Dr.

V Johnson, International Journal of Research in Engineering, IT and Social Sciences, ISSN 2250-0588,
Impact Factor: 6.565, Volume 09 Issue 01, January 2019, Page 1-5

A Review of Indian Economy under British

Rule and Thereafter
Dr. V Johnson
(Associate Professor, PG Department Of Commerce, Pavanatma College, Murickassery, Kerala, India)
Abstract: British imperialists used thousand and one methods to skin in India on the shield of evangelization
backed up by vested economic motives, though they have persistently cried that they have been acting really in
the interests of the subdued peoples. The British aimed at monopolistic trading position in India eyeing on the
fabulous opportunities to flourish in the subcontinent which abounded in immense economic riches. Later their
interest was shifted to a free trade zone, where in they thought the colonial investors and merchants could enjoy
monopolistic privileges over other imperial contenders on the way to becoming an indomitable economic power
in the world . The emerging employment opportunity was yet another motive which could feed the British middle
class, increase foreign inflow into Britain and attain a favorable balance of payment position. However the
ultimate motive was to take control over India which held a strategic position in the world power structure, in
terms of geography, location, resources, logistics, cultural diversities and military manpower.
Keywords: Imperialists, economic, motive, free trade zone, monopolistic privileges, power.

I. INTRODUCTION
The British rule in India from 1757 to 1947 witnessed certain dramatic turnarounds in the economic
history of India, as the aftermath of the battle of Plassey in 1757 which laid the foundation of British hegemony
in the country. It is a paradox to see that a small minority of alien race subjugates a vast territory and population
in the history of dominations. The British imperialists used thousand and one methods to skin in India on the
shield of evangelization backed up by vested economic motives, though they have persistently cried that they
have been acting really in the interests of the subdued peoples. The economic policies followed by the British
led to the rapid transformation of India’s economy into animperial economy whose nature and structure were
determined by the needs of the British expansionism. The colonial rulers were obsessed with consolidating their
military power through building and fortifications for which they enormously exploited the Indians in the form
of oppressive taxes and other restrictive covenants. In addition they collected whatis arbitrarily called ‘Home
Charges’ for ruling India. They left the traditional artisans and peasants in dire straits in the process of
systematic plunder of this affluent land. The economy established by the British in the 18th century was a form
of plunder and a catastrophe for the traditional economy of Mughal India, depleting food and money stocks and
imposing high taxes that helped cause the famine of 1770, which killed a third of the people of Bengal (Rajat
Kant Ray 1998)1. What differentiates the previous conquerors from the English is that while the former
overthrown Indian political powers, without making any fundamental changes in the country’s economic
structure and they had gradually become a part of Indian life, political as well as economic, the latter British
subjugators totally dismantled the traditional structure of the Indian economy consisted of self-sufficient units
existed through generations. According to evidence cited by the economic historians Immanuel
Wallenstein, IrfanHabib, Percival Spear, and Ashok Desai, per-capita agricultural output and standards of
consumption in 17th-century Mughal India was higher than in 17th-century Europe and early 20th-
century British India (VivekSuneja 2000)2.
Initially the British aimed at monopolistic trading position in India eyeing on the fabulous opportunities
to flourish in the subcontinent which abounded in immense economic riches. Later their interest was shifted to a
free trade zone, where in they thought the colonial investors and merchants could enjoy monopolistic privileges
over other imperial contenders on the way to becoming an indomitable economic power in the world . The
emerging employment opportunity was yet another motive which could feed the British middle class, increase
foreign inflow into Britain and attain a favorable balance of payment position. However the ultimate motive was
to take control over India whichheld a strategic position in the world power structure, in terms of geography,
location, resources, logistics, cultural diversities and military manpower. Thus to reinforce their vested
economic motives, military and political power and enhance greater efficiency ,they revamped the
administrative machinery by wiping out the wasteful warlord aristocracy by a bureaucratic-military
establishment, rigorously knit by utilitarian technocrats, which was very efficient in maintaining law and order.
The British policy of economic development in India was a home economy centered development sacrificing the
economic interest of Indians at large. They promoted business and industries which benefitted them the most
.They were not againstIndian economic development if it were advantageous to them. Hence, they refused to
give encouragement to the Indian textile industry until its main competitor became Japan rather than
Manchester.Prior to 1813 she was primarily an exporter of manufactured articles and importer of bullion and
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Dr. V Johnson, International Journal of Research in Engineering, IT and Social Sciences, ISSN 2250-0588,
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luxury products. Such pattern of trade underwent a sea-change due to India’s colonial status, the bias being
