Aditya Mukherjee_second Article

Social Scientist

The Return of the Colonial in Indian Economic History: The Last Phase of Colonialism in India Author(s): Aditya Mukherjee Source: Social Scientist, Vol. 36, No. 3/4 (Mar. - Apr., 2008), pp. 3-44 Published by: Social Scientist Stable URL: http://www.jstor.org/stable/27644268 . Accessed: 15/10/2013 06:03 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp

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The Return of the Colonial The

History:

in Indian Economic

Last Phase of Colonialism

in India >

c I am extremely

to the Executive Council of the Indian India History Congress for electing nie as the President of Modern section this year. I feel deeply honoured to be so associated with this Congress which has spearheaded the promotion of scientific, secular and anti-imperialist history in this country for over seventy years. thankful

is one reason why Indian historiography is one of the most advanced among the erstwhile colonial countries. However, this is not to say that the communal and colonial trends actively promoted the colonial trends have during period have died out. These some resurfaced and acquired influence even after periodically

This

independence. these trends painstakingly

There is thus the need to constantly contend with so that the civilisational so values promoted our are national liberation and by struggle preserved

furthered.

I have in this address in a small way tried to contribute to this effort by questioning the resurgence of the colonial trend in the of economic it writing history of the colonial period.1 Paradoxically, was in the sphere of the economic of that colonialism impact colonialism was first critiqued effectively. Also, the economic critique of colonialism, relative to other critiques of colonialism, was the first to be widely accepted. Yet the colonial point of view in this area has again resurfaced, as for example in the recent work of Tirthankar Roy. Iwill very briefly go over the broad contours of some of the thinking on colonialism

and its economic impact since the mid nineteenth on a and then focus in its last century critique of how colonialism a has been historians with colonial phase perceived by perspective. I may add that I feel humbled at occupying this position, the sectional president-ship teachers

and mentors

of the Congress, which some

of whom

are present

has been held by my here

today.

saw a rich debate on the impact of nineteenth century on the colony. Two journalistic pieces written by Karl Marx in 1853 for the New York Daily Tribune on British rule in India are of raised some key issues concerned with this debate which The

colonialism

relevance

even

today.2

Marx

in

these

articles

wrote

about

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"destructive"

and

the

role

"regenerative"

of

colonialism.

saw

He

in the very

Indian society, the process of destruction by colonialism of the pre-colonial regenerative role of colonialism, as it opened up the possibility of growth of in the colony. This was because Marx, on the capitalism and industrialisation basis of information then available to him, erroneously characterized Indian society as a 'changeless' 'Asiatic society' which needed to be destroyed, even though the process was painful, before any social progress could occur. Further, along with the destruction of the old 'Asiatic' order he expected that new elements introduced by British rule, such as electric telegraph, railways, steam

navigation,

private

in

property

land,

western

education,

free

press,

for the evolution of a political unification, etc., would modern western type of society. As he put it:3 in India: one destructive, the England has to fulfil a double mission other regenerating - the annihilation of old Asiatic society, and the society in India. laying of the material foundations ofWestern lead to the 'mirror image' of The hope was that colonialism would capitalism being produced in the colony. This position of Marx led to much create the conditions

and

controversy

misuse4

subsequently.

This

was

because

Marx's

overall

position in these articles and especially his position as it emerged shortly after writing these articles in the enormous corpus of work produced by him was not fully appreciated.5 Before one looks at the complex position taken by Marx over time it is significant nineteenth

to note that the modern Indian intelligentsia in the first half of the century had a perspective similar to that which Marx was to state

later in his 1853 articles. For instance, Raja Rammohan Roy, the father of India, described British rule as the gift of divine providence not because he was comprador or a lackey of the British but because he saw of the Indian British rule as creating the conditions for the modernization

Modern

economy, polity, etc., much in the manner reflected in the position taken by Marx. It appeared to be the wisdom of the time. Indeed, it is for this reason that the Indian modern intelligentsia did not support the 1857 revolt against the British, which they feared would lead to a throwback to the pre-colonial too, had doubts about the progressive potential of the revolt. the Indian intelligentsia was to soon (by the late 1860s) abandon this position and over the second half of the nineteenth century or see as to route not to of the colonialism capitalist harbinger began order. Marx, However

modernization but as the chief obstacle to the transition to capitalism in India, an understanding which was to lead them to demand the overthrow of British rule. In fact, the Indian early nationalists were among the first in the world, to evolve a multi Lenin or Rosa Luxemburg, before Hobson, pronged, detailed and sophisticated critique of colonialism. The remarkable decades

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The

Return

of the Colonial

in Indian

Economic

History

of the Indian early nationalists in this respect is perhaps still not adequately appreciated among scholars in India and remains virtually ignored globally despite the definitive and monumental work on the early nationalists produced by Prof. Bipan Chandra as early as the 1960s.6 ^ In the context of the change in perception of the Indian intelligentsia 1853 position regarding British rule it is very important to look at Marx's carefully and particularly to note how it evolved over time. (It would be achievement

interesting to investigate evidence of one being influenced by the other as their thinking on several aspects moved on similar lines). It must be noted that when Marx talked of the 'regenerative' role of British rule he was conscious that only the conditions of regeneration were being created under British rule and not regeneration itself. He was talking of a potential which had not yet emerged from the ruin brought on by British rule which he often described so graphically.7 He wrote, in June 18-53:8 of Indian society, England has broken down the entire framework without any symptoms of reconstitution yet appearing. This loss of his old world, with no gain of a new one imparts a particular kind of melancholy to the present misery of the Hindoo and separates Hindost?n, ruled by Britain, ... from the whole of its past history. In fact a few months later in his August 1853 article where he talked of the "destructive" and "regenerative" role he was still talking of England having to "fulfill" this "double mission" "new elements" were

certain

it to move

in India (i.e., it was yet to happen) in Indian society which

introduced

so that would

on

the path of social progress. However, Marx with remarkable prescience (much before the modern National liberation struggle in India took root) was simultaneously the need for the anticipating overthrow of colonialism if India was to actually reap the benefits of the "new elements" that British colonialism was to engender. As he put it:9 enable

The Indians will not reap the fruits of the new elements of society scattered among them by the British bourgeoisie, till in Great Britain itself the new ruling classes shall have been supplanted by the industrial proletariat, or till theHindus

themselves shall have grown strong enough to throw off the English yoke altogether. Marx suggests that British rule, or the onslaught of British capitalism on the Indian colony would "neither emancipate nor materially mend the social of the mass

of the people", which would depend on "not only the of productive powers, hut of their appropriation by the people" presumably possible only with the overthrow of British rule. Yet he says "what they (British rulers) will not fail to do is lay down the material premises for condition

development

at the cost of "dragging... c through misery and degradation".10

both" albeit

people

through

blood

and dirt,

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The question still remains that while Indians may not have been able to reap the fruits of the "new elements" that would lead to the "development of productive powers" till it achieved national liberation but did British rule create the "the material premises" for both the processes so that one could

CL < "5

"safely

S ^ 00 OO

expect

to

see,

at a more

or

remote

less

period,

the

regeneration

of

that

great and interesting country",11 India? That colonialism would create the but did it lay the "material conditions for its overthrow is understandable foundations" for the development of productive powers? o The answer to this question assumes importance not only to decide what view to take of colonialism as a whole but also in explaining certain positive developments in the late colonial period (in India) and particularly after the overthrow of colonialism. As we shall see later itwould involve seeing these

on >

either as the result of colonialism, though much restricted or or as a result of the break from colonialism. The central theme it, delayed by of this address will be to argue the latter. It appears to me that Marx began very quickly to distance himself from

developments

the position that colonialism, however "swinish", would introduce elements which would lead to the growth of productive powers and capitalism in the colony.

It is significant of the that Marx never used the characterization even not 1853 in his effect of after colonialism article, August 'regenerative' articles

written

later

that

year.12

He

clearly

was

moving

towards

a different

especially after he and Engels studied a concrete position colonial situation closely, that of Ireland. In fact, in his later writings, including in Capital Vol. 1 (1867), he began to emphasise the destructive role of colonialism and identify some of the key structural features which the on colonialism

interface was leading to which were not conducive to capitalism-colonialism the growth of capitalism in the colony though it helped the growth of or the colonising country. He clearly saw the capitalism in the metropolis in various unrequited transfer of capital from the colony to the metropolis forms, what the early nationalists called the 'drain', as a "bleeding process" ruinous to the colony but critical to the process of primitive accumulation and therefore to the transition to and growth of industrial capitalism in the countries.

metropolitan

He

now

saw

the Railways

as "useless

to the Hindus",

the dividend paid for the railways, like the military and civilian expenses which involved remittances out of India, as all constituting part of the drain or the "bleeding process". He notes that an unequal international division of labour was emerging, "a division of the chief centres of modern suited to the requirements industry" converting "one part of the globe into a chiefly agricultural field of and therefore counted

?

production,

for supplying

the other part which

remains a chiefly

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industrial

The

Return

in Indian

of the Colonial

Economic

History

advantage was led to growing and non-industrialised

5>

field". As is well known, the Ricardian theory of comparative used to perpetuate this division of labour, a division which

^^

productivity differences between the industrialised societies. Marx was perhaps the first to be able to see that apart from the fact ^ to that British industry benefited from the denial of industrial development was a so not in Britain India there obvious surplus appropriation favour of as

trade

the two countries

in the trade between

involved

to

opposed

the monopoly

or

trade

trade

? j^. a>

even in this so called free non-economic

involving

typical of the earlier mercantile phase of colonialism. He saw the involved in trade between countries with different 'unequal exchange' with levels the country productivity high productivity exchanging from the low commodities with less labour input for commodities country which had a much higher labour input, though the productivity coercion

commodities

of

had

exchanged

India

keeping

simultaneously "unequal

the

same

Each

The

the

process

industry

of surplus appropriation

reinforced

process

British

benefited

the process

strengthened

exchange".

value.13

monetary/market

un-industrialised

but

through

other.

British agrarian policies were also no longer seen by Marx as producing private property in land but "caricatures" of it.He no longer saw the potential in agriculture of capitalism in these societies this emerging through intervention. Here

we

see

seeds

of

the

that

understanding

the

"new

that

elements"

emerged as a result of the impact of colonialism, because they came in a colonial form, they were incapable of having a regenerative effect on the colony. Hence Marx increasingly emphasised the necessity of the overthrow of colonialism, a position taken further within the Marxist tradition by Lenin, Rosa

Luxemburg

others.

and

The critique of colonialism was sophisticated further inmany dimensions as the later stages of colonialism unfolded themselves and their impact could be

studied.

Major

advances

were

in analyzing

made

after the Second World War with

colonialism

the political

the writings

economy

of

of Paul Baran and

later, in the late 1960s and 1970s by the neo-Marxist world system analysts and others like theorists, Dependency Immanuel Wallerstein, Gunder Frank, Samir Amin, Nicos Poulantzas, Ernesto Laclau, Hamza Alavi and Bipan Chandra, to name just a few. [Since the early 1980s however, an alternate motley stream occupied by Balandier

post

1950s and

modernism,

partially among

in the

'post-colonial'

(and I hope sections

of

first

culture

temporarily) world

studies,

hijacked

academia)

subaltern

(fortunately the

mainstream

studies,

etc.,

has

as yet essentially debate

on

the

political economy of imperialism. The focus has shifted from the political response, economy of imperialism to its 'representation'. The nationalist

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7

Social

Scientist

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is also characterised including of massive long drawn popular movements, (and thus virtually dismissed) as either being part of the 'colonial discourse' or 'elite' or 'official'! This setback to the study of colonialism and nationalism has paradoxically occurred through scholarly intervention in the name of the 'people', the oppressed without a 'voice', by scholars who, largely have, at

00 OO

least in the Indian case, shifted base to the FirstWorld or appear to aspire to do so. As Arif Dirlik asks: "When exactly... does the post-colonial begin?" and intellectuals have arrived in First goes on to answer, "When Third World

o rs ^ <

^ Tf

oworld this

vO

academe." A critique of this stream, however,

is outside

the scope of

address.]14

Bipan Chandra in his seminal work "Colonialism and Modernisation"15 delivered as a presidential address to this very Congress in 1970, thirty seven years ago, argued that colonialism did not lead to capitalist modernization, neither did it create certain conditions in that direction, i.e., itwas not as if it or that it had some "residual" led to 'partial' or 'restricted' modernization the overall benefits, despite exploitative character, which- could be of some

>

after

advantage

plea for seeing colonialism nor

as

an

He,

independence.

of

amalgam

neither

along

with

Hamza

Alavi,

'traditional'

pre-capitalist

made

or backward

as semi-capitalist

and

'modern'

a strong

capitalist capitalist

as a distinct colonial structure.16 As Bipan Chandra put it, colonialism "is a well-structured 'whole', a distinct social formation (system) or sub-formation the basic control of the economy and in which (sub-system) a is in of the hands society foreign capitalist class which functions in the features

but

colony (or semi-colony) through a dependent and subservient economic, structure whose forms can vary with the and intellectual social, political, conditions of the historical changing development of capitalism as a world wide system." Further he argued that the new colonial social framework that came into being which of

social,

decaying

political, as

it was

included "not only the economy and

administrative being

bornn,

i.e., had

no

cultural 'regenerative'

life...

but also the patterns was

stagnant

and

potential.17

of the features that a colonial economy demonstrated, though they to be capitalist, within the colonial framework, appeared they performed completely different and distinctly colonial roles. For example, a colonial situation could witness, as it did in India, a high degree of commercialization Many

(or generalized commodity production), rapid growth in transport and with close the world market and a high degree of communications, integration investible within the economy all features 'potential surplus' raised from associated with capitalist development. Yet in the colonial context all these in the metropolis led to capitalist development but further developments colonial structuring in the colony. It ended up, to use Tilak's expressive phrase, g

"decorating

another's

wife",

and

one may

add, while

disfiguring

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one's

own.

