MPDD/IGNOU/P.O.

/0K/JANUARY, 2023
MHI-107
MPDD/IGNOU/P.O./11.8K/MARCH, 2024 HISTORY OF INDIAN
ECONOMY- 2
C. 1700-2000
MHI-107 HISTORY OF INDIAN ECONOMY- 2 C. 1700-2000

ISBN : 978-93-6106-018-2
MPDD/IGNOU/P.O./0K/JANUARY, 2023
MHI-107
MPDD/IGNOU/P.O./11.8K/MARCH, 2024 HISTORY OF INDIAN
ECONOMY- 2
C. 1700-2000
MHI-107 HISTORY OF INDIAN ECONOMY- 2 C. 1700-2000
ISBN : 978-93-6106-018-2
 MHI-107
Indira Gandhi National Open University
School of Social Sciences

History of Indian Economy-2

c. 1700-2000

SCHOOL OF SOCIAL SCIENCES

INDIRA GANDHI NATIONAL OPEN UNIVERSITY
Historiography and Economy

Cover Design Images Courtesy

Fort St. George, Madras (Chennai)
Artist : Jan Van Ryne (1712-60); Publisher: Robert Sayer
Source : http://www.portcities.org.uk/london/server/show/conMediaFile.6142/Fort-St-George-Madras- on-
the-Coromandel-Coast.html
http://collections.rmg.co.uk/collections/objects/105996.html
https://en.wikipedia.org/wiki/en:National_Maritime_MuseumSource:
https://upload.wikimedia.org/wikipedia/commons/4/4f/Fort_St._George%2C_Chennai.jpg

Print Production Cover Design

Shri Tilak Raj Mr. Rakesh Kumar
Assistant Registrar (P) Graphic Designer
MPDD, IGNOU, New Delhi New Delhi
March, 2024
© Indira Gandhi National Open University, 2024
ISBN : 978-93-6106-018-2
All rights reserved. No part of this work may be reproduced in any form, by mimeograph or any other means, without permission
in writing from the Indira Gandhi National Open University.
Further information on Indira Gandhi National Open University courses may be obtained from the University's office at Maidan
Garhi, New Delhi-110 068 or visit University's Website http://www.ignou.ac.in.
Printed and published on behalf of the Indira Gandhi National Open University, New Delhi by Registrar, MPDD, IGNOU, New
Delhi.
Laser Typesetting : Akashdeep Printers, 20-Ansari Road, Daryaganj, New Delhi-110002
2 Printed at M/s Chandu Press, 469, Patparganj Industrial Estate, Delhi- 110092
 The Eighteenth Century
EXPERT COMMITTEE OF THE REVISED COURSE in Indian History
Prof. Rashmi Sinha Prof. Amar Farooqui Prof. Arvind Sinha (Retd.)
Director Department of History Centre for Historical Studies
School of Social Sciences University of Delhi Jawaharlal Nehru University
IGNOU, New Delhi Delhi New Delhi
Prof. Najaf Haider Prof. Sri Krishna (Retd.) Prof. P. K. Basant
Centre for Historical Studies Department of History Department of History
Jawaharlal Nehru University, Indira Gandhi University Jamia Millia Islamia
New Delhi Rewari, Haryana New Delhi
Dr. Vasudha Pandey (Retd.) Dr. Meena Bhargava (Retd.) Prof. Vishwamohan Jha
Department of History Department of History Department of History
Lady Sri Ram College Indraprastha College ARSD College
Delhi University, Delhi Delhi University Delhi University, Delhi
Prof. Abha Singh Prof. S. B. Upadhyay Mr. Ajay Mahurkar
Faculty of History Faculty of History Faculty of History
School of Social Sciences School of Social Sciences School of Social Sciences
IGNOU, New Delhi IGNOU, New Delhi IGNOU, New Delhi
Dr. Mayank Kumar Dr. Harshvardhan Singh Tomar Prof. Swaraj Basu (Convener)
Faculty of History Faculty of History Faculty of History
School of Social Sciences School of Social Sciences School of Social Sciences
IGNOU, New Delhi IGNOU, New Delhi IGNOU, New Delhi

