3.7 The voice of free trade and the changing character of British colonial rule

I. Introduction – Overview of the British Raj in India

Setting the Stage for the Context

• British Raj refers to the period when India was under the colonial rule of the British Empire, starting from 1858, when the rule of the East India Company was transferred to the British Crown, until 1947, when India achieved independence.
• It was a period marked by the significant transformation of India’s political, social, economic, and cultural landscape.
• The East India Company, originally set up as a trading entity, gradually took control over large parts of India through a combination of military conquests and strategic alliances with local rulers. The eventual transfer of power from this company to the British Crown was a major turning point.
• The era witnessed the introduction and consolidation of various administrative reforms, legal systems, infrastructural developments, and educational policies, many of which continue to influence contemporary India.
• One of the hallmarks of the British Raj was its ability to maintain control over such a vast and diverse region through a complex interplay of direct rule and indirect control via local allies and princely states.

Significance of the Free Trade Era in the Colonial Period

• Free trade, in simple terms, refers to the removal of tariffs, quotas, and other trade barriers, facilitating the unrestricted movement of goods between countries.
• The concept of free trade was deeply intertwined with the philosophies of the Industrial Revolution in Britain, which sought markets for its manufactured goods.
• The push for free trade in the 19th century marked a departure from the earlier mercantilist policies, which emphasized protectionism and trade only within the empire.
• For the British Empire, India was a significant market, and free trade policies allowed British-made goods to flood the Indian market, often to the detriment of local industries.
• Simultaneously, India became a source of raw materials, like cotton and jute, crucial for British industries.
• The era of free trade also saw significant infrastructural developments in India, like the laying of railways and telegraphs, primarily to facilitate smoother trade.
• The free trade era was not without its critics. Many in India viewed it as a means of economic exploitation, leading to the impoverishment of large sections of the population. For example, the influx of cheap machine-made textiles from Britain adversely affected the Indian handloom sector.
• Additionally, while free trade theoretically implies an equal playing field, the reality was that British goods often had an advantage due to various policies and mechanisms put in place by the colonial administration.

II. Background and Genesis of Free Trade in the Global Scenario

The British Economic Scene in the 18th and 19th Centuries

• The 18th and 19th centuries marked significant changes in the British economic landscape.
• Industrial Revolution stands out as a transformative period. Originating in Britain in the late 18th century, it saw the shift from manual production methods to mechanized ones.
  • Key developments included the invention of the spinning jenny, steam engine, and mechanized cotton mills.
  • This period also witnessed rapid urbanization, with people moving to cities in search of work.
  • Coal mining expanded, and iron production saw technological innovations.
  • Railways, which became a defining symbol of this era, facilitated movement and trade.
• Emergence of laissez-faire principles: The term “laissez-faire” translates to “let do” or “let go”, advocating minimal government interference in the economy.
  • Rooted in classical economics, it promoted the idea of a self-regulating market.
  • It countered the earlier mercantilist views that favored strict state control and protectionist policies.
  • Laissez-faire paved the way for free-market capitalism, where supply and demand dictated market dynamics.
• Role of the East India Company in global commerce:
  • Initially established for spice trade in the East Indies, the company eventually turned its attention to India.
  • It played a crucial role in the expansion of British influence in the subcontinent through trade and territorial acquisitions.
  • Beyond mere trade, it introduced administrative reforms, standardized weights and measures, and even had its army.
  • The company held a monopoly on British trade with India until its dissolution in 1874.

