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TitleIrfan Habib Colonization of Indian Economy
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Table of Contents
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		Front Matter [pp.  1 - 2]
		Sociology and Sociological Radicalism [pp.  3 - 22]
		Colonialization of the Indian Economy, 1757 - 1900 [pp.  23 - 53]
			Class Character of the Indian Constitution [pp.  54 - 62]
			Theories of State: Aristotle to Marx [pp.  63 - 69]
			Distant View of the East [pp.  70 - 74]
			Establishment Scientists [pp.  75 - 79]
		Back Matter [pp.  80 - 80]
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Page 1

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Page 2


Colonialization of the Indian Economy,
1757 - 1900

FOR all students of modern Indian history, the colonialization of the
Indlan economy under British rule must remain a theme of overriding
importance. Here was the first, the classic capitalist power creating, and
transforming, the largest colony in the world. Marx was greatly interested
in this phenomenon, and called attention to the roles of India as a source
of primary accumulation of capital and as a market for the industries of
the colonizing power. He studied, too, the destructive and the regenera-
tive effects of British rule upon the Indian economy.1 (1) Since then,
and especially since R C Dutt's splendid two volumes of Economic Hisfory
at the beginning of the century, 2 mnuch has been written on the subject.
Monographs on the various regions and on individual aspects of economy
and administration during the period have naturally multiplied. There is,
indeed, now a danger that the major strands may be overshadowed by
the minutiae that detailed research always turns up. A recent debate3
did much to focus interest back on some of the important issues of the
main theme; and this paper is written with the same intention.

An attempt is here made to offer (or, mostly, restate) a number
of propositions about the process of colonialization of the Indian economy
from 1757 to about 1900. I have a feeling that the different stages of colo-
nialization. each with its own specific features, need to be distinguished;

Page 16


colonial objective changed from seizing Indian commodities to seizing the
Indian market. The changed objective did not only make the East India
Company's monopoly over Indian internal commerce and overseas trade
obsolete, but positively required Free Trade. The Charter Acts of 1813
and 1833 largely accomplished this change.

The English exports of manufactures, textiles in the first place, not
only practically wiped out the Indian exports of cotton goods, but also
entered India to challenge Indian manufactures in their home market.
The exports of cotton goods from the United Kingdom to India increased
from 0.80 million yards in 1815 to 45.00 million yards in 1830, 51.78
million yards in 1835, and 100.05 million yards in 1839; and cotton twist
from a mere 8 lbs in 1814 to 4.56 million lbs in 1828 and 10.81 million
lbs in 1839."9 The value of British cotton goods entering India was
?2.29 million in 1839; that of cotton twit t was 0.64 million. 10 In 1855
they reached the values, respectively, of L5.40 million and f1.27 mil-
lion. 1 0 1 The exports of Indian cotton manufactures declined dramatically.
During the decade 1794-95 to 1803-04, the East India Company's sale of
Indian piecegoods amounted to fT2.42 million annually; 02 in 1849 the
value of cotton goods, twist anld yarn exported from India was no more
than J0.69 million. 1 0

Lancashire Captures Indian Market
The eflects of these imports of English manufactures upon the lar-

gest craft industry of India have often been discussed. Crawfurd in 1837
disputed the complaint of adverse effects on Indian textile industry by
claiming that the British cotton goods imported into India accounted for
a mere 6 per cent of the total value of India's domestic textile produc-
tion.104 But inasmuch as the competition of British manufactures
had also wiped out Indian textile exports of a value of well over
J2. million, the total fall in the value of Indian production should have

been about 11.5 per cent. Speaking in terms of quantities, the British
manufactures seem to have annually furnished 1.2 yards of cloth per Indian
family in 1835 and 2.3 yards in 1839.1 0 Working back from the esti-
mated Indian per capita consumption of 9.80 yards in 1900-01, 106 and
assuming at least a 100 per cent increase in consumption between 1839
and 1900, in view of the relative fall in prices of cotton goods, one arrives
at the maximum of 24.5 yards per family per year in 1839. This would
mean that British manufactures were supplying as much as 9.4 per cent of
the cloth annually consumed in India by 1839. Even if we adjust Ellison's
estimate for 1856-60 to our inferences about the size of Indian population
at that time, the proportion of Indian cloth consumption supplied by Bri-
tain would seem to have risen threefold to over 27 per cent by 1860.107

Morris has alleged that this vast influx of British cotton goods did
not harm India's domestic industry becase Indian demand for cloth was
"fairly elastic", and there was an increase in cloth consumption arising
from "changes in custbm". He has also suggested that the import of yarn