EXPERT COMMITTEE OF THE OLD COURSE

Prof. Kapil Kumar Prof. B.D. Chattopadhyaya Prof. R. Champakalakshmi
Director Centre for Historical Studies Centre for Historical Studies
School of Social Sciences Jawaharlal Nehru University Jawaharlal Nehru University
IGNOU, New Delhi New Delhi New Delhi
Prof. Harbans Mukhia Prof. Dilbagh Singh Prof. Neeladri Bhattacharya
Centre for Historical Studies Centre for Historical Studies Centre for Historical Studies
Jawaharlal Nehru University Jawaharlal Nehru University Jawaharlal Nehru University
New Delhi New Delhi New Delhi
Prof. K.K. Trivedi Prof. M.G.S. Narayanan Prof. Dwijendra Tripathi (Retd.)
Centre for Historical Studies Formerly Professor of History Indian Institute of Management
Jawaharlal Nehru University, New Delhi Calicut University, Calicut Ahmedabad
Prof. A.R. Khan Prof. Abha Singh (Convenor)
Faculty of History Faculty of History
School of Social Sciences School of Social Sciences
IGNOU, New Delhi IGNOU, New Delhi

COURSE COORDINATOR : Prof. Abha Singh

COURSE EDITORS
Prof. Harbans Mukhia : Edited Unit 1
Prof. Neeladri Bhattacharya : Edited Units 2-7, 12-17, 21, 27
Prof. Abha Singh : Edited Units 8-11, 18-20, 22-26
FORMAT AND CONTENT EDITING : Prof. Abha Singh
COURSE PREPARATION TEAM
Unit No. Course Writer Unit No. Course Writer
1 Prof. Rajat Datta 2 Dr. Rohit Wanchoo
Centre for Historical Studies St. Stephen’s College
Jawaharlal Nehru University University of Delhi
New Delhi Delhi
3
Historiography
Unit No. andCourse
Economy
Writer Unit No. Course Writer
3. Prof. Lakshmi Subramanian 4 Prof. Lakshmi Subramanian
Professor of History Professor of History
Centre for Studies in Social Sciences Centre for Studies in Social Sciences
Kolkata Kolkata
5 Prof. Peter Robb 6 Prof. David Ludden
School of Oriental and African Studies Department of History
University of London University of Pennsylvania
London, UK Philadelphia, USA
7 Prof. Prabhu Mohapatra 8 Prof. Amar Farooqui
Department of History Department of History
University of Delhi, Delhi University of Delhi, Delhi
9 Dr. Rohit Wanchoo 10 Dr. Rohit Wanchoo
St. Stephen’s College St. Stephen’s College
University of Delhi, Delhi University of Delhi, Delhi
11 Dr. Rachna Mehra 12 Prof. Archana Prasad
School of Global Affairs Centre for Informal Sector and Labour Studies
Dr. B.R. Ambedkar University, Delhi Jawaharlal Nehru University, New Delhi
13 Prof. Archana Prasad 14 Prof. R. Gopinath
Centre for Informal Sector and Labour Studies Department of History and Culture
Jawaharlal Nehru University Jamia Milia Islamia
New Delhi New Delhi
15 Dr. Rohit Wanchoo 16 Prof. Rajat Kant Ray
St. Stephen’s College Department of History
University of Delhi, Delhi Presidency University, Kolkata
17 Prof. Aditya Mukherjee 18 Prof. Tirthankar Roy
Centre for Historical Studies Delhi School of Economics and Political
Jawaharlal Nehru University Science, University of London
New Delhi London, UK
19 Dr. Dhiraj Kumar Nite 20 Dr. Shobhana Warrier
School of Liberal Studies Department of History, Kamla Nehru College
Dr. B.R. Ambedkar University, Delhi University of Delhi, New Delhi
21 Prof. Deepak Kumar 22 Prof. Aditya Mukherjee
Zakir Husain Centre for Educational Studies Centre for Historical Studies
Jawaharlal Nehru University Jawaharlal Nehru University
New Delhi New Delhi
23 Prof. Tirthankar Roy 24 Prof. Tirthankar Roy
Delhi School of Economics and Political Delhi School of Economics and Political
Science, University of London Science, University of London
London, UK London, UK
25 Prof. Tirthankar Roy 26 Prof. Aditya Mukherjee
Delhi School of Economics and Political Centre for Historical Studies
Science, University of London Jawaharlal Nehru University
London, UK New Delhi
27 Prof. Jayati Ghosh
Centre for Economic Studies and
Planning, Jawaharlal Nehru University
New Delhi

