Impact of British Economic Policies

📖 The Big Picture

At the dawn of the 18th century, India was not a poor country. On the contrary, it was among the richest in the world—commanding 23% of the global economy. Its textiles, handicrafts, and agricultural produce were in demand from London to Central Asia.

But by 1947, when India became independent, this share had dropped to a shocking 3%. The natural question is: What happened?

The answer lies in how the British transformed India into a colonial economy—an economy not run for India’s needs, but subordinated to the requirements of British industry and trade.

This transformation had multiple consequences:

1. Ruin of artisans and craftsmen
2. Impoverishment of peasantry
3. Ruin of old zamindars and rise of new landlordism
4. Stagnation and deterioration of agriculture
5. Poverty and famine
6. Commercialisation of agriculture
7. Limited growth of modern industries

Let’s start with the very first theme—Ruin of Artisans and Craftsmen.

⚒️ Ruin of Artisans and Craftsmen

Before the British, India’s economy thrived on handicrafts and small-scale industries. The weavers of Bengal, the silk-makers of Murshidabad, the carpet weavers of Awadh, and the metal workers of Rajasthan enjoyed global fame. Their goods were painstakingly handcrafted, often taking weeks or months to complete.

But under British rule, they faced three shocks:

1. Unequal Competition with Machine-made Goods

• After the Industrial Revolution, Britain began producing goods on a large scale with steam-operated machines.
• Indian goods, made with primitive techniques, were costlier and slower to produce.
• After 1813, the British imposed a policy of “one-way free trade.”
  • Indian markets were forcibly opened to British manufactured goods.
  • But Indian goods faced high import duties in Britain and Europe.
  • Result → Indian goods were eliminated from foreign markets, while British goods flooded Indian bazaars.

👉 This was not free trade, but “free entry for British goods and closed doors for Indian goods.”

2. Oppressive Policies of the East India Company

• Company servants forced weavers in Bengal to buy raw cotton at artificially high prices and then sell their finished cloth at throwaway rates.
• Many weavers, unable to survive under this coercion, were forced to abandon their craft altogether.

3. Disappearance of Indian Rulers

• Who were the biggest customers of Indian handicrafts before the British?
  → Indian kings, princes, and nobles.
• They patronised artisans, ordered luxury items, and sustained local industries.
• But after British conquest, these rulers lost power. Their place was taken by British officials and military men—who preferred imported British goods.

4. Export of Raw Materials

• The British began exporting raw materials like cotton and indigo to Britain.
• This raised the cost of raw materials inside India.
• As a result, Indian artisans could no longer afford raw materials at reasonable rates, further crippling their ability to compete.

🏚️ Consequences of the Collapse

So what happened when these artisans and craftsmen lost their livelihood?

A. Dependence on Agriculture

• Since machine industries did not develop in India, the displaced artisans had no alternative employment.
• They were forced to fall back on agriculture—becoming tenants, labourers, or sharecroppers.
• This caused overcrowding of land, leading to increased poverty.

👉 Historians call this process “Deindustrialisation of India.”

B. Destruction of Self-Sufficient Village Economy

• In pre-British times, villages were self-sufficient.
  • A peasant would cultivate land, but his family might also spin yarn or weave cloth part-time.
  • Agriculture and handicrafts were interwoven—one supplemented the other.
• But with the destruction of rural crafts, this balance was broken.
• Agriculture was left as the only occupation, making villages vulnerable to poverty, famines, and indebtedness.

🌍 Summing Up

Thus, the ruin of artisans was not just an economic change—it was a civilisational disruption. An India that once dazzled the world with muslin, silk, and metalwork was reduced to a supplier of raw cotton and a consumer of Manchester cloth.

This was the first blow of British economic policy—setting the stage for widespread poverty and dependence.

Great, now let’s move forward into the second major aspect of the Economic Impact of British Rule—the Impoverishment of the Peasantry.

🌾 Impoverishment of the Peasantry

If the ruin of artisans and craftsmen represented the destruction of India’s urban and semi-urban economy, the impoverishment of the peasantry symbolised the collapse of the rural backbone of India.

