• Ancient India was a rich and prosperous country. It had been nicknamed as the ‘Golden Sparrow’. Wealth of India was considered to be abundant. The standard of living of Indians was very high.
  • Foreign travelers to India frequently reported a general prosperity. India had achieved a high industrial development. India’s industrial skill was admired everywhere. Even Roman Empire used to purchase large quantities of Indian luxury fabrics.
  • Romans used to pay India in gold and silver for these commodities. At one time the muslin of Dacca, the beautiful woollen shawls of Kashmir, the fine linens, calicos and the brocades of Delhi were famous throughout the World.
  • India had a well-developed metal industry also. The famous iron pillar at Delhi is a standing testimony to it. The ship building industry was also in a prosperous state.
  • In addition, a number of handicrafts flourished both in the rural and in the urban areas. The Britishers ruled over India for about 200 years. During this period, a policy of systematic exploitation and loot of the Indian economy was followed.
  • As a result, the old economic organization of India broke down, industrial structure collapsed, burden on agriculture mounted, and hence the poverty increased.

Economic System of India during the British Regime

  • The East India Company was established in India as a commercial unit. The aim of this Company was to develop trade relations with the eastern countries. The Directors of the company made a serious study of the political condition of India.
    • The process of political disintegration began in India rapidly after the decline of the Mughals. The English took advantage of this situation and besides establishing their trade in India they got an opportunity to take over its administration in their hands.
    • Bengal was the first province where the English established their control in the beginning. Afterwards, the British government went on increasing its influence gradually in most parts of the country. In this way, the East India Company besides being a commercial institution also became a political power.
  • Even then, there is no denying the fact that the English came over to India as traders and continued to be so to the last.
    • They were interested in administration only because they thought that the economic resources of the country were rich enough for commercial development. They were not at all interested in the development of India rather they wanted to utilize its resources in their own interest.
    • Thus, the chief characteristic of the British regime was the economic exploitation of India resulting in poverty for the Indians.
    • The British in order to strengthen their economic system spoiled the traditional economic structure of India and did not give an opportunity to the country to develop her own new economic system based on her resources.
  • Thus, the entire economic system of India was exploited during the British regime, and some revolutionary changes took place in the field of agriculture, trade, commerce and handicrafts.

Influence on Agriculture

India is chiefly an agricultural country

  • From the very beginning, agriculture has been considered to be the very base of its economic system. The British Government made some changes in the agricultural setup of the country, because of which, India’s economic system was affected immensely. The English policy affected Indian agriculture in the following ways –
    1. The British Government had introduced Zamindari system in order to realize the land revenue in the Indian provinces.
      • With the development of this policy, the land of the real owners began to be divided among the moneylenders, wealthy persons, rich merchants and other influential persons.
      • Taking advantage of the illiteracy and poverty of the village folks, some ambitious and rich persons conspired with the revenue officers and took illegal possession of the land of the poor and ignorant villagers.
      • They took recourse to committing forgery in the revenue records and became the owners of the lands so far possessed by the poor farmers.
      • They did not do this for the development of agriculture but just to establish their control over land and a mass money.
    2. The evil result of transfer of lands soon became evident when the landlords started giving their lands on higher revenue and tried to realize the maximum tax from the peasants.
      • If the payment of the revenue was not made in time, the landlord had the right to alienate the peasant from the right to cultivation of that particular piece of land.
    3. The Zamindari system adversely affected the rural economic structure. The productivity of the cultivable land began to decrease gradually because the landlords did not pay attention towards the fertility of the land.
      • They only wanted to extract more and more money by giving the piece of land to the highest bidder hence the equilibrium of the rural economic system broke down.
      • The landlords went on becoming richer and the farmers had to fight against poverty to keep their body and soul together.
      • As a result, a great gulf was created between the poor and the rich, which could not be abridged and gave birth to social tension and class struggle.
    4. As the balance of economic system was disturbed, the rural people fell victims to heavy debts. The farmers had to take loans on high rates of interest for seeds, manures, irrigation and other agricultural purposes. The autocratic and dictatorial attitude of the moneylenders made the position of the farmers all the worse and they were forced to lead a deplorable life, at the mercy of these local exploiters.
    5. The transfer of land from the real owners to the moneylenders and the merchants proved fatal for the peace and order of the society. Various dissatisfied landowners who were deprived of their ancestral lands, took law and order in their hands and created chaos and confusion in the society. Litigations began between the cultivators and the landlords. All these demerits totally undermined the rural economic structure.