overwhelmingly towards the export of agricultural raw materials and food-grains and the import of
manufactured goods especially cotton yarn and cloth. Possibly such shifts in export trade originated from
outside3.
Although the East India Company solved the problem of paying for exports, the textile market was to
face a major shock that destroyed its position in the international market. This was the British industrial
revolution. (Clinging smith and Williamson (2007) 4.The decline in the share of Indian textile products in
domestic consumption between 1830 and 1880 saw deindustrialization (Twomey 1983) 5. Thousands of textile
weavers lost their livelihood. The share of industry and commerce in GDP came down drastically; so did
urbanization which declined from 15% to 9% over the 19th century. From an industrial exporter, India slowly
integrated into the global economy of the British Empire as an agricultural exporter (Ray’s (2009)6. Per capita
income rose exceedingly slowly in the colonial period, possibly just above 1 per cent per year in the late 19th
century (Heston 1983)7, and near-zero in the early 20th century(Sivasubramonian 2004) 8.
In the early 1800s imports of Indian cotton and silk goods faced duties of 70-80%. British imports
faced duties of 2-4%.As a result, British imports of cotton manufactures into India increased by a factor of 50,
and Indian exports dropped to one-fourth. A similar trend was noted in silk goods, woollens, iron, pottery,
glassware and paper. Millions of ruined artisans and craftsmen, spinners, weavers, potters, smelters and smiths
were rendered jobless and had to become landless agricultural workers. The monopoly on trade in salt and
opium was an important mainstay of the Company’s finances. It is interesting to note that together opium and
salt produced on average 18.9 percent of gross revenues. In last fifteen years of Company rule their share
climbed to 25.1 percent, as opium became one of the most valuable commodities sold in world commerce 9.
There is no doubt that our grievances against the British Empire had a sound basis. As the painstaking
statistical work of the Cambridge historian Angus Addison (1995) has shown, India's share of world income
collapsed from 22.6% in 1700, almost equal to Europe's share of 23.3% at that time, to as low as 3.8% in 1952.
Indeed, at the beginning of the 20th century, "the brightest jewel in the British Crown" was the poorest country
in the world in terms of per capita income( Manmohan Singh 2005)10. Pre-colonial India enjoyed a worldwide
market for its manufactured products. Notable ones are handicrafts and textile products,jewellery made of gold and
silver, brass, copper and bell metal wares, marble work, carving works in ivory, wood, stone, artistic
glassware, cinnamon, pepper, opium, indigo etc. constituted a major proportion of exports from India. The Britishers
aimed at diverting this large volume of trade for their benefits cut off the foreign trade of India with rest of the world
by the help of restrictive policies of commodity production, trade and tariff..Before colonial period, India was
exporting manufactured goods which enjoyed worldwide demand. Under the colonial rule, India was reduced to a
supplier of raw materials like jute, cotton, indigo, wool, sugar etc. and importer of finished consumer goods like silk
and woollen clothes and light machinery manufactured in the factories of Britain11.The antagonistic economic
policies and business ideals lasted for centuries using the mechanical efficiency of the British and imperialist
ideologies fragmented and dismantled the economic structural base of the country pausing serious problems to
an otherwise self-reliant economy to scramble.
Economic Impact of the British Rule in India
Depleted Economic Base
The British rule lasted for two centuries had a deleterious impact onthe structure of a self-reliant
economy having age old existence based on the philosophical and tactical edifice of Manu, Kautilya and other
ancient law givers. They isolated the people and remained totally alien to them. In line with the imperial
ideology, they tried thousand and one method to skin India; they never became part of India while disrupting the
age old economic structure injecting colonial venom to disintegrate the system so as to fish out of troubled
waters. They relied on exploitation, plunder and pillage of Indian resources as a tribute instead, leaving far
reaching repercussions in the economic life of people. As structure collapsed, people stood shattered and
withered away from the age old system based on social division of labour and specialization. As Karl Marx
observes, it is not economic exploitation that matters but hammering the age old self sufficient economic base
founded on village economy was the real harm done by the British in India.
Hammered Traditional Occupancies
India had a solid system of traditional flamboyance of Artisans, Craftsman’s and other exceptionally
skillful people who could make spectacular creations to flourish in a world where industries are locking horns.
As a result India had a sizeable share in world export .The British invasion inflicted a sudden and quick collapse
of the urban handicrafts industry which had for centuries made India’s name a byword in the markets of the
entire civilized world. This collapse was caused largely by competition with the cheaper imported machine
made goods from Britain. The Indian industries could not stand up to the challenge paused by the highly
sophisticated mechanized efficiency of the Britain and in many a case their industrial ventures turned out
economically infeasible and thrown out of industry. It is well known that the policy of one way free trade
imposed by British on India after 1813 gave way for the invasion of British manufactures, particularly in
cotton textiles, drove out Indian goods made with primitive techniques which were not a match for goods