Intellectual and Economic Debates around Free Trade in Britain

• Adam Smith’s “Wealth of Nations”:
  • Published in 1776, this seminal work is considered the foundation of modern economic theory.
  • Smith championed the virtues of free trade and criticized mercantilism.
  • He introduced the concept of the “invisible hand”, suggesting that individual self-interest inadvertently benefits society at large.
  • He argued that trade barriers and tariffs reduce overall economic efficiency.
• David Ricardo and the principle of comparative advantage:
  • Ricardo, an influential economist, built on Smith’s work.
  • He introduced the principle of comparative advantage in 1817. It posited that countries should specialize in producing goods they can make most efficiently and trade for other goods.
  • This principle argued against protectionist policies, suggesting that even if a country wasn’t the absolute best at producing something, it could still benefit from trade.
• Political campaigns for and against protectionist policies:
  • The debate around free trade vs. protectionism was intense during the 19th century.
  • Advocates of free trade, like Richard Cobden and John Bright, founded the Anti-Corn Law League in 1838, aiming to abolish the Corn Laws, which were protectionist tariffs on grain imports.
  • On the other hand, protectionists believed that British industries needed shielding from foreign competition.
  • This tug-of-war between the two ideologies played out in Parliament and public platforms, shaping the economic policies of the time.

III. Influence of Free Trade on Colonial Policy

Economic Imperatives Driving British Policy in India

• Colonialism in India was greatly influenced by economic interests, with the primary aim being the extraction of resources and ensuring a continuous flow of profits to Britain.
• The need for raw materials for Britain’s growing industries during the Industrial Revolution meant colonies like India were seen as valuable sources of cotton, jute, and indigo.
• The profitability of colonies like India was not just restricted to the extraction of resources. The controlled economic policies enforced by the British ensured they had a favorable balance of trade.
• The taxation system was another significant aspect, where Indian peasants and farmers were burdened with heavy taxes, ensuring consistent revenue for the British government.
• India’s wealth drained through policies like the ‘Doctrine of Lapse’ and the constant annexation of princely states which led to the flow of treasures and resources to Britain.
• Moreover, India was viewed as a vast market for British manufactured goods. With local industries and craftsmen marginalized by policies that favored British goods, Indian markets were flooded with products from Britain.
• The necessity of having a market for British goods made it essential for the British to penetrate deeper into the Indian subcontinent, establishing railways and infrastructure to facilitate trade.

Shift in Colonial Administration: From Mercantilism to Free Trade

• Initially, the British approach to colonies, including India, was guided by mercantilist principles. This meant that colonies existed for the benefit of the mother country, ensuring a favorable balance of trade.
• With the onset of the Industrial Revolution and the dominance of laissez-faire principles in Britain, there was a shift towards free trade.
• Mercantilism vs. Free Trade: Differences in Approach and Outcomes
  • Mercantilism focused on accumulating wealth through a favorable balance of trade, emphasizing the importance of stockpiling gold and silver. Exporting more than importing was seen as the key.
  • Free trade, inspired by thinkers like Adam Smith and David Ricardo, emphasized the flow of goods without restrictions, arguing that this would lead to overall economic benefits.
  • Under mercantilism, colonies were strictly controlled, ensuring they traded only with the mother country. Free trade opened up markets, allowing colonies to trade with other nations.
  • While mercantilism stressed on monopolies and exclusivity, free trade aimed for competitive markets.
  • In terms of outcomes, while mercantilism led to wealth accumulation, it often led to conflicts and wars. Free trade, on the other hand, had its own set of challenges, including economic disparities and exploitation of resources.
• Examples from Other Colonies for Comparison
  • In Africa, similar to India, resources were extracted, and the continent was viewed as a market for European goods. The Scramble for Africa in the late 19th century was driven by both mercantilist and free trade ambitions.
  • The Caribbean colonies, known for their sugar plantations, saw a shift from mercantilist policies that controlled trade with Europe to a more free trade-oriented approach in the 19th century.
  • Australia and New Zealand, initially penal colonies, eventually became significant players in the global wool and meat trade, aligning more with the principles of free trade.

IV. Repercussions of Free Trade on Indian Economy and Society

De-industrialization of India

• Historical context
  • Before colonization, India renowned for its diverse industries.
  • Renowned for textiles, metalwork, and handicrafts.
• Decline of Indian handicrafts and traditional industries
  • Advent of mechanized factories in Britain led to competition.
  • Indian artisans couldn’t compete with mass-produced British goods.
  • Displacement of skilled artisans.
  • Loss of livelihood for millions, especially in textile hubs like Dhaka.
• Surge in imports of British manufactured goods
  • Colonization policies favored British goods over Indian.
  • Heavy taxes on Indian-made goods while British imports had negligible duties.
  • Resulted in widespread consumption of British goods.
  • Local markets flooded, eroding demand for native products.

