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British Governor General Lord McCauley's said, in a speech to the British Parliament on Feb 2, 1835: "I have traveled across the length and breadth of India and I have not seen one person who is a beggar, who is a thief. Such wealth I have seen in this country, such high moral values, people of such caliber, that I do not think we would ever conquer this country, unless we break the very backbone of this nation, which is her spiritual and cultural heritage, and, therefore, I propose that we replace her old and ancient education system, her culture, for if the Indians think that all that is foreign and English is good and greater than their own, they will lose their self-esteem, their native self-culture and they will become what we want them, a truly dominated nation."
Lord McCauley did institute a school system in India, which for 150 years produced clerks.
As soon as the British gained ownership of the state of Bengal in 1757, they set about the task of dismantling the Indian economic structure. Textiles in Bengal were the first to be dealt the deathblow. Other commercial segments came one after the other. Wherever they defeated a king, economic hardship was instituted. A complete breakdown of the local economic structure was precipitated. From 1857 onwards, the British crown ruled over India. Each viceroy's main task was to transfer wealth to England. Since all state treasuries had already been looted, other means had to be developed to transfer the money to England.
Around the time of the 1757 Battle of Plassey, the Industrial Revolution had begun in England. Manufacturing on a large scale had replaced cottage industries and farming. Factories had to be kept humming and products sold at a profit. The best place the British could find to export their manufactured goods was India. Hence, India's commercial, manufacturing and agricultural sectors, which had existed for thousands of years, were to be completely dismantled. The British went about doing this with great finesse. First they removed artisans from the manufacturing base, then they denied critical raw materials and finally they taxed any product which still managed to come to the market. Life was made miserable all around.
What was the shape of the Indian Economy in 1800? In the 1750s, a prosperous Indian economy became the backbone of international trade. A Dutch, British or French ship owner could borrow money from Indian "banyan," or moneylenders, or "seth," wealthy people, at the going interest rate, load his ship with merchandise in Surat, Cochin or Madras, take it to China, Indonesia or Japan and trade his goods at profit. He then returned to Surat, paid the banyan or seth the money he owed, and reloaded for an onward journey to Europe or the East. After a few voyages, the shipowner and his crew had made enough money to pay off all their debts in England or Holland and become rich.
There was no central bank; hence the concept of a Jagat Seth, or universal moneylender, arose. He was the master banker. Lesser bankers turned to him when in trouble. He also had high connections with the king, hence maintained a fair arrangement between the king and commerce. Each geographical area had a Jagat Seth. The Indian economy, although almost all of it privately owned, was a hallmark of prosperity.
Decline began soon after the success of the Industrial Revolution in England. This impact started to be felt, as British factories were kept busy at the expense of Indian cottage industries. All Indian-produced goods were heavily taxed. This was done to promote European goods. European voyages of the trading ships multiplied several fold. They carried Indian raw materials and brought back finished goods. All the forgoing was good for England and bad for India. The trade balance began to shift heavily in England's favor.
Fifty years after Plassey, the Indian economy just began to rot away. British had cleverly blocked the French and Dutch from India; hence all gains were British only. A population base of about 100 million in 1800, previously prosperous, suddenly found themselves at the mercy of a double-edged sword. One edge represented the declining authority of the Mughal Empire, and the other edge represented British who were slowly dismantling the economic structure in India. Worst of all, there was no help in sight.
The British completed their conquest in 1857; by that time India was set up as a basket case. It received finished goods from England at a high price. In return, it sold raw materials at throwaway prices. The whole society was moving into poverty. The next 100 years were a classic case of systematic looting of the nation.