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produced on a mass scale by powerful steam-operated machines. As the American writer, D.H. Buchanan
(1934)12 has put it, “The armour of the isolated self-sufficient village was pierced by the steel rail, and its life
blood ebbed away.”In addition the hostile attitude of , practiced by the East India Company on the craftsmen of
Bengal during the second half of the eighteenth century, forcing them to sell their goods below the market price
and to hire their services below the prevailing wage, compelled a large number of them to abandon their
ancestral professions.
Shattered Peasantry
The British exploitative regime made deep inroads in the organic Indian village right from the
induction of East India company rule which imposed land revenue at exorbitant rates and thereby realised larger
returns from land. Supplementing the above, the new land system of the British ruler also created a serious
impact on the Indian economy. Adding fuel to the fire, the introduction of land settlement in 1793, permanent
settlement in Bengal leading to the zamindary system and ryotwary settlement system completed the process of
exploitation leaving the socio economic plight of the peasants in amiserable state. In this connection, Daniel and
Alice Thorner(1957)13 wrote, “Whereas the zamindary system made the landlords masters of the village
communities, the Ryotwary system cut through the heart of the village communities by making separate
arrangement between each peasant cultivator and the state”.The consequence was alarming as it severely led to
melt down in agriculture. There was a disproportionate increase of land revenue in terms of production as it
increased from Rs. 16.1crore in 1859-60 to Rs. 37.4crore in 1937-38, inflicting severe burden on the peasantry.
By the twentieth century, the agrarian economy had been shattered and the landlords, moneylenders and
merchants had made deep inroads into the village.
Battered Agriculture
Indian economy was predominantly agrarian which the live wire of the economy as 90 percent of the
population thrived on agriculture. The British conquest of India made things different. As a result of
overcrowding in agriculture, excessive land revenue demand, and growth of landlordism, increasing
indebtedness and the growing impoverishment of cultivators, Indian agriculture began to stagnate and even
deteriorate resulting in extremely low yields per acre. Overall agricultural production fell by 16 per cent
between 1903 and 1940. The overcrowding in agriculture and increase in subinfeudation led to subdivision and
fragmentation of land into small holdings most of which could not maintain their cultivators. The extreme
poverty of the overwhelming majority of peasants left them without any resources with which to improve
agriculture by using better cattle and seeds, more manure and fertilisers, and improved techniques of production.
Further, India’s traditional village economy was characterised by the “blending of agriculture and handicrafts”.
But this internal balance of the village economy had been systematically slaughtered by the British Government.
Though there was marked improvement in the percentage of the population engaged in agriculture
whichincreasedfrom 63 p.c. in 1895 to 73.3 p.c. in 1914 and to 74 p.c. in 1922,the standard of living of this
hapless segment was rather pathetic.
Shackled Industrial Development
India had never been an industrial country in the modern sense. She had highly sophisticated handicraft
industries. Thanks to the policy of the British Government, some modern capitalist industries were developed in
India. Traditional Indian industry can be classed as peasant arts and crafts, village subsistence industries, village
art industries and urban arts and crafts. While at the village level, industry was flexibly organised under
individual artisan level. However, in cities traditional Indian industry would have been organised along the lines
of guilds. A number of reasons have been attributed to the decline of traditional Indian industries (Kaushal
1979)14.These reasons included the demise of local royal dynasties and their replacement by British rule, the
peace and relative security brought by British rule, the adoption of western lifestyle by Indians and the
emergence of machine manufactured goods. The introduction of machanised production by the Britishers gave
rise to the rapid rise of various industries including coal mining industries, cotton textile industries cotton gins
and presses, rice, flour and timber mills, leather tanneries, woolen textiles, sugar mills, iron and steel works, and
such mineral industries as salt, mica and saltpeter. Cement, paper, matches, sugar and glass industries developed
during the 1930s.Most of these industries were owned and controlled by British capital, while the Indian
industrialists were kept at the mercy of the Managing Agents to gain sanction. The Britishers were really carried
away by the prospects of high profit. The availability of cheap labour, raw materials, ready market and
international demands for many goods induced the Britishers to venture into this lucrative opportunity.
Berg, M., (2004)15and Booth, A. (2007)16 estimated that the volume of foreign trade to and from India
more than doubled in 1865-1914. The volume of trade through the three British Indian ports increased from 1.6
million tonnes in 1863 to 8.6 million tonnes in 1913. The figure dropped thereafter to recover to 10 million in
1937. While assessing the distribution of global output of manufactured goods, P. Bairoch (1993)17 concluded
that India’s share of manufacturing output in the world was as high as 19.7 % in 1800. In a span of 60 years, it
plummeted to 8.6 % (in 1860) and to 1.4%. in 1913. The declining share of industrial output in the’ world
output could be attributed to an absolute decline in manufacturing output per person. The number of people
engaged in industrial activities declined from 2.11 crores to 1.29 crores between 1881 and 1931.