The

of the Colonial

Return

in Indian

Economic

History

3>

colonial which was economy, forcibly internally and extroverted, the above changes did not stimulate internal inter-sectoral exchanges between Indian agriculture and Indian industry, or between Indian consumer goods industry and capital goods industry.18 The In

the

Indian

disarticulated

^-' ^ ?

circuit of commodity circulation was completed via the metropolis where 5 was colonial linked to metropolitan agriculture industry, or colonial consumer goods industry (if and when it was allowed to develop) with metropolitan capital goods industry; the multiplier effects of these exchanges were thus transmitted abroad. Similarly, the surplus generated in the colonial

j3. a>

economy did not lead to extended reproduction through investment (the key feature which modes of from pre-capitalist distinguishes capitalism production) to a higher facilitated

thus raising the organic composition of capital and productivity level on a significant scale within the indigenous economy, but this process in the metropolis.19 Traditional artisanal industry was a process

(i.e.,

destroyed,20

of

de-industrialization

in

occurred

a

country

which was the world's largest exporter of textiles in the pre-colonial era) and not replaced with modern capital intensive industry on a significant scale. in Capitalism did not grow in agriculture either. Commodity production was

agriculture the

colonial

to a "forced

in response

state's

revenue

demands

to primarily

commercialization" and

not with

a

capitalist

meet i.e.,

rationality,

to earn profit for investment. Typically, agriculture witnessed a high degree of but it did not lead to capitalist farming through extended differentiation The petty mode of production was perpetuated in agriculture reproduction. the large estates being let out to tenants with to cultivate at more or less the same

with

continued

technology.21

Moreover,

output

agricultural

grew,22 they remained

and

small holdings who traditional levels of

exports,

articulated with metropolitan

even

industrial

when

they

and other

needs.

The basic point was that colonialism overall

structure.

Growth

in one

or

had to be viewed and evaluated as an

the other

sector

of

the

economy

or

society

could not be evaluated as 'partial' development (to be offset against the lack of such growth in another sector) if that sectoral growth was instrumental in creating the colonial structuring which led to overall stagnation and even arrived at by Marx and Engels in their decline. This was an understanding as in the the Irish situation itwas by the early nationalists of colonial study case of India.23The development of railways, foreign trade, telegraph, agrarian transformation,

a colonial

civil

service,

etc.,

occurred

in a manner

that

they

instruments in converting the pre-capitalist and sometimes emerging capitalist societies24 into a stillborn colonial structure. The very in favour of instruments of the subversion of modern capitalist development colonial structuring cannot be treated as the 'residual' or 'partial' benefits of

became

critical

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9

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a fallacy which unfortunately colonialism, creeps into the thought of at the highest level and even some otherwise staunch liberal nationalists Marxists. The opportunity cost of failing to use the same resources, (which for colonial purposes) alternatively, often over domination and of having to undo the colonial structuring after freedom was won, ismind boggling. if it was not If colonialism was not leading to 'partial' modernization, the

created

Z vO m >

colonial

to modernization,

'transitional' O

instruments

of

centuries

was

but

then

backwardness,

structuring-in

moving temporally further on the colonial path would not bring the colony closer to modernization. Only a break from itwould.25 The colonial path and the capitalist path are not even like parallel paths which do not ever meet, they

are

actually

divergent

paths.26

The

more

a

society

moved

on

the

colonial

path the more the colonial distortions would be structured-in and the more difficult it would be to make the transition to independent capitalist or for that matter

socialist

term attributed

The

development.

to Daniel Thorner,

'built-in

to use

depressors',

an

apt

that colonialism

created would get heavier that much more challenging.

and the task of independent development Itwas not only the task of un-structuring the colonial economic structure which was the challenge before the countries politically liberated from colonialism.

task

The

of

spawned education

etc.,

system,

the

'de-colonizing'

like the colonial

by colonialism

were

to

prove

non-economic

bureaucracy,

equally

daunting.

institutions

judiciary, Sixty

years

police, after

India is still struggling to decolonize these institutions. As we independence, will see later we still have textbooks taught in our schools and major universities such as the recent Oxford Economic History of India by Tirthankar Roy,27 which argues a blatant colonial position which would have embarrassed many British Governor-Generals it is and Viceroys. While understandable that Niall Ferguson, the no-holds-barred open defender of British imperialism, should find Roy's work praiseworthy; what is surprising is that scholars such as Ramachandra Guha and Sanjay Subrahmanyam, whom

one would

not suspect of harbouring colonial sentiments, echo that of the mind is indeed a long and tortuous process.

view.28 Decolonization

II The

colonial

argument

has

a

long

ancestry.

Being

the

argument

emanating

from the more 'successful'/rich and powerful part of the globe, even though it was the argument of the ruling elite, it found takers among the oppressed as well. Its influence varied depending on the intellectual and political strength of the anti-imperialist movement at different points of time. Since the nineteenth century British colonial officials as well as some intellectuals put up a spirited defense of colonialism. They argued that British

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The

of the Colonial

Return

in Indian

law and order and brought led to growth of foreign trade communications, in resources with the global market, brought investments (drain was persistently denied), made colonialism

Economic

History

>>

modern

and transport and integrated the colony to India through British major changes in property ^ in and all factors leading 5to rights agriculture improved irrigation, economic development in India.29 The "white man's burden" unprecedented or the "civilizing mission" did not end there. Indians had to be retrievedn>from

R-" ^

c2.

their 'barbaric' and 'hideous' conditions through gradually training them for self government as well! Further, the inhibiting factors in Indian development it was

were,

argued,

over-population,

social institutions,

customs, thriftlessness,

on

extravagantly

spending

of

shortage

values and habits

Indian

capital,

social

like lack of ambition, and

marriages,

apathy,

also

India's

and climatic conditions. The negatives, in other geographical not at within involved and colonialism. words, looking The early Indian nationalists, consisting of some of the best minds ofthat era, over nearly half a century of intense intellectual activity, questioned each one of the colonial claims and, as I pointed out earlier, created a sophisticated weaknesses

critique of imperialism. Through books based on years of research, articles, newspapers, legislative assemblies, the British parliament, public meetings and numerous such forums they argued their position. Their success was that the essential elements of their thought became the common sense wisdom of the time and provided the basic structure of the economic understanding of not only to the Indian national movement but to the planners

colonialism

and academics

after independence. resurgence of the colonial

A major of colonialism

regarding the Indian the writings of Morris in the early 1960s,30 and the publication of the voluminous 2 A robust challenge 1980s.31 Economic Vol. in the History Cambridge early Toru with Matsui, Chandra, Bipan Tapan Raychaudhuri,32 Irfan emerged Habib,33 and others writing detailed critiques and by a number of research experience D. Morris

occurred

position in academia with

such as that of A. K. Bannerji, Basudev Chatterji, Sunanda Sen, Michael R.W. Goldsmith, Kidron, George Blyn, Utsa Patnaik, S. Sivasubramonian, A.I. Levkovsky, V.B. Singh, Debdas Bannerjee34 (to name just a few) and the seminal work of A. K. Bagchi.35 The colonial position on the economic front

works

however century,

continued, leading

particularly

to an

interesting

regarding

an

interpretation

of

the

18th

debate.36

works since independence However, while most of the pro-colonial reiterated the colonial position regarding only some aspects of the economy the recent work of Tirthankar Roy, The Economic History of India, mentioned above,

tries

to present,

somewhat

in a

'made

easy'

in its entirety covering all aspects of the colonial

style,

the

economy.

colonial

position

Roy laments that

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i i

Social

Scientist

in

o rs

the

"responsible...

in creating

^ <

Indian's

"average for...

this

sense

underdevelopment".

of

history", (The

was

"colonialism" 'guilt'

of

the

early

seen

as

nationalists

'sense' is evident). He wants us to "take leave of (such) and "step into history"37, ? history which then he proceeds to sense of little better than sketch the average colonialist's

generalizations" outline, doing history. It is not possible to do here a detailed critique of Roy's work as it involve going over the entire colonial position. He has reiterated would almost all the arguments of the British civil servants and Viceroys about the benefits of British rule and the causes of lack of growth in India that are

5 n3

above and has ignored or summarily dismissed the rich anti colonial discourse that evolved over more than a century. (Given below in the >footnote are some examples of Roy's position.)381 shall in this address limit myself to amore modest and limited task. summarized

m

Ill This address will focus on the last phase of colonialism in India particularly since the First World War.39 The period saw some growth of indigenous industry and a substantial growth of the indigenous capitalist class. Apart from this the period witnessed several other 'positive' developments which diverge from the classical colonial pattern that had got established in India. This has led to one group of colonial writers seeing these as the result of colonialism and its policies,40 which created conditions for rapid economic advance later.41Morris D. Morris too sees the period after 1914 as one during which "rather substantial structural modifications occurred" when "the base was laid for a renewed upward surge after independence"; unfortunately, despite all the "growth benefits of nineteenth century" the "nineteenth century as a period was too brief to achieve all the structural changes needed to provide the preconditions for an industrial revolution."42 The implication in their writings colonial

is that the

impetus of the changes during 1914-1947 and post Independence India could just build on them, break without fundamental from colonialism. Other colonial involving any scholars see this period as one of 'decolonization' where colonialism was gradually pulling out, handing over to Indian interests.43 Some even see this remained

period as one where England was being exploited by India!441 shall question this range of colonial views.45 Before I do a critique of the colonial view of this period I shall, however, first take a detour and in some detail enumerate what the positive that occurred in this period were and then go on to show how developments were not a result of colonialism or of a process of these developments decolonization.

2

First, it is generally undisputed

that a major

development

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in the Indian

The

Return

in Indian

of the Colonial

Economic

History

colonial economy in the twentieth century was the initiation of a rapid phase of import substitution inmost of the major consumer goods industries and certain intermediate and capital goods industries like textiles, sugar, matches, soap,

>

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paper, glass, sulphuric acid and other basic chemicals, chloride, tinplate, and iron and steel.46 (See table 1). This process,

cement,

magnesium

Table

1: Sea-Borne

Imports

Into British

India, 1900-1945

m

Cotton Piece-goods (million yards)

IV

1900-01

1920-21

1936-37

2003

1510

764

344

Sugar (thousand tons)

fD ."? CD" fD

1944-45

23

nil

(net imports-17)a Soap (thousand cwt) Matches (thousand gross boxes

Cement

(thousand tons!

165

313

48

12399

55 (By 1938-39, 95% of total consumption met indigenously)

131

51 [1940-41] Insignificant in 1944-45, being 1/5th of 1940-41 in value terms at current prices._

[1914]

Paper 8c Pasteboard (Rs. Lakhs) Iron and Steel (thousand tons)

286

During war imports rise due to shortages. No figures available for 1944-45.

7,30

3,94

712

363

26.1

Source: Columns II, III and IVfrom S. Subramanian and P.W.R. Homfray, Recent Social and Economic Trends in India, Government of India, New Delhi ,1946, pp.48-49 and 6-8. Column 1 from A.K. Bagchi, Private Investment...op.cit., pp.238, 295 and 354. a- See Rajat Ray, Industrialization in India, Delhi, 1979, p.138. By 1937 India had started exporting sugar. Note: Up to 1936-37, figures included Burma.

a reversal of the general nineteenth century colonial trend began in the early twentieth century, picked up by the First World War and the twenties, got a major push in the thirties and during the Second World War, and took a different level in the years following leap at a qualitatively was more or less self-sufficient In India in case, any by 1939, independence. her major consumer goods requirements.47 Most important, the bulk of this process was occurring under the aegis of independent indigenous capital. quantum

Second, towards

apart from

inward

orientation,

import substitution, with

indigenous

there was producers,

a growing who

tendency

were

earlier

for export, shifting towards the home market. Also, the link producing between agriculture and indigenous industry began to grow, reversing the earlier trend where the former was increasingly linked to metropolitan

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13

Social

Scientist

industry. A good example of this process was the cotton textile industry, the most important industry in India at that time. In the early decades of the twentieth century the cotton mill industry in Bombay was beginning to shift from export of yarn to the far-east (particularly China) to production of yarn and cloth for the domestic market. Also other textile centres in the interior

o cvi ^ <

areas, such as Ahmedabd, Cawnpore and Coimbatore, which grew faster than Bombay in this period, produced yarn and cloth mainly for the domestic market.48 Further, as the textile industry in India grew due to rapid import substitution, it began to pick up an increasing proportion of the domestic raw cotton production. The growing inward orientation was also a result of the

z

export oriented industries like jute stagnating in this period, while the domestic market oriented industries like cotton textiles, sugar and iron traditional

>

and steel registering relatively quicker growth rates.49 Third, reflecting the changes discussed above, India's total volume of in the nineteenth international trade, which had grown stupendously a century, when India became typical outward oriented colonial economy, began to decline afterWorld War I. Simultaneously, her internal trade began to grow, in some areas quite dramatically. For example, between 1920 and 1939, the volume of internal trade in sugar increased by three times, in cotton piece goods, iron and steel, raw hide and skins and cement (1933 to 1939) it nearly doubled and in tanned hides and skins and leather it increased by eight times.50 It may be noted that the spurt in Indian industrial growth in this period was not linked to growth in international trade (one of the so called benefits of colonial rule, see f.n. 38) but to growth in internal trade. Fourth, there occurred in this period a rapid shift of traditional 'pre in trade, usury and landlordism to industry, again capitalist' accumulations reversing landlordism

the earlier a

pattern of

process

of

such

're-feudalisation'.

accumulations While

being

many

of

diverted the

to

princes

a lot of

into small capital went trading-usury big industry, wars two and the This world because the shift occurred enterprises.51 partially as Indian in world for well demand the fall (as primary products) Depression financed

for investment in trade, indigenous opportunities same factors combined with the fact The and landlordism. banking, usury that the colonial state was forced to raise tariff duties on imports created for indigenous industrial investment (more on this later). opportunities reduced

the traditional

Fifth, as compared to the pre-World War I period, in the post-war period upto 1945 there was a gradual but consistent shift in the pattern of foreign trade with the proportion of manufactured goods in total exports showing a in total increase and imports showing an even more significant significant decrease.

