Economic Impact of British Rule in India- Complete Notes for UPSC

Economic Impact of British Rule in India

The British Empire in India was highly organized administratively. The fundamental difference between the earlier conquest of India and the British conquest is that the earlier conquerors made no basic changes in the country’s economic structure and gradually became a part of it.

The British totally disrupted the traditional structure of the Indian economy. Besides, they remained foreigners in the land, exploiting Indian resources and carrying away India’s wealth.

The Indian economy  transformed in the following ways:

1. De-industrialization: Ruin of Artisans and craftsmen

The British interests lay in maximizing their profits. Active efforts were made by both the East India company as well as under the Crown rule to maximize their profits at the cost of the Indian industry.

• One-way Free Trade Policy: The East India Company imposed a one-way free trade policy on India in 1813, which meant that the Indian exports were taxed, but not the British exports to India. It flooded the Indian market with British goods, particularly Cotton textiles.
• Industrial Revolution: Due to cheaper imported machine-made goods from Britain, the Indian Urban Handicrafts industry collapsed. Indian goods made with primitive technology could not compete with mass-scale production by powerful steam-operated machines.
• Loss of Royal Patronage: The disappearance of Indian rulers and their Courts, who were the main customers of these handicrafts, gave a major blow to these industries.
• The Ruralisation of the Indian cities such as Dhaka, Surat and Murshidabad also severely affected the artisans. The urban population barely formed 10% of the total Indian population by the end of the 19th Century.
• The absence of Technology in India: The decaying traditional industries were not accompanied by modern machine-based industries like in the case of Britain and Western Europe.

As a result, millions of rural artisans lost their traditional means of livelihood and were forced to work as farm labourers or petty tenants. The increasing pressure on Agriculture was the major reason for extreme poverty in British India.

2. The Impoverishment of The Peasantry and The Rise of New Landlordism

Intending to maximise its revenue, the British government introduced a Permanent settlement system in large parts of the country. We read about the revenue settlements in previous articles.

• The new system caused insecurity to the tenants, who lost all their traditional rights to land.
• Little efforts were made to improve the productivity of the land.
• The peasant had to face the triple burden of the Government, Zamindar and moneylender.
• The situation was no better in areas under the Mahalwari and Ryotwari systems.

This situation led to various Peasant uprisings, as discussed in our earlier articles.

3. Stagnation and Deterioration of Agriculture

Agriculture began to stagnate and even deteriorate due to overcrowding, excessive land revenue demand, and increasing indebtedness of cultivators. The extreme poverty of the cultivators left them with very little or no resources to improve agriculture, nor did they have any incentive to do so.

Sub-division and fragmentation of Agricultural land made it difficult to introduce modern technology.

In the latter half of the nineteenth Century, the commercialisation of Agriculture happened; since it was forced on the peasants, it further led to their exploitation. Commercial agriculture led to a shortage of food grains and exposed the cultivators to International market trends and fluctuations.

4. Poverty and Famines

The prevalence of extreme poverty, a consequence of British economic policies, became a major characteristic of British Rule in India. As discussed earlier, the characteristic features of this age are:

1. The decay of indigenous industries and the failure of modern industries to replace them,
2. high taxation,
3. drain of wealth to Britain,
4. stagnant agriculture and
5. the exploitation of the peasants by the landlords and moneylenders.

The extreme poverty of the people culminated in a series of famines that devastated a large region of the country in the second half of the nineteenth Century.

• The first of these occurred in western Uttar Pradesh in 1860-61; it cost over 2 Lakh lives.
• The Bengal Famine: In 1865-66, a famine occurred in Orissa, Bengal, Bihar and Madras in which nearly 20 lakh lives were lost.
• Again, in 1868-70, 14 lakh persons died in Western Uttar Pradesh, Punjab, and Bombay.
• In 1876-78, possibly the worst famine in Indian history occurred in Madras, Mysore, Hyderabad, Maharashtra, and Western Uttar Pradesh.
• In 1896-97, draught led to a country-wide famine, which affected 9.5 crore lives and caused the death of over 45 lakhs.
• The famine of 1899-1900 quickly followed and caused the death of nearly 25 lakhs of persons.
• Another famine in Bengal in 1943 led to the loss of three million lives.

famine (public)

In addition, various plagues and flu spread during British Rule. For example, in 1918, Spanish flu spread across the world, and the soldiers returning from the World War led to its spread in India. It took more than 15 million lives, i.e. greater than 5% of the Indian population died.

India’s economic backwardness and poverty were man-made and were consequences of foreign rule, exploitation, and flawed agrarian and economic structure.