British Economic Policies

Deindustrialisation—Ruin of Artisans and Handicraftsmen

The Decline of Indigenous Industry: Deindustrialisation in India under British rule marks one of the most catastrophic economic changes that transformed the subcontinent. Prior to British dominance, India had a flourishing artisan economy, renowned globally for its fine handicrafts, textiles, and metalwork. Cities such as Dhaka, Surat, and Murshidabad were famous for producing muslins, silks, and other goods, drawing merchants from across the world. However, the British systematically dismantled this robust industry, leading to the eventual ruin of artisans and craftsmen.

The introduction of one-way free trade under the Charter Act of 1813 allowed British manufactured goods to flood the Indian market. These machine-made goods, produced in large quantities at lower costs due to the Industrial Revolution in Britain, created an unlevel playing field for Indian artisans who relied on hand-made production methods. Indian goods, which had once been in high demand globally, could no longer compete with the cheaper British imports. The British imposed heavy tariffs on Indian goods entering European markets, while maintaining little to no tariffs on British goods entering India. This dual system devastated India’s internal industries, specifically textiles, which were the backbone of its economy.

Moreover, the British administration did not attempt to modernize India’s traditional industries or introduce new technologies that could have helped artisans compete in global markets. Instead, their policies favored extraction and profit for the British economy. Many artisans who once worked in the booming industries of Bengal, Gujarat, and Tamil Nadu found themselves without livelihood as markets collapsed.

Impact on Ruralisation and the Migration of Artisans: The most immediate consequence of deindustrialisation was the large-scale migration of artisans to rural areas. Without jobs in their traditional crafts, artisans and their families were forced to abandon urban centers and seek agricultural labor. This movement towards agriculture caused a significant ruralisation of India, where towns and cities once bustling with craft and trade began to empty. The rural economy, already struggling under British land revenue systems, was burdened further by this influx of displaced artisans.

This collapse also meant a severe loss of cultural heritage. India’s traditional handicrafts, such as the fine textiles of Bengal, intricate metalwork of Rajasthan, and carpet weaving in Kashmir, began to disappear, with many skills being lost due to the lack of patronage and demand. Cities like Murshidabad, once the textile capital of the world, declined into poverty as factories were shuttered and weavers were forced to sell their looms.

One-Way Free Trade and its Effects: The British policy of one-way free trade was designed to turn India into a market for British goods rather than a competitive economy in its own right. Indian exports, especially cotton, silk, and textiles, were subjected to harsh duties, preventing their sale in European markets. At the same time, British manufactured goods were imported into India without similar restrictions, pushing local products out of the market.

The so-called “Manchester goods” – cheap, mass-produced cotton textiles from Britain – flooded Indian bazaars, and soon, Indian handloom products were driven out of business. The devastating effect of this trade policy can be seen in the sharp decline of India’s share in global textile exports, which fell from over 25% in the 1700s to almost nil by the late 19th century.

The imposition of such trade policies signified the turning of India from a global exporter to a captive market for British products. As a result, Indian artisans were left destitute, their craft industries ruined, and entire communities of weavers and craftsmen were reduced to poverty. In contrast, Britain’s economy flourished on the back of this colonial exploitation, with its industrial cities booming at the cost of Indian deindustrialisation.

Impoverishment of Peasantry

Transformation of the Agrarian Economy: The British conquest of India brought about a radical transformation of the agrarian structure, with peasants suffering the most under the newly imposed systems of land revenue. The introduction of exploitative land tenure systems like the Permanent Settlement in Bengal (1793), the Ryotwari System in the South, and the Mahalwari System in the North were primarily designed to secure a steady revenue for the British administration, often at the expense of the peasantry.

The Permanent Settlement system fixed the land revenue that zamindars (landlords) had to pay to the government, regardless of agricultural output or market prices. While the landlords were responsible for collecting taxes from the peasants, they often prioritized their profits, demanding higher rents from the cultivators. In times of poor harvests, peasants were still forced to pay the fixed rent, leading to increased indebtedness. Many were compelled to borrow from moneylenders at exorbitant interest rates, pushing them further into debt.

