[This essay Some Thoughts on The Drain of Wealth: Colonial India and Imperial Britain was published in the World History Bulletin (WHB) Spring 2004 (Vol XX No1). The WHB is published by World History Association (WHA), USA]

© Anup Mukherjee

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Another important aspect of the economic exploitation was the process of deindustrialisation. Certain western scholars find that the de-industrialisation did not happen [17]. The process of de-industrialisation encompassed a vaster spread than just decline of traditional handicrafts and increasing exports of raw materials. This was intricately linked to the area of technology and issues of foreign capital and foreign investment in India, particularly from the latter half of the 19^th century. The rural artisans under increasing pressure of coercive tactics used by EIC were giving up their traditional crafts, and this was a continuous process since the latter half of the 18^th century. This was further aggravated by the monopolising nature of EIC that would monopolise these trades and force the artisans to work for the company on coercive terms. This meant that the artisans were to leave their independent work and come under their employment through a process of coerced outsourcing in terms of agreement that was beneficial only to the EIC. This process was mediated by the requirements of the imperial country and by the penetration of the western technology and the Manchester goods into the interior countryside. Such thing however did not happen through a free competition. Instead, the process was catalysed through the use of political power that the company commanded. In a letter dated March 17, 1769, the EIC directors desired the encouragement to manufacture of raw silk and discouragement to manufactured silk products [18]. H.H. Wilson, History of British India, remarks, “It was stated in evidence (in 1813) that the cotton and silk goods of India up to the period could be sold for a profit in the British market at a price from 50% to 60% lower than those necessary to protect the latter by duties of 70% and 80% on their value, or by positive prohibition. Had this not been the case, had not such prohibitory duties and decrees existed, the mills of Paisley and Manchestor would have been stopped in their outset, and could scarcely have been again set in motion, even by the power of steam. They were created by the sacrifice of the Indian manufacture.” [19]

Such dispossessed craftsmen added to the queue of cultivator class. Amiya Bagchi in a paper De-industrialisation in Gangetic Bihar, 1809-1901, comparing the Buchanan-Hamilton surveys and census figures of 1901, finds that the craft employment in the districts under study of Bihar, contracted from 18.6% to 8.5% in the given time period. There was also a significant fall in the number of cotton spinners and weavers.

Consequently, pressure on land increased. This meant an increasing pressure on the unremunerative land (due to the land revenue pressures). This led to a situation of steady economic decline of the countryside. De-industrialisation led to decline in manufacturing of value added cotton and silk finished products. India, which had earlier been exporter of finished products, now became an exporter of raw cotton and other raw materials (by early 19^th century) and importer of British industry manufactured clothes. Much of this
process had already taken place before the 1850s. Between 1815 and 1832, the value of Indian cotton goods exported fell from £ 1.3 million to below £ 100,000. In the same period, the value of English cotton goods imported into India rose from £ 26,000 to £ 400,000. [20] As R. Palme Dutt puts it, “While machine-made cotton goods ruined the weavers, machine made twist ruined the spinners". This process happened in various different products whether it be silk, woollen goods, iron, pottery, glass or paper.

If the drain had not taken place and the imbalance in the economic structures had not been introduced, it was well possible that areas like manufacturing and processing would have improved than what it actually remained. This would have been mediated by the process of capital formation that would have added to the economic activity of the country. Instead, this capital was siphoned off through various structures of economy that was tilted to serve the imperial interest.

This also meant ruralisation of the economy. As the value added industries were being systematically finished, India lost her manufacturing base. Rather than being an exporter, it now became an importer of British manufacture. And in return India paid with the raw materials in form of food grains. Such a process is also evident from the increase in percentage of population dependent on agriculture. Between 1891 and 1921, the percentage of population dependent on agriculture increased from 61.1 to 73 percent [21].

But most important aspect of de-industrialisation was technological impoverishment - both real and potential. The ‘two great events, the Industrial Revolution and the process of colonisation, took place almost simultaneously. Perhaps they had a cause and effect relationship’ [22]. This related to sectors like shipping, railways, telegraph, and technical education, among others. It was technology that made colonisation feasible and cheap [23]. But the emergence of technology as an application for use was a consequence deriving out of imperial exploitation of colonial resources. This input of the western technology was directly related to forced decline of the technology that had developed in India and was in competition with British technology. In case of shipping, ‘If the Braudelian judgement is extended to the Indian Ocean shipping, surely, Indian ships were the equal of European’ [24]. The only difference being that the European ships were also weapons of war and used guns to further their economic interests. Throughout the 18^th century and the initial part of 19^th century, there was concerted move by lobbyists and authorities in England to protect British shipping rights. In 1814, a Select Committee headed by Robert Peel recommended restrictions of Indian ships and sailors. The finale happened to be the Registry Act of 1815 that proved disastrous for the Indian shipping. The Registry Act imposed a 15% duty on ships built in India. It further ruled that the goods from the south and east of Cape of Good Hope should come only in British ships. Moreover, the Mariners would have to be British (three-fourth of crew or seven per hundred tons) and only those ships were to be allowed to London port whose Master was British. And Indian sailors were not deemed British [25]. The steam ships using coal were introduced in India only by 1830s. It is transparent that it was the imperial policy and not superiority of industrial revolution that led to decline of Indian shipping. Not pulled down by imperial policy, Indian shipping could have survived and technologically developed as it happened in other sovereign countries of Europe, Asia and America.

Railway was an area that was linked both with technological development of industrial revolution in Britain as well as export of foreign capital to India. However, the investment of foreign capital in India was only apparent and not real. The burden of funding was shifted over to India through a system of guaranteed interest rate regime whereby dividend was paid to the private companies even if there were no profits. It was ‘private investment at public risk’ [26] There was also much wasteful construction and operational expenditure that were done.