Influence on the small scale industries

  • The other drawback of the administrative system was that it destroyed the small-scale industries. At that time, the Indian small scale industry contributed a lot to the economic system of the country. Its following effects need special mention here –
    • The small-scale industry of India was the pillar of its foreign trade and prosperity. As soon as the Company established its political supremacy in Bengal, it began to exploit the artisans of cotton and silk cloth. As a result, the cloth trade did not remain a source of profit for the artisans and the cloth industry of Bengal disintegrated.
    • According to the Charter Act of 1813, the English merchants were permitted to establish their trade relations in India, hence the number of exploiters multiplied, which ruined the economic structure of the country.
    • England imposed heavy duty on the goods to be exported from India. It patronized the British industry. On the other hand, the government of India imposed light duty on the goods imported into India so that these could be sold in the Indian market easily. Thus, it affected the Indian trade and industry from both sides and resulted in the ruin of trade and industry.
    • In 1833, the Indian Government declared the policy of free trade, which destroyed the small-scale industry completely. Because of tax-free trade, the British began to get the raw materials at a very low price and as such, the goods manufactured in the British factories began to be sold cheaply in the Indian market. The Indian goods being costly could be sold in the market hence the small-scale industry was almost ruined.
    • Influence on Big Industries – The British administrative policy affected the big industries in the following ways –
      • The development of the big industries was quite slow in the country.
      • The Indian industrialists were not provided with any help by the government.
      • The lack of fundamental industries did not permit the industrial development in India. For example, the production of steel began in India in the year 1913.
      • The Indian industries were established in some exclusive parts of the country, which contributed to further regional economic inequality.

The effects of the British rule in India.

  • There was a positive aspect to the British rule in India, inspite of the fact that the Britishers had always been prompted by their narrow interest. The Britishers fulfilled the role of as Karl Marx the ‘Father of Communism’ puts it, ‘the unconscious tool of history’ in the political, social and economic development of India.
  • The Britishers did the following favours to the Indian society –
    • by destroying, the old social order, the Britishers laid down the material basis for a new social order. The new social order is it precondition for economic growth.
    • The new social order helped break the rigidities of the caste system.
    • The Anglicised education was imposed. It opened the avenues to the great stream of English democratic and popular inspiration. It laid the seeds of Indian Nationalism and found expression in such movements as Swadeshi.
    • The Britishers introduced the railway system and a vast net work of transportation and communications. These became the forerunner of the industrial development of India.
    • Above all, the political and economic unification of the country was achieved for the first time under British rule.
    • The Britishers developed the most modern and efficient system of communication. The first telegraph line was operated in 1853 between Calcutta and Agra. The first postage stamp was released in 1852. Adequate improvements were made in the postal service. They made it possible to avail postal facility at a uniform rate throughout the country. Development of the post and telegraphs helped the integration of the different regions and accelerated the process of economic growth by facilitating the development of trade, commerce and industry.