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Indigent Socio Economic life of people

The life of the rural masses was in a deplorable condition throughout the British regime in India.
Unemployment, Poverty and famine were the walk of theday.They were deprived of primary education, shelter,
and hospital facilities which forced them to live in state of extreme poverty, backwardness and perils.Instigated
by the British economic exploitation there arose a situation where the decay of indigenous industries, failure of
modern industries to replace them, high taxation, the drain of wealth to Britain were thoroughly
reinforced.Consequently, a backward agrarian structure leading to agricultural sluggishness and the exploitation
of the poor peasants by the zamindars, landlords, princes, moneylenders and merchants gradually tied the Indian
people only to languish at the slippery verge of the mythical canyon. Further, the internal balance of the
traditional village economy, characterized by the blending of agriculture and handicrafts, had been
systematically slaughtered by the British Government. In the process, traditional handicraft industries slipped
away, from its pre-eminence and its decline started at the turn of the 18th century and preceded rapidly almost to
the beginning of the 19th century which is called‘de-industrialisation’.
Resources Drain
The British colonial rule lasted for two centuries robed India off her fabulous wealth. With the object
of building a powerful Army, they made buildings and fortifications across the country inflicting severe strain
on India’s resources. In fact, the basis of prosperity of England rested on her largest and richest colony—India.
This is in addition to huge sum of money for the maintenance of the armed forces and procurements of weapons
to be retrieved from the states exchequer. The arbitrary levy of home charges for ruling India from England, the
industrialization of England, and the continued economic exploitation tore her economy apart with depleted
resources. People stood stranded in perils where they languished homeless, unemployed, povertystricken and so
on.As a result, the entire edifice of the total social structure crumbled. In the process, even the social relations
were not spared.The situation is well depicted by B. R. Tomlinson (2013)18like this, “The laws, institutions and
social structure of contemporary South Asia were thus a creation of Britain’s requirement for cheap labour and
cheap export within the imperial system, and the dominant classes that have exercised control over agricultural
and industrial capital for the last hundred years or so are identified as the products of this colonial
transformation.
The economic resurgence after independence
The wanton imperialist exploitive regime continued for centuries landed India in total disarray both
socially and economically on the verge of her attaining freedom in I947. She was really on the slippery edge of
oblivion as the aftermath of the colonial plunder. However thanks to some valiant and lion hearted attempts
made by the much farsighted and resilient founding fathers of the nation, India started signs of resurrection from
a state of doom, particularly, with the introduction of the five year plans during Nehru government. The saga
continued as India slowly started consolidating its economic position through providing better educational
opportunities innovation, instilling scientific temper, investment in heavy capital intensive projects and the
overall resurgence of the economy ushered in a democratic environment. The agriculture, industry and service
sector grew by leaps and bounds, instilling balanced economic growth. The situation dramatically improved
with the new economic policy initiated by the government which resulted in letting the economy off the hook
through the process of liberalization, privatization, and globalization. Consequently, the economy surged ahead
recording remarkable improvement in GDP growth rates as well.
India’s GDP is estimated to have increased 6.6 per cent in 2017-18 and is expected to grow 7.3 per cent
in 2018-19.The GDP is expected to reach US$ 6 trillion by FY27 and achieve upper-middle income status on
the back of digitisation, globalisation, favourable demographics, and reforms. India’s revenue receipts are
estimated to touch Rs 28-30 trillion (US$ 385-412 billion) by 2019, owing to Government of India's measures to
strengthen infrastructure and reforms like demonetisation and Goods and Services Tax. India has retained its
position as the third largest startup base in the world with over 4,750 technology start-ups, with about 1,400 new
start-ups being founded in 2016, according to a report by NASSCOM.India's labour force is expected to touch
160-170 million by 2020, based on rate of population growth, increased labour force participation, and higher
education enrolment, among other factors, according to a study by ASSOCHAM and Thought Arbitrage
Research Institute19.
India's foreign exchange reserves were US$ 400.49 billion in the week up to September 14, 2018,
according to data from the RBI. With the improvement in the economic scenario, there have been various
investments in various sectors of the economy. Some of the important recent developments in Indian economy
are as follows. In the Union Budget for 2018-19, the government is committed towards doubling the farmers’
income by 2022. A total of Rs 14.34 lakh crore will be spent for creation of livelihood and infrastructure in rural
areas. Budgetary allocation for infrastructure is set at Rs 5.97 lakh crore for 2018-19. All-time high allocations
have been made to the rail and road sectors20.
India is also focusing on renewable sources to generate energy. It is planning to achieve 40 per cent of
its energy from non-fossil sources by 2030 which is currently 30 per cent and also have plans to increase its
renewable energy capacity from to 175 GW by 2022.India is expected to be the third largest consumer economy