4
 The Eighteenth Century
Course Contents in Indian History
Page No
COURSE INTRODUTION 7

THEME I : HISTORIOGRAPHY AND ECONOMY 9

Unit 1 The Eighteenth Century in Indian History 11
Unit 2 Historiography of the Colonial Economy 32
THEME 2 : TRADE AND MARKETS 57
Unit 3 Merchants and Markets: 1757-1857 59
Unit 4 Colonialism and Trade: 1857-1947 81
THEME 3 : THE RURAL ECONOMY 97
Unit 5 Agrarian Policy and Land Rights 99
Unit 6 Patterns of Commercialisation 110
Unit 7 The Question of Agrarian Growth and Stagnation 124
THEME 4 : COLONIAL ECONOMY 137
Unit 8 Currency 139
Unit 9 Drain of Wealth Debate 150
Unit 10 Colonial Economy and Its Impact 167
Unit 11 Famines and Epidemics 187
THEME 5 : FORESTS AND COMMONS 203
Unit 12 Forests and Tribal Economies 205
Unit 13 Tribal Societies and Colonial Economy 214
THEME 6 : DEMOGRAPHY AND ECONOMY 225
Unit 14 Demographical Changes in Colonial India 227
THEME 7 : CRAFT PRODUCTION, TECHNOLOGICAL CHANGE AND 241
INDUSTRIALISATION
Unit 15 The De-Industralisation Debate 244
Unit 16 Crafts Industries and Small Scale Production 265
Unit 17 Patterns of Industrialisation 278
Unit 18 Emergence of Capitalist Class 290
Unit 19 Labour in Colonial India 299
Unit 20 Women and Work 313
Unit 21 Technology, Science and Empire 324
THEME 8 : ECONOMY OF POST-INDEPENDENCE INDIA 339
Unit 22 Planning and Development 341
Unit 23 Land and Tenancy Reforms 351
Unit 24 Agriculture and Industries 359
Unit 25 Growth of Modern Banking System, Nationalisation of Banking 374
and Industries
THEME 9 : TOWARDS LIBERALISATION 389
Unit 26 Globalisation 391
Unit 27 Political Economy of Liberalisation 400
5
Historiography and Economy

Guidelines for Study of the Course

In this Course we have followed a uniform pattern for presenting the
learning material. This starts with an introduction to the Course underlining
the significant developments in chronological order and covers 9 major
themes with coverage of 27 sub-themes or Units. For the convenience
of study, all the Units have been presented with a uniform structure.
Introduction, as the first section of the Unit, introduces you to the
subject area covered and guides you to the way subject matter is
presented. These are followed by the main subject area discussed
through sections and sub-sections for ease of comprehension. At the
end of each Unit some exercises have been provided. We advise you to
attempt these. These will help you assess your study and test your
comprehension of the subject studied. At the end of each Unit under
Suggested Readings we have also provided a list of books and
references. These include sources and books which are useful or have
been consulted for developing the material for the concerned Unit. You
should try to study them.