Agriculture had always been the primary occupation of the Indian people. But under the British, instead of becoming modernised or productive, agriculture became the site of over-taxation, exploitation, and misery. Let us see how:

1. High Revenue Demand

• One of the biggest causes of poverty was the heavy land assessment (land revenue).
• Right from the time of Clive and Warren Hastings, the guiding principle was simple: extract the maximum revenue possible, regardless of the cultivator’s condition.
• Under different revenue systems:
  • Permanent and Temporary Zamindari Settlements → Zamindars squeezed cultivators mercilessly, charging exorbitant rents, demanding illegal dues, and even forcing begar (unpaid labour).
  • Ryotwari and Mahalwari Systems → Here the government directly dealt with peasants (ryots) or villages, but fixed revenue at 1/3rd to 1/2 of produce—an unbearable burden.

👉 Thus, whether through zamindars or directly, the cultivator was crushed.

2. Rigid Revenue Collection

• The British system was extremely rigid—land revenue had to be paid on fixed dates, even if the harvest had failed due to drought, flood, or pests.
• If the peasant defaulted:
  • His land was auctioned off by the government, or
  • He was forced to sell part of his land to meet arrears.
• In both cases, the cultivator lost his land and slipped into tenancy or labour.

👉 Compare this with pre-British systems: earlier rulers often remitted taxes or reduced them in case of bad harvests. But under the Company, there was no compassion, only collection.

3. Overcrowding of Land

• Because of deindustrialisation (artisans losing jobs), millions turned back to agriculture.
• This led to overcrowding of land—too many people depending on too little land.
• The peasant now faced a three-fold burden:
  1. Government → high taxes
  2. Landlords → heavy rents
  3. Moneylenders → high-interest debt
• Left with almost nothing, peasants lived on the verge of starvation.
• Famines became frequent: whenever crops failed due to flood or drought, millions perished.

👉 Even though in later years, the proportion of revenue as produce declined (because prices rose), the population pressure was so high that even this reduced share felt equally crushing.

4. Commercialisation of Agriculture

Now, here comes another twist. The British pushed agriculture into commercialisation—growing crops not for food, but for the market.

• Crops like indigo, cotton, jute, opium were grown to meet British industrial and trading needs.
• The poor peasant was forced to sell his produce immediately after harvest to pay revenue, debts, and rents.
• But since he had to sell quickly, he sold at throwaway prices to grain merchants.
• Who were these merchants? Often the same village moneylenders.

👉 The result? The cultivator remained perpetually poor, while the merchant-moneylender accumulated wealth.

⚖️ The Broader Consequence

Thus, the peasant was systematically impoverished. He:

• Produced for the British market, not for his own family’s needs.
• Paid revenue and rent that left him half-fed.
• Fell into debt traps with moneylenders.
• Lost resilience against natural disasters, leading to devastating famines.

In short, the backbone of India’s economy—the peasantry—was broken. Agriculture, instead of being the source of prosperity, became the site of misery.

🌍 Summing Up

If we look at the story so far:

• First, the artisans were ruined, leading to deindustrialisation.
• Those displaced artisans crowded into agriculture, putting extra pressure on land.
• At the same time, the peasants already in agriculture were overburdened with revenue, rent, and debt.
• This dual process created a cycle of poverty, famine, and stagnation.

👉 The Indian peasant, once the proud cultivator of a fertile land, was reduced to a debt-ridden tenant or labourer under colonial exploitation.

⚖️ Ruin of Old Zamindars and Rise of New Landlordism

When the British introduced their new land revenue systems, they not only ruined peasants but also disrupted the traditional class of zamindars. Let’s see how:

1. Decline of Old Zamindars (especially in Bengal & Madras)

• Under Permanent Settlement, zamindars were required to pay a fixed revenue to the government every year, no matter how the harvest turned out.
• Many old zamindars failed to meet this heavy and rigid demand.
• By 1815, almost half of Bengal’s zamindari lands had been transferred to merchants, moneylenders, and new moneyed classes.

👉 The old aristocratic zamindars, who had some traditional bonds with tenants, were gradually replaced by new urban-based landlords.