In the whole scheme of things, there was an ongoing debate regarding comparative merit of canals for irrigation vis-à-vis the railways system- ‘preference was given to railways that facilitated British trade with India, and not to canals which would have benefited Indian agriculture’ [27]. By the mid 19^th century, the financiers of England were in look for a safe place for their investment and they found it in the form of investment in railways. William N. Massey, Finance Minister of India under Lawrence and Mayo would understand the issue as- “All the money came from the English capitalist, and so long as he was guaranteed 5 per cent on the revenues of India, it was immaterial to him whether the funds that he lent were thrown into the Hooghly or converted into brick and mortar….the East India Railway cost…are the most extravagant works that were ever undertaken” [28].

The nature of investment in railways is quite a giveaway of how such foreign capital became another source of Drain of Wealth from India. All railway investments were given sovereign guarantee for profit by the Government of India. Railways were an extravagant project that was undertaken by British by guaranteeing assured profit from territorial revenues. The equipments for the project was imported from England. This meant that ancillary industries that usually take shape when such huge industry comes up at a place, did not take shape in India and in the nearly a century before 1947, only 700 locomotives came to be built in India [29]. The higher posts in railways were reserved for the British and by 1921, only 10% Indians were in railways [30]. This meant two things that the money received by the British manpower would go out of India as part of the invisible transfer, it also meant that the Indians would remain excluded from the association with technological know-how. This was despite the fact that in the ultimate analysis, their own money generated through revenues was financing it. Moreover, railways itself became a source of further penetration of the British goods to the interior - which had till now been relatively free from the influence of Manchester goods. This led to further disruption of the village economy and decline in local crafts. The tariff policies were discriminatory - Indian goods were levied higher tariffs than the British goods [31]. From the technological angle, the early introduction of railways had an unfavourable influence in terms of inability to absorb later developments of railway technologies. Ian Derbyshire speaks of railways being ” equipped with expensively superfluous bull- and double-headed rails, and laid out an anachronistic broad gauge. India’s railways were also built at a time when constructional technologies were crude” [32]. However, India did not receive the benefits of development of railways because of the absence of the backward linkages of such development. These advantages were being reaped by the British industry in Britain. While the railway finances were a drag on Indian taxpayer [33], the comparative interests that would have been useful in terms of investment in agriculture was not appreciated. There was a skewing of public policy whereby the imperial interests led to creation of distorted priorities. “£ 225,000,000 were spent on railways, resulting not in a profit, but in a loss of £ 40,000,000 to the Indian taxpayer up to 1900. And so little were the interests of Indian agriculture appreciated that only £ 25,000,000 were spent on irrigation works up to 1900″ [34]. Moreover, even in technological terms, India did not derive much benefit, as transfer of railway technology in complicated processes did not happen. The technology that was made available to India was of low-tech areas of railways like those of way levelling, while in “the more complex activities of plate-laying, tunnelling and bridge-building, Western working technologies were never transferred undiluted” [35]. Besides, railways also served the imperial military purpose of quick movement of army from one place to another and in penetration into the areas of local princely kingdoms that were theoretically independent with treaty arrangements with the British. But as the British wished to have a foothold on those areas as well, what better than the railway network that would pass through these areas. Interestingly enough the railways network touched only the strategic areas or areas important to British from commercial point.

The area of technical education was also neglected. Arun Kumar [36], notes that “Japan began engineering education under British guidance in 1873 and within 30 years, nine technical institutions teaching civil engineering, shipbuilding, electrical engineering, mining and metallurgy were in existence. By 1903, the Tokyo Engineering College had a staff of 24 professors, 24 assistant professors and 22 lecturers. In the US, MIT was established in 1865, and by 1906 had 306 teachers. Within 50 years it had produced thousands of graduates- 6,248 with bachelor’s degrees, 290 with master’s degrees and 29 with doctorates. In India, where engineering education was introduced much earlier (in 1847), 100 years after its founding, the most prestigious institution, Roorkee college still had only three professors, six assistant professors and 12 lecturers.” This was primarily because, engineering was linked to the colonial objectives that sought to make India a resource of raw materials (for Britain) and deny it any basis for industrial development. The issue of imperial interests did not just rest within the confine of conquest, but equally into the issues of technological impoverishment. In this regard it is useful to quote Clark & Feenstra (2001), “…by 1910… incomes per capita began to diverge sharply between an advanced group of economies, and an underdeveloped world whose most important members were India and China…Why did income per capita decline in poor countries such as India and China relative to the advanced economies such as the US since 1800? We argue that the overwhelmingly cause was a decline in the relative efficiency of utilization of technology in these countries relative to the more successful economies such as Britain and the USA.” [37] It is quite obvious of who was in-charge of utilisation of technology in India from 1800 onwards and how these impacted on the various issues of economy including, but not exclusively to the per-capita income!

Similarly, development of telegraph was also shaped by the ‘political and military necessities’ [38]. All these areas of technology and economy was symbiotically related with each other, where institutionally created deficiencies tended to impact each of these fields in a system-wide manner. This meant that the technology from Britain also served the political needs, and not just the requirements of economy or commerce from the imperial perspective. These technologies (like railways and telegraph) were a prime instrument in quelling revolts and for troop movement. While the political decisions led to decline of indigenous technology, western technology itself became a political tool of thwarting potentials of development of indigenous technology. Both reinforcing each other and increasing the strangle hold of imperialism on the colony. In this regard, Bipin Chandra has commented, “…actual British capital investment in India was rather small, and if guaranteed investments in railways and public debt were excluded, virtually negligible, or that even of this capital very little had gone into modern industries…there was no recognition of the fact that even the foreign-owned capital in India was not imported from Britain but was generated within India and that India was throughout this period a net exporter of capital” [39].

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