6
COURSE INTRODUCTION The Eighteenth Century
in Indian History
The present Course is a sequel to MHI-105. It focusses on India’s economic past
from the eighteenth century to the current phase of globalisation. The major phases
in this transition from medieval to modern were the decline of feudalism in Europe
coupled with a rapid increase in trade and commerce, the renaissance and the
industrial revolution. Europe achieved a high level of monetisation, emergence of
joint stock companies, and corporate banking. European dominance set the pace
of exploitation of the major part of the globe by European powers at the highest
level. Silver mining in the new World required a huge labour force; transporting
slaves from Africa met this demand. Silver thus mined was siphoned off to South
Asia in return for textiles and spices.

The eighteenth century marked another turning point. On one hand, European
dominance emerged ‘uncontested’ as the fate of the three Empires dwindled; Asia
plunged into the clutches of ‘colonial regimes’ and was overpowered by ‘western
capitalism’ (Theme 1).

Appropriation of political power by the East India Company is yet another watershed.
Indian economy gradually fell prey to British interests. Theme 2 tells the story of
the transformed role of Indian merchants in the new setting. In this context fluctuating
fortunes of Surat and Bengal is interesting. If the British domination restricted the
take-off, nonetheless the emergence of bazaar economy, though subordinate to
European dominated world economy, adapted successfully to the changing global
economy.

Theme 3 explores the impact of colonial domination in the rural sphere. The
transformed land relations intensified rural stratification and class differentiation.
Theme 4 focusses on the repercussions of British colonial government policies on
the Indian economy. The conspicuous adverse aspects of the colonial Indian economy
include the drain of wealth of Indian resources and the recurrent incidence of famines.
Colonial impact was equally felt in the tribal areas inasmuch as the existing structures
were disrupted, resulting in conflicts and resistance (Theme 5). Theme 6 delves
into the political dimensions surrounding the generation of census data and other
associated demographic concerns.

How far did the colonial rule affect the traditional Indian crafts and industries is the focus
of Theme 7. De-industrialisation debate occupies centre stage in this context. How far
did the reorganisation of production technology influence the production process will be
interesting to explore. The twentieth century saw the beginnings of industrialisation in
India, although the process remained largely lopsided. Technological advancement and
innovations are crucial to industrial development. But to what extent did such diffusion
take place and helped the industrial growth is open to question. During the second half
of the nineteenth century, the Indian capitalist class emerged. To establish themselves,
Indian capitalists had to contend vigorously with colonial policies. Theme 7 also delves
into the challenges faced by the labour class and the phenomena of labour migrations in
colonial India. The discussion within Theme 7 also encompasses the role and contribution
of women labour, shedding light on their exploitation in comparison to their efforts to
secure better wages.

What followed after independence is the subject matter of the last two Themes 8 & 9.
India since independence has come a long way from planned economy to globalisation.
What followed and to what extent these policies were successful and how far globalisation
of Indian economy is relevant, are questions addressed in concluding the course. 7
 In the Course diverse, often even conflicting viewpoints, debates, etc. have been retained
to bring home to you that the discipline of history does not provide, indeed, does not
even look for final, conclusive answers. Constant questioning of views and theories,
one’s own as much as others’ lies at the heart of the growth of the discipline, provided
certain principles of research are abided by. We have tried to be balanced in our approach
as far as possible and our attempt is also to provide equal space to both North and
South. However, at times the equilibrium bends in favour of the north, partly because of
the differential amount of information and in part owing to the authors’ unequal access to
it. You may at times find some ‘repetition’ in the Units. But it is used more as a ‘tool’ to
‘recapitulate’. At times it is also retained to provide the flow of an argument. ‘Political
markers’ and boundaries of ‘ancient’, ‘medieval’ and ‘modern’, you will find, are not
always relevant to the story of economic rhythms, though their relevance as interplay of
continuity and change cannot be completely ignored. In sum, what you have in this
Course, is a finished product only in part; the next in line are the uncertainties and gaps
in our knowledge but also the directions in which knowledge building is proceeding.

Note: In the entire course BCE (Before Common Era) and CE (Common Era)
are used in place of BC and AD to denote the dates and eras.