2. Rise of New Landlordism

• These new landlords were mostly merchants, moneylenders, and rich peasants who had spare capital but no industrial outlets to invest in.
• So they invested in land.
• Unlike the old zamindars who at least lived near their estates, the new landlords lived in towns.
• They were absentee landlords:
  • Ruthless in collecting rents
  • Detached from the sufferings of cultivators
  • Exploitative, since land for them was purely a source of income, not responsibility.

3. Landlordism in Ryotwari Areas

• In theory, ryots (cultivators) were landowners. But the excessive revenue demand forced them to borrow from moneylenders.
• Once trapped in debt, ryots lost land to these moneylenders and wealthy peasants, who also joined the new class of landlords.

👉 Thus, in both Zamindari and Ryotwari areas, traditional cultivators lost control of land and a new class of exploitative landlords emerged.

4. Subletting & Intermediaries (Subinfeudation)

• Many landlords found it easier to lease out land instead of cultivating.
• This led to a chain of intermediaries: zamindars sublet to one layer of rent-collectors, who again sublet to others, and so on.
• The actual cultivator at the bottom bore the heaviest burden—he had to feed the entire pyramid of rent-seekers.

👉 This system of subinfeudation created absentee landlordism and extreme exploitation of peasants.

5. Political Position of Landlords

• Because their very existence depended on British rule, most zamindars and landlords became loyal supporters of the British.
• Along with princes of princely states, they opposed the rising national movement.
• Hence, while peasants were naturally drawn towards nationalist agitation, landlords often stood on the opposite side.

🌱 Stagnation and Deterioration of Agriculture

Now let us see how all these structural changes affected agriculture itself.

1. No Investment, No Incentive

• Cultivators were too poor to invest in improvements.
• Even if they managed to increase productivity, the benefits would go to landlords or moneylenders.
• Hence, peasants had no motivation to adopt better seeds, irrigation, or tools.

2. Role of Absentee Landlords

• Absentee landlords cared only for rent collection.
• They had no interest in improving productivity.
• Instead of reinvesting profits, they squeezed tenants harder.

3. Neglect by the British Government

• The government collected huge land revenues from peasants but spent very little on agricultural improvement.
• For example, agricultural education was neglected: by as late as 1939, India had only six agricultural colleges!
• While countries like the USA, Germany, and Japan were witnessing Agricultural Revolutions, India remained technologically stagnant.

4. Why Agriculture Remained Backward?

• Heavy land revenue demand and rigid collection
• Overcrowding due to deindustrialisation
• Indebtedness of peasants
• Fragmentation of holdings because of subinfeudation
• No government support for irrigation, research, or credit

👉 All these ensured low productivity and perpetual stagnation.

🌍 The Broader Picture

So far, we’ve seen three stages of colonial impact:

1. Artisans ruined → deindustrialisation → pushed into agriculture
2. Peasants impoverished → over-taxed, indebted, famine-stricken
3. Old zamindars replaced by new exploitative landlords → agriculture stagnated, peasants squeezed further

Thus, by the 19th century, India’s economy was caught in a vicious cycle of poverty, stagnation, and exploitation.

Excellent, now we come to one of the most painful outcomes of colonial rule in India—Poverty and Famines. This section really shows how deeply the economic exploitation affected ordinary people’s lives.

🌍 Poverty and Famine under British Rule

If one had to describe British India in one word, it would be poverty.
Most Indians lived permanently on the edge of starvation. Even a slight drought or flood could push lakhs into death. And this was not because India lacked resources—it was the outcome of colonial policies.

Why Did Poverty Become the Permanent Condition?

The poverty of Indians during British rule was not “natural poverty.” It was a product of colonial exploitation. The major reasons were:

• British economic exploitation → India’s wealth was drained to Britain.
• Deindustrialisation → artisans lost their livelihood, fell back on agriculture, and overcrowded land.
• Drain of wealth → resources that could have developed India were instead financing Britain’s industrial growth.
• Exploitation of peasants → by zamindars, landlords, princes, moneylenders.
• High taxation → both land revenue and indirect taxes on daily goods.
• Backward agrarian structure → no irrigation, no scientific inputs, and heavy dependence on monsoon.