The Ryotwari system directly taxed peasants (ryots) based on the size of their landholding, but the rates were often excessively high, leaving little room for economic growth or agricultural improvement. The Mahalwari system similarly burdened peasants by fixing taxes on entire villages, which had to be paid regardless of the productivity of the land.

Indebtedness and Land Alienation: As peasants were unable to pay taxes, their lands were confiscated and auctioned off to rich landlords or moneylenders, who then became the new absentee landlords. This led to widespread land alienation, where small peasant owners became tenants or sharecroppers on land they once owned. By the end of the 19th century, a significant portion of India’s rural population had become landless laborers, dependent on the whims of landlords.

The economic policies of the British systematically impoverished the peasantry, as they were forced to produce cash crops for export to Britain, such as indigo, cotton, and opium, instead of food crops for their own sustenance. Famines became more frequent and severe, as peasants could not produce enough food to feed themselves. Between 1870 and 1900, India experienced several devastating famines, killing millions of people. The impoverishment of the peasantry was directly linked to the British economic policies that prioritized revenue extraction over agricultural development.

Emergence of Intermediaries, Absentee Landlordism, and the Decline of Traditional Zamindars

The Rise of Intermediaries: The introduction of British land revenue systems facilitated the rise of intermediaries, a class of people who inserted themselves between the state and the cultivators. These intermediaries, often wealthy merchants or moneylenders, acted as middlemen who collected rents from peasants and remitted a portion to the colonial state. Over time, they acquired vast amounts of land, becoming de facto landlords without any direct connection to the actual land or its cultivation.

This new class of landlords differed significantly from the traditional zamindars, who were once the custodians of their lands and communities. Many of the new landlords were absentee landlords, who lived in urban centers, far removed from the lands they controlled. They had little interest in improving agricultural productivity or investing in infrastructure. Their primary concern was to extract as much rent as possible from the peasants, which worsened the conditions for agricultural laborers.

Absentee Landlordism: Absentee landlordism was a direct consequence of the British land revenue policies. Many of these absentee landlords had acquired land through auctions when the traditional zamindars, unable to pay the high fixed revenues under the Permanent Settlement, lost their estates. The new landlords viewed the land purely as a source of revenue and had no emotional or traditional ties to it. As a result, they were indifferent to the needs of the peasants who worked the land.

Under these conditions, the zamindari system, once a relatively stable socio-economic structure in Indian society, deteriorated. Traditional zamindars, who had previously enjoyed autonomy and held administrative powers over their territories, were systematically replaced by absentee landlords and intermediaries who had no interest in the land’s sustainability. These new landowners prioritized short-term profits over long-term agricultural development, leading to the decline of agricultural productivity and the further impoverishment of peasants.

Stagnation and Decline in Indian Agriculture

Lack of Agricultural Investment: British colonial rule witnessed a steady stagnation and deterioration in Indian agriculture. Unlike other sectors, agriculture saw little investment in technology or modernization. The British government, preoccupied with maximizing revenue collection, neglected to invest in rural infrastructure, irrigation, or improved farming techniques. The absence of agricultural development led to stagnant productivity and a continued reliance on traditional farming methods.

Peasants were left to struggle with old and inefficient methods of cultivation, and no significant effort was made to introduce mechanization or modern agricultural practices. While other countries like the United States and those in Europe were experiencing agricultural revolutions, India remained caught in a cycle of low productivity, exacerbating rural poverty.

Declining Soil Fertility and Crop Failures: Due to repeated cultivation without rest for the land, the soil’s fertility began to decline. The absence of modern agricultural inputs like fertilizers, crop rotation, and scientific irrigation further degraded the land. Frequent crop failures, coupled with exploitative revenue collection, left farmers unable to recover from poor harvests.