 Theme I
Historiography and
Economy
Historiography and Economy
HISTORIOGRAPHY AND ECONOMY
The present Theme takes us through the many bylanes of the raging debates among
historians on the eighteenth century in Indian history. Suddenly, all the existing notions
about this century – that it was a century of political, economic, moral and cultural
decay – appear suspect. Instead an extremely variegated, multi-hued picture emerges
which defies a single characterisation. That makes it the historian’s truly dream century.
((Unit 1)

Unit 2 traces the historiographical trends beginning with the colonial perception of
Indian economy. While the colonialists defended the British policies; nationalists held
colonial rule responsible for impoverishment of India. Marxists were equally critical
of the British policies and held them responsible for drain of wealth from India. All
these debates find place in Unit 2. The Unit also takes into account the new issues
covered in recent writings – forests, labour, women, tribal societies, irrigation, etc.

Grant of Diwani Rights by Shah Alam to Lord Clive, 1765

Image Courtesy
Author : Benjamin West (1738-1820)
Source : British Library https://www.theguardian.com/world/2015/mar/04/east-india-com-
pany-original-corporate-raiders; http://searcharchives-beta.bl.uk/permalink/f/ja42l1/
IAMS032-003264600;
https://commons.wikimedia.org/wiki File:Shah_%27Alam_conveying_the_grant_
10 of_the_ Diwani_to_Lord_Clive.jpg
 The Eighteenth Century
UNIT 1 THE EIGHTEENTH CENTURY IN in Indian History
INDIAN HISTORY*
Structure
1.1 Introduction
1.2 The Eighteenth Century: Salient Features
1.3 The 18th Century Debate
1.4 The Mughal Empire, Its Decline and the Genesis of the Eighteenth Century
1.5 The Process of Regionalization
1.6 How ‘Mughal’ were these Regimes?
1.7 The Economy of the Eighteenth Century
1.8 The Indian Economy in the Late Eighteenth Century: The Emerging Differences
1.9 Summary
1.10 Glossary
1.11 Exercises
1.12 Suggested Readings

1.1 INTRODUCTION
For the people of India, the eighteenth century appeared as an age of dissolving certainties.
Never in its history had the Mughal Empire appeared so vulnerable. Its citadels were
being buffeted by Afghan marauders (Nadir Shah, 1739 and Ahmad Shah Abdali,
1748-1767), Maratha adventurers (the Peshwas) and various warrior-peasant groups
(Jats, Rohillas, and the Sikhs), while its military-bureaucratic apparatus (the
mansabdari system), which had been its pride and mainstay stood by helplessly.
The fiscal system had also broken down, thereby threatening the life-styles of a genteel,
highly urbane class of people and their dependants. The empire was bankrupt and all
semblance of political governance and fiscal probity had apparently disappeared. And
this was not all. The worst possible ignominies had been heaped on the house of
Timur: two emperors, Ahmad Shah (1748-1754) and Shah Alam II (1759-1816) were
blinded, and another, Alamgir II (1754-1759) was assassinated by nobles engaged in
bitter factional feuds.
The speed with which this happened was bewildering. In 1700 the Mughal Empire
under Aurungzeb was at its territorial zenith. Yet by the 1730s of the century many of
its core areas had been fragmented into numerous regional polities. While some of
these, like the Nawabi of Awadh or the Nizamat in Bengal, took roots as ‘successor’
regimes, others, like the Marathas or the Jats, emerged on the basis of their sustained
and often violent opposition to the Mughal empire. A further thirty years down, the
political fortunes of India were clearly moving in a different direction. A European
power, the British East India Company, had succeeded in conquering much of eastern
India and had begun to exercise a decisive influence on the state of affairs in other
parts of the subcontinent. On the basis of these successful political ventures, the
Company was slowly but inexorably creating the bases of an early-colonial system of
rule. No wonder, contemporaries amazed at the intensity of the disturbances around
them thought that this was an age when their world was being turned upside down.
Given the nature of these changes, the eighteenth century has attracted the attention of a
number of modern historians and has gradually emerged as the hub of a lively debate.
Because of this, the historiography of this century has seen some very innovative advances.
While interpretations differ sharply on many aspects, there are a few areas of unanimity.
The older interpretation that the decline of the Mughal Empire was a result of Aurungzeb’s
religious bigotry has been comprehensively rejected. If Aurungzeb faced opposition from
the Marathas, the Jats and some Rajput clans, he was equally troubled by recalcitrant

