INTRODUCTION

From 1600 to 1757 the East India Company’s role in India was that of a trading corporation

which brought goods or precious metals into India and exchanged them for Indian goods like
textiles and spices, which it sold abroad. Its profit came primarily from the sale of Indian goods

abroad. Naturally, it tried constantly to open new market for Indian goods in Britain and other
countries. Thereby, it increased the export of Indian goods and thus encouraged their

production. This is the reason why Indian rulers tolerated and even encouraged the
establishment of the Company’s factories in India.

But from the beginning, the British manufacturers were jealous of the popularity that Indian
textiles enjoyed in Britain. They put pressure on their government to restrict and prohibit the

sale of Indian goods in England. Several laws were passed to curb the sale of Indian goods in
England. In spite of these, Indian silk and cotton textiles still held their own in foreign markets,

until the middle of the 18 th century when the English textile industry began to develop on the
basis of new and advanced technology.

ECONOMIC IMPACT OF BRITISH RULE

There are three stages of British Colonialism:-

First phase- The Mercantile Phase

1.The East India Company used its political power to monopolize trade in Bengal.

2. Revenues of Bengal were used to finance exports to England.

3. Increasing the price of goods by the British officials.

Second phase-The Industrial Phase

1. India was exploited as a market for British goods.

2. Indians were forced to export raw materials and import finished goods.
3. Heavy import duty on Indian products to England to discourage them in market.

4. Because of Act of 1813 allowed one way trade for British as a result, Indian traders lost
foreign as well as home market.

Third phase- Financial Phase

1. British made there position in Indian market and made it a market for manufacturers and
supplier of foodstuffs and raw material.

2. Heavy British investements in India was made and public debt increases.

3. Railways, telegraph and industries come in to existence.

COMMERCIALISATION OF AGRICULTURE
The latter half of the 19th century , witnessed a developing trend in the Indian Agriculture. The
emergence of the commercialization in the Indian Agriculture was the marked feature in the
latter parts of the 19th century. So far agriculture had been away from the business enterprise.
Now agriculture began to influence by the commercial consideration. Under the
commercialization of Agriculture, certain specialized crops were s grown. The sole aim for the
productions of such crops was not for consumption in the village, rather these were used for
sales in the national and even in the international markets. Commercial crops like cotton, jute,
groundnuts, oilseeds, sugarcane, tobacco, etc were more remunerative than food grains. Again
the cultivation of crops like condiments , spices, fruits and vegetables could make a widespread
commercial transactions. However the historians have opined that the trends of
commercialization reached in its highest level of developments in the plantation industry i.e.
tea, coffee, rubber etc, which were produced for selling in the wider market. Agriculture as a
medium of business transaction was not a sudden outcome. Rather certain factors were
responsible for the commercialization and specialization of agricultural market. The British
rulers of India did not conceive of India as an industrialized country. Rather the British rulers
deliberately followed policies to de-industrialize India. Their sole motive was to convert India
and preserve it as an agricultural farm providing raw materials to industrializing Britain.
However, compulsions of maintaining Imperial control over the country.

GROWTH OF AGRICULTURAL LABOUR

Establishment of industries in India has a rich past. Industry was and still can be called the life-
blood of a developing country. India falls under the category of a developing country, whose
beginnings can be credited to the British Empire in the bygone centuries. British administration
had much to do with India growing up into a country which became instilled in Westernisation.
Prior to British rule, India was essentially a country which looked to a monarchical rule of
administration. Kings, queens and dynastic system had prevailed. However, after the British
arrival, Indian government never was the same like before. The British East India Company
established business transaction with Indian wealthy merchants, thereby paving the way for
future establishment of Indian industries.

Indian industries since its establishment witnessed major changes to befit the changing socio
political scenario. It was in the 19th century, Indian industries received a tremendous growth
when magnum factories had already been planned and charted to being built. Industries
related to agriculture, fabric, leather, paper, processed food began to be founded by the side of
major port cities and rivers. Such trade business and its impact on common population was a
kind of breakaway from the Mughal system of industrialisation. Indians were slowly made to
adapt themselves to the custom of English way of living.

INDUSTRIAL REVOLUTION

The Industrial Revolution in Britain completely transformed Britain’s economy and its economic

relations with India. During the second half of the 18th century and first few decades of the
19th century, Britain underwent profound social and economic transformation, and British

industry developed and expanded rapidly on the basis of modern machine, the factory system
and capitalism.
As a result of the Industrial Revolution an entirely new class of society, the industrial capitalist
was born. This new class of society, the industrial capitalists owned the factories and workers

who hired themselves out their labours on daily wages. The rise of these new powerful classes
had an important impact on British economic relations with India. The interest of this class in the

Empire was very different from that of the East India Company. It did not gain from the
monopolization of the export of Indian handicrafts or the direct appropriation of Indian

revenues. As this class grew in number and strength and political influence, it began to attack
the trade monopoly of the Company. Since the profits of this class came from manufacturing,

not from trading, it wanted to encourage, not imports of manufactures from India, but exports
of its own products to India as well as imports of raw material from India. They looked upon the

East India Company to be the chief obstacles in the fulfillment of their dreams. Between 1793
and 1813, they launched a powerful campaign against the Company and its commercial

privileges and finally succeeded in 1813 in abolishing the Company’s monopoly of Indian trade.

