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DAILY
CLASS NOTES
Modern History

Lecture - 12
British Economic Policy
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British Economic Policy

Social conditions during the 18th Century:

Inequality:
❖ During the 18th century India became a land of contrasts as extreme poverty and extreme luxury existed
side by side.
❖ The common population lived at a bare subsistence level whereas the lives of the rich were full of lavishness.
❖ However, the lives of Indian masses were by and large better in the 18th century than it was under British rule.

Agriculture:
❖ The society was technologically backward.
❖ Peasants were forced to pay an exorbitant amount of rent to the zamindars and jagirdars.
❖ The situation got more intensified during the later Mughal period with the development of the jagirdari crisis
and the fall in state’s revenue.

Castes and Sects:

❖ Both Hindus and Muslims were divided into numerous castes and sects. Among Hindus, inter-caste marriage
and inter-dining were forbidden.
❖ Caste Panchayats existed to impose caste norms.
❖ Among Muslims, the sharif Muslims consisting of nobles, scholars, priests, etc. often looked upon ajlaf
Muslims in a way similar to how higher caste Hindus treated lower caste Hindus.
❖ Muslim nobles were divided on the lines of:
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➢ Shias and Sunnis and

➢ Irani, Afghan, Turani and Hindustani Muslims.

Position of Women:
❖ Patriarchal society and women possessed little individuality Raja Sawai Jai Singh of Amber and
of their own. Maratha General Parshuram Bhau tried
❖ Purdah, Sati, Child marriage, polygamy, and dowry for promoting widow remarriage but failed.
marriage were highly prevalent.

Slavery:
❖ Accounts of European travellers from the 17th century reveal the widespread prevalence of slavery in India.
❖ Some people were compelled to sell their offspring due to extreme poverty. Higher caste Rajputs and khatris
usually kept slave women for domestic work.
➢ Condition of Slaves:
✓ The condition of slaves in India was better than that in Europe.
✓ Slaves in India were treated as hereditary servants rather than as menials.
✓ Marriage used to take place among slaves and their offspring were considered free citizens.
✓ The advent of Europeans led to an increase in the slave trade in India.
✓ They used to purchase slaves from Bengal, Bihar and Assam and carry them to Europe and
America.
✓ Abyssinian slaves were sold at Surat, Madras and Calcutta.

Developments in Art and Culture:

❖ With the decline of the Mughals, newly emerged state courts like Hyderabad, Awadh, Lucknow, and Kashmir,
became the new centre for talented people to seek patronage.
❖ At Lucknow, Asaf-ul-Daula built Bada Imambada in 1784.
❖ In the mid-18th century, Sawai Jai Singh built the Pink City of Jaipur and prepared a set of timetables called
Zij Muhammad-Shahi to help people observe astronomy.
❖ Painting: New schools of painting came up. Paintings of Kangra and Rajputana became prominent and
revealed new vitality and taste.
❖ Urdu Poetry: Eminent poets like Mir, Sauda, Nazir and Mirza Ghalib emerged.
❖ In Punjabi, Heer Ranjha was composed by Warris Shah and in Sindhi, Shah Abdul Rashid composed Risalo.
❖ South:
➢ In Kerala, Padmanabhapuram Palace, famous for its architecture and mural painting was constructed.
➢ Malayalam Literature flourished under the patronage of the Travancore Ruler.
➢ Sittar Poetry helped in enriching the Tamil language.
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British Policy towards Indian Handicrafts:

❖ European companies began arriving on Indian soil from the 16th century.
❖ As far as the traditional handicraft industry and the production of objects of art were concerned, India was
already far ahead of other countries in the world.
❖ Textiles were the most important among the Indian industries:
➢ Its cotton, silk and woollen products were sought after all over the world.
➢ Particularly, the muslin of Dacca, carpets of Lahore, shawls of Kashmir, and the embroidery works of
Banaras were very famous.
❖ Dhotis and dupattas of Ahmedabad, Chikan of Lucknow, and silk borders of Nagpur had earned worldwide
fame.
❖ For their silk products some small towns of Bengal besides Malda and Murshidabad were very famous.
❖ Similarly, Kashmir, Punjab and western Rajasthan were famous for their woollen garments.
❖ Besides textiles, India was also known widely for its shipping, leather and metal industries.
❖ Indian fame as an industrial economy rested on the cutting and polishing of marble and other precious stones
and carving of ivory and sandalwood.
❖ Moradabad and Banaras were famous for brass, copper, and bronze utensils.
❖ Nashik, Poona, Hyderabad and Tanjore were famous for other metal works.
❖ Kutch, Sindh and Punjab were known for manufacturing arms.
❖ Kolhapur, Satara, Gorakhpur, Agra, Chittor and Balaghat had likewise earned a reputation for their glass
industries.
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Decline of the Indian Handicraft Industry:

❖ The Indian handicraft industry had begun to decline by the beginning of the 19th century. There were many
reasons for it.
❖ The policies followed by the English East India Company proved to be highly detrimental to the Indian
handicraft industry.
❖ The Indian market was flooded with cheap finished goods from Britain. It resulted in a steep decline in the sale
of Indian products both within and outside of the country.
❖ The Company encouraged the cultivation of raw silk in Bengal while imposing service restrictions on the
sale of its finished products.
❖ So, with the disappearance of the traditional dynasties, their nobility also passed into oblivion. This led to a
sharp decline in the demand for traditional luxury goods.
❖ Besides, the Industrial revolution led to the invention of new machinery in Europe. Power looms replaced
handlooms.
❖ Finally, the new communication and transport facilities brought about a revolution in public life.
❖ But now conditions were changed with the introduction of railways and steamer services. Concrete roads were
laid to connect the country’s agricultural hinterland.

Trade & Commerce:

❖ India during the 18th century was self-sufficient in handicrafts and agricultural products.
❖ Import was limited and gold and silver were the major imported items. India was known as the sink of precious
metals.
❖ India’s export was more than import. Its industrial and agricultural goods enjoyed huge demand in foreign
markets.
❖ Items of Import:
➢ From the Persian Gulf: Pearls, raw silk, wool, dates, and dried fruits.
➢ Arabica: Coffee, gold, drugs, honey.
➢ China: Tea, silk
➢ Africa: Ivory, drugs.
❖ Items of Export: Cotton textiles, raw silk, silk fibres, indigo, hardware, saltpetre, opium, rice, spices, precious
stones, and drugs.
❖ Important Trade Centres of the Textile Industry: Dacca, Murshidabad, Patna, Surat, Ahmedabad,
Chanderi, Masulipatam, etc. Kashmir was an important centre for woollen manufacturing.
❖ Ship-Building Industry: Maharashtra, Andhra, Bengal. Europeans used to buy Indian-made ships.
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Pre-Colonial Stage (1600-1757):

➢ The role of the East India Company was limited to the exchange of goods and profit came by selling
Indian goods abroad.
➢ There was jealousy raised in British manufacturers, by the popularity of Indian goods. Hence the law was
enacted and the English government imposed a heavy duty on the import of clothes.
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Colonial Stage (Post-1757):