The stagnation in agriculture was not just an economic issue but also a social and political one. Peasants, trapped in an unending cycle of debt, often rose in revolt against the British and their intermediaries. These peasant uprisings were a clear indication of the agrarian crisis that had taken root under colonial policies.

Famines and Widespread Poverty

Colonial Policies and Famine: Famines were an all-too-common occurrence during British rule, largely due to the government’s inability to respond to food shortages and the emphasis on cash crops over food production. Famines were exacerbated by the British revenue collection policies, which required peasants to continue paying taxes even in the midst of droughts or crop failures. The Great Famine of 1876-78, which ravaged southern and western India, claimed millions of lives, and yet, British revenue collection did not cease during this period. The British administration’s reluctance to intervene in markets, combined with its export-oriented policies, worsened the impact of famines.

Poverty as a Direct Consequence of British Policies: As peasants were increasingly pushed to grow export-oriented cash crops like cotton and indigo, there was a significant reduction in food crop production. With large portions of the agricultural output earmarked for export to Britain, food shortages became common, leading to widespread starvation during drought years. The colonial government’s failure to address these crises resulted in immense suffering. By the turn of the 20th century, nearly 28 million people had died from famines, poverty, and related causes

The Commercialisation of Indian Agriculture

Shift to Cash Crops: The British policies during the 19th century brought about a significant transformation in Indian agriculture, shifting it from subsistence farming to commercial agriculture. The British colonial rulers encouraged and sometimes forced Indian farmers to cultivate cash crops like indigo, cotton, jute, tea, and opium, which could be exported to Britain and other international markets. This process, known as the commercialisation of agriculture, had far-reaching consequences for both Indian farmers and the country’s economy.

The shift towards cash crops was largely motivated by British interests in sustaining their industrial revolution. For instance, Indian cotton was crucial for feeding Britain’s burgeoning textile industry, and Indian tea plantations provided Britain with an important export commodity. However, the emphasis on cash crops came at the cost of food production. Many Indian farmers, who had previously cultivated grains to feed their families and local communities, were now growing crops that were of no immediate use to them. This led to food shortages and contributed to the devastating famines that afflicted the country during British rule.

Exploitative Contracts and Peasant Suffering: The cultivation of cash crops, especially indigo and opium, often came under exploitative systems like the Tinkathia system in Bihar, where peasants were forced to dedicate a significant portion of their land to indigo cultivation for British planters. Similarly, in Bengal and other regions, farmers were compelled to grow indigo instead of food crops, despite the fact that indigo cultivation severely depleted soil fertility.

Peasants were also at the mercy of middlemen and colonial agents, who acted as intermediaries between them and the British planters. These middlemen, often known as gomastas, manipulated prices and wages, ensuring that the peasants received little to no compensation for their labor. The profits from this commercialisation largely went to British companies, and the Indian peasantry was left impoverished.

Effects on Food Security and Economic Vulnerability: One of the most harmful effects of the commercialisation of agriculture was the weakening of India’s food security. With large portions of agricultural land dedicated to non-food crops, less land was available for the cultivation of staples like rice and wheat. In times of drought or poor harvests, this imbalance became especially deadly, leading to widespread famine and malnutrition. The prioritisation of cash crops for export over food production created a deep economic vulnerability, as the livelihoods of Indian peasants were now tied to fluctuating global markets beyond their control.

By the late 19th century, the Indian economy was deeply integrated into the British colonial system, with agriculture serving as a backbone for British industry and trade. However, the benefits of this integration were overwhelmingly skewed in favor of the colonisers, while the Indian peasantry bore the brunt of the risks and losses. This economic exploitation would become a focal point for Indian nationalists, who saw in the commercialisation of agriculture one of the clearest examples of colonial oppression.