Transformation of Indian agriculture

• British interest in agriculture
  • Aimed to transform India into a supplier of raw materials.
  • Required shift from subsistence to cash crop farming.
• Cash crops and their consequences
  • Introduction of cash crops like indigo, jute, and cotton.
  • Farmers forced to grow these instead of food grains.
  • Made them dependent on volatile global market prices.
  • Loss of biodiversity with monoculture practices.
  • Soil depletion due to lack of crop rotation.
  • Famines due to decline in food grain production.
• Indigo revolts and the plight of farmers
  • Indigo cultivation under oppressive conditions.
  • “Tinkathia system” forced farmers to dedicate portions of land to indigo.
  • Farmers paid meager amounts, leading to protests.
  • Notable revolt: 1859 Indigo Revolt in Bengal.
  • Highlighted exploitation and led to changes in indigo trade.

Emergence of new socio-economic classes

• British policies reshape Indian society
  • Not just economic, but deep societal impacts.
  • Creation of new classes, restructuring of old ones.
• Indian middle class and its relationship with the British
  • Emergence of a Western-educated Indian middle class.
  • Occupied roles in colonial administration, law, and education.
  • English language and British education became status symbols.
  • Ambivalence in relations: Admiration for British culture but resentment against colonial rule.
  • Seeds for future nationalism.
• Impact on the traditional artisanal and agricultural communities
  • Displacement from traditional vocations.
  • Migration to cities for employment.
  • Formation of labor class in colonial industries.
  • Loss of social status and economic independence.
  • Rise of social reform movements, calling for revival of indigenous industries.

V. Indian Responses to the Onslaught of Free Trade

Intellectual and political responses

• Origins of Response: As the British deepened their economic grip on India through policies favoring free trade, intellectual and political responses within the subcontinent began to take shape.
• The Spark of Nationalism: This period saw the budding of early Indian nationalism.
  • Rise of Associations: Organizations like the Indian National Congress (INC) in 1885 laid the groundwork for political mobilization.
  • Gathering Momentum: Annual sessions of the INC became platforms to address economic grievances and demand a greater say in policy-making.
• Economic Critiques from Indian Thinkers: Various Indian intellectuals raised voices against the economic drain.
  • Dadabhai Naoroji: Known for his “Drain Theory” where he detailed how Britain was systematically draining India’s wealth.
  • R.C. Dutt: Authored ‘Economic History of India’, highlighting the deleterious effects of British policies on Indian agriculture and manufacturing.
  • Gopal Krishna Gokhale: Advocated for a more equitable economic policy and criticized land revenue systems.
  • M.G. Ranade: Emphasized the need for industrial development and protective measures for Indian industries.

Grassroots movements and resistance

• Resonating Discontent: Economic exploitation wasn’t just met with intellectual dissent. The common populace, feeling the brunt of the policies, began to resist.
• Local Revolts against Economic Exploitation:
  • Indigo Revolts: Farmers in Bengal, forced into indigo cultivation, revolted against the oppressive system in the late 1850s.
  • Deccan Riots of 1875: Indebted farmers in Maharashtra resisted against moneylenders and landlords.
  • Champaran Movement: Led by Mahatma Gandhi in 1917, highlighted the plight of indigo farmers in Bihar, forced to cultivate indigo under unfair terms.
• Strategies Employed by Indian Communities:
  • Swadeshi Movement (1905-1911): A significant strategy where Indians promoted the consumption of Indian goods and boycotted British-made goods.
  • Self-reliance through Cottage Industries: Emphasis on self-reliance led to the revitalization of traditional handicrafts and industries.
  • Khadi Movement: Promoted by Mahatma Gandhi, it advocated the spinning of one’s cloth, challenging the dominance of British textiles.
  • Cooperative Movements: Encouraged the formation of cooperatives to ensure fair prices for products and protect against exploitation.