Distructive role of British Rule

  • It is for its destructive role that the British rule in India is remembered. The destructive role of the British rule can be put under the following heads –
  • Decay of Indigenous Industries – Before the British rule India had a well-organized industry. With the arrival of the British, Indian industry began to decline. The process of decline began as early as the end of 18th century. It became very steep towards the middle of 19th century. Following causes were responsible for the decline –
    • The disappearance of the Native Indian Courts – Urban organized industry in India produced chiefly luxury and semiluxury articles. Aristocrats generally purchased these. Aristocracy consisted of Native Rajas, Nawabs and their Courtiers. With the establishment of the British rule in India, native rulers began to disappear. Their courtiers and officials were thrown into the background. Their disappearance meant the closure of the main source of demand for the products of these industries. The abolition of the courts meant that the fine articles which were in demand by the nobles for state occasions were no longer required. Hence began the decline of so many handicrafts and art.
    • Lack of patronage from the new upper class – As the old aristocracy and courts vanished, their position was now occupied in the towns by two classes – the European Officials and the new Educated Class. The European officials and the European tourists demanded the local products merely as souvenirs and curios. As such, they wanted goods at cheap prices. The demand tended to lower the artistic value of the goods produced. In many cases, artisans were forced to copy European designs and patterns. They worked hard to satisfy their customers. The products occasionally were bad copies of the originals.
      • The new class of educated Indians was proud to copy European fashions. They bated every thing Indian. They blindly imitated the western ways to please their masters. Apart from this slavish mentality sometimes some unwritten rule or convention also forced these Indians to behave like that. Thus the decay of the embroidered shoe industry was brought about by a strange convention. This convention permitted an Indian to retain a pair of leather shoes on slacking feet only. It also required him to put off shoes of native make when in the presence of a superior. Lack of patronage and demand for this new class accelerated the decline of indigenous industries.
    • Weakening of the Guilds – The British rule affected handicrafts in another way also. Urban artisans and craftsmen were organized in the form of guilds. The guilds supervised the quality of the products. They also regulated the trade. With the entry of British traders, these guilds lost their power. As soon as supervising bodies were removed, many evils began to appear. These were, for example, the adulteration of materials, shady and poor workmanship etc. This at once led to a decline in the artistic and commercial value of the goods produced.
    • Competition with machine made goods – The competition from the European manufacturers was responsible for the decline of the local industry. The construction of roads and railways made it possible to distribute the goods to every nook and corner of the country. Opening of the Suez Canal reduced the physical distance between England and India. English goods in large quantities were sent for sale in India. Among these goods textiles was the most important item. The quality of these clothes was definitely poor as compared to Indian clothes. However, they were cheap. They were within the reach even of the poor man. Hence, these imported clothes and other machine made goods came to be demanded in large quantities. Local handicraft lost their demand.

Distructive Role of British Government in India

  • The British Government in India was more interested in the development of industries at the home. Thus Government sacrificed all the interests of the local industries. The policies adopted by the Government were very harmful for indigenous industries.
  • For example, British goods were allowed to come to India without any duty or barrier. On the other, hand Indian exports of manufactured goods had to pay heavy customs duties. An unfair competition was result.
  • Many such instances of the British policy can be quoted. The simple consequence of this policy was that Indian industries suffered. Ultimately many of them closed down for good. Such was the fate of Indian industries at that time. It looks very ironical. Just imagine the following situation.
  • Industrial Revolution was booming in England and other western countries. It was the same Western countries, which were considered backward in relation to India. However, simultaneously in the rich India industries began to decline.
  • In other words process of ‘deindustrialization’ of India began. The industrial labour was rendered unemployed. It began to tall back upon agriculture. It increased the pressure on land. Land was divided and subdivided into smallholdings.
  • Agricultural productivity fell down and agriculture thus became a backward industry. This process of decline continued till the end of First World War. After the War the Britishers realized the significance of a developed industrial economy in India from the military point of view. A developed Industry in India could have easily helped them keep running the supply lines during the War. However, by then great harm had already been done to the indigenous industry.
    • Decay of old towns and Growth of new cities – Another impact of the British rule in India was the movement of population from the old towns to the new trading centres. These trading centres were situated in the cities. Thus many new cities developed. However, at the same time, many important towns began to decay. Among these important towns were Mirzapur. Murshidabad, Malda, Santipore, Tanjore, Amritsar, Dacca etc. Among the important cities that developed were Delhi, Bombay, Calcutta, Madras, Bangalore, Nagpur, Karpura and Karachi, Lahore (now in Pakistan) Chittagong (Bangladesh), Rangoon (Burma) etc. These cities grew in importance as great commercial towns.
    • The decay of Urban Handicrafts – The decay of urban handicrafts following the disappearance of the royal courts brought about a decrease in the population of the old Indian towns. As the craftsmen lost their occupations, they turned to agriculture. They shifted to villages.
    • Diversion of Trade Routes – Introduction of railways in India by the Britishers opened up new means of transportation. Some of the old towns were prosperous because they were located on some important trade routes. For example Mirzapur was an important trading centre because of its location on the River Ganga. With the introduction of railways, old routes and old means of transportation lost their importance. Hence the old towns also began to lose their significance.
    • Epidemics and Insanitary conditions in old towns – Most of the old towns had become stagnant. These were vulnerable to diseases. Frequent outbreak of epidemics Like plague and cholera was a common feature. Such epidemics took a heavy toll of the urban population. These, therefore, also drove a large population from the urban areas. In this way many old towns lost their importance. However, simultaneously commerce and trade encouraged the growth of new cities.