Destruction of Indigenous Industry and the Late Development of Modern Industry

The Collapse of Traditional Indian Industry: The British economic policies, aimed at transforming India into a supplier of raw materials and a consumer of British manufactured goods, had a devastating effect on India’s indigenous industries. By the 19th century, the traditional sectors of Indian manufacturing—textiles, metalwork, shipbuilding, and handicrafts—were in steep decline. The industrialisation that had begun in Britain during the late 18th century was deliberately withheld from India, as the British colonial authorities saw the subcontinent primarily as a resource for their own industrial needs.

The destruction of the Indian textile industry was particularly notable. Prior to British domination, India had been a world leader in textiles, exporting fine muslins, silks, and cottons to Europe and Asia. However, by the mid-19th century, British policies had reversed this dynamic. Indian textiles faced heavy tariffs when exported to Britain, while British manufactured goods entered India with minimal duties. This led to the gradual collapse of India’s handloom sector, as machine-made textiles from Britain flooded Indian markets.

Delay in Industrialisation: While the Industrial Revolution had transformed Europe and the United States, the British colonial authorities were reluctant to encourage similar developments in India. They feared that the rise of an industrial economy in India would challenge British economic dominance and upset the colonial power structure. Consequently, industrialisation in India was delayed, and when it did arrive, it was largely concentrated in sectors that served British interests, such as jute mills in Bengal and cotton mills in Bombay.

It wasn’t until the late 19th century that modern industry began to take root in India, and even then, it was heavily restricted. Indian entrepreneurs like Jamshedji Tata and G.D. Birla sought to establish industries in steel, textiles, and chemicals, but they faced significant challenges from both the British government and British businesses that saw them as competition. The Tata Iron and Steel Company, founded in 1907, marked a turning point in the industrialisation of India, but it was an exception rather than the rule during the colonial period.

Economic Dependency on Britain: The deliberate destruction of traditional industries and the delayed development of modern industries ensured that India remained economically dependent on Britain. Raw materials like cotton, jute, and indigo were exported to British factories, while finished goods were imported into India. This colonial economic structure hindered India’s ability to develop a self-sufficient industrial base, and the profits generated from Indian resources flowed back to Britain rather than being reinvested in the Indian economy.

The Nationalist Critique of the Colonial Economy

A Growing Realisation of Economic Exploitation: By the late 19th century, Indian intellectuals and nationalists had begun to articulate a powerful critique of the colonial economic system. Leaders like Dadabhai Naoroji, R.C. Dutt, and Gopal Krishna Gokhale were at the forefront of this movement, exposing the economic drain that was impoverishing India while enriching Britain. The nationalist critique was grounded in the belief that British rule had transformed India from a prosperous economy into a poor and dependent colony.

Dadabhai Naoroji’s Drain Theory: One of the most significant contributions to this critique was Dadabhai Naoroji’s Drain Theory, which argued that a substantial portion of India’s wealth was being drained away to Britain in the form of salaries, pensions, and profits. According to Naoroji, this economic drain was the primary reason for India’s growing poverty. He estimated that approximately 200 million pounds were drained from India to Britain annually, money that could have been used to improve the country’s infrastructure, industry, and social services.

Naoroji and other nationalists highlighted how British economic policies, such as the export of raw materials and the import of manufactured goods, created a lopsided economy that benefited Britain at India’s expense. They argued that India was being systematically looted, with little to no investment in the country’s development.

R.C. Dutt’s Economic History of India: In his work, “The Economic History of India”, R.C. Dutt further elaborated on the harmful effects of British economic policies. He described how the heavy taxation of Indian agriculture, the forced cultivation of cash crops, and the neglect of traditional industries had left the Indian economy in shambles. Dutt’s analysis provided a detailed account of how colonial rule had stunted India’s economic growth and impoverished its people.

Dutt also emphasised that the construction of railways, often touted by the British as a sign of development, was primarily designed to serve British commercial interests. Railways were used to transport raw materials from the hinterlands to ports for export, rather than for the benefit of the Indian population.

