With the establishment of British rule and policies in India, several changes occurred and impacted the socioeconomic and political spheres of Indian society. The main difference between the British colonists in India and previous invaders was that none of the previous invaders made structural changes in the Indian economy or drained away India's wealth as tribute. The British rule in India transformed India's economy into a colonial economy, in which the structure and operation of the Indian economy were determined by the interests of the British economy. Historians estimate that at the beginning of the 18th century, India accounted for roughly 23% of the global economy. When India gained independence, this share fell to around 3%. This article will explain to you about the Impact of British Policy on Indian Economy which will be helpful in Modern Indian History preparation for the UPSC Civil service exam.

Economic Impact of British Policy

1. Deindustrialisation

• One Way Free Trade - After the Charter Act of 1813, which allowed one-way free trade for British citizens, cheap and machine-made imports flooded the Indian market.
  • On the other hand, Indian products found it increasingly difficult to enter European markets.
  • Tariffs of nearly 80% were imposed on Indian textiles, making Indian cloth no longer affordable.
  • After 1820, Indian exports were virtually barred from European markets. The Indian market was inundated with low-cost British-made clothing.
• No Modern Industrialisation - The loss of traditional livelihoods in India was not accompanied by an industrialisation process, as it had been in other rapidly industrialising countries at the time.
  • This resulted in India's deindustrialization at a time when Europe was experiencing a renewed Industrial Revolution.
• Ruralisation - Another feature of deindustrialisation was the decline of many cities and a process of ruralisation of India.
  • Many artisans, faced with diminishing returns and repressive policies, abandoned their professions, moved to villages, and took to agriculture. This resulted in increased pressure on land.
  • An overburdened agriculture sector was a major cause of poverty during British rule and this upset the village economic set-up.

2. Impoverishment of Peasantry

• The government had imposed the Permanent Settlement system in large parts because it was only interested in maximising rents and securing its share of revenue.
• The transferability of land was one feature of the new settlement that caused great insecurity among the tenants, who lost all of their traditional land rights.
• The government spent very little on increasing land productivity.
• With increased power, the zamindars resorted to summary evictions, demanded illegal dues, and 'begar' to maximise their share of the produce and had no incentive to invest in agricultural improvement.
• Overburdened peasants were forced to turn to moneylenders in order to pay their zamindar dues.
• To clear his debts, the moneylender, who was often also the village grain merchant, forced the farmer to sell his produce at low prices.
• The powerful moneylender could also sway the judiciary and the law in his favour.

3. Rise of Intermediaries, Absentee Landlordism, and Ruin of Old Zamindars

• By 1815, half of Bengal's total land had passed into new hands—merchants, moneylenders, and other wealthy urban dwellers.
• With increased powers but few or no avenues for new investments, the new zamindars resorted to landgrabbing and sub-infeudation.
• The increase in the number of intermediaries who had to be paid led to absentee landlordism and increased the burden on the peasant.
• Because there was such a high demand for land, prices rose, as did the peasant's liabilities.
• The zamindar had no incentive to invest in agricultural improvement because he had no traditional or benevolent ties with the tenants.
• The zamindars' only interests were in the continuation of British rule and in opposing the national movement.

4. Deterioration of Agriculture

• The cultivator lacked both the means and the motivation to invest in agriculture.
• The zamindar had no ties to the villages, and the government spent little money on agriculture, technology, or mass education.
• All of this, combined with land fragmentation caused by sub-infeudation, made it difficult to introduce modern technology, resulting in a perpetually low level of productivity.

5. Famine and Poverty

• The recurrence of famines became a regular feature of daily life in India.
• These famines were caused not only by a lack of foodgrains, but also by the poverty unleashed by colonial forces in India.
• Famines killed approximately 2.8 crore people between 1850 and 1900.

6. Commercialisation of Agriculture

• Agriculture had previously been regarded as a way of life rather than a business venture. Commercial considerations began to have an impact on agriculture.
• Certain specialised crops began to be grown for sale in national and even international markets, rather than for consumption in the village.
• Cotton, jute, groundnut, oilseeds, sugarcane, tobacco, and other commercial crops were more profitable than foodgrains.
• Perhaps the commercialisation trend reached its pinnacle in the plantation sector, i.e., tea, coffee, rubber, indigo, and so on, which was dominated by Europeans and the produce was for sale in wider market.
• Commercialisation appeared to be a forced process to the Indian peasant.
• Given his subsistence level, there was little surplus for him to invest in commercial crops, while commercialisation linked Indian agriculture to international market trends and fluctuations.
• Cotton, for example, pushed up prices in the 1860s, but this mostly benefited the intermediaries, and when prices fell in 1866, it hit the cultivators the hardest, causing heavy indebtedness, famine, and agrarian riots in the Deccan in the 1870s.
• As a result, the cultivator hardly fared any better as a result of the new commercialisation trend.

7. Destruction of Industry

• The destruction of India's textile competition is a clear example of the country's de-industrialization.
• The British stopped paying for Indian textiles in pounds, instead paying with Bengal revenue at very low rates, further impoverishing the peasants.
• A thriving shipbuilding industry was destroyed. Surat and Malabar on the western coast, as well as Bengal and Masulipatnam on the eastern coast, were well-known for their ship-building industries.
• The Company granted a monopoly on trade routes to British ships, while Indian merchant ships plying along the coast were subjected to heavy duties.
• The British stifled the growth of India's steel industry.
• Industries such as the Tatas, which began producing steel after much difficulty obtaining the necessary permissions, were hampered by the requirement to produce steel of a higher standard for British use.
• Because the firms were unable to produce the lower quality steel at the same time, they were excluded from the larger market that demanded the lower quality steel.

8. Late Development of Modern Industry

• Modern machine-based industries did not emerge in India until the second half of the nineteenth century.
• Cowasjee Nanabhoy established the first cotton textile mill in Bombay in 1853, and the first jute mill in Rishra (Bengal) in 1855.
• However, the majority of modern industries were foreign-owned and managed by British companies.
• In the nineteenth century, Indian-owned industries emerged in cotton textiles and jute, and in the twentieth century, in sugar, cement, and other industries.
• Credit problems, no tariff protection from the government, unequal competition from foreign companies, and stiff opposition from British capitalist interests who were backed by strong financial and technical infrastructure at home were all disadvantages for Indian-owned industries.

Conclusion

On the surface, it may appear that British rule in India improved its society. However, upon closer examination, these advantages were purely coincidental, if not self-serving. Economic improvements were only implemented to better plunder the Indian economy. Even societal changes would have occurred on their own without the need for British intervention. In the end, the negative consequences of British imperialism far outweigh the benefits.