14

Conversely,

a definite decrease

the proportion

and the proportion

of

raw materials

of raw materials

in total

exports

showed

and capital goods

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(as

The

to consumer

opposed increase.52

There

was

goods)

here

in total

a tendency,

showed

imports

however

Economic

in Indian

of the Colonial

Return

a comparative the

towards

hesitant,

History

>

reversal

?+

*"

colonial pattern of foreign trade, though the pattern still remained largely colonial till independence. The example of sugar illustrates consumer aspects of the new tendency. The import of sugar (amanufactured ? to commencement in the the fell inter-war dramatically period leading good) ^ of exports by 1937 (see table 1). On the other hand, the value of imports of sugar machinery shot up from Rs. 1.75 m. in 1920-21 to Rs. 87 m. in 1932-33, of India's traditional

at constant

Z

$

prices.53

Sixth, contrary to traditional belief,54 the actual net inflow of foreign capital to India was never very large and virtually insignificant in the form of industrial investments. Most foreign capital in the twentieth century came in the form of loans to meet the balance of payment deficits caused in no small measure

in the form of home by unilateral transfers made to the metropolis or and interest and debt dividends servicing accruing due to charges charges In fact, if one pitted outflows on earlier foreign loans and investments. current account due to interest, dividends and home charges against net

inflow due to foreign borrowing on the capital accounts, one would find that there was an outflow of capital from India virtually throughout the colonial even if one considers period and certainly since World War I.55However, only the flows in the capital account, then also it is evident that foreign capital inflow fell off after the spurt of the early 1920s, and, by the early 1930s, Indian repayments and repatriation of foreign debt and earlier foreign investments exceeded

fresh

i.e.,

investments,

there

was

a net

outflow

of

foreign

capital.56

The process of repatriation which began in the early '30s picked up after 1935, and, with the onset ofWorld War II, both repatriation of sterling public debt and retirement of private foreign loans and investment increased rapidly.57 In fact, during World War II,when Britain made large war purchases in India, India ceased to be a debtor country and by 1946 had accumulated as credit against Britain awhopping sterling balance of nearly Rs. 17,000 million. on the London money the dependence market for Indian Further, government borrowing was also reduced dramatically after having peaked in in 1934 sterling debt (or external debt) represented While cent 43 of India's total public debt, by 1945 sterling debt accounted per nearly for only 4 per cent, i.e., 96 per cent of the public debt was raised internally.58 the mid-1930s.

Further,

for

a

variety

of

reasons,

areas

where

traditional

foreign

capital

(European controlled business in India where a large part of the investments were internally raised) dominated, e.g., plantations, jute and foreign trade, underwent a relative stagnation after the First World War. Also, a dual sectors and of of foreign capital from these process of repatriation Indianisation

of ownership

(and gradually

control)

in them set in.59On

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the

ic

Social Scientist

other hand, the intrusion of the new type of foreign capital in the form of investments by multinational corporations during the twenties and remained small till thirties, very independence,60 especially when compared to the rapid growth of indigenous enterprise in this period. For example, between 1921 and 1938 the net foreign industrial investment was worth ?17 while the new investment in Indian industry was estimated to be ?144 m.61 ^m., 1914-1947 the paid up capital of rupee companies Also, between (or companies registered in India) grew more than twice as fast as the increase in

o rsi

direct

^
Z 00 o

the paid up capital of sterling companies. In fact between 1929 and 1947 the of doubled while that of sterling companies rupee companies paid up capital an decline after actual the peak reached in 1932-33.62 stagnated showing after did increase considerably investments, however, were were to not strict but under control and allowed they independence kept a or most in in dominant either the of the overall economy acquire position

>

direct

Foreign

sectors

critical

of

the

economy.63

Last, between 1914 and 1947, the Indian capitalist class, through a process of economic and political struggle, and taking advantage of the two wars and as well as the specific crisis faced by British the Great Depression64 was able to significantly increase its hold over these years, imperialism during the Indian economy vis-?-vis foreign capital. This was achieved chiefly the following three processes: (a) by entering new areas almost of the new and for the overwhelming exclusively accounting proportion through

investments

made

after

the

1920s,

in

e.g.,

sugar,

cement,

paper,

chemicals, iron and steel, etc.,65 (b) by edging out or encroaching greater or smaller degree the various traditional areas of European

heavy

upon in influence

and dominance,

e.g., banking, life-insurance, jute, textiles, partially shipping, trade, coal, and tea,66 (c) through a faster growth, in terms of

foreign investment

and

in economic

output,

Indian capital dominated, dominant, and

oriented and

e.g.,

cotton

the metropolitan

industries

vs.

as opposed jute,

centres,

sectors

and

Bombay home

and

geographical

regions

to those where European other

market-oriented

like jute, plantations,

interior

regions

industries

where

interests were vs. vs.

Bengal export

etc., internal trade vs. foreign trade,

so on.67

Thus before independence itself Indian capital had acquired considerable control over the domestic market. Rough estimates suggest that about 72-73 per cent of the domestic market was controlled by indigenous enterprise at the eve of independence. In the financial sphere also, where, earlier, European in capital was supreme, the Indian capitalists made massive inroads. While 1914 foreign banks held 70 per cent of the deposits, by 1937 they held 57 per cent, and by 1947 amere 17 per cent, i.e., 83 per cent of the deposits were in iz

Indian

banks.68

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The

of the Colonial

Return

in Indian

Economic

History

The various factors listed above suggest that what are considered to be some of the typical disarticulating colonial features of an extroverted to

were,

economy

an

however

extent,

hesitatingly,

getting

reversed,

even

2> ^"^

within the overarching colonial structure. First, there was a growing tendency towards surplus value being appropriated through extended reproduction in the colony, and it was being accumulated and invested by an independent albeit within the constraints of a colonial economy. indigenous bourgeoisie,

?f ^F J2. fD

Second, there was a growing tendency towards indigenous industry being articulated with indigenous agriculture and the home market. Thus the typical colonial feature of the colony's agriculture and its home market being articulated with metropolitan industry was showing a decline. Third, the hold of foreign capital was declining; and the indigenous bourgeoisie had gradually sphere as well acquired a dominating position in the indigenous production as in the home market. Last, the colonial economy, like the indigenous strength and bargaining position vis-? bourgeoisie, had acquired aminimal centre. For example, the economy vis the metropolitan instead of being a balances by the down debt enjoyed foreign exchange by huge large weighed II, and the colonial bourgeoisie was able to bargain effectively associating with foreign capital in setting up enterprises,69 or while

end of W.W. while

negotiating

trade

agreements

with

Britain.70

IV

now was:

to understand these positive changes? As question earlier the colonial view was to see these changes as the beneficial mentioned result of colonialism or as the result of imperialism voluntarily pulling out. in scholars have focused on the increasing import substitution Colonial The

how

consumer

goods industry in India (see Table 1) and the sharp decline in the British market in India, particularly in cotton textiles, to basically argue that Britain was now 'surrendering its interests in India in favour of Indian industrial interests. The 1919 'Fiscal Autonomy Convention' was described as "a British self-denying ordinance"71 which led to the "deliberate surrender of the largest export market in the world for a staple British manufacture."72 The since the First World War India was fact that in the changed circumstances able to achieve a somewhat better bargain in the trade agreements of the 1930s (the Ottawa Agreement, 1932, the Mody-Lees Pact, 1934 and the Indo British Trade Agreements of 1935 and 1939), compared to the total surrender to British industrial and financial interests earlier, was interpreted as "the trade treaty clever and powerful Indians (having) forced a disadvantageous upon the weak and inept English."73 The 1939 agreement was described by as: "a 'capitulation' % the sort ofthing which Marxists tell us the Drummond force on the weak and helpless evil imperialist Western governments

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.7

Social

Scientist

o countries rsi

who

of

had

the Third

capitulated,

in this

But

World. sacrificing

most

case,

of her

as at Ottawa...

preferential

it was

Britain The

advantages....

reader is left to ask himself who was exploiting whom."74 Itwas further argued that not only was Britain not exploiting India but it
^ ~5 j$ ^f ?? 00

the

immense

oAlso,

challenge.76

like what Tirthankar Roy was to echo later, Dewey and nationalists of being simplistic and indulging in "a conspiracy theory of imperialist exploitation".77 He accused them of ascribing "Indian tariff policy to a single dominant the determinant, principally cotton Lancashire not and the "remarkable lobby..." recognizing that had occurred since the First World War, where "the metamorphosis" somewhat

accused Marxists

vO >

of India were power-struggles within the India Office and the Government resolved in favour of factions allied with the Bombay mill owners, while the factions allied with Lancashire were reduced to virtual impotence." It was said, "in the 1870s the Secretary of State allied with Lancashire against the Government of India, while in the years after 1917 the Government of India In their aligned itself with Indian nationalists against the India Office...." battle with

the Secretary of State the Government of India's "alliance with the nominal nationalist enemies" proved useful as did "the public opinion they helped manufacture" and the "upsurge of political unrest in India."78 It seems some 'manufactured' political unrest by the 'nominal nationalist enemies'

was

still necessary despite the assertion that "an important attribute of sovereignty had passed from England to India, twenty-five years before A.D.D.

independence".79

Gordon

of India was

argued

a similar

position

that

saying

the

by the Home government on the one hand and the fiscal demands of the local business interests on the other, with the government of India increasingly giving in to the latter, 'nurturing' Indian industrialists rather than industrialists of Britain. Subsequent events, it was

Government

claimed, were in

1947,

influenced

to "illustrate this point" as with

manufacturing

was

industry

to grow

the ugranting of independence" from

"strength

to

strength".80

since again is the tendency to see continuity between developments the First World War and the failure to and those after independence understand the decisive structural break that 1947 represented in the political

Evident

economy of the colonial situation in India. While all this is bad economic history it is even worse political history. It goes one step further backwards from the so called "Cambridge School", which

Ig

saw

Indian

elite, and argues

nationalism

as

a

'tamasha'

the early nineteenth

'manufactured'

century Whig

by

the

Indian

or liberal imperialist

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The

Return

in Indian

of the Colonial

Economic

History

saw the role of British rule as gradually training Indians for ^ self-government.81 Itwas now the Government of India which was helping to 'manufacture' nationalist opposition! The colonial people are robbed even of

position, which

^"^

their own liberation struggle. With elements of 'sovereignty' already being passed on to India with Government help one is left wondering what the mass

Gandhian

World

movement

of

phase

I and

War

the

Indian

national

untold

1947, costing sacrifices by millions, was all about.82

In my

there

V is a completely

between

movement,

tens of thousands

^ ?r es.

a>

of lives and involving

for the explanation century, particularly between World War I and 1947. Instead of decolonization, what this period witnessed was not only the continuation of colonial exploitation (though in an altered form) but its in many respects at great cost to the Indian economy blatant intensification understanding, in the twentieth developments

different

and its people. Britain did not afterWorld War I abandon itsmost important market for textiles in India, so ruthlessly captured in the nineteenth century, as a result of their now giving in to Indian industrial interests or merely due to Indian nationalist pressure. Britain was forced to concede substantially her imperial interest

industrial interest,

i.e., or

remittance

using 'drain'.

in the colonial market the

as

colony It was

a

a switch

in favour

source from

of one

of

capital

imperial financial

through

unrequited

interest

imperial

to another,

not a switch from

imperial to Indian national interest. The tussle between the two imperial interests had already surfaced by the late nineteenth of India was facing some century when the Government in raising the revenue necessary

difficulty

The

requirements.83

of

salt

tax,

etc., was

to

keen

for meeting India,

revenue from

to raise the required

politically revenue,

Government

levy

some

the sterling remittance

unable

revenue

and

economically

source

any other duties

on

like land

Indian

imports

the Secretary of State under pressure from (not protective British textile manufacturing interests was adamant in not allowing. It is of India was not bending to national important to note that Government duties) which

only trying to facilitate remittance and 'drain', a critical interest. Eventually, in the 1890s the dilemma was resolved, financial imperial at India's cost, by levying revenue duties on imports along with expectedly interest but was

countervailing

excise

duties

of

the

same

amount

on

Indian

manufacture

of

textiles to avoid even a semblance of any protection to Indian industry. The dilemma of adjusting the two imperial interests, of finance and industry, followed a somewhat different trajectory in the twentieth century, on India increased since 1914. British financial demands particularly

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.g

Social

Scientist

since W.W.

manifold

o ?s ^

approximately

< -5 ^

^ 00 OO o

I. For

example, Home Charges84 increased from in 1924-25. Military in 1913-14 to ? 32 million doubled from ?5 million to ? 10million and interest charges on ? 20 million

expenditure to ? 14.3 million external public debt increased from about ? 6 million between 1913-14 and 1934-5.85 In 1917 India supplied goods worth ? 100 million without any payment and in 1918 decided to make another gift of ? 45 million to the British war effort.86 During World War II defence over crores in 1939-40 nine from Rs.50 increased about times, expenditure by crores

to Rs.458

in 1944.

The proportion of the total expenditure of the accounted for by the Defence Services (an expenditure Tirthankar Roy fully approves) was about 55 per cent in 1920-21 rising to 75 per cent by the end ofWorld War II.87 Far from decolonizing, retaining India had become even more critical for Britain. Central Government

^ ^2 >

The huge rise in India's sterling 'obligations' or 'commitments' (often used as an euphemism for, if not denial of drain)88 or the 'external drain' required large increases in the revenues raised by Government of India or the 'internal drain' in order to pay for the external drain. Again, area

revenue

where

could

be

increased

the only possible

was

substantially

customs

revenue,

primarily meant import duties. Thus between 1901-05 and 1936-37 while the total revenue raised by Government of India more than doubled, customs alone met about 72 per cent of the increase in total revenue. Customs which had overtaken land revenue as the principal source of revenue by 1921 25 was thus critical in the maintenance of the rapidly increasing remittances which

of

the Government

India

of

on

account

of home

charges,

military

etc.89

expenditure,

The import duties on cotton goods had gone up from 3.5 per cent in the 1890s to 25 per cent for British cotton goods in 1931. (Duty on non-British, mainly Japanese goods had risen to 75 per cent by 1933). The countervailing excise of 3.5 per cent levied in 1896 however could not be increased in the mass circumstances with a powerful changed political anti-imperialist this change in Significantly, having come up in the meantime. scenario was not seen by the British government as the surrender of imperial interest, even if that may have been the view of some imperialist scholars.

movement

Samuel Hoare, the Secretary of State for India, quite conscious of the crucial role played by import duties inmaintaining imperial interests, argued against the Lancashire agitation for removal of cotton duties. Apart from the "disastrous" political consequences such a course of action would produce, he urged that itmust cotton

20

goods"

was

be recognized

necessary

India would

be unable

and provide

for military

for

that "the present

revenue

to discharge

purposes

its financial

for

level of tariff on British "without

obligations

expenditure."90

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this

revenue

in this country

The

Return

in Indian

of the Colonial

Economic

History

India to Britain at any cost became the centre piece of British economic policy in this period for yet another reason. ** Britain, having lost its industrial supremacy in the world (first in consumer goods and later in capital goods as well) by the end of the nineteenth century and particularly by the beginning of the twentieth century, was increasingly

3>

of remittance from

Maintenance

emerging as the major financial centre of the world with the pound sterling as to an> its foundation91 - a position that Britain was able to maintain tillW.W.II extent of her with the aid India, by manipulating currency, blatantly large exchange and budgetary' and financial policy. It is small wonder, then, that finance was one portfolio the British refused

.R-* ?r 5 o.