👉 Thus, poverty in India was man-made, not because of geography, population, or natural resources.

Poverty: The Paradox of a “Rich Land, Poor People”

• India had abundant natural resources.
• Before British rule, India was not less advanced than Europe. In fact, in the 18th century, India’s share in world GDP was around 23%.
• But while Western nations modernised during the 18th and 19th centuries, India became the victim of modern colonialism.
• Britain deliberately subordinated India’s economy to serve British interests.
• The outcome: while Britain grew rich, India sank into poverty, disease, and semi-starvation.

🌾 Famine: The Darkest Face of Poverty

What is Famine?

• Famine = extreme scarcity of food leading to mass hunger and starvation.
• Note: Famine ≠ drought.
  • A drought can be managed by irrigation, relief, and distribution.
  • A famine occurs when mismanagement and lack of access to food combine with natural stress.

👉 This is why Amartya Sen later argued: famines are not caused by the absence of food, but by inequalities in food distribution and purchasing power.

Causes of Famines under British Rule

Famines recurred regularly because of both natural and colonial policy factors.

• Agricultural stagnation: no new technology, low productivity.
• High land revenue: peasants had no savings to withstand bad harvests.
• Rigid revenue system: taxes were collected even in years of drought or crop failure.
• Forced commercialisation: land was diverted to cash crops (indigo, cotton, opium) instead of food grains.
• Neglect of irrigation: British ignored the repair/expansion of traditional canals and tanks.
• Drain of wealth: surplus was siphoned away instead of reinvested in India.
• Export of food grains: India exported grain to Britain even during times of domestic scarcity!
• Population growth (from 1920s) further worsened food shortages.

Major Famines and Their Toll

Year	Region Affected	Lives Lost
1770	Bengal Famine (EIC rule)	~1 crore (1/3 of Bengal’s population)
1860-61	Uttar Pradesh	2 lakhs
1865-66	Orissa, Bengal, Bihar, Madras	20 lakhs
1868-70	Western U.P., Bombay, Punjab	14 lakhs
1876-78	Madras, Mysore, Hyderabad, Maharashtra, U.P., Punjab	Madras: 35 lakhs, Mysore: 20% pop., U.P.: 12 lakh, Maharashtra: 8 lakh
1896-97	Entire country	45 lakhs
1943	Bengal Famine	~30 lakh

👉 Between 1850–1900 alone, 2.8 crore people died of famine.
👉 The Bengal Famine of 1943 was the last major famine under British rule, killing 3 million in a few months.

Intellectual Opinions on Famines

• Amartya Sen → Famines were not due to lack of food but due to inequality in distribution and fall in purchasing power of the poor.
• Mike Davis → Export crops displaced food crops, making Indians more vulnerable.
• Florence Nightingale → Spoke of two famines:
  1. Grain famine (shortage of food)
  2. Money famine (peasants had no money to buy food, even if grain was available).
     She also criticised the diversion of famine relief funds to finance Britain’s Afghan war (1878–80).

British Response

• Initially, the British government neglected famine relief.
• Under Lord Lytton, famine relief was minimal, since he believed “relief breeds laziness.”
• In 1878, a Famine Commission under Richard Strachey was appointed.
• It led to the Famine Code of 1883, which tried to systematise famine relief (grain depots, work programmes, limited remission of revenue).
• From 1880s onwards, irrigation and relief works received some attention, but it was always inadequate.

⚖️ Conclusion

The story of poverty and famine under British rule shows that:

• India’s poverty was structural and man-made.
• Famines were not inevitable but the direct result of colonial policies, drain of wealth, and neglect of agriculture.
• While Britain was industrialising and prospering, India was reduced to a land where millions perished of hunger in a naturally fertile country.

👉 This contrast explains why Indian leaders like Dadabhai Naoroji called British rule a “drain” and argued that poverty in India was the strongest indictment of colonialism.

