HISTORY March 21, 2018

Capitalism-System in which the means of production is in the hands of an individual

Three stages of Capitalism in India

Mercantile phase of Capitalism

Started with the arrival of Europeans and existed till the end of 18th century

India used to receive gold and silver from the Europeans in exchange for the goods

which earned India the title of Golden Bird.

India occupied 24% of the world trade while England’s role was only 2% in 1790

In 1947, the percentage were reversed

Before the advent of the foreigners the trade & commerce was in Indian favour.

The economy was well balanced between agriculture and industry.

It actually started ever since the Industrial Revolution in Europe in 1750’s to 1850’s

Charter act hastened the process of the second phase

The finished goods from England were brought to India

Raw material from India were exported to England

Economy primarily became agricultural

Led to deindustrialization

Policies adopted favoured only the British industries

The export of raw materials from India to England consumed both time and money

Industrial phase of Capitalism

Post 1850

Some industries were setup in India due to the presence of both raw material &

markets

The cost of journey and the time taken in the 2nd phase were considerably reduced

Example would be Railways, establishment of cotton & jute industries

But the problem was the kind of revolution which occurred in England never took

off in India & hence it is called partial industrialization

A large number of cottage industries were ruined by the colonial system

These industries were not replaced because the capitalists feared that if the industry

in India developed, the parallel industry in Britain would be forced to shut down

As a result, only few select capitalist were allowed to establish the industries

Indian capitalists were also not encouraged by the government

These are some of the reason why the third phase was not as successful as the 1st &

2nd phase of capitalism

Financial phase of Capitalism

Questions expected from this area: People who wrote about the drain of wealth

1st man to write about the drain of wealth was Dadabhai Naoroji

He wrote about it in a paper called ‘The English debt to India’

He also wrote a book ‘Poverty and un-British rule in India’

Other people who wrote were

Govind Ranade

R.C. Dutt made drain of wealth the subject of his The Economic History of India

R.P. Dutt

Dinshah Wacha

S.N. Banerjee

Prithwishchandra Ray

G Subhramaniya Iyer supported the cause of India's freedom & used his newspaper

The Hindu to protest British Imperialism.

Drain of Wealth

Who of the following was/were economic critic/critics of colonialism in India ?

1) Dadabhai Naoroji

2) G. Subramania Iyer

3) R.C. Dutt

Select the correct answer using the code given below:

(a) 1 only

(b) 1 and 2 only

(c) 2 and 3 only

(d) 1, 2 and 3

2015

Channels through which drain of wealth took place

Bribes taken by Robert Clive from the Nawabs of Bengal

Interest paid to English companies who invested in India

The English government in India borrowed money from English capitalists and they

paid the interest from India’s exchequer

Home charges

The salaries of Secretary of State

Maintenance of the army and funds for waging wars even outside India

Other expenses related to administration

Profits earned by British capitalists through illegal channels

They used to pay less than the market value while purchasing Indian goods

Support the India office in London.

Salaries & pensions of British personnel engaged in India.

With reference to the period of colonial rule in India, “Home Charges “ formed an important

part of drain of wealth from India. Which of the following funds constituted “Home Charges’’ ?

1. Funds used to support the India office in London.

2. Funds used to pay salaries and pensions of British personnel engaged in India.

3. Funds used for waging wars outside India by the British.

(a) 1 only. (b) 1 and 2 only. (c) 2 and 3 only. (d) 1,2,and 3.

2011

Dadabhai Naoroji wrote that it was the main reason behind the poverty of the nation

The drain of wealth became a big issue in the Congress session that followed 1896.

The British claimed that there was no drain of wealth but they were providing

services like roads, railways, health, education etc.

Impact of Drain of Wealth

Factors that led to deindustrialization

Industrial revolution in England

Requirement of raw materials from India

Markets in India

The English goods were much cheaper than the Indian goods & hence penetrated

easily into the Indian markets

The English traders started buying most of the raw material at a relative higher price

Hence the Indian traders were facing shortage of raw material & since they had to

pay a higher price of raw material, their cost of production increased

Deindustrialization

Import duty on Indian goods in England was 200% to 400% while for the English to

sell their goods in India, it was just 2% to 10%

Extinction of ruling class, & Indian ruling families by the British

Implementation of discriminatory laws by the government

There were no banks or co-operative societies in India

On the other hand in London alone, there were more than 600 banks at the turn of

17th & 18th century

No technical progress made by Indians

There was no sense of entrepreneurship

Indian traders did not search for new markets after losing a big market in the west

Lack of financial and technical support

Indian goods were charged higher than the English goods for transportation through

railways

It was prevalent everywhere, not only in railways

Discrimination in freight rates

Impact of deindustrialization

Indian economy, which was a balanced economy earlier, became a purely

agricultural based economy

Large scale unemployment

The small cottage industries which were destroyed were not replaced which led to

severe unemployment

Industries were established only in few places like Bombay, Ahmedabad etc. due to

pressure from certain Indian traders

Most of the Indian traders went back to agriculture, leading to fragmentation of land

holding size.