Railways and the Economic Drain: The construction of railways in India, while seen as a symbol of modernisation, was primarily undertaken to facilitate the transport of raw materials to British industries. The railway lines connected the interior agricultural regions with the major ports, allowing British merchants to export cash crops like cotton and jute with greater ease. Indian taxpayers, however, bore the costs of these railway projects through heavy taxes and loans, further contributing to the economic drain.

Economic Issues as a Catalyst for National Unrest

Economic Discontent Fuels Nationalism: By the early 20th century, economic issues had become a major source of discontent among the Indian population. The growing awareness of the economic exploitation under British rule provided a strong impetus for the rise of the Indian national movement. Peasant revolts, labor strikes, and boycotts of British goods were increasingly common as Indians began to protest against the economic hardships they faced.

The Swadeshi Movement (1905-1908), which emerged in response to the partition of Bengal, was one of the first large-scale nationalist movements that focused on economic issues. Indian nationalists encouraged the boycott of British goods and the promotion of indigenous industries, advocating for self-reliance as a way to undermine British economic control. The movement was particularly strong in Bengal, where local industries like handloom weaving were revived as part of the nationalist effort.

The Role of the Indian National Congress: The Indian National Congress (INC), which had been founded in 1885, gradually adopted a more confrontational stance towards British economic policies. Early Congress leaders, including Dadabhai Naoroji and Bal Gangadhar Tilak, argued that British rule was systematically impoverishing India. They called for greater economic autonomy and demanded reforms that would allow India to develop its own industries and control its own resources.

Economic grievances were also central to the Congress’s demands for constitutional reforms and self-rule. The growing economic unrest helped unite different sections of Indian society, including the peasantry, the urban middle class, and the industrial working class, all of whom had been adversely affected by British policies.

The Three Stages of Colonialism in India

First Stage—Mercantilist Phase (1757-1813): The first stage of colonialism in India, often referred to as the mercantilist phase, began with the establishment of the British East India Company’s control over Bengal following the Battle of Plassey in 1757. During this period, the primary goal of the British was to extract as much wealth as possible from India through trade and revenue collection. India was viewed as a source of raw materials, particularly textiles, spices, and indigo, which were shipped to Britain and sold at enormous profits.

The British East India Company operated as both a trading corporation and a governing body, collecting taxes from Indian subjects and using the revenue to fund its military and administrative apparatus. The exploitation of Bengal’s resources, combined with the heavy taxation of the peasantry, led to widespread economic dislocation during this phase. Famines, such as the Great Bengal Famine of 1770, were a direct result of the Company’s policies, which prioritised profits over the welfare of the Indian population.

Second Stage—Industrial Capitalism (1813-1860s): The second stage of colonialism in India began with the passage of the Charter Act of 1813, which opened up India to free trade with Britain. This period coincided with the rise of the Industrial Revolution in Britain, and the focus of British colonial policy shifted from mercantilism to industrial capitalism. India was now seen as both a market for British manufactured goods and a source of raw materials for British industries.

During this phase, British textiles, produced in the factories of Manchester and Lancashire, flooded Indian markets, leading to the destruction of India’s once-thriving handloom industry. India was reduced to the status of a supplier of raw cotton and other commodities, while its manufacturing base was systematically dismantled.

Third Stage—Financial Capitalism (1860s-1947): The third and final stage of colonialism in India saw the rise of financial capitalism, marked by the increased involvement of British banks and financial institutions in the Indian economy. During this period, the British government took direct control of India following the Revolt of 1857, and new economic policies were implemented to further integrate India into the global capitalist system.

The construction of railways, telegraphs, and irrigation projects were undertaken during this phase, but these developments primarily served British commercial interests. India became a key part of the global economy, but its role was that of a dependent colony, supplying raw materials and labor to Britain and its allies. The Indian economy remained heavily dependent on agriculture, and the benefits of industrialisation were largely limited to British-owned enterprises