Concentration of Trade in Big Cities

  • The biggest single cause of the rise of big cities is the Concentration of Trade. It means that most of the producers, distributors etc. open offices in big cities. It is because of the fact that big cities offer better marketing facilities to the traders. Traders are attracted to these places from small towns and rural areas. This is what happened during the British rule. The British promoted trade and commerce in our country. This was concentrated only in a few cities. These cities grew in importance.
    • Higher Wages in big cities – New and big cities generally offer more job opportunities. With the growth of trade and commerce job opportunities in big cities were increasing. At the same time large number of artisans and craftsmen were being thrown out of their jobs in semi-urban areas. These unemployed artisans, village craftsmen and landless agricultural workers were shifting to big cities in search of jobs. It was because agriculture had already become crowded. Thus big cities attracted large labour force.
    • Centralization of Administration – The Britishers adopted a new system of administration. Government offices came to be located in big cities. These places were known as district headquarters.
      • These cities grew at the expense of small towns in the districts. These Government offices were also a good source of jobs.
      • A large part of the urban population came to depend on the government service for their living. It led to the migration of population to these cities. This resulted in growth of cities.
      • In other countries growth of cities was always encouraged by establishment of industries. In India on the other hand influence of industry has been totally lacking. This was because that old industries were dying out at that time, new industries were not coming forth.
      • Growth of trade and commerce was in the interest of the Britishers. Therefore, trade and commerce had more influence on the decay of towns and cities.

Introduction of Railway

  • India is a vast country. It extends from KanyaKumari in the South to Kashmir in the North. For such a large country means of transportation and communication play a crucial role. Political, Social and Economic integration of the country depends to a large extent on the availability at cheep and easy means of transportation and communication.
  • In this sense only, the Britishers made a significant contribution to the economic progress of India. They introduced railways in the country. First railway train ran from Bombay (Mumbai) to Thane a distance of 21 miles on 16th April 1853. The advantages of railways from the economic point of view are very clear. Railways have made it possible to fight famines and food scarcities even in distant regions. Growth of trade and commerce always depends on railways. Railways also make it possible to make better use of resources like raw materials etc, lying at different places. They help in the movement of population. The growth of towns, ports developments etc. are possible because of railways.
  • However, during the British rule railways did not make much headway towards the economic development of the country. As a matter of fact, the Britishers never wanted Railways to act as an agent of economic progress. The motive behind railway construction was never industrial and economic development of the country. The motive was to open up India more completely, so that the far-flung areas should be easily accessible. That would make it easy for the Britishers to exploit the resources of the country in a better way for their own interests. Following reasons explain why the Britishers accepted the scheme of railway construction in India. These throw light on their real motives also.
    • Transportation of Raw Materials – Industrial Revolution started in England around the beginning of the 19th century. A number of large industries especially cotton textiles had been established in England. Raw materials supplies fed up the wheels of these industries from English Colonies. India was a rich source of supply of raw cotton to the British industries. Bullock carts carried the raw cotton bales. These carts delivered cotton to big centres. These used to cover long distances. It was submitted by the cotton traders and manufacturers in England that when bullock carts transported cotton dirt used to get mixed with it. The Lancashire textile mills wanted good, clean cotton for their use. Only railway transport could meet their need.
    • Market for Manufactured Goods – Another essential requirement of the Industrial Revolution in England was that there must be profitable sources of sale for manufactured goods. England in itself is a small country. Large quantity of manufactured goods could not be sold there. India on the other hand could offer them a very large market. For that it was essential that the country should be opened up. Far-flung areas should be made accessible by easy and cheap means of transportation. Railway served the purpose.
    • Military Considerations – The Britishers were a foreign power. They were ruling over India. India is spread far and wide. It was necessary for the Britishers to join different corners of the country. Their strength and power, was often challenged and put to test by the local people in one region or the other. The Britishers had to meet this challenge by mobilizing troops and military stores. No other means of transportation could make fast mobilization possible. Only railways did that.