Wonderful, now we come to the next major theme—Commercialisation of Agriculture. This is very important because it shows how British rule fundamentally altered the nature of Indian farming, making it part of the global capitalist system while leaving the Indian peasantry impoverished. Let’s try to understand this:

🌾 Commercialisation of Agriculture under British Rule

The Shift in Company’s Focus

• In the beginning, the East India Company exported Indian textiles to the West.
• But after the Industrial Revolution in Britain, Manchester’s cotton mills found it difficult to compete with fine Indian fabric.
  • British manufacturers complained that imports from India were ruining their mills.
• To protect British industry, the Company shifted focus from exporting finished Indian goods to exporting raw agricultural commodities.

👉 The idea was simple: instead of competing with British mills, India would supply raw materials to feed them.

Trade with China and the Role of Opium

• Britain imported huge amounts of tea from China, but China demanded silver in payment since it did not want Western goods.
• This created a drain of silver from Britain.
• To solve this, Britain pushed Indian goods (especially raw cotton, ivory, and later opium) into the Chinese market.
• Opium smuggling became especially lucrative:
  • Indian opium was grown under British monopoly.
  • It was exported illegally to China.
  • The silver earned was then used by Britain to buy Chinese tea.

👉 Thus, Indian agriculture became central to Britain’s China trade strategy.

Major Commercial Crops Promoted

Crop	Purpose
Raw Silk	For British weavers
Cotton	For British mills and also sold to China
Indigo	Blue dye in Western textile industry
Opium	Smuggled into China to finance tea trade
Tea (introduced in Assam, 1840s)	To reduce dependence on Chinese tea
Sugar, Pepper, Tobacco	Export crops for international markets

👉 Notice: None of these crops competed with British goods. Instead, they were chosen because they either served British industry (cotton, silk, indigo) or financed British trade (opium, tea).

Effects of Commercialisation

A. Impoverishment of Peasantry

• Though commercial crops fetched higher market value, the actual cultivators did not benefit.
• Profits went to moneylenders, merchants, zamindars, and European traders.
• India exported valuable crops but received no proportionate imports in return—contributing to the drain of wealth.

B. Instability in Rural Economy

• Agriculture in India was already dependent on monsoon.
• Now, an additional risk appeared: international market fluctuations.
  • If cotton prices fell in London, cultivators in Deccan were ruined.
  • Farmers were forced to grow crops not for local needs but for distant foreign markets.
• This made the rural economy highly unstable and vulnerable.

C. Rebellions and Unrest

• Since peasants bore the brunt of commercialisation, they sometimes resisted.
• Example: In the late 1860s, when cotton prices crashed, cultivators of Deccan suffered heavily. This economic misery partly fuelled the Deccan Riots (1875).

⚖️ The Broader Consequence

Commercialisation linked Indian agriculture to the global capitalist economy, but only on exploitative terms:

• India became a supplier of raw materials and a consumer of British manufactured goods.
• The benefits of this new system flowed to Britain and to Indian elites (moneylenders, zamindars, traders), not to the cultivator.
• It made agriculture export-oriented and market-dependent, increasing the vulnerability of peasants while deepening poverty.

👉 Thus, commercialisation of agriculture was less about “progress” and more about colonial control and exploitation.

✅ At this point, we can see a pattern in the economic impact:

• Artisans ruined → Deindustrialisation
• Peasants impoverished → Revenue system, debt, famine
• New landlordism → Exploitation through intermediaries
• Agriculture stagnated → No investment or technology
• Famines → Man-made disasters of colonialism
• Commercialisation → Agriculture linked to world market, but peasants left destitute

Excellent—now we arrive at the last pillar of the economic impact of British rule: the limited growth of modern industries. This section is crucial because it shows how, despite India entering the machine age, industrialisation was deliberately stunted and one-sided under colonial policies. Let’s unfold this:

⚙️ Limited Growth of Modern Industries

Colonial Policy and Industrial Revolution

• The Industrial Revolution in Britain changed everything.
• British policy in India was not to industrialise India, but to ensure that India became:
  1. A market for British manufactured goods.
  2. A supplier of raw materials for British industries.
• Result → Modern industries in India grew very late, very slowly, and very selectively.