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strengthened the competitive position of the Indian weaver. 108 These

arguments have been dealt with by Bipan Chandra 109 and Meghnad
Desai; 10 and a few comments here should suffice. While it is true that
the low prices of imported manufactures increased the total quantity
of the cloth consumed, the further implied assertion that the total value
of cloth consumed in India also increased substantially, at any rate by a

higher percentage than that of the value of imported cloth to previous
total consumption, is quite baseless. In the intitial phase, with such
extreme pressure for tribute, there could hardly have been much scope for
demand to expand. On the supply side, Desai has shown that in order
to maintain their position against competing British cloth, the Indian
weavers, even after shifting to cheaper British yarn needed to increase
their productivity by 43 per cent between 1818-21 and 1829-31, unless

they accepted a corresponding diminution in their income or wages. 11

The fact that Indian weavers were being forced to shift to imported twist,
in order to survive, is only an argument for the larger destruction of the
Indian spinning industry, and hardly one for the prosperity of the Indian
weaver. It would seem that initially the British cotton goods mainly hurt
the weaving of the fine and medium varieties, and therefore affected the

hitherto better situated urban weavers far more than the rural weavers

producing coarse cloth for tbe poorer part of the population. 12

Deindustrialization and Urban Decline

Alongside the cotton goods, English exports to India of iron (bar
and bolt as well as cast and wrought), together with hardware and cut-

lery, guns, glass, and 'machinery', had increased enormously by 1828.'13

They continued to grow during the following years and naturally caused

a slump in the corresponding crafts in India.
There was thus ample cause for the 'de-industrialization' of India

which marks the second phase of British rule. The urban decline, initiated

by the diversion of the surplus from the Indian ruling classes to the Com-

pany, spread quile natutally wherever the East India Company's sovere-

ignty extended. It was compounded many times over by the urban

unemployment forced by the English manufactures. This urban decline

seems not only to have been in relative terms (percentage of urban popu-
lation to total), but in absolute terms as well. Taki lg the same districts of

eastern India, whose populations I studied for 1812, 1852 and 1872, I

found that the populations of eight major towns in those districts had

declined from 923,344 around 1812 to 866,749 in 1872. 14 Since the towns

included Calcutta, the capital of British India, whose population had

increased by nearly 270,000 during the period, the overall decline is

remarkable. The population of Patna fell from 312,000 in 1812 to 158,900
in 1872; '5 and there was no town in Bihar in 1872 which could even

remotely be said to approach Patna in population, so that there was no

question here of compensatory growth elsewhere. Examples of spectacular
decline in populations of individual towns can be multiplied, for example


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Economic Developiment & c., op. cit., p 26.
12 8 Crawfurd in Economic Development, & c., p251.
124 Ibid., p251-2.
125 Parliamentary Papers, 1831-32, Colonies: East India, I U P, p 251 (QNo. 2190).
I26 Thomas Toke in Economic Development, & c., p 171.
127 R C Dutt, Economic History of India in the Victorian Age, p 162. In 1836-37 India

had exported to China goods of the value of Rs 6.72 crores and imported to the value
of Rs 0.53 crore in goods and 1.24 crores in treasure, leaving a favourable balance of
Rs 4'96 crores. The balances were smaller in the next two years (K N Chaudhluri,
op. cit., table on p 49). It ought to be borne in mind that Indian customs house
figures for exports at this time used to be gross under-valuations (Crawfurd, op. cit.,
pp 245-6).

128 B R Mitchell and Phyllis Deane, Abstract of British Historical Statistics, Cambridge
1962, p 318.

1g2 Cf. Dadabhai Naoroji, Poverty and Un-British Rule in India, 1st Indian edn. pp 188-89,
for a passage written in 1880 and containing an indignant criticism of the Opium
Trade as an infamous form of realization of the Indian tribute.

so Deane and Cole, p 266 (table).
81 Cf. M Dobb, Studies in the Development of Capitalism, London 1947, pp 311-12.

1 2 R C Dutt, Economic History of india in the Victorian Age, p 359.
1 8 Ibid., pp 373-74.
1 84 L H Jenks, The Migration of British Capital, to 1875, London 1963, p 207; quoted in

AG L Shaw (Ed.) Great Britain and the Colonies, 1815-1865, London 1971, p 21.
135 Mitchell and Deane, op.cit., p 318. The excess in value of Indian exports over imports

in trade with all countries in 1871 was almost the same, viz. ? 17.6 million (RCDutt
op.cit., pp 343-44).

1 6 The burden was increased substantially also because the guaranteed capital was so

wastefully employed. According to Dadabhai Naoroji (Poverty and Un1-British Rule in
India, p 121; also p 31), the annual drain of wealth from India to Britain increased
from ? 8.7 million during 1855-59 to f 31 million during 1870-72. WNhile Naoroji
certainly stood on the right side of the barricades, the principles on vlwhich he based
his calculations are not above criticism (cf. Bipan Chandra, Rise and Growth of Econo-
tmiic Nationalism in India, New Delhi 1966, pp 645-48). The large increase in the
annual drain exhibited in Naoroji's figures is partly to be explained by the excep-
tional capital-flow to India during the late 1850s and early 1860s, which reduced the
excess of Indian exports over imports during that period, and so concealed the real
size of the Indian tribute.