DRAIN OF WEALTH

Drain of Wealth theory refers to a portion of national product of India which was not available
for consumption to its people.

Constituents of drain were:-

1. Extortion by company servants the fortune from the rulers, zamindars, merchants and
comman men and sending it to there home in England.

2. Purchasing goods out of revenues of Bengal and exporting them. This was called
Investement.

3. Remittances or salaries and other incomes by company officials send to England.

4. Home charges or cost of salaries and pensions of company officials in India were paid from
the treasury of India.

5. Hefty interest were paid to British investors.

EFFECTS

1. It stunted the growth of Indian enterprise and checked and retarted capital formation in
India.

2. It financed capitalist development in Britain.

3. India was kept as a zone of free trade without allowing it to develop the ability to compete.

4. Plantation, mimes, jute, mills, banking, shipping, export-import concern promoted a system
of interlocking capitalist firms managed by foreigners. It drained resources from India.

GROWTH OF MODERN INDUSTRIES

Indian industries since its establishment witnessed major changes to befit the changing socio
political scenario. It was in the 19th century, Indian industries received a tremendous growth
when magnum factories had already been planned and charted to being built. Industries
related to agriculture, fabric, leather, paper, processed food began to be founded by the side of
major port cities and rivers. Such trade business and its impact on common population was a
kind of breakaway from the Mughal system of industrialisation. Indians were slowly made to
adapt themselves to the custom of English way of living. The ready availability of raw cotton,
silk and dye stuffs in Coromondel, Gujarat and later Bengal had stimulated, over centuries, the
growth of a village-based hand-loom industry which gave employment to hundreds of
thousands of highly skilled weavers, dyers and washers, producing enormous quantities of
different kinds of cloth for specific market requirements throughout Asia. The supreme Indian
achievements lay in the mastery of colour-fast dyeing techniques and the fabulous designs and
colour combinations produced by hand-painting and wood-blocking.

The English factors engaged Indian brokers who were paid a fixed percentage to negotiate and
manage contracts with local authorities, village headmen and weaver families for the delivery
of stated numbers of particular types by specified dates, and who guaranteed the safety of cash
advances made by the Company for the purchase of yarn and dyestuffs. The weavers, the
ancillary craftsmen and the cultivators of the raw materials were at the bottom of the chain.
Frequently devastated by climate, famine and war, they were always subject to varying degrees
of pressure and exploitation while the landholders, the brokers and the Company grew rich on
their skills.

RISE OF CAPITALIST CLASS

The emergence of new social classes in India was the direct consequences of the establishment a
new social economy, a new type of state system and state administrative machinery and the
spread of new education during the British rule.

The new social classes involved in the Indian society during the British rule were: in agrarian
area, they were: zamindars created by the British Government, absentee landlords, tenant
under zamindars and absentee landlords, the class of peasant proprietors, agricultural
labourers, the modern class of merchants and the modern class of money lenders. In urban
areas, they were: modern class of capitalist, industrial, commercial and financial; the modern
working class engaged in industrial, transport, mining and such other enterprises, the class of
pretty traders and shopkeepers, the professional classes such as technicians, doctors, lawyers,
professors, journalists, managers, clerks and others, comprising the intelligentsia and the
educated middle class.

Primarily, these new classes came into existence as a result of the basic economic transformation
brought about by the various acts of the British Government such as the new type of land
relations, the penetrations of Indian society by the commercial and other forces from the outside
capitalist world, and the establishment of modern industries in India.

In the agrarian area, a group of modern money lenders and merchants who were unknown in pre-
British Indian society, developed on an increasing scale. They are intermediaries between the
peasants and the market, and absentee landlords.

In the rural area, the classes of money lenders and merchants existed in pre-British India. But the
role was transformed when the new land system was introduced. So, the class of modern money
lenders and merchants might be described as new social classes linked up with the new capitalist
economy and performing functions quite different from pre-British Indian society.

The professional classes comprising modern lawyers, doctors, teachers, professors, managers,
clerks, engineers, chemists, technologies, journalists and others, formed another new social
group, which evolved in Indian society during the British period. These social groups linked up
with modern industry, agriculture, commerce, finance, administration, press and other sections
of the new social life, were unknown to pre-British Indian society since such a social, economic,
and class system did not then exist.
 TABLE OF CONTENTS

INTRODUCTION

ECONOMIC IMPACT OF BRITISH RULE

1 THE MERCANTILE PHASE

2 THE INDUSTRIAL PHASE

3 THE FINANCIAL PHASE

COMMERCIALISATION OF AGRICULTURE

GROWTH OF AGRICULTURE LABOUR

INDUSTRIAL REVOLUTION

DRAIN OF WEALTH

GROWTH OF MODERN INDUSTRIES

RISE OF CAPITALIST CLASS

 NATIONAL LAW INSTITUTE UNIVERSITY
BHOPAL(MP)

TRIMESTER – VI
HISTORY-II
PROJECT
ON
BRITISH ECONOMIC POLICIES AND THERE
IMPACT

SUBMITTED TO:- SUBMITTED BY:-

DR. UDAY PRATAP SINGH RAHUL KULHARE
ASSO. PROFESSOR 2009BALLB(Hons)71