THE IMPACT OF

RAILWAYS ON
COLONIAL INDIA

Prepared By:
NAMAN AGARWAL
SECTION - H
22BC311
The Impact of Railways on Colonial India
INTRODUCTION
In colonial India, the history of railroads is not just one of growth and progress, but also of
economic transformation and colonial domination. The article examines how railways shape
the environment and have long-lasting consequences on Indian society, drawing on historian
Irfan Habib's views on colonialism and the Indian economy.

Railways as Instruments of Colonial Domination

Railways were seen by the British East India Company as a means of securing their colonial
power, as they sought to optimize resource exploitation and trade. This can traced back to the
mention of Lancashire interest to extend the inland markets for British cotton products and gain
entry to India's inland cotton region as a low-cost supply for the British cotton industry.
Additionally, the general strategic goals of imperialism dictated that the various sites in the
country be connected by rail to facilitate easier and faster troop movements for both internal
insurrectionary movements and conflicts beyond the borders. It was suggested, almost as an
afterthought, that by reducing transportation costs, trains could provide cheaper grain in
sufficient quantities to regions afflicted by hunger.

How Private Railway Companies Dictated Terms in Colonial India

The American Civil War and other events that disrupted US cotton shipments further
highlighted the importance of effective internal transportation. A construction boom was
sparked by the "Guaranteed Railway System", which provided financial guarantees and land
concessions to private enterprises. The Government of India would give them land for free,
having purchased it at its own expense; if they ran at a loss or did not secure a sufficient profit,
the Government of India would return 5% of their capital; the minimum return would be paid
at a fixed exchange rate of 22d to the rupee; and the railways would be fully privately managed
with minimal government oversight. The government would have to reimburse the railway
firms for all of their expenditures if they were to stop operating with six months' notice. The
government could only own the railways if it paid the company's share price on the London
market, not the assets. The East India Company's directors signed standard contracts with the
East Indian Railway and the Great Indian Peninsular Company in 1849. The contracts'
conditions imposed significant burdens on the Indian taxpayer. To ensure a return on
investment, he had to make up for any losses and profit shortages. The British government's
convertible notes, which yielded an annual return of 3%, were valued at 3.2% over the London
market rate in 1849.

From Private Profits to State Control: The Shift in British Railway Policy in
India
By 1871, the initial phase of railway development in colonial India had reached a turning point. The
"Old Guarantee System," established in the mid-19th century, had seen private companies build and
operate railways with significant financial support from the British government. While this system led
to the construction of major lines connecting ports like Calcutta, Bombay, and Madras with their
hinterlands, it came at a steep cost. Recognizing these limitations, the British government initiated a
shift in policy by 1869. This marked the rise of "State Railways":

Direct Government Investment: Using loans with lower interest rates than the guarantees
given to private enterprises, the government started building railways directly.

Strategic Priorities: State Railways gave top priority to strategically significant regions,
especially the northwest frontier, which is vital for military operations but less appealing to
businesses focused on making profits.

Gradual Acquisition: The government started buying up "guaranteed" businesses, such as the
East Indian Railway (EIR), in 1879. This guaranteed more authority and made it possible for
the government to run the railroads directly. Although there was significant remuneration, the
government's ultimate goal was to oversee railway operations directly.

Motivations for Change:

The shift to State Railways was driven by a combination of factors:

• Economic Considerations: Lower loan rates and more focus on infrastructure

development offered potential long-term financial benefits.
• Military Needs: The ability to build strategically important lines in the northwest frontier
became paramount.
• Greater Control: Direct government control ensured better management and alignment
with broader colonial objectives.

A pivotal point in the railway history of colonial India was the transition to State Railways.
Even though the private sector was instrumental in starting the expansion process, the Old
Guarantee System's shortcomings were soon to be discovered. State Railways shaped the
extensive network that India inherited at independence by enabling a more planned and
economical approach to railway expansion.

The High Cost and Disorganized Nature of British Railway Development in

India

• High Guaranteed Interest: As a result of the "guarantee system," India bore a heavy
financial load. When private businesses built railways, the British government guaranteed
a specified return on investment. As a result, India had to pay an astounding £126.6 million
over four decades—a significant amount given the country's GDP at the time.
• Haphazard Construction: There was no clear strategy for the railway system. To meet
immediate demands, lines were constructed, frequently putting military or British
interests—such as the Lancashire, England, textile industry—before India's general growth.
• Fragmented Management: The system lacked a unified structure. There were a whopping
thirty-three separate railway companies or administrations! This included private
companies, government-run lines, and those nominally controlled by princely states.
• Limited Competition: Despite the numerous entities, there was little competition. Large
regions were assigned monopolies, allowing companies to set high prices with minimal
pressure to improve services.
In essence, the British built a railway network in India that primarily served their own interests. It
burdened the Indian economy, lacked a long-term vision, and prioritized profit over efficient and
equitable transportation for the Indian people.