(even in the limited sense of appointing an Indian of their choice to the Viceroy's Executive Council) till the very end, i.e., till the formation of in 1946. Several other economic portfolios such as the Interim Government and supply were those of commerce, industry, planning and development, to part with

that. Even when the colonial long before given to Indian members set up the Reserve Bank of India in 1935, itwas barely given any Government autonomy, with the British government insisting on "the last word" on financial matters. The bank, seen as an instrument for safeguarding imperial financial interests, was not to be allowed to be misused by Indians who "like a instantly want

spoilt, willful, naughty child" would financial responsibility.92

to use

it to demand

An India Office document of December 1930, marked 'secret' and called "The Position of the Secretary of State in Relation to Indian Finance,"93 brings out clearly some of the reasons for the crucial importance attached to the issue of finance by the British. It was stated that about 60 per cent of the Indian Government's budget, i.e., about ? 60 million out of ? 100million, was by military expenditure, sterling debt charges and liabilities in of for and officials for which the Secretary of State salaries respect pensions was responsible. Of this, defence expenditure alone absorbed 45 per cent of absorbed

the

central

revenues.94

such

When

a

large

of

proportion

the

revenue

was

earmarked for charges for which the Secretary of State was responsible, itwas pointed out that "it is hardly open to doubt that Parliament should retain the power

to secure

from which

were

'commitments' State

to see

that

its obligations

these commitments "that

in

currency

sterling, and

are

duly

it was exchange

"incumbent" are

being

"revenues

in rupees", and the

upon so

the

Since

honoured".95

must be met are collected

managed"

the

Secretary

of

as to "permit

of the remittances of the requisite funds from India to London". Also, he had of India were to ensure that the revenue and expenditure of the Government balanced.96

In other

words,

the

Secretary

of State

needed

the

"power

to

impose

on the Indian Executive such measures as are needed to provide thefunds and to facilitate their transfer... from India to London.97 Some decolonization!

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9 I

Social

o Before I go on to outline other aspects of the fiscal and monetary policy followed by Britain in this period to meet its growing imperial financial must it be the noted that tariffs did not mean that Britain was interests, rising
rs ^

since W.W.I, exports to India were shrinking rapidly (except in chemicals where they increased) India still remained, as late as 1938, the as it did for largest single market for British exports of cotton piece-goods other market and items.98 The Indian general machinery though shrinking was thus far from redundant, on the contrary its importance increased as British

^ ^ 00 OO o ^

Scientist

??

share in world

British

o >

demonstrated and Britain

trade kept declining. Basudev Chatterjee has ably how Lancashire was desperate to hang on to the Indian market tried to ensure that it did, as much as the new circumstances

permit.99 By introducing the principle of Imperial Preference at Ottawa and through the various trade agreements of the 1930s Britain was making a last ditch effort to retain as much of the Indian market as was possible at a time when Britain was no longer able to compete effectively with other

would

countries

in various

such

commodities,

as

Japan

in cotton

textiles.

There

were

however limits to how much imperial preference could be given to British goods as it could lead to retaliation by other countries, which in turn would affect Indian exports. This could not be permitted as India had to generate an export surplus at any cost so that the smooth flow of remittance to Britain could be sustained as imperial financial interests would not countenance any in that

interruption

process.100

It is to ensure that India remained a constant source of capital to Britain through remittances, during a period when Britain just flitted from one crisis to the other (especially the two world wars and the depression), that the most gross

use

of

imperial

was

authority

to turn

made

the

policy in her favour and against Indian interest. To the great agitation of Indian nationalist in

government,

order

to

"manage"

the

currency

instruments

opinion, and

exchange

of economic

the colonial in

such

a

manner

that the process of raising revenue in India and its remittance to Britain remained undisturbed, constantly followed a deflationary policy in India, including by severely contracting the currency in circulation, in order to push up the exchange value of the Rupee which it tried to keep at Is. 6d. by deflationary policy including severe cuts was followed even during the Depression capital expenditure

virtual decree. A fiscal and monetary in Government years,

severely

aggravating

its negative

consequences.101

the onset of the Great Depression, the situation in India changed World those of prices, especially drastically. primary produce, plummeted and India's export earnings collapsed. With agricultural prices being so low, With

22

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The

Return

of the Colonial

in Indian

Economic

History

was unable to collect full revenue.102 Also, with the fall in export earnings, there was great difficulty in securing remittance to meet ^ India's sterling obligations or the Home Charges.103With both revenue and remittance in jeopardy, the colonial Government was in the throes of a major the Government

financial of

crisis. Under

India

to ease

sought

currency

continuous remittance

^

pressure from London,104 the Government 5 by

causing havoc

repeatedly,

^ 9 ^"

resorting

to severe

deflation,

in the Indian economy,

^.

contracting

especially

a>

in the

market.

money

A massive period. India's

was averted by the of the remittance mechanism from the of India that export government gold encouraged in this The gold exports were crucial in compensating for the drastic drop in

total breakdown

export

on

surplus

commodity

transactions.105

Between

1931-32

and

1938-39, on an average, more than half (about 55 per cent) of the total visible and (positive) balance of trade (i.e. balance of transactions in merchandise treasure) was met through the net exports of treasure, with the exports of gold the commodity balance of trade was sharply in years when For in low. 1932-33, particularly example, gold exports constituted about 95 cent the visible total balance trade.106 per of positive of Clearly remittance had to at all costs, if the export surplus in commodities be maintained (necessary to convert the rupee revenues into remittance) fell short itwas made up through increasing

export of gold. Apart from

a smooth flow the role of gold exports in India's maintaining or of remittance of the 'sterling obligations' the Home Charges as well as the as other invisibles such profits, dividends and interests earned on foreign investments, it played another critical role for British interests at home. At a time when Britain was facing a balance of payment crisis it played a major the value of sterling vis-?-vis part in strengthening gold and other currencies.107

Itwas small wonder

then that the gold export from India was one issue on remained very firm, though many government countries including Britain were following an opposite strategy themselves. It appears that the Governor of the Reserve Bank of India, Osborne Smith, had to resign partially because of his taking a position on this question which was

which

the British

home

far too independent of the India Office and the Finance Department. He took a position similar to the nationalist demand for devaluation of the rupee to prevent outflow of hoarded gold from India.108 However the blatant and cynical manner in which Britain used Indian finances for its own benefit during the Second World War was breathtaking or in its audacity. It puts paid to any notion of imperialism withdrawing decolonisation occurred till the bitter end of colonial rule. Britain having took massive

forced loans from

India (popularly called the Sterling Balance)

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93

Social

Scientist

of about Rs. 17,000 million (estimated at seventeen times the annual revenue of of the Government India and one-fifth of Britain's gross national product a in 1947)109 at time when over three million Indians died of famine! The Sterling Balances got accumulated as a result of the "large purchases in India", against of goods and services...made by the British Government, reserve or in For in these securities London. bills large exports placed sterling of goods and services, India, thus, received no "tangible quid pro quo" other than

"I.O.U.s

of His

The

Government".110

Majesty's

was

procedure

similar

to

that adopted during World War I - the Reserve Bank of India expanded currency or issued notes against its sterling holdings held in reserve in London to pay for the British war purchases in India.111The rapid expansion of currency that occurred as a result (the total notes issued increased by nearly 1939 and 1944) combined with the fact that large of and services were made available to England for which no goods quantities or came to India in return, led to severe shortages and a services back goods was What inflation.112 runaway shocking was that this policy could be pursued times between

four

at a time when famine conditions prevailed in India. To cap it all, after the War was over, Britain made a serious bid towards defaulting on repayment of the

loans

raised

at such

cost

tremendous

to

India.113

The Second World also saw British colonialism to make an industrial breakthrough another opportunity

deny India yet an opportunity seized by the 'White' colonies. Indian entrepreneurs, who had already in the inter-war years shattered the bogey of India facing a lack of capital or or of Indian capital being 'shy' and unwilling to take risks, entrepreneurship, War

by growing rapidly, much faster than foreign capital in India and venturing into new areas,114were poised for amajor industrial push during the Second World War. The persistent efforts of Indian entrepreneurs to enter frontier areas of industry in India such as automobile, aircraft and locomotive manufacture,

machine monetary Control',

shipbuilding,

manufacture

of

armaments,

engineering

goods,

tools, etc., were smothered by the colonial state using fiscal, and other instruments of state policy such as the 'Capital Issues all in the name of the "War effort," but in actuality in deference to

imperial interests and even the interest of the white

colonies.115

VI To return to the question of the positive 'non-colonial' type of developments I listed in section III, clearly they were not the result of any since W.W. process

of decolonization

because,

as I argue

above,

there

was

were

no

such

process

the result of colonialism itself. these developments occurring. were I it it. the As earlier116 wrenched from have of space They product argued that all the developments is easily demonstrable listed above, occurred (to list Neither

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The

of the Colonial

Return

in Indian

Economic

History

some of the causes) either (a) as a result of the struggle, political and economic, against imperialism, whether through the national movement,^ ^ or legislative assemblies, business chambers directly by entrepreneurs, asmost case or in the of shipping,117 (b) when the grip of imperialism demonstrably or loosened

weakened

due to world

of the logic of the factors autonomous such as the World Wars and the Great

colonial

system in the colony, the principal metropolis Britain, lost out in Depression,118 or (c) when centres to to permit other and competition metropolitan preferred to in the allow than rather other grow indigenous enterprise colony foreign to

powers

capture

the

colonial

market,

e.g.,

to

protection

iron

cotton,

and

and sugar was related respectively, to competition from Japan, and Germany, Sweden, and Java, a Dutch colony,119 or (d) due to the

steel, matches Belgium inner

of colonialism

contradictions

itself,

e.g.,

the

increasing

need

for

revenue

the colony to meet imperial financial interests could no more be met from a by now stagnating or even declining agriculture but had to be met through revenue tariffs on imports, which provided indigenous manufacture from

certain amount of protection against imperial industrial interests.120 In other the specific non-colonial in the twentieth type of developments a as not or in occurred result colonialism but in opposition to century of spite of

words, it.

The very limited growth of the positive, non-colonial developments was an occurring in embryonic form in the hostile womb of colonialism whose continuation was making the birth of capitalism in India more and more difficult. The structural distortions created by colonialism made the future transition to self-sustained growth much more difficult. It required the of

overthrow

colonialism,

and

the

'un-structuring'

of

the

colonial

structure

for India to start its attempt to build independent capitalism after colonialism for nearly two hundred years ravaged its economy and society and deprived it in the process of modern of participating of the opportunity industrial transformation

occurring

in other

parts

of

the world.

Despite

the post W.W.I

the Indian economy till 1947 remained essentially positive developments backward and structurally colonial. The Indian economy at independence was still basically dependent on a stagnating, low productivity, 'semi-feudal' agriculture with modern industry (in 1950) contributing a mere 6 to 8 per cent of the national income and (in 1951) employing 2.3 per cent of the labour force (in 1946).121 What India inherited after two hundred which to

the

years of colonial 'benevolence', India of the 'commercialization', allegedly gave 'advantages' 'exposure world

market',

'transport

and

communication',

'a

strong

state',

'western scientific skills', etc., benefits that Tirthankar Roy could hardly stop listing, was a very sorry state of affairs indeed. 25

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3>

?=* ? ^3. n>

Social

rsi ^
Scientist

work shows, India was the largest oAs Angus Maddison's monumental economy of the world for the entire thousand years of the first millennium accounting for close to 30 per cent of the world's GDP. Till as late as the beginning of the eighteenth century India's was still the largest economy with 25 per cent of the world's GDP, more than eight times that of the Kingdom. The decline started soon after and at the end of nearly two hundred years of colonial rule (during which Tirthankar Roy claims "colonial about

United

^ ^00 OO

o

India

vO m >

positive

experienced

economic

growth")122

India's

share

had

been

4.2 per cent in 1950. It was a few decades before India could sufficiently shrug off the colonial legacy and begin to gradually claw her way back into improving her share of the global pie.123 The impact of colonialism in human terms was traumatic and all too reduced

to a mere

visible. At independence the average life expectancy was barely 30 years. The poor obviously died much younger. India was faced with acute food shortages creating near famine conditions repeatedly in different areas. The Bengal famine of 1943, just four years before the British left, claimed more than three million

lives.124 (A great tragedy which Tirthankar Roy predictably underplays, putting the famine deaths only at "some half amillion", a figure much lower than even the official famine Inquiry Commission and other government tons of food grains worth estimates.)125 Between 1946-53 about 14 million

Rs. 10,000 million had to be imported, seriously affecting India's planned In 1951, 84 percent of the people (92 after independence. development were The illiterate. women) percent legacy of colonialism which Tirthankar so completely126 was anticipated by the poet Rabindranath before his death in 1941, in his inimitable way:127 Tagore, shortly The wheels of fate will some day compel the English to give up their Roy misjudged

Indian Empire. What kind of India will they leave behind, what stark runs dry at misery? When the stream of their centuries' administration a waste of mud and filth will they leave behind them. last, what VII The

growth

carrying

on

that India witnessed the

'good'

work

started

after during

independence colonialism.

was It was

not a

all about

product

of

a

structural break painstakingly crafted through amulti pronged planned effort an unique effort of trying to industrialize and build capitalism with democracy and civil liberties. Jawaharlal Nehru and other leaders were deeply aware that India was experimenting with a hitherto uncharted path as none of countries of the world had. democracy and civil liberties I the initial during period of transition to capitalism and industrialization. have evaluated elsewhere the nature of this stupendous effort since independence.128 Iwill only outline here a brief comparison of some of the the industrialized

~,

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The

features

of

Return

the

in Indian

of the Colonial

colonial

and positive growth after independence. This may help underline period required,

to a considerable

History

the period of so called especially since World War I with those of the

period,

decolonisation

and

Economic

extent

> g.

the enormity of the break

z c

achieved.