In short the Britishers had their own selfish interest in construction of railways in India. The military and trade considerations prompted them to do this. They were never interested in industrial and economic needs of India. Same was with the railways also. Railways have contributed much too economic progress especially after independence. We do acknowledge our debt to the Britishers for this gift. However, during the British rule railways contributed more to the destruction of our economy rather than its construction. The adverse effects of railway construction were innumerable.

Adverse effect of Railways in India

  • Decline of Urban Handicrafts – One of the most serious consequences of railway construction in India was the decline of urban handicrafts. With the growth of railways, the mills of Lancashire and Manchester entered in big way in Indian markets. The mill made goods posed a serious challenge to the local handicrafts. These handicrafts could not stand ‘Cost Price Warfare’. They ultimately decayed out.
  • Growth of Colonial Character of our Trade – Railways contributed to the expansion of trade in our country. However, this expansion of trade was more of the colonial character. Railways made it possible to arrange for mass distribution of manufactured goods of England. They also made it possible to collect agricultural raw materials even from the remote corners of the country for supply to England. Thus the composition of trade that emerged was as follows. India used to import manufactured goods and export raw materials – a really colonial character of foreign trade.
    • In short, the Britishers used railways as a tool of economic exploitation. It failed to act as an agent of growth during that period of history. It served the trade and military interests of the Britishers.
  • Drainage of National Wealth – The Britishers were tempted by the immerse wealth of India. They took to large-scale plunder of it. They began to carry its capital and wealth to England on such a large scale that many historians and economists correctly labelled it as, the ‘Economic Drain’. Among them the name of Dadabhai Naoroji and C. N. Vakil are worth mentioning.
    • This process of wealth and capital drain from India continued unchecked almost for 200 years. Even the richest nation would have been ruined when such inhuman treatment was given to it. India too could not survive these constant onslaughts. When the Britishers left India in 1947 Indian economy was completely shattered. It was thrown out of balance. The rich and prosperous land of India bad been ‘converted into a country of hewers of wood and drawers of water’.


  • Famine means non-availability of the bare minimum food for subsistence. Such a situation arises when widespread drought conditions prevail in a country. Before the arrival of the Britishers in India the Indian villages were self-sufficient and they also catered to the food requirements of the urban population.
  • The Britishers gave a new turn to the village set up and as a result of that the economic life in India became more stagnant. Recurrence of famines became a normal and regular phenomenon. About 22 major famines were reported from all over the country during 1770-1900. The most severe of them was the famine of Bengal in 1770.
  • It took a toll of 35 percent population of Bengal. In another major famine of Western Uttar Pradesh in 1860-61 about 2 lakh people lost their lives. The most devastating was the famine of Bengal in 1943, which took a heavy toll of over 30 lakh human lives.