British Domination and Missed Opportunities in Indian Railway

Development

Dominant British Personnel:

• Exclusion of Indians: All top railway officials earning over Rs. 10,000 annually were
Europeans, with even supervisory and technical staff dominated by them. This not only
increased operational costs due to higher European salaries but also fostered racial
discrimination against Indian passengers.

"Buy British" Policy:

• Draining Indian Resources: Private railway companies, controlled from London, and the
Indian government prioritized buying supplies from Britain. Everything from sleepers
(wooden supports for tracks) to locomotives and carriages was imported, draining resources
from India.
• Stifling Domestic Industry: The ever-increasing import of railway materials (from Rs.
2.09 crore in 1867-68 to Rs. 5.35 crore in 1897-98) constituted a significant portion of
India's total imports. Even attempts to purchase cheaper locomotives from Germany and
the US were discouraged due to pressure from Britain.
• Discouraging Local Production: Existing railway workshops in India, like the one in
Byculla, Bombay, which had successfully built locomotives, were actively discouraged
from further production.

The Impact of Railways on Transportation, Employment, and Markets in

India
Railways in India revolutionized goods transportation by offering faster, cost-effective, and
larger loads compared to traditional methods like bullock carts. By the late 19th century,
railways had surpassed the cargo capacity of the Banjaras, a group of long-distance transporters
who dominated the sector in the 17th century. This led to a significant increase in the volume
of goods transported, reducing travel time and expediting delivery. Railways also surpassed
traditional transportation methods, making it a more efficient and cost-effective mode of
transportation.

The rise of railways

in India led to job
displacement in
certain sectors, such
as pre-industrial
transportation like
the Banjaras.
However, the
railways also
created new
employment opportunities, employing around 273,000 people in 1895. These jobs included
train operators, track maintenance workers, station staff, and administrative personnel.
However, the new employment opportunities did not fully compensate for the jobs lost in
traditional transportation sectors, as by 1895, only about half of the new railway jobs replaced
the number of workers displaced by the railways.
Railways significantly unified India's national market for bulk goods by enabling cheaper and
faster movement over long distances. This led to reduced price variations, especially in
agricultural products, as transportation costs became less of a factor, allowing for more even
distribution across regions. This stabilized prices and reduced regional disparities. Easier and
cheaper transportation also encouraged trade between different parts of India, allowing
producers to reach new markets and consumers to access a wider variety of goods. This process
of market unification, where regional barriers are broken down, was facilitated by railways in
India.

The Complexities of Railway Impact: Famine Reliefs and Industrial

Development

Railways can alleviate temporary food shortages in specific regions by facilitating quicker
movement of food supplies. However, during large-scale crop failures, railways can exacerbate
the situation by spreading rising prices across a larger territory, affecting a wider population.
This phenomenon was evident during the famines of 1896-97 and 1899-1900. Additionally,
railways facilitate the export of large quantities of food grains to ports, potentially reducing
domestic food availability during famines. Furthermore, the British policy of control restricted
railway supplies to benefit British industries, but railways indirectly benefited the Indian textile
industry, particularly Bombay mills, by enabling efficient transportation to access inland cotton
supplies. This development alarmed British textile manufacturers, who faced increased
competition from India, as railways indirectly boosted their operations.

Conclusion

The late 19th-century British railways in India revolutionized transportation, created a national
market, and boosted industrial growth. However, they also imposed financial burdens,
disorganized the system, and stifled domestic industries. The railways' tendency to spread price
increases hindered famine relief efforts. Despite their modernization, they also facilitated
British control. There were an astounding 43,000 kilometers of track in the railway network by
the time India attained independence in 1947. The enormous infrastructure functioned as an
essential basis for the recently established country. The legacy of colonial railways is still up
for discussion, though. It is crucial to acknowledge the human cost, the systemic disparities,
and the uneven development it promoted, even as one acknowledges the system's significance
in economic development and national integration. As India's extensive railway network
develops in the twenty-first century, the lessons learned from this era—such as the necessity
of social equity, the efficient transport network, and the significance of balanced economic
development—remain relevant.