VI. Evolution of the British Raj’s Administrative Structure in the Context of Free Trade

Changes in fiscal and economic policies

• Origin of fiscal changes: As Britain gained control over India, they systematically transformed the economic and fiscal policies to facilitate and bolster their interests.
• Land revenue systems:
  • Permanent Settlement (1793): Introduced by Lord Cornwallis in Bengal, Bihar, and Orissa. It fixed the land revenue that zamindars had to pay to the British, turning them into landowners while peasants became tenants.
  • Ryotwari System (early 19th century): Introduced in Madras and Bombay Presidencies. Here, every farmer was recognized as the owner of his plot but had to pay a fixed tax directly to the state.
  • Mahalwari System (1833): Implemented in parts of North and Central India. Revenue settlements were made with clusters of villages or estates.
• Taxation and its impact on Indian economy and society:
  • Salt Tax: An exclusive right to produce salt was given to the British, which led to the infamous Dandi March led by Mahatma Gandhi in 1930.
  • Custom Duties: Heavy duties on Indian goods going to Britain, while British goods enjoyed free or minimal duty in India, leading to an unfavorable balance of trade.
  • Impact: Reduced purchasing power among Indians, shrinking of Indian industries, especially handicrafts, and increasing dependency on British goods.

Infrastructural developments

• Objective: The primary intent was not development, but to further British economic interests.
• Railways:
  • Established in 1853, connecting Bombay to Thane.
  • Facilitated movement of raw materials from the hinterland to ports and British goods into India.
  • However, they did inadvertently integrate markets, cultures, and catalyzed nationalist sentiments.
• Ports:
  • Major ports like Bombay, Calcutta, and Madras expanded considerably.
  • Served as export hubs for raw materials like cotton and jute to Britain and import points for finished goods.
• Telegraph:
  • Started in 1851, connecting Calcutta and Bombay.
  • Quick communication facilitated administrative control and coordination.
• Impact on Indian society: Although infrastructure facilitated British economic exploitation, it unintentionally paved the way for national integration, exchange of ideas, and the movement of people across regions.

Comparison with other British colonies

VII. The Role of British Business and Mercantile Interests

British businesses and their stakes in Indian free trade

• Historical backdrop: The British Raj provided the backbone for British businesses to operate freely and securely in India. The intertwined interests of the British Crown and these enterprises were evident.
• East India Company: Originally established in 1600, this joint-stock company monopolized trade relations between Britain and India until 1858.
  • Influence on colonial policies: Often dictated tax regulations and land revenue systems to maximize profits.
  • Trading commodities: Primarily textiles, spices, and opium.
• Other notable British companies: Beyond the East India Company, numerous British businesses operated in India.
  • British Cotton Mills: Dominated the textile market, negatively impacting Indian handloom weavers.
  • British Steel and Iron companies: Supplied materials for infrastructure projects like railways.
  • British Shipping Companies: Controlled major maritime trade routes between Britain and India.
• Economic advantages reaped by British businesses:
  • Monopolization: British businesses enjoyed exclusive rights in several sectors, thereby reducing competition.
  • Tax benefits: British-imported goods often faced reduced duties, making them cheaper than Indian counterparts.
  • Cheap labor: Abundant labor force in India, available at much lower wages, boosted profits for British enterprises.

Competition and collaboration with Indian businesses

• Competitive landscape:
  • British businesses enjoyed distinct advantages due to imperial policies favoring them.
  • Indian businesses, on the other hand, faced a dual challenge: Competing against the British and adjusting to the changing economic climate.
• Prominent partnerships and mergers:
  • As the economic environment changed, some Indian businesses recognized the benefit of collaborating with British firms.
  • Tata & Sons: Founded by Jamsetji Tata, it forged partnerships with British businesses in sectors like steel and textiles.
  • Birla Group: Led by Ghanshyamdas Birla, collaborated with British ventures in textiles and jute industries.
• Suppression of Indian industries:
  • Textile sector: The once-thriving Indian handloom industry suffered severely due to the influx of cheap British textiles.
  • Salt industry: Indigenous salt producers faced stiff competition when the British monopolized the salt trade.
• Navigating the new economic landscape:
  • Diversification: Indian businessmen ventured into new sectors, such as banking, to reduce dependency on traditional industries.
  • Leveraging community networks: Many businessmen used kinship and community ties to expand their trade and ensure trust in business dealings.
  • Engaging with the colonial administration: Indian businesses realized the importance of engaging with the colonial authorities. They sought favorable policies and even took roles in legislative councils to represent their interests.

