Modern Indian History Notes


Economic Impact Of British Rule In India

Prior to Britih colonial rule, India was well known for its handicraft industries coping with silk and cotton fabrics, metal and precious stone functions, etc.. These products manufactured in India needed a worldwide market as a result of fine quality of material used and high standards of workmanship employed from the products that were exported.

The policies followed by the company rule caused a basic change in the structure of the Indian market, transforming India into a provider of raw materials and a customer of finished industrial products from Britain.

With the arrival of British colonialism in India, the economic policies adopted by the British were concerned about the protection and promotion of their financial interests of their own country instead of the development of the Indian market under British rule.

The financial effect of British rule in India can be examined under these stages to estimate the full meaning of British rule.

The initial stage was: Mercantile development (1757-1813)

It dictated the terms of commerce in its dealings with all the traders and retailers of Bengal. The Company imposed inflated costs of goods resulting in adventurous capitalism where the wealth was generated by the political clout of the British traders.

The second stage was: Industrial phase (1813-1858)
With the development of British businesses, India was manipulated by its own masters as a market for British goods. With the coming of the action of 1813, the only 1-way trade was permitted by the British, as a consequence of that, the Indian markets have been flooded with cheap, machine-made imports from recently industrialized Britain. This resulted in the loss of the Indian market and foreign market for traders of the nation.
Now, Indians have been forced to export their raw materials to Britain and import the final goods. They imposed heavy imports obligation on the Indian products exported to England so as to discourage them from the British industry.
The Third stage was: Financial phase (1860 onwards)
Following the British consolidated their place in India, they converted India to a market for British producers while still being a supplier of foodstuffs and raw materials. In the next half of the 19th century, modern machine-based industry started arriving in India. There was a rush of foreign investment in India mainly lured by large profits and the availability of cheap labor, raw materials. The Banking System was released in the type of Avadh Commercial Bank in the year 1881.
Socially, this caused the growth of an industrial capitalist class and a working-class became an important facet of this phase.
Impact of British Rule on economic conditions:
  • The British rule stunted the development of Indian business.
  • The economic policies of the British assessed and retarded capital formation in India.
  • The Drain of Wealth funded capital growth in Britain.
  • Indian agricultural industry became stagnant and dropped even when a large part of the Indian populace was dependent on agriculture for subsistence.
  • The British rule in India directed the meltdown of handicraft industries without making any significant contribution to the development of any modern industrial foundation.
  • Some efforts by the colonial British regime in developing the Plantations, mines, jute mills, banking, and shipping, mainly promoted a method of capitalist firms that were handled by foreigners. These selfish motives led to an additional drain of resources from India.

Fiscal Roast or Drain of Wealth

It stated important components of the drain in kind of wages and pensions of military and civil officials, along with interests and loans obtained by the Indian Government from abroad. Other contributors were earnings from foreign exchange in India, sending payments, banking, and insurance providers which restricted the growth of Indian enterprise in these types of services.
This drain of wealth retarded and assessed capital formation in India. While this exact same riches hastened the economic development in the British market.
R C Dutta wrote in his job”Economic History of India” annually in 1901 blaming British policies for Indian economic ills. These policies hampered employment and income potential inside India.
The’Economic Drain’ theory mainly identifies some portion of the National Product of India which was not readily available to Indians for ingestion.
Following were the component of ‘Drain of Wealth’
  • The money extorted by business servants from several staples, zamindars, retailers as well as the common man was delivered to Britain.
  • The Duty-free exchange provided to the British producers gave them a competitive edge over the Indian dealers.
  • The remittances and wages alongside different incomes sent to England by company officials working in India.
  • ‘Home prices’ were the cost of wages and pensions of the firm officials in India, that were charged on the treasury of India.
  • Hefty interests were paid to these British investors resulting in drain of riches.


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