The growth of per capita income in India in the colonial period was either zero or very low, remaining way below that of the independent countries of 1820 and 1913. See table 2. In the last Europe, USA and Japan between decades

of colonial

or a> 0>

rule after colonialism

had had its full impact, the per an annual rate of -0.22 per cent in at India actually declined capita income between 1913-1950.129 After independence, on the other hand, it grew at 1.4 per cent in the first couple of decades (about 3 times faster than the best phase, 1870-1913, under colonialism) and much faster at 3.01 per cent in the next 30 years, 1973-2001 (a rate considerably higher than that achieved by West Europe,130 USA or Japan) and in the last four years (2003-4 to 2006-7) at an astounding 7 per cent (itwas over 8 per cent in 2006-7) comparable to the explosive rates achieved by Japan (though in very special circumstances) between

1950-73.131

TABLE2 Rate of Growth of per capita GDP (annual average compound growth rates) (1)

(2)

1820-70

1870-1913

(3) 1913-1950

(4)

(5)

1950-73

1973-2001

France

1.01

1.45

1.12

4.04

1.71

UK

1.26

1.01

0.93

2.42

1.86

1.61

USA

*

1.34

1.82

2.45

1.86

Japan

0.19

1.48

0.88

8.06

2.14

India

0.00

0.54

-0.22

1.40

3.01

(6) 2001-2007

5.65*

per capita net national product

Source: Column 1 to 5 from Angus Maddison, op. cit., Table 8b, p. 643. Column 6 is based on Economic Survey, 2006-07, Government of India, New Delhi 2007, and Aditya Mukherjee, "Indian Economy in the New in Bipan Chandra, Mridula Mukherjee and Aditya Mukherjee, India Since Independence, Millennium," Penguin, Delhi, forthcoming, 2008.

where Similarly, the colonial period saw a process of de-industrialisation traditional industry was largely destroyed and modern industry grew very slowly. Despite the growth of modern industry since W.W. I, at about 3.8 per cent per annum, it contributed amere 6 to 8 per cent of the national product in 1950, having product

in

started from an extremely

1913.132

Moreover,

modern

low level of 4 per cent of national industry

was

yet

dominated

by

consumer

goods industry with a near total and debilitating dependence on the advanced countries for capital goods and technology. Contrast this with

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27

Social Scientist

Industry during the first three plans ( 1951 -65)

the period after independence.

o rsi

at 7.1

grew

^ < "5 S

cent

per

per

annum.

More

"the

important

in

increase

three-fold

1951 and 1969 was the aggregate index of industrial production between result of a 70 per cent increase in consumer good industries, a quadrupling of the intermediate goods production and a ten-fold increase in the output of This of industrial led to a structural pattern capital goods."133 development of

the

colonial

a situation

From

to make

where

xj-

transformation

00 OO o

capital investment, virtually the entire equipment had to be imported (in 1950, India met nearly 90 per cent of its needs of even machine tools through imports) the share of imported equipment in the total fixed investment in the form of equipment in India had come down to 43 per cent in 1960 and amere

^ ^2 >

legacy.

any

9 per cent in 1974, whereas the value of the fixed investment in India increased by about two and a half times over this period (1960-74).134 This was a major achievement, and it considerably increased India's autonomy from the advanced or

countries

her own rate of capital accumulation

in determining

growth.

the largest sector of the Indian economy, was in a state of Agriculture, ruin under colonialism. Per-capita agricultural output actually fell at the rate of 0.72 per cent per year during 1911-1941. Per-capita food grains output fell even more sharply by 1.14 per cent per year, a 29 per cent fall over the period.135 All crop yields per acre declined by 0.01 per cent per year between 1891-1946 and again food grain yields declined more rapidly by 0.18 per cent, and

even

more

sharply

by

0.44

per

cent

per

year

No

1921-46.136

between

the food shortages and famine conditions mentioned above. After a combination of institutional changes (land reforms) and independence,

wonder massive

During

state

sponsored

technological

the first three plans grew

agriculture

at an annual

change

(leaving out rate

of over

transformed

1965-66, 3 per

cent,

this

a drought a

growth

situation.137

Indian

year), rate more

than

eight times faster than the annual growth rate of 0.37 per cent achieved during the half a century (1891-1946) of the last phase of colonialism in India.138The a rate of growth ranging from Green Revolution in the late 1960s maintained about 2.5 to 3.5 per cent (primarily through increases in yield) till the mid areas like Punjab and Haryana did not have 1990s139The Green Revolution in the colonial period as Tirthankar Roy, for continuities with trends any example,

argues.140

was

Haryana

largely

an

extremely

backward

area

in

colonial times and even Punjab showed meager growth rates in terms of all crop yields per acre of 0.36 per cent per annum between 1901-1941 by one estimate and of only 0.06 per cent between 1906-7 and 1941-42 by another. The highest increases in yield seen in Punjab were in non-food crops of an average

2g

of

productivity

1 per

cent

per

annum

of eleven major

between

1891-1951.141

crops in Punjab

In contrast

increased between

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the

value

1950-51 and

The

1969-70

by

255

Return

cent,

per

in Indian

of the Colonial

an average

i.e.,

cent.142The huge productivity

difference

annual

increase

certainly

of more

Economic

12.5

than

History

> a.

per

r+" ^<

signifies a structural break.

Table 3 Capital Formation (GDCF) as percentage of GDP, Public Expenditure at Current Prices and Public Expenditure as Percentage of GDP 1901-2006 (All figures are annual averages)

z c 7\ IX a>

Gross Domestic

GDCF

as % of GDP

Public Expenditure Rs. Crore (current

1901-1913

6.92*

prices)

75.4

(1925-30)#

41.7

(1930-38)#

*

Share of Public in Expenditure GDCF as % of GDP

1914-1946

6.75*

1950-1955

9.04

331.8

1955-1960

13.30

769.6

5.62

1960-1970

14.66

1912.1

6.96

1970-1980

17.63

8003.4

8.19

1980-1990

21.23

26416.9

9.98

2004-2006

32.65

3.14

Source: Computed from Economic Survey 2006-07, Government of India, New Delhi, 2007, Tables 1.4 and 1.5, S-6 to S-9. * Goldsmith, op.cit., Table 1-10, p.20 and Table 2-9, p.80. # Computed from Rajat K. Ray, Industrialisation in India, OUP, Delhi, 1979, Table 40, p.257.

rate of capital formation, the key to economic development, at a very slow pace during the colonial period. India was in fact if not more, of what losing to Britain as drain or tribute an equal proportion, was invested in India. The drain has been variously calculated to be between 5 The

occurred

to

10 per

cent

of

her

national

income.143

The

average

annual

rate

of

capital

formation between 1901 to 1913 was 6.92 per cent of GDP, falling to 6.75 per cent between 1914-46 (see Table 3). Public expenditure, an important engine of capital formation in backward countries, declined sharply from Rs. 75.4 crores annually during 1925-1930 to Rs. 41.7 crores during the Depression the opposite needed to be done. The massive cut in government expenditure along with other deflationary fiscal and monetary on the policies greatly exacerbated the negative effects of the Depression years

1930-38, when

Indian

economy.

The contrast between

the colonial and the post independence scenario is public expenditure was low and declining during the last decades of colonial rule144the initial forty years of independence (1950-1990) saw it rise by more than three times (see Table 3, column 2 and 3). Similarly, saw the gross while the last fifty years or so of colonial rule (1901-1946) to 7 cent of GDP 6 in hover around formation the economy per capital saw rate the first after of capital the independence annually, fifty years evident.

While

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29

Social

OO o rs CL < 5

Scientist

rise consistently and sharply, ending up at a rate of 33.8 per cent in about five times the colonial rate.1 There was also a rapid per capita increase in the availability of some of the infrastructural and social benefits as they grew several times faster than the In 1965-66, as compared to population immediately after independence. formation

2005-06

1950-51, installed capacity of electricity was 4.5 times higher, number of town and villages electrified was 14 times higher, hospital beds 2.5 times higher, in schools was a little less than 3 times higher and very enrollment importantly admission capacity in technical education (engineering and was at and levels the technology) diploma higher by 6 and 8.5 times, degree

z

m

This when

respectively.

increased only by 37.3 per cent over the

population

> period.146 Also,

Jawaharlal

Nehru

of India's backwardness barren

in the colonial

overcome

this

shortcoming.

and

the

early

Indian

were

planners

acutely

aware

in science and technology (an area left consciously and therefore made massive efforts to period) An

unprecedented

increase

occurred

in

the

in science and technology in the universities and opportunities institutes. National expenditure on scientific research and development kept growing rapidly with each plan. For example, it increased from Rs. 10million in 1949 to Rs. 4.5 billion in 1977. Over roughly the same period the stock of educational

India's scientific and technical manpower increased more than 12 times from 190 thousand to 2.32 million. A spectacular growth by any standards, a towards a growth whose benefits India reaps today as the world moves society.147

'knowledge'

The health,

in quantum jump in investments, growth rates, improvements education etc., listed above did not occur because of any dramatic

in India's "climatic "resource risks," change or to "have sumptuous tendency marriage

endowments," feasts,"

some

"hunger of

the

causes

for gold," listed

by

Roy for the Indian economy stagnating in the colonial period.148 because of the concerted effort to break away from the occurred They disabilities created by the colonial structure.

Tirthankar

However

India is despite the paradigmatic change since independence intolerable levels of poverty and backwardness.149 Undoing the ravages of nearly two hundred years of colonialism was never going to be an easy task.What is certain, however, is that the answers to the future challenges would not lie in building on the continuities with colonialism but on the still faced with

breaks.

We Acknowledgement: this article. publish

are grateful

to Studies

inHistory

30

This content downloaded from 202.41.10.3 on Tue, 15 Oct 2013 06:03:21 AM All use subject to JSTOR Terms and Conditions

for permission

to

The

of the Colonial

Return

is Professor

Aditya Mukherjee Studies, Jawaharlal

Nehru

of

in Indian

Contemporary New Delhi.

University,

Economic

Centre

History,

History

> Q. ^"fu

for Historical

C ZT

Notes 1 Imust

at the outset I have my debt to the Delhi Historians' Group. acknowledge of the comraderie, and otherwise, the years been a beneficiary academic of Iwill particularly like to thank Bipan Chandra, this group. Mridula Mukherjee, Sucheta Mahajan, Salil Mishra, Tadd Rakesh Fernee, Mahalakshmi, Batabyal,

over

Vishalakshi

Menon,

2

'The British New

Jha,

written

Gyanesh on this

the British

in India'

Rule on

1853. Marx's

writings as well Engels

in

India

as relevant

by Frederick 1853-62 have

in an been Correspondence compiled on India, Tulika, edited by Iqbal Hussain, Karl Marx The volume also contains contributions "Introduction: by Irfan Habib, of India" and Prabhat The Other Patnaik, Perception "Appreciation: " which and and thus increase the value analyse explain Marx's position

2006. Marx's Marx,

the volume

3 New

immensely.

York Daily p. 46.

India, 4

articles

of

and

comments

Jha for

Results

8 August

Medha

Minha,

and Vagish

'The Future

and

25 June and

Tribune,

this newspaper along with extracts from Marx-Engels useful volume extremely

of

Verma

Sanjay

in India'

Rule

York Daily

Shin

Yadav,

Bhupendra

Bhuvan

Kudaisya, address.

Pro-imperialist colonialism

Tribune,

8 August

scholars

like Morris

Marx's through of Nineteenth

1853,

D.

in Iqbal Husain,

Morris See

remarks.

have for

Indian Century Century: A Symposium,

Reinterpretation in the Nineteenth Economy

ed., Karl Marx

on

a defence

of

sought his

a

"Towards

example Economic

in Indian History" 1969, p.3. Even within

Delhi, the Left, works such as those of Bill Warren, Pioneer Imperialism: of Capitalism, a mockery New Left Books, of Marx's 1980, have made position. Writing after the role of Imperialism decades had been laid bare, Warren the critiqued that position, arguing in the 1853 articles

anti-imperialist

(Marx

capitalism. on More

imperialism actually had suggested this

led to the growth of as a possibility.

only

on stronger this below). Warren is somewhat in his critique of ground to equate of the Dependency school's which tended positions imperialism with the world and which market excluded the possibility of any by definition . third world 160 Ibid. progress. p. non-dependent capitalist some

5 For

a detailed

Irfan Habib,

Delhi,

of Marx's analysis position of Asian Theories Societies

CHS,

UNESCO,

6

and his

in and JNU 1980, an abbreviated

Mimeo.,

Habib,

discussion

"Karl Marx,

Chandra,

"Marx's

Essays 1995.

See Bipan

Perception in Indian History:

Chandra,

Rise

and

on and

India,

see Bipan

Colonial

Rule", Theories: Race and Colonialism, Sociological see in Review, 1981. Also version 1, Summer of

India"

Towards

Growth

cited

in footnote

a Marxist

of Economic

1 and

Perception,

Nationalism

also

in

Irfan

Tulika,

New

In India,,

New

Delhi, 1966 31

This content downloaded from 202.41.10.3 on Tue, 15 Oct 2013 06:03:21 AM All use subject to JSTOR Terms and Conditions

Social

CO o o CNl

Scientist

7 Bipan Mimeo,

"Karl Marx,

Chandra, 1980,

regeneration

of Asian

his Theories

pp. 36, 41, has as a future potential.