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as its consumption may triple to US$ 4 trillion by 2025, owing to shift in consumer behaviour and expenditure
pattern, according to a Boston Consulting Group report; and is estimated to surpass USA to become the second
largest economy in terms of purchasing power parity by the year 2040, according to a report by Price water
house Coopers21..

II. CONCLUSION
The problem, unemployment, low productivity, illiteracy and, malnutrition are still hanging like
democles sword over Indias forward march. The dearth of high quality education, unfavourable balance of
payments and import of capital goods and falling rupee add fuel to fire. India’s share in world exports is
currently at 1.9%. Efforts to increase this figure by way of providing export credit to manufacturers, increasing
the capital base of Export Credit Guarantee Scheme, increasing financial support to 5% etc. may be undertaken.
The economy benefitted from increased foreign inflows during the latter half of 2017 22. While this is good news,
efforts to contain further appreciation of the rupee should be in place as further strengthening may affect exports
and job creation. Bank credit growth hit a 20 year low in 2016-17 with Non-Performing Assets (NPAs) at 9.9%.
India has been ranked fifth on the list of countries with highest NPAs. Though bank recapitalization efforts are
underway, the economy needs to recover from the bad loan problem quickly for favourable economic growth in
the future23. Nevertheless it is encouraging to see that India’s economy grew at an impressive 8.2 per cent in the
first quarter of 2018-19 financial year ending June 30 on the back of a strong core performance and a healthy
base.24 .On a brighter note, there were stronger expansions in public consumption, fixed investment and exports
in the second quarter. Turning to the third quarter, the outlook appears mixed: Although the private-sector PMI
hit an over two-year high in November, consumer confidence slipped in the same month 25. Apprehensions
relating to the economy are at the moment centered on further escalations in the high prices, of fuel and other
goods in the domestic market, affecting the daily lives of people . As is generally held, the major reasons behind
this include the rising dollar price of crude oil in international market and the steady declines in the value of the
rupee in terms of dollar, causing escalating transport costs as well as the rupee prices of all imports 26.

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