    Causes of Famines

    The main causes responsible for frequent famines during the British rule were as follows –

    • Failure of Monsoon and other Natural Calamities – Indian agriculture depended fully on the monsoon. The Britishers did not make adequate arrangements for irrigation on the other hand they neglected the development of irrigation facilities. Failure of rains was the main cause of famines. Similarly failure of crops due to other natural calamities also caused scarcity of food grains.
    • Commercialization of Agriculture and decline of Selfreliance – The Britishers did a great injury to the old economic structure and destroyed it completely. In the old order the cultivators produced food grains for self-consumption. They used to keep sufficient stock of food grains for facing eventualities like famines, droughts etc, under the new system the cultivator was required to pay the rent in cash. Therefore, it became obligatory for the cultivator to sell off his produce in the market and repurchase it for self-consumptions. Therefore, in case of crop failure the poor cultivator had to suffer untold miseries.
    • Inadequate growth of means of Transportation and Communication – British rulers did not care much to develop the transport system. Though a network of railways was developed but it was only to help the Britishers to keep their strong hold on the Indian soil. Lack of the means of transportation and communication obstructed the free and quick movement of food articles from one region to another at the time of famine.
    • Export of Food Grains – The Lassies Faire policy of the British Government encouraged massive exports of food grains. The Britishers did not even keep buffer stocks of food grains. At times food grains were exported even when there was shortage of food articles in India.
    • Hoarding and Profiteering – The business community further aggravated the famine conditions by indulging in hoarding black marketing and other profit making activities.
    • Poverty – Chronic poverty of the people was also responsible for the pathetic conditions of famines. People could not store food grains to provide for the emergency conditions because of their megre money income. The Indian farmer was under heavy debt, his land holdings were small and scattered and the average productivity of land was also very low.

    Famines Commission

    • The devastating effects of 1876-78 famine compelled the British Government to do something substantial to check the recurrence of famines in India. The first Famine commission was set up in 1878 under the Chairmanship of Sir Richard Strachey.
    • The Commission recommended State interference in food trade in the event of famine. India witnessed another major in 1896-97. Therefore, the Second Famine Commission was set up in 1897, under the Chairmanship of Sir James Lyall. This Commission recommended the development of irrigation facilities. The Third Famine Commission was set up in 1901. This Commission recommended that the official machinery dealing with a famine must work all the year round so that the scarcity of food grains could be controlled well in time.
    • Though all the three Famine Commissions worked sincerely and vigorously but the British Government was never serious in dealing with the welfare plans for the masses. Famines continued to occur and the Famine of Bengal 1943 was the most horrifying. This was the gift of the British rule to India.
    • The early phase of the British rule in India is characterized by direct loot and plunder of the wealth of India. Gradually this loot and plunder paved the way for more systematic colonial exploitation of the Indian economy first by the industrial capitalist and then by the finance capital. All the interests of the Indian economy were sacrificed at the altar of British interests. Indians old system, which showed a fine harmony between agriculture and industry, crumbled down under the weight of the British interests. India was reduced to the status of a colonial appendage of the British Empire.
    • New Revenue Settlements – Lord Cornwallis Permanent settlement of 1793 created a number of absentee landlords. The assessment was arbitrary. No account was taken of the fertility of the soil and area of land. The Zamindars who were unable to meet their dues leased parts of their estates to middlemen. The rights of the Ryots were sacrificed. The permanent settlement was extended to Orissa, Banaras and to the Northern Sirkars in 1802-05.
    • Ryotwari Settlement was adopted in Madras. The settlement was made directly with the cultivator for a period of years. A direct relationship was created between the Government and the cultivator. The Ryot enjoyed free lessee as long as he paid legal dues. The system increased the security of the cultivator and removed the Zamindar the middleman.
    • Mahalwari or Village Settlement was adopted in the Punjab, Oudh, and Delhi. The settlement was not made with industrial landlords but with the village as such. The villagers as a whole both collectively and individually became responsible for the payment of revenue for the whole village.
    • Monopoly versus Free Trade – The East India Company enjoyed monopoly trade. Its opposition came from the British manufacturers in the make of Industrial Revolution. The free traders won their victory when the Charter Act of 1813 abolished East India Company’s monopoly of trade with India. By 1830 instead of being the world’s largest exporter of Cotton Textile, India had been converted into a net importer of cottons from Manchester. The company, which had been making much profit, from Indian trade, now lost it. The Charter Act of 1833 abolished the company’s monopoly of China trade also.

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