Societies

this

emphasised

aspect

and

Colonial

of Marx

CL 8 New

<

York Daily p. 12, emphasis

I a ai

25 June,

Tribune,

in Iqbal Husain,

1853,

Rule", the

seeing

on India,

ed., Karl Marx

mine.

on in Iqbal Husain, 8 August 1853, ed., Karl Marx was to see the In fact a few years later Marx of the class following the emancipation emancipation working on the Irish colonial In 1869, while colonial situation, people. commenting a precondition in Ireland was Marx for a that a "national revolution argued "Karl Marx, in Britain" his Theories successful revolution See Bipan Chandra,

9 New

Z

York Daily

India,

en

of Asian 10 New

>

Societies

and

York Daily

India, 11

Tribune,

mine. emphasis of the British

p.49,

p.49,

Ibid.,

Colonial

Rule",

8 August

Tribune,

Mimeo, 1853,

p.58. on

ed., Karl Marx

in Iqbal Husain,

mine.

emphasis mine.

emphasis

For all is a point Chandra. by Bipan emphasized I am basing myself 1853 article, after the August writing "Karl Marx, his Theories of Asian Societies and Colonial

12 This

Irfan Habib, Marx's "Introduction: on India, Tulika, 2006.

of

Perception

India"

to Marx's

references on

Chandra, Bipan and Rule", Mimeo

in Iqbal Hussain,

Karl

Marx 13

awareness to note that a similar involved It is interesting of "unequal exchange" in in trade between with levels was expressed countries productivity divergent in the 1880s and by Indian business India by the early nationalists 1930s. See Bipan Chandra, India: British versus the mid "Colonial

leaders Indian

since Views

of Development", Braudel Center, Vol XIV, No.l, Review, A Journal of Fernand Federation of Indian Chambers Annual Winter 1991, p. 106, G.D.Birla, Report, and S.P.Jain and B. M. Birla in of Commerce and Industry 1934, p.173 (FICCI), and Annual FICCI, 1943, 1946, Report, p.129 pp.104-5, respectively. 14

For

a useful

collection

on

see Peter J. Cain and Mark Harrison, ed., imperialism 3 in Historical 2001, Studies, Routledge, London, to this series the 19m the material from surveys

Critical Imperialism: Concepts volumes. The Introduction

in this collection, till the late 20m century. Another useful article included century to A century from Marx and Imperialism: of Theory Patrick Wolfe, "History is also critically the literature. The Arif Dirlik Postcolonialism", surveys quotation from

this

article.

nationalism

an

important resistance

and

detailed

to colonialism

see Mridula scholarship Mukherjee, Practice and Theory, Sage, New Delhi, Peasant titled Interrogating Historiography:

critique by the

associated

Peasants

Revolution,

2004,

work Practice and

and

Subaltern

Peasant

Economic 'subalterns',

32

For

and popular

and

Political

(hereafter have not responded

Weekly,

15 Reprinted in Bipan Chandra, Orient New Delhi, Longman,

in India's

treatment

of and

studies' Non-violent

Book especially Peasant Perspectives,

II in this Marxist

"Peasant Resistance Mukherjee, and Beyond", India: 'Subalterns' 8 and 15 October, 1988. The EPW),

Also

knowledge,

the

see Mridula

Theory. Consciousness

to my

of

'subaltern

in Colonial

Nationalism

and

to this critique. Colonialism

1979.

This content downloaded from 202.41.10.3 on Tue, 15 Oct 2013 06:03:21 AM All use subject to JSTOR Terms and Conditions

in Modern

India,

The

16

See

of

"Structure

Colonial

and Hamza

33-35, EPW,

Formations", etal.,

Capitalism

also

EPW,

and Modernisation",

See Hamza

a World

a Theoretical

Development: for a brilliant

of Colonial

"Structure

Alavi, on

Accumulation

enumeration

New

Scale,

Special Number, Vol. Annual No., Production, of Colonial

op.cit.

industry

goods

of what

constitutes

unrequited

.-s (T)' fD

the

Amin, and 1974

Political

Economy, structure / peripheral it has been calculated by Irfan

of African a colonial

to a metropolitan / central one. Also in 1801, at a crucial industrial revolution, stage of Britain's to Britain transfers from 9 per India represented about

as opposed Habib that

for

capital goods not arise.

Samir Formations," op.cit, 1974 and "Accumulation

Review

Z c 7T ZT a>

mine.

emphasis

York,

Model",

of the

a Theory

1970,

>

and

Ibid.,

Journal "India and

and Colonial "For

Jairas Banaji, 23 December 1972.

History

State", Alavi,

Nos.

Vol.10,

between the sector producing exchange and the capital goods did industry

of

question

capital

Alavi, See

"Colonialism

Chandra,

1980

3,

of Colonial

1982.

the

Economic

1970,

Modernisation",

and

EPW,

and Hamza

and Canberra, of Production",

17 Bipan

10, No.

Production",

10-12,1981

Modes

19

and

1975,

London

18 The

of

and

Colonialism

Stages Asia, Vol.

Contemporary Colonial Mode August 16, Nos.

"Colonialism

Chandra,

Bipan

"Colonialism,

in Indian

of the Colonial

Return

or

Drain cent

of

the

GNP of British India which was equal to about 30 per cent of British domestic available for capital savings from Asia and West Indies put

formation

in Britain.

transfers unrequited to be 70 Habib by Sayera of domestic in the same year. savings cent. This shows how critical transfers

was

together out formation per cent of British capital Utsa Patnaik it to be 84.06 per calculated

The

calculated

to the process the colony were of capital accumulation and how for Britain it was for the colony. See Irfan Habib, of the Indian "Colonisation a Marxist in Essays in Indian History: Towards Tulika, Economy", Perception, New Delhi, "Colonial and Capital 1995, pp. 304-6, Sayera Habib, Exploitation from

debilitating

in England

Formation of the Indian

History

in the Early Stages of Industrial Revolution", Proceedings "New Estimates of 1975, Utsa Patnaik, Congress, Aligarh, to Transfers British Trade and Their from Relation

Eighteenth-Century and Colonies," Tropical 1600-1900: A Quantitative Tulika, New Irfan Habib, 20

some

cases

destruction

of

In

Mohd.

Ali

V.

Lutsky, 1969.

21

This which

even the

has

"The Indian Economic Moosvi, in The Making Essays Study" of History: Delhi, 2000, pp. 386-390.

been

of the Arab

shown

"Agrarian

been

to be

claimed wrongly by Mridula agriculture, Mukherjee, Punjab Exceptionalism, Sage, New Conditions

to

was witness the industry destroyed, and armament started industry, by See for example colonial intervention. Countries, Moscow, Publishers, Progress

in Assam

true

was

even

in areas in the

moving

Colonialising 2006.

Delhi, 1880-1890:

The Indian Economic Valley", for a discussion 1979, pp.207-232 Apr-June, occurs Indian agriculture in a vastly different Brahmaputra

Experience, Presented

modern existing textile, shipbuilding in the 1830s, through

in Egypt Modern History

tendency it has

Shireen

A Case and on

like Punjab of direction

in India, capitalist

The Myth Agriculture: of See also Aditya Mukherjee, of the Study of Five Districts Social how

situation

History colonial (from

Review,

XVI,

structuring

2, of

Punjab). 33

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Social

CO o o rS

Scientist

22

In some century, technology no positive

?

as the

in the late 19*" of Indonesia sugar plantations at high and levels of investment operated by foreign capital to colonial needs and had but yet they remained totally articulated See for in Indonesia. effect towards of capitalist growth agriculture such

instances, they were

The Process Clifford Involution: Geertz, example Agricultural 1963 and J. S. Furnivall, Netherlands in Indonesia, Change Berkeley, New 1956. 1944 and Colonial and York, York, Practice, Policy

u 23

and Colonial See Bipan Chandra, his Theories of Asian Societies "Karl Marx, on Indian Economic Ideas "British and Indian Mimeo, Rule", p.62, and in his Nationalism and Colonialism...,op.cit 1858-1905" Development, versus A of Development", Indian Views India: British "Colonial Review, of

Journal

Fernand

24 Mohammad

>

25

of Ecological India, New

Ali's

had

India witnessed result

the

of

because

of

America) the last phase

during

"loosening it. See his

XIV,

to empirically that

the first for Latin

shown

Vol

Center,

No.l,

Winter

p. 87.

1991,

for example.

Egypt

was

Chandra

Bipan Frank

Braudel

of

of

spurts colonialism

or breaks

links"

the

for

demonstrate the

of

1914

from

with

India

industrial

(as Gunder that growth a to 1947 was than

rather

colonialism

op.cit. More

on

this

to partial modernization leading to accept that moving have would to closer the country fact bring

or

that

and Modernization",

"Colonialism

later. 26

Those

who

on

that

argue transitional

it was the

colonial

development,

was

colonialism

to modernization

path would a position even

in

the die

hard

find

would

imperialists

further

capitalist to difficult

argue. 27

28

Tirthankar

The Economic Roy, Press, New Delhi, 2000, Second to the first edition. See Niall

Ferguson, for 2003,

Empire: How an unabashed

Oxford

of India: 1857-1947, 2006. All references

History edition,

Britain

University are in this address

the Modern

Made

World,

Praise empire. are quoted and Subrahmanyam Guha Roy's work by Ferguson, for the book. edition of Roy's book, ibid,, as an advertisement London,

29

defence

versus

Indian Vol

Economic

Views XIV,

No.l,

of Development", 1991 Winter

the

Review, and

A

"British

of Journal and Indian

in

1858-1905"

Development,

Penguin, of Tirthankar in the

second

ideas on and Indian the British given in India in, "Colonial India: British

has in considerable detail Bipan Chandra and the issue of development colonialism Center,

of

his

Braudel

Fernand Ideas

Nationalism

on

Indian and

Colonialism...,op.cit. 30

See Morris

D.

Indian

Economic

31 Dharma

Kumar,

"Towards

Morris, History," ed.,

Journal

Cambridge

a Reinterpretati?n History, of Economic

Economic

History

of Nineteenth VoLXXIII,

of India,

Vol.

No.

Century 4, 1963.

II, Cambridge,

1982. 32 Morris

34

D. Morris's

1963

article

in Journal

it by Bipan Chandra, Toru Matsui, Tapan all in Indian Economic and Social History

to and responses History of Economic and Morris's rejoinder Raychaudhuri and Review (IESHR) were compiled

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The

as Indian

published

Irfan

See

in the nineteenth

Economy

"Colonization

Habib, Vol.

Scientist,

8, March

3, No.

reproduced

Colonialism", in Irfan

Perspective,

Tulika,

Perceiving

34

in Indian

A

Century:

Economic

of 1975

Habib,

New

the and

Modern

? Indian

Without

Economy "Studying Vol. Studies, 19, No. 3, in Indian Towards History:

C

!985, both a Marxist

a> Balance

1992; Michael

Estimates

of Payments:

Blyn,

Kidron, Trends

Agricultural

of Current

Long Income

Philadelphia, Transition, Tulika, The

Goldsmith,

New

the

in

India

of

in India,

1891-1947:

Patnaik,

and

S. Sivasubramonian, New

OUP,

Century,

Development of A.I. Levkovsky,

London,

India,

: Mankind his

The

serious

Investment and

in India,

the Global

Political differences

1900-1939,

Ascendancy

University in India, Delhi, 1966; a series of 1965 contains

Century",

See

Category critique

Blusse

Passage See also

2006. I have

1982.

some

of the last aspects of post colonial India

of Indian

"The

in Indian Economic Eighteenth Century History", Femme the Eighteenth Gaastra, ed., On Century Van Leur in Retrospect, 1998 History Ashgate, Hampshire, and

of Asian of positions

taken

like Chris

by people

Bailey

and

others

on

in as

a

for a

eighteenth

India.

Century

The Economic

38 Here

1999.

and Mridula Mukherjee in the Twentieth Capitalism 12 March 1988 and Aditya Mukherjee, and the Making 1920 Class: of the Indian Capitalist 2002. See also f.n. 45 below.

and the Growth "Imperialism Economic and Political Weekly,

Irfan Habib,

Delhi,

Economy of Underdevelopment, Cambridge, however with Bagchi's treatment of some

Nationalism Imperialism 1947, Sage, New Delhi,

Leonard

in Action:

1972 and Perilous New

OUP,

and especially of his characterization phase of colonialism as "neo-colonial" in this work. See, for example, Aditya Mukherjee,

R.W.

2000;

Yale

1860-1977,

Cambridge,

of Capital,

and The

The National

Delhi,

Press, New 1983; Haven, Capitalism ed., The Economic V.B.Singh, History of India, Bombay, articles the colonial Colonialism view; Debdas questioning Bannerjee, and Dependence in Late Colonial Trade, Development India, New Delhi, See Private

1965;

Output, Availability, on Political Economy:

Essays

1999,;

Delhi,

Twentieth

Financial

Investment

Foreign in India,

1966; Utsa

Productivity,

37

PJ

Social

1757-1900",

Economy a Colonial

Capital to 1938-39, 1921-22 1963 and Aspects from Bombay, of Indo-British Economic 1858-1898, OUP, Relations, 1982; Basudev Trade, Bombay, Chatterji, and British Policy in India 1919-1939, OUP, Delhi, Tariffs and Empire: Lancashire and the Empire: India Orient 1992; Sunanda Sen, Colonies 1890-1914, Longman,

George

36

> g.

IESHR,

Symposium,

Asian

Essays 1995.

Delhi,

India's

A.K.,

Bannerji, Accounts

Calcutta,

35

History

1969.

Delhi, 33

of the Colonial

Return

History

of India,

op. cit., Introduction,

are

of Roy's just a few samples position which he himself calls "no more than

p.18.

from various parts of the an updated version and shorter of the Cambridge Economic He Vol.II." "...Colonial India, (i) argues: History of India experienced economic In the nineteenth ...it century positive growth.... .... Other was driven a India's in world market by integration rapidly growing a strong ...were economic state and modern key factors encouraging growth book

transport

and

communication."

selected

in industry income and services grew that commercialization (ii) "The notion or debt, and not driven by profit motive,

"Real

the colonial rule." rapidly throughout was forced upon the peasants by taxes

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35

Social

Scientist

CO o o rs

is seriously of the peasantry "indebtedness" (iii) The proverbial disputable." could be "a sign of prosperity and not poverty of the peasants" of (iv) "Drain resources nor correctly measured". from India can neither be precisely defined

Q.

In

case

any

of

British

created....assets

India

z

had it not quality was for necessary

m

benevolence, on luxuries

"5 >

infrastructure

O

crucial

to be is unsatisfactory thesis and needs (vi) "The most story" that of "commercialization" rule was modern and infrastructure public

"alternative

Z

as

as

were from colonies neither gains to the origins of industrialization."

