Naoroji mentioned it, as did Jawaharlal Nehru in his Discovery of India.

The facts are indisputable: for instance, India had 25 percent of world industrial output in 1750, and this dwindled to two percent in 1900. What constituted industrial output at that time was different from now: luxury goods: fine cottons and silks, jewellery and brassware. It also included spices and saltpetre. In fact, raw cotton of the kind produced in India, didn’t find much favour in international markets. Until the 1840s, 80 percent of British raw cotton came from America and only 13 percent from India.

Among the first to actually quantify deindustrialisation was Amiya Bagchi in 1976. He used data from the region around the mid-Gangetic plain collected by the British administrator Buchanan Hamilton in the early 19th century. Bagchi then compared these to census figures of 1901.  Accounting for factors such the rate of growth, soil productivity, etc., it appears that around 18.6 percent of the population was engaged in handloom spinning and weaving in the early years, and this dropped to 8.5 a century later.

Many phases

Despite the “chaotic” 18th century, provinces like Mysore saw impressive developments in industries like metallurgy. Tirthankar Roy has described how handicrafts such as handloom weaving, gold weaving, brassware, carpets and leatherwork adapted and found new markets in the 18th century and later.

The economic historians Clingingsmith and Williamson (2005) denoted three phases to suggest that deindustrialisation began well before Britain’s industrial revolution: Post-Mughal (1700-50);

then the merchant capital period from the 1750s, which saw net transfer of wealth and goods as the East India Company tried to balance trade,

and then after the 1850s, when British industrial interests weighed in heavily on policy decisions of the colonial government – a time when modern industry also had its beginnings in India.

While a centralised regime like that of the Mughals was beneficial for the economy, the chaos that followed a weakened empire saw a rise in revenue farming, when more income was drawn from land: rents rose as high as 50 per cent and grain prices did too. Instability affected intra-country trade as well. While provinces and areas like Mysore and Dacca invested in manufacturing through the "karkhanas", local rulers well into the 19th century were more set on investing their gold in impressive rituals and rites, as for example described even a century later by Vishnu Bhatt Versaikar’s memoirs of 1857.

It was in the early 18th century that India’s share in world trade declined. Developments in worldwide shipping occurred mainly in the west.
 In these early years, when trade in the seas bent to sheer might, they sought the help of privateers and buccaneers like William Kidd for instance, who would trade, protect ships they were allied to, and attack and loot enemy ships. Import tariffs came up in these years too, after 1700, when the British parliament raised duties on goods such as fine textiles from outside.
1750s onward

The second phase followed the East India Company’s acquiring the diwani of Bengal province. Revenue collection meant not merely the net transfer of wealth but also goods bought from this revenue out of India, without which the Company’s trade could not be balanced.

The Company’s merchants elbowed out the traditional “gomastas”, or middlemen, forced new terms of bargaining from Bengal’s artisans who, as Tapan Raychaudhuri (1983) has shown, worked under conditions of indenture. But despite the outflow, the Company could only balance its trade only when the opium and tea trade were placed on a firm footing.

Environmental historians have also shown how incidence of famine took a different turn before and after 1750. Vinita Damodaran, writing of the period after 1750 and later, differentiates between famines of scarcity, or true famines, of the earlier time, and famines caused by a lack of purchasing power.  She cites the Report of the Famine Commission in 1880 to show an “immiseration” of the peasantry and general populace, with rising extractions from the state: since the East India Company took over the diwani of Bengal from 1765 to 1858, Bengal experienced 12 famines and four periods of severe scarcities.

In the 1840s, Britain rapidly industrialised. But while manufacturing lobbies bargained hard for concessions, the Parliament, the Board of Control in London managing India’s operations before 1858, and later, the Raj, had to balance and weigh every option.

Even the introduction of railways meant several lobbies —industrial, military, welfare, merchant-capital — had to be played off against each other.

But it was around this time that Indian industry too emerged and their products competed with native cottage industry handlooms as well — some historians have in fact called this a “re-industrialisation”.

Entrepreneurial spirit

A part of the reason for absent or slow industrialisation in India has been ascribed by historians to the fact that merchant traders or small-time capitalists were not able to transform themselves into industrialists. Bombay’s textile mills, for example, were built with credit, technical assistance and machines from Britain, but remained largely uncompetitive because of a shortage of technology, skilled labour, and capital.

As Dwijendra Tripathi has shown, the manufacturing system was an exact replica of Manchester’s, and while mechanical devices more conducive to Indian conditions were available, Indians for long favoured the technology used by British manufacturers. For instance, the mule spindle used in Indian cotton factories was developed in Britain in 1779, when the ring spindle developed in the 1830s in the USA would have been more efficient. But it was only in 1883 that JN Tata applied the new American cotton technology in his Empress Mill at Nagpur.

In the Economic and Political Weekly (August 1970), Amalendu Guha wrote of the transformation of Parsi artisans into merchant-entrepreneurs during the first half of the 19th century. A few did become wealthy as did Sir Jamsetji Jeejeebhoy (1783-1859), but in those early years, it was not the railways but gains from the opium trade that attracted many, in the words used memorably by Bahram Modi in Amitav Ghosh’s River of Smoke. Modi, hoping to convince his father-in-law to diversify from his ship-building business to the lucrative opium trade, pleads thus:
‘Listen sassraji… look at the world around us; look at how it is changing. Today the biggest profits don’t come from selling useful things: quite the opposite. The profits come from selling things that are not of any real use... Opium is just like that. It is completely useless unless you’re sick, but still people want it. And it is such a thing that once people start using it they can’t stop; the market just gets larger and larger. That is why the British are trying to take over the trade and keep it to themselves. Fortunately in the Bombay Presidency they have not succeeded in turning it into a monopoly, so what is the harm in making some money from it?’