Political Economy History of Pakistan Part-2 (B)

Part-2 (B)

Several Indian authors have argued that British rule resulted in India’s deindustrialization. According to R. C. Dutt, “India in the eighteenth century was a great manufacturing as well as a great agricultural country, and the products of the Indian loom supplied Asian and European markets.” Unfortunately, it is true that following the selfish commercial policy of a century ago, the East India Company and the British Parliament discouraged Indian manufacturers in the early years of British rule in order to encourage the rising manufacturers of England. Their fixed policy, pursued during the last decades of the eighteenth century and the first decades of the nineteenth, was to make India subservient to British industries and to force the Indian people to grow only raw produce in order to supply material for British looms and factories.

The Foreign Economic Burden

The British raj was a regime of expatriates, which added to the burden of foreign rule. Income from government service would have accrued to local residents rather than foreigners under an Indian administration. Because it concentrated purchasing power in the hands of people with a taste for foreign goods, the diversion of upper-class income into the hands of foreigners hampered the development of the local industry. This increased imports and harmed the luxury handicraft industries in particular.
During the period of direct British rule from 1858 to 1947, the colonial government’s official transfers of funds to the United Kingdom were referred to as ‘Home Charges.’ They primarily represented debt servicing, pensions, and India. Office expenses in the United Kingdom, military purchases, and railway equipment purchases Government procurement of civilian goods, armaments, and shipping was almost entirely handled in the United Kingdom. By the 1930s, these home charges had risen to between £40 and £50 million per year. Some of these flows would have occurred in a non-colonial economy, such as debt service on railway development loans, but a large portion of the debt was incurred as a result of colonial wars.
There were also significant private remittances from British officials in India, either as savings or to cover educational and other family expenses in the United Kingdom. These amounted to around £10 million per year during the interwar period, and Naoroji estimated that they were running at the same level in 1887. These objects were unmistakably the result of colonial rule. Furthermore, there were dividend and interest remittances by shipping and banking interests, plantations, and other British investors; to some extent, these were normal commercial transactions, but there was a large element of monopoly profit due to British business’s privileged position in India; and, in many cases, the original assets were not acquired by remitting funds to India but rather by remitting funds to the UK. Approximately one-third of private profit remittances should thus be considered colonial profits.
Despite its consistently favorable trade balance, India accumulated significant debts. By 1939, India’s foreign assets totaled $2-8 billion, with about $1-5 billion in government bonded debt and the rest in direct investment (primarily in tea, other plantations, and the jute industry). During the 1929-33 depression, many developing countries defaulted on foreign debt or froze dividend transfers, but India was unable to do so. The currency was kept at par with sterling and devalued in 1931, but the decisions were made with British interests in mind rather than Indian ones. Furthermore, civil servant salaries remained high, and the burden of official transfers increased during a period of falling prices.
Other observers have estimates which show some growth over this period as well as in the period from 1857. There has been a good deal of controversy amongst statisticians about the rate of growth of income in India in the colonial period. The estimates by economic historians show no increase in per capita income over the years 1900-46. It appears unlikely that per capita income increased by more than a third from the beginning of the British conquest in 1757 to independence, and it most likely did not increase at all. Over the last two centuries, per capita income in the United Kingdom has increased tenfold. From 1757 to 1947, the most noticeable change in the economy was the increase in population from approximately 170 million to 420 million.
The British eased agricultural taxation and converted warlords into landlords, but the new order lacked dynamism. Much of the old ambiguity about property rights remained, and landlords remained largely parasitic. The larger zamindars imitated the Moghul lifestyle by maintaining hordes of retainers and massive mansions, whereas the smaller landowner’s goal was to stop working and improve his ritual purity by establishing a seedy gentility. There was little incentive for investment, and almost nothing was done to promote agricultural technological change. The position of sharecropping tenantry and landless laborers at the bottom of society remained deplorable. In cities, a new Westernized ‘middle class’ of Indians emerged, posing a major challenge to the British raj.
Thus, apart from the British, the main beneficiaries of the British regime were the so-called ‘middle class of Indian capitalists and professionals, as well as the village squirearchy. The majority of these were high caste Hindus, though Parsis and Sikhs fared well. The main losers were the Muslims, who had made up the majority of the Moghul aristocracy, officer corps, lawyers, and luxury handicraft artisans. Continue