"economic

nor imagined industrialization'


could

state was

of the colonial and more and

legacy that it

have

and rule

to modernity, if not (vii) The modernity, also seen from the fact that "it spent less duties of the state such as defence, welfare,

on the genuine institutions." (viii) "Any role of local characteristics

of slow explanation and peculiarities..."

on the focus hold colonialism for stagnation responsible within India" such as: (a) "scarcity of water"

must

an

by

replaced important

goods in such extent acquired links with i.e., British Britain,"

not believably close political

developed India's transition

large as was 'de (v) The

one

to

had

despite

look

investments

rates

growth Rather at

than

"conditions made

the

by

British which "go to the credit of this (British) regime"; (b) "scarcity of capital was

and always rates; acute"; (c) accelerated always present population growth institutions like "caste...introduced market (d) social (e) the imperfections"; for gold and silver" and inclination Indians' "to spend the extra income "hunger on sumptuous or road rather than on irrigation feasts and jewelry marriage " to climatic risks"; (f) building"; subject (g) poorly "agriculture...was high institutions...

developed History

of India...op.cit., mine.

emphasis 39

In

this

I have

section

Class: Capitalist in the Colonial

Aspects

as banks

such

pp.vi,

and

insurance

," etc.

14-18,91,130,217,240-43,257,

drawn

from

heavily of its Economic,

Aditya Mukherjee, Political and Ideological

The

Economic

273,

310-11,

"The

Indian

Development

read at Indian History paper Congress, in S. Bhattacharya and Romila eds., Thapar, Indian History, 1986 and Aditya Mukherjee, OUP, Delhi, Situating Imperialism Nationalism and theMaking Class: 1920-1947, Sage, New of the Indian Capitalist 2002. Delhi, Kurukshetra,

40

Tirthankar

41

A.D.D.

Roy,

Gordon,

1927-47",

reprinted

particularly

Businessmen

4 and

Ch.

and Politics:

1918-1933,

Manohar,

of India, London, Development 136-7, 152-3, pp. 51, 116-17,

example, See

op.cit.,

in Bombay,

Economy Economic

42

Period, 1982 and

Rising Nationalism New Delhi,

1957 and Tirthankar

Roy,

aModernising Anstey,

The

op.cit,

see for

etc.

in the Nineteenth 1969, pp. Delhi, Economy Century: A Symposium, mine. about the nineteenth Morris is writing Shockingly, too brief, in 1963, when India, making century being genuine independent to change structural of the industrial landscape changes was already beginning emphasis

in less than 15 years of planning. the country "Indian Economy, 1947-65: The Nehruvian and Aditya Mukherjee, Mukherjee edition 2000, revised and enlarged 43

and Vera

Indian

13-15,

36

5.

See,

Clive

Dewey,

"The

End

of

See for example Aditya Mukherjee, in Bipan Chandra, Mridula

Legacy",

India After Independence-1947-2000, called India Since Independence, Imperialism

of Free Trade:

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The

Penguin, (in press). Eclipse

of

the

The

Return

of the Colonial

Lancashire

and the Commission Lobby and A.G. Hopkins, eds., Imperial

Dewey

and

of Africa Industrial

India,

Policy and Society, Economy and A.D.D. Gordon, 44

45

I.M.,

Drummond, 1972. I shall not

here

initially continued

imperialism therefore

the

Economic

in an

bourgeoisie "The Workers'

The

Indian

Indian

a similar

to argue

this

countries" capitalist 1947. The Political

1919-1939,

c ZT a>

no

had

period

London,

CD

and Peasant

it as one where

seeing

in History,

s' Parties,

was

thesis which

industrialization encouraging basic contradictions with

III,

1920-1937,

the

setting

1&2,

and it. See

1926-30:

1981,

Calcutta,

which

position,

has

that this period adding only on Britain for that of multilateral

Left,

dependence

eds., 1979;

An Aspect of in Bipan reprinted New Delhi, 1983, for a brief Left: Critical Appraisals, view. Datta Gupta, See, also, Sobhanlal Comintern,

Studies

of the communist summary India and the Colonial Question, continued

the Empire,

of the decolonization

to explain form altered

1920s

colonial

ed.,

and

Policy

the "Left" variant late

Aditya Mukherjee, Communism in India", Chandra,

> Q.

to India", in Clive Autonomy in the Economic Impact: Studies History and "The Government of India's New

op.cit.

in the

argued

History

of Fiscal

and K.N. Chaudhuri, Dewey Economic and Social History, Delhi,

in Indian

Essays

Economic

in Clive

1900-1925",

British

discuss

1978

London,

in Indian

1980.

persisted

"exchanged

a

A. K. Bagchi has in a section of the state

of

unilateral

on

the

advanced

dependence for a "neocolonial, retarded

stage

society" after 1982, pp. 90-94.

Revolution

Economy of Underdevelopment, Cambridge, and Economic in India; A Bagchi, Capital "Foreign Development in K. Gough and H.P. and View", Sharma, eds., Imperialism in South Asia, New York, 1973.1 have critiqued this view extensively

elsewhere

(see f.n.

See also, A.K. Schematic

46

A.

K.

35 above).

Chs. 3, 7 and 9-14; Rajat Ray, 145 ff., 161 ff. And 196 ff.; B.R. 1979,pp. The Political Tomlinson, 1979, pp. 31-32 London, Economy of the Raj, 1914-47, and Subramanian and Homfray, Social and Economic in India, Recent Trends New Delhi, and 6-8. 1946, pp.48-49 See

Private

Bagchi,

47

A.K.

48

A.K.

Bagchi,

Private

Bagchi,

Private

49

Ibid.,

50

Subramanian

51

See,

52

See

R.L.

pp.440-41.

Investment...,

Chs.

Varshney,

It was foreign Indian

op.

investment edition),

7.

op. cit., p.51.

1965;

Investment...,

Subramanian

table

of imperialism in the colonies.

Calcutta,

1970,

Delhi,

in V.B.

Trade",

"Foreign

that

in India,

Capitalism

Bombay, cit., p.31

Private

assumed

3 and

433 ff.

and Homfray,

1857-1856x

53 A.K.Bagchi,

Delhi,

Investment...,

e.g., A.I.Levkovsky,

Tomlinson,

54

and

pp.83ff.

India,

Investment...,

in India,

Industrialization

1966,

pp.233

ff.

319.

and

ed., Economic Singh, History of and Homfray, op. cit., p.47; B.R.

12.2, p.367.

the

third

See,

e.g.,

stage necessarily R.P. Dutt, India

meant

massive

Today,

(second

ch.6.

37

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Social

CO o O rN

Scientist

55

See A.K.

Private Investment..., p. 160 and A.K. Bagchi, and Capital Accounts Estimates of Current and 200. 1963, pp.195

of Payments: Bombay,

India's Balance Bannerji, to 1938-39, 1921-22 from

CL <

I

56 A.K.

Bannerji,

57

and Michael

58

Ibid, See

B.R.

Table

Ibid. Kidron,

Tomlinson,

XX,

Investment

Foreign

p. 155

cit.,

op.

and

in India^Lon?on, Subramanian

and

1965,

ff.

pp.53

Homfray,

op.cit.,

p.75.

59

Kidron,

60

in them Some the scholars their sometimes role, exaggerate seeing greatly in of'dependent See, A.K. Bagchi, Capital...," capitalism'. "Foreign ushering the balance of payment do not suggest op. cit. However figures of this period investment. inflow of foreign direct See, e.g., A.K. Bannerji, any massive op.cit., of fact the entry of multi pp. 195, 200 etc. As Rajat Ray put it, "As a matter

m O >

10-11

op. cit., pp.

nationals

not

did

and 40

any

bring

ff.

appreciable

to

addition

61

B.R.

62

table 10, p.42; Subramanian See Rajat Ray, op.cit, Indo-British XVII, A and B, pp. 63-5 and Arun Bose, 1947, p. 9-10

63

and Mridula See Aditya Mukherjee, Mukherjee in Twentieth Indian Capitalism op. Century",

See Bipan Colonialism Indian were

level

of

investment".

op. cit., pp.48-49.

Tomlinson,

in V.B. Capital", Singh, 1991 that the position extent. considerable 64

the

p.274

op.cit,

ed.,

foreign

regarding

"Colonialism

Chandra, inModern

economy loosened

It is only

op.cit.

India,

and Homfray, Big Business

"Imperialism cit., and Arun

after

the economic

direct

investments

table op.cit, Deals, Delhi,

and

Growth

"Foreign reforms since

changed

", in Nationalism of how for a demonstration

and Modernization

New

Delhi,

1979,

of

Bose,

a

to

and the

the links with spurts of growth when imperialism of crisis faced by the advanced metropolitan periods

experienced during

countries. 65 A.K.

66 M.

Private

Bagchi,

Rajat

Ray,

op.cit,

and A.K.

op. cit., Ch.2

Kidron,

Chs.3

Investment...,

and

6, particularly,

pp.83

ff,

192ff.

Ch.3. Private

Investment...

67

A.K.

68

See Aditya Mukherjee, Nationalism..., pp. 28-30, R.W. Goldsmith, Imperialism, New Haven, and G. The Financial 1983, p.102 1860-1977, Development of India, K. Shirokhov, in India, Moscow, Industrialisation 1973, pp.48-49.

69

See Aditya

70

See

71

I. M.

72

Clive

ibid.., pp.

Bagchi,

ibid.,

83ff.,

Mukherjee,

Drummond, Dewey

ff.

Imperialism,

7 and

Chs.

433

Bagchi,

Ch.

10.

8.

op.cit,

in Dewey

Nationalism...,

p. 124

and Hopkins,

ed.,

op.cit,

p.36.

38

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The

73 Drummond,

Return

History

> o.

It is to be noted

74

Ibid., p. is seen as exploitation.

75

Ibid., p.

76

Given Ibid., p. 249-52. Dewey, in recent years at least doubts of the Indian entrepreneur.

122-3

Economic

p. 132

op.cit., 140.

in Indian

of the Colonial

and Clive

that

the

loss of

in Dewey

Dewey

advantage'

'preferential

and Chaudhuri,

the massive should

about

of Indian

upsurge the various



op. cit.

ed.,

economic

arise

by Britain

alleged

business

incapacities

fD

77 Dewey in Dewey and Hopkins, ed., op.cit., p. 38 and Tirthankar Roy, op.cit., pp. accuses and Marxists 'left-nationalist' of scholars 10-18,309-11. e.g., Roy of the early nationalists "that were for them not much up the arguments picking more

than

tools" and political 311. Ibid. p. descriptions."

then

"as correct

them

"reestablishing"

and valid

78 Dewey in Dewey and Hopkins, mine. ed., p. 50, 55-56, op.cit, emphasis Somewhat in the same work talks of rival factions within the inexplicably Dewey India Office and the Government of India and again a few pages later sees the as rival factions. two themselves Tirthankar of State Roy too sees the Secretary and

the Viceroy and Indian interests with "the balance representing Imperial in favour of India in the twentieth He goes one step further and tilting century". adds a third layer, that of the provincial Governors "who were concerned with or welfare local developmental related This third layer of issues", op.cit, p.247. colonial

Governance

would

presumably

even

tilt the balance

in India's

further

favour. 79

in Dewey

Dewey

80 A.D.D.

and Hopkins,

ed.,

p.67,

op.cit,

emhasis pp. 238-241, op.cit, in Aditya "Business and Mukherjee, 1981. B. R. Tomlinson Review, 9.1-9.2,

Gordon,

Gordon Historical

mine.

emphasis mine.

also

a also of critique in Bombay", Indian sees the Government of See

Politics

India

the "imperial and domestic the former commitment" and balancing War dominated till the First World and presumably the latter after that. B. R. Political the 1914-47: The Economics Tomlinson, Economy of Raj of in India, Macmillan,

Decolonization 81

p. 28.

1979,

London,

as sees "British rule in India" example, having 1947" the nineteenth of century by objective Elphinstone: dream of perpetual but must ourselves possession, apply for

Tomlinson, achieved not

natives that may 82

The the

The

colonialists

people,

would

perhaps of the

a position of

an equivalent the necessary

admit

to our

movement

Government

utilizing

that will

be beneficial

'official'

Indian 83

a state

into

interests have

amount

their as well litde

governing as their

objection

down keeping by the 'Subaltern

'elite'

favoured

India's

of

sterling obligation out of in Rupee

or

themselves

to bring the in a manner

Ibid. p. 152.

own...", to seeing the real

"successfully "We must

as

this movement of

aspirations

the

school.' remittances

the Government's

were

met

revenues

by to

hard earned her export currency by India through remittance Smooth therefore could occur if the Government of surplus. only a India could generate and the export budgetary surplus equal to the remittance, was to convert sufficient the former into the latter. When these surplus

purchase

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39

Social

Scientist

co O O

conditions

introducing India's currency

CL -C Z

vO

85

87

and monetary

on

More

manipulation.

this

later.

were

The Home

of Government of India incurred the sterling expenses Charges cost in Britain civil and of the of State's office, including maintaining Secretary interest on Railway interest on public debt and the guaranteed military charges, to British etc. The , pension investments civil and military and furlough officers, Home

Charges

India

correctly

Rajat

86 A.I.

O >

of fiscal

combination 84

was forced to adopt measures the Government such prevail, revenue at home and/or abroad, tariffs, borrowing up using rate or resorting to a the Rs./Stg. reserves, Exchange altering

not

did

as

Ray,

to a very large extent what the early nationalists represented as drain of resources or capital described from India. in India,

Industrialization

Levkovsky,

OUP,

in India,

Capitalism

PPH,

1979,

Delhi,

1966,

Delhi,

in

11-13.

pp. p. 96.

and Homfray, Recent Trends in India, Subramanian Social and Economic 1946, 1914-1947: The Political The 15, 72; B.R. Tomlinson, pp. Economy of the Raj, in India, Macmillan, Economics The early 1979, p.93. London, of Decolonization on the nationalists focused their critique incurred by huge defence expenditure out to meet British that India's defence India pointing imperial designs as a proportion revenue was of annual larger than that spent by See Bipan and militaristic like Britain and Czarist Russia. nations

expenditure advanced

Rise 580 ff. Tirthankar however and Growth...op.cit., pp. Roy of this expenditure that the colonial approves government by "spent arguing on the and more less on luxuries duties of the state such as defence..." genuine mine. p. 273, emphasis op.cit,

Chandra,

88

It is, for example, said that to explain the Government which

of

India's

terms meant

"in financial

to meet

"we do not

need

a conspiracy

"day-to-day

running

theory of imperialism" of its own business" revenue adequate remittance enough Political Economy

two

things only % obtaining and Britain, and securing or See B. R. Tomlinson, obligations. in India

its commitments

to pay its sterling debts" in India, Macmillan, London, of the Raj 1914-4: The Economics of Decolonization was 25-6. Tirthankar favoured 1979, pp. Roy's government's euphemism commitments". is to question The point, however, "expenditure p.254. Op.cit, or 'obligations' to begin with. the very legitimacy of the 'commitments' 89

P.J.,

India's

Finances

Public

Mukherjee, 90

The

See Thomas,

Imperialism,

Growth from

1833

of Federal to 1939,

Finance

in India:

London,

1939,

pp.