3 87 See tables in R C Dutt, op. cit., pp 315, 530.
188 These calculations have been made from the statistical tables given in Mitchell &

Deane, pp 283, 324-5.
89 Based on tables of imports into India in R C Dutt, op.cit., pp 161, 345, and tables of

British exports in Mitchell & Deane, 303-4. It would have been better to take both
sets of figures from British trade statistics. But the result is unlikely to be very diffe-
rent. M Desai estimates the share of India (in Britain's total textile export) to have
been 15% during 1821-30 and 30% during 1871-80 (IESHR VIII, 4, p 339).

110 The classic account is in R C Dutt, op.cit., pp 401-16, 537-44.
141 Of a total of? 365.3 million of British capital invested in India by 1909-10, govern-

ment debt accounted for X 182.4 million, railways and other transport for f, 141.5
million and plantations for 24.2 million. Investments in electricity and power, &c.,
minerals and oil, and commerce and industry, all together, amounted to no more
than ? 12.7 million. (Sir George Paish's estimate, adapted and cited by Arun Bose
in V B Singh (Ed.) Economic History of India, 1857-1956, p 494).

142 Desai in IESHR VIII, 4, p 351 (table).
14 8 Amiya K Bagchi, Private Investment in India, 1900-1939, Cambridge 1972, p 226 (table.)


Page 32


144 Desai in IESHR VIIT, 4, pp 353-4.
1 4 Daniel and Alice Thorner, Land and Labour in India, Bombay 1962, p 77.
146 Ibid., pp 78-79 (table).
T 47 R C Dutt, op.cit., tables on pp 529 & 533.
1 4 Sec tables in B M Bhatia op.cit., p 224, & Amiya K Bagchi, Private Investnent in India,

1900-1939, Cambridge 1972, p 95. The tables relate to the last decade of the 19tlh

century and the earlier years of this century. Agricultural statistics of tlis kind are
not available for earlier periods.

14 9 A chronologicable table i3 furnished by Bhatia, p 343.
150 Bhatia, pp 242, 250, 261.
151 M Mlukerji in V B Singh (Ed.), Economic Ilisto;y of India, 1857-1956 pp 678-9 (table);

13hatia, pp 349-51 (tables). D Kumar finds a substantial decline in real wages of agri-
cultural labourers in the Madras Presidency between 1875 and 1900 (op.cit., pp 165-

152 RC Dutt,op. cit., p 471.
1 5 Ibid., pp 518-19.
154 S.J Patel, Agricultural Labourers in India and Pakistanz, Bombay 1952, pp 1-20.
155 D Kunar, op.cit., pp 168-82. She declines to see in this increase a "radical transfor-

mation of the agrarian economy".
156 D and A Thorner, Land and Labour in India, pp 70-81
157 vMarx summed up the divergence between the old and new 'lines' of imperialism in

his reference, in 1853, to a parliamentary speech of Bright, "wrhose picture of India
ruined by the fiscal exertions of the Company did not, of course, receive the supple-
ment of India ruined by Manchester and Free Trade" (Articles on India, p 36; On

Colonialism, p 29.)
The ambitions of Lancashire with regard to India were given full expression during
the parliamentary controversy over the renewal of the East India Company's Charter
in 1853. The construction of railways was a major plank in the Manchester pro-

gramme for India, and the guarantee system for railway capital was vigorously suppo-
rted (R J Moore, "Imperialism and Free Trade Policy in India, 1853-1854", A G L

Shaw, (Ed.) Great Britain and the Colonies, 1815-1865, pp 184-96).
15 Quoted by E Stokes in Elites in South Asia, p 25.
159 Cf. D R Gadgil, Industrial Ezolution of India in Recent fTimes, London 1942, pp 21-22.

60 3rijj Narain, Indian Economic Life: Past and Present. The movement of wvheat prices
at Farrukhabad is corroborated by the detailed price-data for Meerut collected alnd

analysed by Toru Matsui in Memoirs of the Institule of Oriental Culture, University of

Tokyo, No 64. March 1970, pp 97 ff. (tables). Toru Matsui's prices begin from

1845, or more often, 1848.
161 D Kumar, op. cit., p 91 (table).
162 MI Mukerji in V B Singih (Ed.) Economic History of India 1857-1958, p 683 (tables)

C. tables of prices from the same source in Bhatia, p 348.
1 s Cf. A C1lvin's Memorandum of 8 November 1875, extracts quoted in RC Dutt,Op.cil.

pp 330-32.
164 See my article, "Usury in Medieval India", Comparati,e Stiudies in Society and Hisory,

The Hague, VI, 4, pp 394-98.
1 65 Cf. Bipan Chandra, Rise and Growth of Econtomic 'Yntionalism in India, p 466 and n.
166 K Marx, "The Future Results of British Rule in India" (1853), Articles on India, pp

70-72; On Colonialism, pp 79-81.

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