Indian Economic and Political History

2014
Session 4
Rajesh Bhattacharya
rb@iimcal.ac.in
1 Indian Institute of Management Calcutta
Land Reforms in Independent India
Abolition of Intermediaries
Tenancy Reforms: Reduction of Rents, security
of tenure, ownership rights of tenants
Ceiling on land holdings and distribution of
surplus land
Consolidation of holdings
Compilation and updating of land records
-------Only Partially successful.
Average Area Operated per Holding
(in Hectares)
Year Area
1960-61 2.63
1970-71 2.2
1981-82 1.67
1991-92 1.34
2002-03 1.06
Changes in Percentage Distribution of Operated Area by
Category of Operational Holdings (percentage
distribution of operated holdings in parentheses)
Category of
Holdings
Percentage of Operated Area
1960-61 1970-71 1980-81 1990-91 2002-03
Marginal
(<1.000
hectares) 6.9 (39.1) 9.2 11.5 (45.8) 15.6 (56.0) 22.6 (62.8)
Small
(1.001-2.000
hectares) 12.3 (22.6) 14.8 16.6 (22.4) 18.7 (19.3) 20.9 (17.8)
Semi-medium
(2.001-4.000) 20.7 (19.8) 22.6 23.6 (17.7) 24.1 (14.2) 22.5 (12.0)
Medium
(4.001-10.000
hectares) 31.2 (14.0) 30.5 30.1(11.1) 26.4 (8.6)) 22.2 (6.1)
Large
(>10
hectares) 29.0 (4.5) 23.0 18.2 (3.1) 15.2 (1.9) 11.8 (1.3)
All
Categories
100.0
(100.0) 100.0 (100.0) 100.0 (100.0) 100.0 (100.0) 100.0 (100.0)
Rise of modern Industry in India
Late 18
th
and early 19
th
centuryPrivate merchants from Europe (mainly,
Britain) adopted a business organization called agency houses, so called
because a) acted as business agents for others against a fee for their
service and b) organic links with a firm in London of which the merchant in
India acted as the 'agent'.
They did not bring in capital. Initially, main source of financedeposits of
company servants. Because of their connections with the London, the
agency houses acted as a safe medium for remittance of funds by the
Company servants to their families back home.
Later as they gained reputation, The Agency houses could act as banks,
receive loans from London and EIC and raised Indian capital.
European promoters were on unfamiliar ground in India. Therefore, they
needed Indians as agents to assist them in a myriad waysknown as the
banian. The banian was the centre of the operation and received a
percentage of sale proceeds. In the east, to begin with Bengali banians,
later replaced by Marwaris.
Agency Houses in Calcutta: first half of
the 19
th
century
Agency Houses often had Indian partners
Carr, Tagore and company, Oswald, Seal and
Co.. Rustomji, Turner and Co.
However, Indo-European partnership in
agency houses were fatally decimated in the
crisis of the 1840s
The British came back, but not the Bengalis.
Also, later agency firms did not have Indian
partners.
The Bombay scenario
Bombay, coming later under the British rule, was
spared the worst excesses of the early decades of the
Company rule. Also, the Bombay Presidency being a
chronically revenue-deficit area, depended on
remittances from the Bengal Presidency, which made
the EIC dependent on merchants and bankers.
The pioneers in the Bombay textile industry came
almost entirely from among the Parsi traders, shippers
and financiers of Bombay.
The Parsi community had a unique relationship with
the British. They were more Westernized than the
other communities.
Opium Trade
Bombay replaced Surat by the middle of the 18
th
century. as
the main port on the West. The Europeans made their base
in Bombay and drew Indian merchants and shipbuilders
from Surat area.
Since 1770s the fortunes of Indian merchants linked to the
China trade.
Prior to beginning of industries in India, Bombay, like Calcutta,
was a commercial city.
Bombays rise as a rival city to Calcutta is linked to the trade
upswing connected to the rising demand of China for
opium.
Opened up opportunities for merchants in Ahmedabad, Surat,
Broach, Cambay, Baroda, Bombay.
Opium Trade
In Western India, opium trade remained a clandestine operation.
In Bengal, production and trade was tightly controlled by the
Company.
Frustrated EIC allowed regulated trade in Bombayexport
permit.
Setbacka) Treaties of Nanking (1842) and Tientsin (1858)
opened up opium trade to the world and b) Steamships that
rendered the older sailing vessels of Indian merchants
obsolete.
By 1850, Indian merchants had lost their control over China
trade.
However, Bombay intermittently benefitted from periods of
English demand for cotton for their textiles.
Rise of Modern industry:
Infrastructure and Institutions
Abolition of transit and town duties between 1836 and
1844.
Assault on Thugees and Pindaris.
Unification of currency The company rupee was
declared legal tender throughout he Empire
Homogenization of weights and measures was less
successful.
Introduction of Railways in 1854
Modern British Education
Modern Judicial System, including Company Laws, in
1850. Limited liability introduced soon after.
First Phase of Industrialization: 1850-
1914
Jute industries in Bengalvirtual walkover to
the Scots. No Indian Initiative.
Cotton mills in Bombay, by Parsees (Cowasjee
Nanabhai Davar) and in Ahmedabad, by a
Brahmin civil servant from Surat, Ranchodlal
Chotalal.
Primary accumulation of capital for Bombay
industrialists in Opium trade
Conflict with British Industrial interests
Indian and British firms in India operated in separate spheres.
No conflict between Indian business and the Colonial state.
But conflict with firms in England. Manchester's growing
hostility to Indian cotton textile industry.
All import duties on textile goods were banished in 1882.
Opposed by Indians.
Factory Acts of 1892 protecting workers' welfareparticularly
women and children.
In 1894, a countervailing excise duty was imposed on
production of textile goods to offset the duty on imports
----Birth of nationalist Politics
Difference between Western and
Eastern India
Bombay benefitted from the large class of merchants from
Gujarat, with a larger ethnic and communal diversity in
Bombay business circleParsis, Hindu Bhatias and
Bhansalis, Muslim Bohras, Khojas and Memons.
In the East, after the withdrawal of Bengali entrepreneurs
and their eventual exclusion from upper echelons of
business, business was entirely dominated by Europeans,
until challenged by the Marwaris in a bitter business fight
(colored by racism ) in the early 20
th
century.
The Bombay industries also showed greater flexibility to
adopt innovations and tackle changing market conditions,
including orienting themselves towards the domestic
market.