177-180,

Nationalism...op.cit,

Being

a Survey of and Aditya

pp.500-01 6.1 Tables

and

6.2.

to Kirpatrick, Hoare 3 February M.P., 1933, Secretary of State's Private For a detailed India Records London. Office L/PO/270, (IOR), Papers, Office on the fiscal discussion since W.W.I and maintenance of imperial policy see Aditya Mukherjee, Chs 5-8 on interest, Nationalism..., Imperialism, op.cit, Samuel

Tariffs

, Trade

and

Industry

froml916

to 1947,

the

figures

in this para

are from

p.180. 91

See E.J. Hobsbawm, particularly,

92 Neville

40

State

pp.

Chamberlain, at a cabinet

and

Industry 148-153. Chancellor meeting,

Empire,

Harmondsworth,

1969,

of Exchequer and Samuel Hoare, of the Cabinet of Meeting

Minutes

This content downloaded from 202.41.10.3 on Tue, 15 Oct 2013 06:03:21 AM All use subject to JSTOR Terms and Conditions

Chapter

7,

Secretary Committee

of

Financial regarding India Office 191, Chamberlain's.

4 November

Economic

History

> g.

Financial

L/F/5/ Collection, statement is child' 'naughty on see Aditya the Reserve discussion Bank, over Formation of Reserve Bank of India, 1927-35", 1992 and Imperialism, ch. 4, sec. Nationalism..., op.cit,,

Safeguards, Records, For a detailed

Mukherjee, EPW, 27.5,

in Indian

of the Colonial

Return

The

"Controversy 1 February

London.

1932,

The

PJ C ZT

V. 93

8 Dec.

1930,

similar

document

95

Department dated June 17,

and C.H.

Kershaw 94

Finance

Kisch,

(L/F)/5/191,

IOR,

London.

See

signed by R.A. Mont, IOR, London.

H.

1931,

L/F/5/191,

1931 document the June citing Chatterjee the heads under of defence, debt charges ... of 'would ...absorb three quarters pension Federation'" p.21. op.cit,

Basudev

says

annual

servicing the total

8 Dec. of the Secretary of State...', Government the Indian Federal

'The position Assurances as a first

that

1930,

also

another

Strakosch,

that

"the

aggregate and salaries

and

revenues

of

the

L/F/5/191, meet

would

op. cit., pp.3,8. these obligations considered enough.

on the government were clearly not budget in this regard and rejected with Australia anticipated parallels were drawn and nationalist leaders with repeatedly by Indian capitalist is a country where that "Australia, however, argument, rarely made publicly, The

n>'

L.J.

charge

note

that the the

mine. Many is of our own kith and kin.n colonial ibid., p.9 emphasis government and more Niall scholars like Drummond fail to note recently Ferguson, op.cit, in USA, Canada, the critical differences between British Australia and presence like India or West Indies when in colonies talking of the British 'empire'. 4.

96

Ibid.,

pp.2,

97

Ibid.,

p. 11, emphasis

98

Tomlinson,

99

Trade, Delhi,

100

101

p.46

op.cit,

Tariffs 1992.

mine.

and Empire:

Lancashire

See Aditya Mukherjee, Imperialism, to froml916 Trade and Industry in the inter-war trade agreements See Aditya

Mukherjee, Issue, August Special Indian Capitalists' Critique

in Amiya From Early Medieval chs. 3-4 on Finance 1929-39",

policy

and

Policy

Nationalism..., 1939 for a detailed

in India

Chs op.cit, discussion

Question

in Colonial

2007,

Aditya Mukherjee, of British Monetary and

Finance

on Tariffs

of

the various

,

Yojana,

Depression

Vol. Years:

in India, Policy in and Credit Indian ed., Money History: Bagchi, 2002 and Imperialism, Times, Tulika, Nationalism...op.cit, and Monetary for a detailed discussion of 1926-39, Policy on this question. Much of the advantage Indian that response Financial

Kumar

got due to the rise in tariifs in this period industry of the government. fiscal and monetary deflationary policy Investment... op.cit, p.66. Schuster,

OUP,

5-7

India",

"The

Indian

102

1919-1939,

period

"The Currency

51,

British

and British

Member

to Irwin, Viceroy,

1 June

1931,

was

smothered See, Bagchi,

Private

Office

by the Private

Papers,

(L/PO)/269, IOR, London. 103 Ibid.

41

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Social

CO o o rs xi CL < I jC u

Scientist

wrote to Irwin on 1 June 1931: "We have 104 George the Finance Member, Schuster, to force us to contract, the usual been from London getting telegrams trying contract rate - in their own words and put up the bank 'to create a contract, which

famine', money sell for sterling. IOR, London. 105

See

A.K.

Subramanian pp.45-46 106

The

figures

107

only

India's Balance 1963, pp.22,27. Bombay, Bannerji, of Payments, in India, Recent and Homfray, Social and Economic Trends 1946, and G.D. Birla, Indian Currency..., p. 17.

and Homfray, have been from Subramanian op. figures computed of Bombay Bullion cites similar C.B. Mehta XII, pp.45-46. Exchange, of Commerce and of Indian Chambers for 1931 to 1938, Federation Annual

Industry, Kasturbhai

>

to it impossible here to get rupees for people do that you will get remittance". L/POI'269,

make

above

cit., Table

m

will

say if you

They

FICCI,

President,

See G.

Balachandran,

Between

the Wars,

FICCI,

(hereafter

Report,

Lalbhai,

Bullion's

John

A.R.,

Gold

Britain's

Empire:

178

pp.

particularly 1929-39, Manohar, Depression, FICCI, A.R., 1933, p.5; C.B. Hirachand, President, 1932 5 Feb. 1933, p.423; N.R. FICCI, A.R., Sarkar, in

India

the

Great

(PT Papers), press Papers, ?.76. 1934, PT Papers, 108

also

India

Rothermund,

1992; Walchand

Delhi,

and M.R.

Mehta

, Purshotamdas and

NMML,

and

Problem ff.; D.

Parikh,

Thakurdas

Purshotamdas,

5 May

For a detailed account difference IOR. ,of the unusually strong not quite with the celebrated British understatement) gentlemanly (expressed the Finance Smith and the Government of India, especially between Osborne L/POI321,

Member,

a "weak ass, Smith ended the Viceroy up calling Grigg, where "a liar, undercover and mongrel...a failure" and Grigg slanderer see exchange of telegrams the Secretary of scurrilous between etc., swine", to and the Viceroy, and Osborne Smith L/PO/321 1936, Sept.-Oct. James

terrified dirty State

of

16 Nov.

Purshotamdas, 109

fl.ll,

clippings,

See

pp.46-50.

p.6.

1996,

Richmond,

1938,

A.R.,) 1935,

B.R.

Political

Tomlinson,

110 G.D.

Birla,

conclusions

and

Indian of War

24 Oct.

1936, PT Papers,

Economy...,

p.140.

in Retrospect, Allahabad, 27 July 1943,

Currency Cabinet

fl.105.

meeting,

pp. 18-21.

1944,

See

also,

IOR, London.

L/PO/325,

111

on Economic 11 of State, L.S. Amery, Secret Note in India, Situation Secretary Note and War Cabinet 1943, War Staff Papers 1/581, IOR, London (L/WS), Aug. on Indian Sterling 1 Aug. 1942, L/PO/325, IOR, London. Balances,

112

See L.S. Amery, 581, IOR. The the RBI

Note

on Economic

Eastern

Economist

to

criticized

11 Aug., the Government

1943, of

L/WSIll India

for

without expenditures raising corresponding in e.g., by issuing rupee loans, but by simply issuing notes against sterling was the journal the worst form of inflationary This, finance, England. argued, on and the sterling credits the involuntary, forced inflicted represented savings 26 Nov. the Indian people, 1943, p.981. using funds,

113

For

a full discussion

The

Controversy

finance

in India,

Situation (EE)

of over

British

this India's

issue

see Aditya

Sterling

Mukherjee,

Balances,

Indo-British

Finance:

Studies

in History,

1939-1947",

42

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The

new

6.2,

of the Colonial

Return

1990

series,

and Aditya

Mukherjee,

in Indian

Imperialism,

Economic

History

> Q.

Nationalism...op.cit,

ch.5 114

See

III above.

section

was capitalists how to create

the

crucial -

the "realization

it was

PJ

faced by the Indian problems not shortage of resources but

problem" resources for converting the available into productive bothered them. One may perhaps show a linkage between the of Indian the colonial vis-?-vis government phases capitalists

belligerent their unrealized

and

of

C 7T ZT a>

conditions

which

investment more

one

In fact,

See

accumulations.

Nationalism...op.cit.

Mukherjee,

Aditya

fl>

Imperialism,

ch.9.

particularly

115 1have dealt with this at some length in Ibid. 116

See f.n.

117

There

39 above

economic

Private 118

a direct

was

in the Indian national movement surges state. I have in great detail by the colonial as well as individually to the efforts documented of Indian business collectively resist the 'collective of British and wreak concessions from monopoly' capital state in my the colonial See also Bagchi, Imperialism, Nationalism...op.cit. and

See

120 As

Chandra

op.cit. The Indian study by B. P. Adarkar, and my Imperialism, Nationalism...op.cit,

the classic

W.

Raymond

in Bimal 1992,

Tirthankar

pp. Roy,

above. The

Goldsmith, New

Press,

Legacy", Delhi,

V

in section

discussed

University

122

Ch.6.

has documented how the spurts of growth by experienced a result of the in this period was of the link" with industry "loosening and the Great in Colonialism and the two wars colonialism during depression

Bipan Indian

pp.468-73

121

between

conceded

Investment...op.cit,

Modernisation, 119

correlation

concessions

Also

1983,

The

ed.,

Jalan,

Policy, ch.6.

Allahabad,

1941,,

see Ibid.

Financial

Haven,

Fiscal

Indian

Development and p.68 Economy:

of India:

1860-1977,

Yale

"Colonial Chandra, Bipan Problems and Prospectsx New

8-9. op.cit,

123 Angus Maddison, Historical Statistics,

p. 14.

The World OECD,

Economy. Indian 2006,

IA Millennial

Vol.

New

Edition,

Delhi,

Perspective, table 2007,

Vol.II 8b, p.

641. 124

See

Amartya

Sen,

Poverty

OUP, Delhi, Deprivation, in estimation of exercise Famine the figure Misery argues Famine

and

Inquiry Commission is closer to around

on Entitlements and Essay for a comprehensive pp. 195-216 the Bengal famine. While the during An

Famines:

1982, Appendix famine deaths

D,

Sen convincingly put it at 1.5 million argues why 3 million. See also, Paul Greenough, and Prosperity New Famine he 1982, where York, of 1943-44,

in Modern BengahThe a higher and Rakesh figure, Batabyal, toNoakhali, 1943-47, Sage, New Delhi,

125

See Tirthankar

126

See f.n.

Roy,

op.cit,

p. 257

and

f.n.

Communalism

in Bengal:

From

2005.

124 above.

38. 43

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Social

CO o o

Scientist

127 Quoted

Independence,

CNl

128

cl <

in Bipan Chandra, Mridula Mukherjee, Aditya Mukherjee, India After

i

op.citp.19.

Ibid., Aditya Mukherjee of Indian Capitalism XXIII,

II,

12 March Critical

Development:

and the Growth "Imperialism and Political Weekly, Economic Century", in Ghanshyam 1988, Also Shah, ed., Capitalist reprinted 1990 Mridula and Bipan Chandra, Essays, Bombay, chs. 25-31. India After Independence, Mukherjee, op.cit, and Mridula

Mukherjee,

in the Twentieth

and Aditya Mukherjee See also Bipan Chandra, of the Transformation "Aspects and Contemporary Hitotsubashi World", Journal of 1989. August

O Z 129 m

The

are

figures

all

>

reflecting

the

sharp estimates

Mukherjee's See Goldsmith, 130 West

Europe p. 643.

op.cit, 131

op.cit, as a whole

for 2001-2007 Figures 2007, India, New Delhi in the New Millennium,"

2 which

Table

from

indicated. except where p.643 rate of per annual growth at 0.26 and somewhat higher

in aggregate 1900-1947 between

of

income

Table

at

are based

1.88 per

op.cit,

estimates to

1946

op.cit, show an which our

prove

1,

is

point M.

independence. even Maddison's.

and Bipan

cent

between

1973-2001.

Maddison,

Government of Survey, 2006-07, "Indian Economy and Aditya Mukherjee, and Aditya Mridula Chandra, Mukherjee

Delhi, Penguin, forthcoming, at a conservative rate for 2006-7 and

rates as well growth and 1947-2000. See,

p.68

than

Maddison,

XXI,

on Economic

1.2, S-4,

in the Twentieth of India 9.5, pp. 622-28.

132 Goldsmith,

lower

the Modern

Studies,

1.2, p.4.

grew

Table

are much

growth

Income Fig.

on Angus and Heston's

1914 income between capita 0.13 respectively but nevertheless contrast and after between before

in Bipan India Since Independence, Mukherjee, taken the per capita income growth S. Sivasubramonian's comprehensive break

is based

Sivasubramonian

of

Period Social

Century,

Chandra

2008.1

detailed

as

have

8 per cent. the sharp

confirms study sectors of the economy S. Sivasubramonian, The National

in different

e.g.,

OUP,

New

, Colonial

Delhi,

Legacy...

44

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2000,

op.cit,

Table

9.35,

p. 8-9.33