This resulted in stagnation in agricultural production & disguised unemployment

India was very famous for crafts like brass work, Malmal of Dhaka etc, but on

establishment of industrial products from England, these craft industries lost their

markets which ultimately resulted in loss of culture and history.

Loss of craft industries

Agriculture

I………………………………………………………………………I

Direct Consumption Selling in market

Commercialisation Food Crops E.g.-Rice, Wheat

Cash crops E.g.-Sugarcane

Commercialisation existed in ancient, medieval and modern times

The difference between the commercialization in 1890’s and in ancient times was its

magnitude

Commercialisation of agriculture

Industrial revolution

They required raw material like cotton, indigo, sugarcane which were agricultural

products

Later, tea was also in great demand as it acted as a stimulant for workers who

worked in cold conditions

Improvement in communications through rail and roads

Emergence of a unified national market

Linkage of markets

Boost to international trade given by entry of British finance, capital, etc

Factors leading to commercialization

Gave advance payment to the peasants: 1st time advance payment was made

The British traders paid part-payments, around 10% to 20% in advance for growing

cash crops

This was a big allure as advance money was in great demand since there was no

credit market

The British took land on lease

For growing these cash crops, intensive care and technical know-how was required

They hired landless labour to work on the leased lands

The wages paid to them was very low

The situation in the tea gardens were very inhuman

Process of commercialization

Positive

Indian markets linked with international markets

More profits due to export of cash crops by rich peasants

Improved agricultural infrastructure

Impact of commercialization

Shortage of food crops

Exploitation of peasants

Rural indebtedness

Got loans with heavy interests

Negative impact due to linking with international markets: If the harvest is good in

some other markets, the Indian peasants were ignored

Impact on land

For the Indian peasant, commercialization was a forced process.

Negative

Only in the 2nd half of the 19th century modern machine-based industries came up in India.

The first cotton textile mill was set up in 1853 in Bombay by Cowasjee Nanabhoy

The first jute mill came up in 1855 in Rishra.

But most of modern industries were foreign-owned.

Indian-owned industries came up in cotton textiles & jute in the 19th century & in sugar,

cement etc in the 20th century.

Development Of Modern Industry

The colonial factor also caused certain structural & institutional changes.

The industrial development was lopsided —core and heavy industries & power

generation were neglected & some regions were favored more than the others

causing regional disparities.

These regional disparities hampered the process of nation building.

Absence of technical education, the industry lacked sufficient technical manpower.

Socially, the rise of an industrial capitalist class & the working class was an

important feature of this phase.

Continued

“An Acute shortage of food in a given area due to natural or manmade reasons is

called famine”

Causes

Poverty causes famine or famine cause poverty?

British scholars:- Famines cause Poverty

Indian Scholars:-Poverty cause Famine

Colonial economic policy, not using rail networks etc

Between 1850 and 1900, about 2.8 crore people died in famines.

Eg:- 1876-1877 – period of Lytton. Vast past of central India.

Great famine in Calcutta of 1943 was directly linked with 2nd world war.

Famine commission headed by Richard Strachey . Famine code was drafted in 1883

It’s recommendations

Food would be supplied to people would be given in famine affected area

No tax

Fodder for animals

Famines

Development of Means of Transport and Communication

They were confined to bullock-cart, camel and packhorse.

They introduced steamships on the rivers and set about improving the roads, Work

on the Grand Trunk Road began in 1839 and completed by the 1850's.

The earliest suggestion to build a railway in India was made in Madras in 1831. But

the wagons of this railway were to be drawn by horses.

Construction of steam-driven railways in India was 1st proposed in 1834.

It was given strong political support by England's railway promoters, financiers,

mercantile houses trading with India, and textile manufacturers.

It was decided that Indian railways were to be constructed and operated by private

companies who were guaranteed a minimum of 5% return on their capital by GoI.

1st railway line running from Bombay to Thana was opened to traffic in 1853.