❖ Era of Merchant Capitalism (Mercantilism):
➢ The East India Company adopted the policy of buying cheap and selling dear.
➢ They had monopoly over trade and political control over the trading countries.
➢ On the lines of these East India Company eliminated rival companies, dabbled in Indian politics and
waged wars to control the economy of India.
➢ For example - post Battle of Plassey East India Company used political power and position to exercise
monopolistic control over Indian trade and production to buy cheap and sell dear.
❖ Adopting Gomasta System:
➢ Earlier traders depended on Indian merchants (Dadni) to procure cloth by giving them advances which
used to go to artisans.
➢ After 1753, Gomasta (agent of the East India Company) replaced merchants. It resulted in the status
of merchants being reduced to commissioned brokers.
➢ Direct Agency System with which the company dispensed with the Indian middleman altogether.
➢ After the Battle of Buxar, East India Company acquired Diwani Rights of Bengal which severely
impoverished the peasants and pushed them into extreme poverty.
❖ Transfer of Funds:
➢ The company began using territorial revenue to pay for conquest of another region.
➢ Funds were used in financing the company’s export in Europe and investment in China.
➢ Also, these funds were used in buying Indian goods and exporting to Britain.
❖ Use of Coercion:
➢ Forcing artisans to buy raw cotton from and sell cloth to the company alone.
❖ Khatbandi System:
➢ To accept advances to produce cloth and then sell their product below the market price to the company.
❖ Ryoti System:
➢ The Company found it more profitable to use state power to coerce the small peasants into unprofitable
cultivation instead of engaging in direct production with hired labour.
❖ Domination of Markets and Producers:
➢ The collective monopoly established by merchants and companies in cotton cloth in Bengal to eliminate
rivals and set high prices to handicraftsmen. Results in the creation of a buyer’s market.
❖ Use of Import restriction:
➢ Indian textiles were subjected to heavy import duties on entering England resulting in the decline of Indian
export, the income of weavers and spinners falling and ruling out any possibility of capital accumulation
and technological innovation.
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❖ Era of Industrial Capitalism (1813-1858):

➢ India thrown open to Machine Foreign Goods: Monopoly of East India Company ended in 1813, and
commercial policy shifted to fulfil the need of British industry by making India a consumer market of
Britain's goods and supplier of raw material to Britain.
➢ Trade Discrimination: Heavy import duties in Britain for Indian products and free trade policy for
importing goods from Britain to India.
➢ De-industrialization of Indian Economy: Sanction led to the destruction of the local handicraft industry
and India was converted into an agrarian economy.
❖ Era of Fiscal Capitalism (1858-1947):
➢ British capitalist investment in India: Investment in the form of development like railway, postal not
for the development of the country but because it would ultimately help trade and export.
➢ “Opening UP”: It is referred to the stage where the country receives capital as well as innovation.

Economic Policy of East India Company:

❖ A far-sighted vision with a clawing strategy led the East India Company to survive in India. Some factors are:
➢ Coming as a Joint Stock Company: Joint stock structure allows to raise large capital and ensures
continuity of business for the long term. Also reduces the risk of collapse.
➢ Monopoly status: England gave monopoly status to East India Company for two reasons:
1. To promote foreign trade and accumulate home wealth.
2. Influence of rich merchants of East India Company in the monarch’s court.
➢ “Buy Cheap and Sell Dear” Approach: It refers to the purchase of goods at a cheap rate and the sale of
goods at higher rates, a special trade privilege acquired by East India Company by bribing and bullying
the successor states. This approach also ruled out the competition in the market.
➢ Generation of a new market: Industrial revolution in England raised the need for a new market,
especially for their cotton manufacturers and the need for more raw materials.
➢ Expansion of territories for Profit: Fortification of factories, militarising the trading station and crossing
the reasonable limits of local administration. Controlling the territories brought under land revenue,
threatening peasants and artisans ultimately shifting their role from the voyage system to territorial power
helped East India Company to increase its business profit and consolidate their greed of territorial
ambition.
➢ Shifting Financial Base: Shift from trade to land revenue due to following reasons:
✓ Threat to the monopolistic status of the company due to Doctrine of Free Trade promoted by
economist Adam Smith.
✓ Capital accumulation and emerging strong lobbies in England began to pursue the abolition of
monopoly.
✓ Merchants other than East India Company managed to make their way into Indian trade and the
company's own employees were not above temptation to set their own private trade.
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✓ Declining income from the trade financial base shifted from trade to land revenue, from business of
trade to business of government.
❖ Because of these factors, the Charter Act of 1813 ended the monopoly and complete closure in 1833.

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