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Impact of Colonial Rule on the Indian Economy, 1757-1947

Lecture 1 of a series of eight Lectures on Indian Economy by Professor Venkatesh Athreya Advisor, M.S.Swaminathan Research Foundation Chennai

Indian Economy circa 1757


Overwhelmingly an agrarian economy Rural economy consisted of zamindars, rich peasants, the lower orders of the peasantry and a landless agricultural wage labour force under conditions of bondage.

Land revenue was extracted by the sovereign, and accounted


for most of the surplus above peasant subsistence; another small part went to the zamindars. Urban economy-including commerce and long distance tradewas parasitical, and based on the surplus exacted from the peasantry by the sovereign.

Rule of East India Company of Britain


Took over the revenue and taxation powers from the sovereign rulers Treated entire land revenue net of costs of administration as profits and used this money to buy Indian goods at very low prices Sold these goods all over the world at much higher prices, thus increasing their profits further In essence, Indian tribute financed British capitalist development; surplus extracted from India amounted to 10 % of Indias output or 2-3 % of Britains GDP or about onethird of capital formation in UK; this continued more or less throughout the colonial period.

Phases of colonial rule


1757-1800: Prime focus on converting surplus extracted through land revenue into commodities purchased cheaply from India and sold dear elsewhere in the world

1800-1850: Extraction of surplus continues unabated. Indian industry destroyed by cheap imports from Britainclassic case being textiles; massive de-industrialization and de-urbanization.
1850-1914: British capital invests in India, mostly in plantations, textiles, cement, sugar and railways; this is also the period of emergence of Indian businesses such as Tata and Birla 1914-1947: Two wars and the crisis between the wars; Rise of national movement, assertion by Indian capital and progress to Independence

Political Development under Colonial Rule: Some Key Dates


1757-1857: Rule by East India Company 1857: The Great National Revolt 1858-1947: Direct Rule by the British Crown 1883: Founding of the Indian National Congress 1920: First Conference of the All India Trade Union Congress 1930s: Organizations of Farmers, Students, Youth and Women, all linked to the freedom struggle, emerge 1947: India gains Independence, but the country is also partitioned

India at Independence
Weakening of Imperial Powers Emergence of Socialist Camp Massive Decolonization MANDATE FOR INDEPENDENT DEVELOPMENT

India at Independence
Militant movements of the peasantry The Naval Revolt Working Class Struggles

Indian Economy at Independence


Backward Economy in every sense of the term: Agriculture, Industry, Infrastructure, Education, Health, Financial Sector, Other Services

Hence, Crucial Role of State

National Consensus on Planning

Public Sector as Leading Development