BRITISH ECONOMIC POLICY IN INDIA

From 1600 to 1757 the East India Companys role in India was that of a trading
corporation which brought goods or precious metals into India and exchanged them
for Indian goods like textiles and spices, which it sold abroad. Its profit came
primarily from the sale of Indian goods abroad. Naturally, it tried constantly to open
new market for Indian goods in Britain and other countries. Thereby, it increased the
export of Indian goods and thus encouraged their production. This is the reason why
Indian rulers tolerated and even encouraged the establishment of the Companys
factories in India.
But from the beginning, the British manufacturers were jealous of the popularity
that Indian textiles enjoyed in Britain. They put pressure on their government to
restrict and prohibit the sale of Indian goods in England. Several laws were passed
to curb the sale of Indian goods in England. In spite of these, Indian silk and cotton
textiles still held their own in foreign markets, until the middle of the 18th century
when the English textile industry began to develop on the basis of new and
advanced technology.
After 1757, the pattern of the Companys commercial / economic relation with India
underwent a qualitative change. After defeating the Nawab of Bengal in the Battle
of Plassey in 1757 and after the Battle of Buxar the Company could now use its
political control over Bengal to acquire monopolistic control over Indian trade and
production and to push its Indian trade. Moreover, it began to utilize the revenues of
Bengal to finance its export of Indian goods.
The Indian merchants were gradually squeezed out, while the weavers and other
craftsmen were compelled either to sell their products at uneconomic rates or to
hire themselves out to the Company at low wages.
The Industrial Revolution in Britain completely transformed Britains economy and
its economic relations with India. During the second half of the 18th century and
first few decades of the 19th century, Britain underwent profound social and
economic transformation, and British industry developed and expanded rapidly on
the basis of modern machine, the factory system and capitalism.
As a result of the Industrial Revolution an entirely new class of society, the industrial
capitalist was born. This new class of society, the industrial capitalists owned the
factories and workers who hired themselves out their labours on daily wages. The
rise of these new powerful classes had an important impact on British economic
relations with India. The interest of this class in the Empire was very different from
that of the East India Company. It did not gain from the monopolization of the export
of Indian handicrafts or the direct appropriation of Indian revenues. As this class
grew in number and strength and political influence, it began to attack the trade
monopoly of the Company. Since the profits of this class came from manufacturing,
not from trading, it wanted to encourage, not imports of manufactures from India,

but exports of its own products to India as well as imports of raw material from
India. They looked upon the East India Company to be the chief obstacles in the
fulfillment of their dreams. Between 1793 and 1813, they launched a powerful
campaign against the Company and its commercial privileges and finally succeeded
in 1813 in abolishing the Companys monopoly of Indian trade.
With this new event, a new phase in Britains economic relations with India began.
Agricultural India was to be made an economic colony of industrial England.
The Government of India now followed a policy of free trade or unrestricted entry of
British goods. Indian handicrafts were exposed to the fierce and unequal
competition of the machine-made products of Britain and faced extinction. India had
to admit British goods free or at nominal tariff rates. The free trade imposed on
India was one-sided. While the doors of India were thrown wide open to foreign
goods, Indian products which could still compete with British products were
subjected to heavy import duties on entry into Britain. Instead of exporting
manufactures, India was now forced to export raw materials which British industries
needed and served as a market for British manufactures.
Thus the commercial policy of the East India Company after 1813 was guided by the
needs of British industry. Its main aim was to transform India into a consumer of
British manufactures and supplier of raw materials.
By the middle of the 19th century, British economic policy with India underwent
changes. The development of its trade and industry, the extended exploitation of
colonies and colonial markets began to produce an unlimited accumulation of
capital which was increasingly concentrated in fewer banks, corporation, trusts and
cartels. The need for investment of this capital brought about changes in the BritishIndia economic relation. After 1850, a very large amount of British capital was
invested in railways, loans to the Indian Government, and to a smaller extent in tea
plantations, coal mining, jute mills, shipping industry, trade and banking. India now
served as an area for investment of foreign capital.