VIII. Counterarguments and Critiques

The perceived benefits of free trade for India

• Economic Growth:
  • Advocates pointed to the increase in trade volumes and GDP growth rates.
  • British colonization purportedly paved the way for modern economic practices, which proponents believed facilitated India’s integration into the global economic system.
  • Introduction of various industries that India hadn’t previously engaged in, promoting diversification.
  • Establishment of banking, insurance, and financial institutions enhancing monetary transactions.
• Introduction of New Technologies:
  • Prior to British colonization, certain industries in India had not been exposed to the technological advancements prevalent in Europe.
  • The introduction of machinery, especially in sectors like textiles, revolutionized production capacities and quality.
  • Tools, equipment, and methodologies from Europe provided a technological thrust in sectors such as agriculture, mining, and manufacturing.
  • Railways, telegraphs, and other infrastructural projects integrated various parts of India and facilitated quicker communication and transportation.
• Infrastructural Development:
  • Perhaps the most evident physical legacy of British rule was the infrastructural transformation.
  • Railways, roads, bridges, ports, and telecommunication lines were established and expanded, fostering intra-regional trade.
  • Cities like Mumbai, Kolkata, and Chennai flourished as trade hubs due to enhanced port facilities.
  • Public institutions, including hospitals, schools, and colleges, sprung up, impacting social development.

The moral arguments for British rule and free trade

• The “Civilizing Mission”:
  • Rooted in the idea that European civilization was superior and that it was Britain’s duty to bring its perceived benefits to India.
  • Advocates believed that British rule would uplift Indians from their “primitive” state and introduce them to the “enlightened” Western ways.
  • This rationale was extended to economic policies, with the belief that free trade and capitalism would be beneficial, regardless of initial resistance or challenges faced by the indigenous population.
  • Elements like English education, legal systems, and democratic institutions were seen as beacons of modernity and progress, which India should aspire to.
• Debates within Britain on the ethical implications of their economic policies in India:
  • Not everyone in Britain supported the colonial approach. Dissenters were vocal about the exploitative nature of British policies in India.
  • The economic drain from India to Britain, where India’s wealth was siphoned off for the benefit of the British economy, became a contentious topic.
  • Figures like Dadabhai Naoroji and Romesh Chunder Bonnerjee, even while based in Britain, criticized the economic policies, highlighting the disparity they created.
  • The exploitation of Indian labor, the deliberate stifling of indigenous industries to favor British goods, and the famines exacerbated by economic policies were hotly debated.
  • The inherent racism and prejudice in the “civilizing mission” argument were challenged, asserting that India had a rich and advanced civilization long before the British arrived.

IX. Legacy and Long-term Impacts

Post-colonial economic structures: How the British Raj’s free trade policies influenced post-independence India

• Transition from Colonial to Independent Economy
  • British economic policies significantly altered the fabric of the Indian economy.
  • While colonial rule aimed at making India a supplier of raw materials and a consumer of British goods, post-independence leaders aspired to rebuild self-reliance.
  • Industrial policies of post-independence India were, in part, a response to the exploitative nature of colonial economic strategies.
• Impact on Agricultural Sector
  • The zamindari system, introduced during British rule, led to fragmentation of landholdings and created layers of middlemen, affecting the efficiency of the agricultural sector.
  • Post-independence, land reforms aimed to remove these inefficiencies and promote a more egalitarian land distribution.
• Institutional Legacy
  • The British Raj established various institutions like railways, telecommunication systems, ports, and administrative structures.
  • These institutions provided a foundation but also posed challenges for the newly independent India to modify them according to its needs.