Early Beginnings of Modern Industries

• 1850s: Machine-based industries began.
  • 1853: First textile mill set up in Bombay by Cowsajee Nanabhoy.
  • Cotton mills expanded in Mumbai, Ahmedabad, Kanpur, Sholapur, Nagpur (mostly Indian-owned).
  • 1855: First jute mill at Rishra (near Hooghly) by George Auckland and Shyamsunder Sen.
• Early 20th century: Sugar, iron and steel, mineral industries.
• 1930s: Glass, matches, cement industries.

👉 So, industrialisation did happen, but at a very limited scale.

Characteristics of Industrial Development

A. Dominance of British Capitalists

• Most industries were owned by foreign capital, except:
  • Cotton textiles (significant Indian ownership).
  • Sugar industry (Indian-owned in the 1930s).
• Why foreign capital dominated:
  • Cheap labour in India.
  • Abundant raw materials.
  • Huge ready market in India & Asia.
  • British govt. policies favoured foreigners.

👉 Indian capitalists remained weak because:

• The colonial state consciously favoured foreign capital.
• Railway freight policies discriminated against Indian goods.
• Banks and credit were controlled by Europeans; Indians struggled for loans.

B. Lack of Basic / Heavy Industries

• No iron, steel, or machinery plants for a long time.
• First steel produced only in 1913 (Tata Steel, Jamshedpur).
• Without capital goods industries, India’s industrial development remained incomplete and dependent.

C. Stunted Growth

• Industrial progress could not even compensate for the loss of handicrafts.
• Thus, poverty and land overcrowding continued.
• Causes:
  1. British policy restricted industries to protect Manchester and Lancashire.
  2. No tariff protection to Indian goods (unlike Britain, Germany, USA, which had protective tariffs).
  3. Limited technical education (only 7 engineering colleges in India by 1939).

👉 Finally, under pressure from nationalists and Indian capitalists, some tariff protection was granted in the 1920s–30s, but even then foreign-owned industries benefited more than Indian-owned ones.

Plantation Industries

• Exclusively European-owned.
• Tea plantations: Assam Tea Company (1839), world’s first tea plantation company.
  • Received Royal Charter in 1845 from Queen Victoria.
  • Prince Dwarkanath Tagore (grandfather of Rabindranath Tagore) was one of its directors.
• Indigo plantations: Flourished in Bengal and Bihar.
  • Peasants were forced to grow indigo under oppressive conditions.
  • This oppression was immortalised in Dinbandhu Mitra’s play “Neel Darpan” (1860).
  • Declined after invention of synthetic dyes.

Issues of Industrial Workers

• Harsh working conditions.
• Long hours, very low wages.
• Mostly unorganised, with little bargaining power.
• Discrimination: Europeans often held managerial jobs; Indians were confined to hard labour.

Disadvantages to Indians Despite Industry

• Equipment purchased abroad.
• Technical staff was mostly foreign.
• Finished products were exported, and foreign exchange earnings went to Britain.
• Regional imbalance: industries concentrated in Bombay, Bengal, Madras—large parts of India remained backward.

New Social Classes

Even though industries were limited, they produced two entirely new classes in Indian society:

1. Industrial capitalist class → Indian entrepreneurs like Tata, Birla, etc.
2. Modern working class → Industrial labourers in mills, plantations, and mines.

• These were new classes in Indian history because such modern industries had never existed earlier.
• Though small in number, they had big political importance:
  • They brought new technology and new social relations.
  • They became key supporters of the national movement.
  • Capitalists demanded tariff protection and economic reforms.
  • Workers joined strikes, protests, and later organised trade unions.

🌍 Conclusion

Thus, the story of Indian industrialisation under the British can be summed up in one line:

👉 “Industrialisation did occur, but it was crippled, distorted, and subordinated to colonial interests.”

• Britain prevented India from developing as a competitor.
• Instead, India became a dependent economy—supplier of raw materials, market for British goods, and host to foreign-owned industries.
• At the same time, the limited industries that did develop gave birth to new social forces—capitalists and workers—who later played an important role in the freedom struggle.