So began India's dramatic rise to poverty. Thirty years after the British conquest of India, the period 1870 to 1900, came a period known as the golden age of Queen Victoria in England, and rightfully so. Her representative, the viceroy in India, was doing a fine job of transferring wealth from India to England. Smart as they are, the British set about documenting all their Indian holdings on the lines of the Dooms Day Book of William the Conqueror in 1086. They called it "The Imperial Gazetteer" of 1881. It was revised again as British penetration in the far-flung areas was completed. It is a 25-volume exhaustive description of India. The third volume gives all possible details of economy, trade, balance of payments, census etc.
To quote from this volume: 1903-04 data is in Lakh, valued at one hundred thousand Rupees, (around $2,300 dollars.)
Items Imports/Exports
Apparel 172/16
Raw Cotton 5/2438
Cotton Goods 31288/10
Wool Items 215/27
The above is mostly textile-related data. India sent to England raw cotton. In return, it received imported manufactured goods made out of that cotton. India paid 31,680 lakh rupees to import textiles. In return, around 2,500 lakh rupees were paid for the raw material. Hence it was an advantage of 13 times for Britain.
The story was repeated for metals and minerals.
Items Imports/Exports
Metals Wrought Iron 992/30
Hardware /Machinery 1189/5
Dyes and Chemicals 484/13
Precious Stones 152/9
In the above listing, the British advantage was 50 times.
The story was repeated year after year for one product category after another. India had an advantage only in jute production and the manufacture of jute goods. The British did not wish that industry in its midst. A rough estimate in many references indicates that about a billion dollars in today's dollars was transferred to Britain every year for about a hundred years. With this much drain over such a long period of time, India was turning into a poor man. And when the British left, there was nothing else left for them to loot. If they wished to continue with their ways, the cost of transferring the wealth could exceed the cost of containing the independence movement, which was already afoot. Hence they left.
Gandhi understood all the British machinations. First he tackled the British in the textile industry. It was a crime to spin cotton into yarn and weave yarn into cloth in India. It hurt factories in Manchester. Gandhi began spinning on a "charkha," or manual spinning wheel, and forced the British to relent.
Next was the metal-working business. India never had any serious metal-working skills other than gold and silver smiths. Steelworks were unknown. In order to encourage the steel and wrought iron industry, Gandhi pushed for a major expansion of iron-making in India. The British did not like it, but two wars in the 20th century made them relent. Still they prevented the transfer to India of any superior steelmaking skills lest it hurt Birmingham and Sheffield.
Third, the British had monopolized the salt quarry business. Realizing its importance, they had banned any salt-making except in the quarries, which they owned. This very important ingredient of living in a hot climate was their way of maintaining control of the teeming masses. Gandhi broke that monopoly by organizing a march and picking up salt from the sea. Later the British relented and gave up their monopoly. Gandhi thought and carefully implemented economic successes. These endeared him to the people. He later used his prestige and popularity to gain full independence in 1947.
When the British left in 1947, India was already very poor. On top of that, the country suffered the trauma of partition. It had 350 million souls and an economy of $55 billion in 1947. Famines visited often. British always blamed them on the inept Indians. The British never wished to be reminded that India's predicament was their creation and if they were rich, it was because of India's former wealth.
India began the slow task of rebuilding. After 60 years, the economy is reaching the US$1 trillion mark. It is slow growth, but it is moving in the right direction. The burden of over-population is slowly turning into a blessing. The younger workforce is much sought after. India may not catch up to the Europeans and the Americans economically, but it will be in their midst, sooner or later. They still have the technology monopoly, but not for long.
The genesis of India's poverty lay in the sunset days of the Moghul Empire. Outsiders, mostly British, came to loot and they did a fine job for themselves. Now, India's success will be heralded when it reaches reasonably close to the West in standard of living and breaks the Western technology monopoly. One thing is certain, India has to keep its powder dry and gunbarrels clean, least another power tries to sneak in.
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(Hari Sud is a retired vice president of C-I-L Inc., a former investment strategies analyst and international relations manager. A graduate of Punjab University and the University of Missouri, he has lived in Canada for the past 34 years. ©Copyright Hari Sud.)