The debate around re-industrialization in post-independence India: Strategies adopted to revive Indian industries and protect against external competition

• Five-Year Plans
  • Initiated by Jawaharlal Nehru and influenced by the Soviet model.
  • Focused on the public sector as the main driver of economic growth.
  • First Five-Year Plan (1951-1956) emphasized agriculture, while the Second Five-Year Plan (1956-1961) laid the groundwork for industrialization.
• Import Substitution Industrialization (ISI)
  • A strategy to reduce foreign dependency by producing goods domestically.
  • Emphasized self-reliance by producing consumer goods within the country, thereby reducing imports.
  • Tariffs and import controls implemented to protect nascent Indian industries from foreign competition.
• Licensing System
  • Industries needed licenses for capacity expansion, location, and production decisions.
  • Aimed at protecting domestic industries from intense competition and ensuring a balanced regional development.
• Public Sector Undertakings (PSUs)
  • Government-owned corporations played a pivotal role in driving industrial growth.
  • Key sectors like steel, mining, telecommunications, and energy were primarily under state control.

Contemporary relevance: How the debates around free trade in the colonial era still resonate in modern economic and political discourses in India

• Liberalization, Privatization, and Globalization (LPG) Reforms of 1991
  • A shift from protectionism to opening up the economy.
  • External factors, especially a severe balance of payment crisis, pushed India to adopt structural reforms and open up to foreign investments.
  • The debate around these reforms echoed concerns from the colonial era about potential exploitation and loss of self-reliance.
• Modern Trade Agreements
  • As India engages in various bilateral and multilateral trade agreements, the discourse around the benefits and drawbacks of free trade is revived.
  • Concerns about safeguarding domestic industries, farmers, and artisans against cheap imports remain paramount.
• Political Narratives
  • Colonial economic policies and their repercussions are often invoked in political discourses.
  • Economic self-reliance, or “Aatmanirbhar Bharat”, a term popularized by Prime Minister Narendra Modi, is reminiscent of the post-independence emphasis on self-reliance.
  • Discussions around foreign direct investment (FDI) in sectors like retail have parallels with colonial era debates on the influence of foreign businesses.

X. Conclusion

Summarizing the impact of free trade on the changing character of British colonial rule

• Free trade, as endorsed by the British, fundamentally reshaped the economic terrain of India.
• The ideology of free trade was rooted in the desire for increased markets and access to valuable resources.
• Through strategic control of tariffs, taxes, and regulations, the British ensured India remained a captive market for their goods.
• Introduction of cash crops like indigo and opium in Indian agriculture had significant socio-economic repercussions.
  • Redirected resources from food production, leading to famines.
  • Forced Indian farmers into cycles of debt.
• The traditional Indian industries faced a decline.
  • Example: The textile industry, once a global leader, faced challenges due to influx of cheap machine-made textiles from Britain.
  • Resulted in large-scale unemployment and deindustrialization.

The intertwined fates of Britain and India in the world of global commerce

• Britain’s industrial revolution was significantly powered by resources and markets accessed through its colonial endeavors, especially in India.
• India was transformed into both a supplier of raw materials like cotton, jute, and spices and a consumer of finished British products.
• This trade dynamic resulted in a shift of wealth, with Britain amassing significant economic gains.
• Indian seaports like Mumbai, Kolkata, and Chennai developed as major hubs, enabling the British to control trade routes and maritime commerce.
• The establishment of British institutions, laws, and governance structures in India further solidified their economic dominance.

Reflection on the broader implications for understanding colonialism and global economic history

• The case of British colonialism in India underscores the interplay between political power and economic strategy.
  • Colonialism wasn’t just about territorial acquisition; it was also about economic dominance and exploitation.
• British economic policies in India offer insights into the mechanics of global economic dominance and dependence.
• The legacy of these policies can still be seen in modern global trade dynamics, where former colonies often remain dependent on more developed nations.
  • However, post-colonial nations, including India, have worked hard to redefine their positions in global commerce.
• Understanding this history is vital for framing current economic discourses, especially in areas like trade, development, and international relations.

1. Analyze the impact of laissez-faire principles on the East India Company’s role in global commerce. (250 words)
2. Discuss the consequences of the transformation of Indian agriculture due to the introduction of cash crops during the British Raj. (250 words)
3. Evaluate the influence of major British businesses on colonial policies in India during the era of free trade. (250 words)