*Prof. Rajat Datta, Center for Historical Studies, Jawaharlal Nehru University, New Delhi 11
Historiography and Economy Muslim nobles and officials who were instrumental in leading the factional struggles in the
imperial court, and powerful Rajput ruling houses continued to be loyal to the empire.
The earlier stereotype that this was a century of moral decadence and cultural decay has
also been rejected. Attention is now drawn to the robust and dynamic cultural life of the
regional states, many of whom carried the legacies of high Mughal culture and blended
these with the rich cultural heritage of the regions. Lucknow and Hyderabad had emerged
as centres of literary and cultural patronage thus becoming the hubs of remarkable cultural
efflorescence. Eighteenth century Banaras emerged as a great centre of banking and
commerce in north India and combined this with its unique position as a centre of religion,
education and pilgrimage. In Bengal, Nadia was the centre of Sanskrit learning and Dayabhaga
that of Hindu law, and Bishnupur became the place where elaborate regional architectural
and musical styles grew and flourished. In the south, Tanjore, under the patronage of its
Maratha rulers, became a vibrant centre in the fields of religion, music and dance.
Thus historians now view the decline of the Mughal Empire and its aftermath not as a
result of religious bigotry or the weakness of individual rulers but as a structural process:
as a systemic rather than the personal failure of an individual. But sharp differences
nevertheless remain about the causes and nature of this systemic failure. Opinions are
divided between those who view the decline as a result of an economic crisis engendered
by an over-exploitative ruling class and those who see the entire process as a process of
local resurgence fuelled by a long-term process of economic growth. There are also
differing interpretations of the changing relationships between state and society, the patterns
and processes of economic growth, and the consequences of the tussle between the
empire and the localities over the distribution of the fruits of this growth.
But the eighteenth century was not limited to the decline of the Mughal Empire and the
consolidation of regional state systems. Much more fundamental changes were occurring
in the subcontinent from the middle of the century, and these have understandably attracted
the attention of a large number of historians with widely discordant voices. The areas of
debate are centred around, first, the reasons of the transition of the Company from a
commercial to a political entity; secondly, the roots of colonialism in India, whether it was
a purely exogenous process, or did it have local, that is, indigenous roots; and thirdly, what
was the nature of its social and economic impact. Implicated in these are questions of
continuities and changes and the relative position and importance of each in the new
colonial order.

1.2 THE EIGHTEENTH CENTURY: SALIENT

FEATURES
In order to understand the broad processes at work, and to make sense of the immense
range of issues thrown up by the differing points of view, it is worth keeping in mind the
following salient features of this century.
First, the eighteenth century witnessed two transitions. One occurred with the parcellisation
of the Mughal Empire into regional, and even sub-regional, political entities. The genesis of
this transition lay in the crisis of the empire and its subsequent disintegration. While this
mainly involved the redistribution of political power among regional social groups, the
other transition went much deeper. This occurred towards the middle of the century and
was unleashed by the political ascendancy of the British East India Company after the
battles of Plassey (1757) and Buxar (1763). Involved in this were some new developments,
the most important being the transformation of an overseas trading organization, the East
India Company, into a ruling power in India, and the use of this political supremacy for
military and commercial purposes.
Second, in order to fathom its full implications historians are beginning to look upon the
eighteenth century as a ‘long’ century. Recent interpretations tend to see the political
dynamics of this century beginning to unfold in the 1680s amidst the fragmentation of the
Mughal Empire. By the 1720s the aftershocks of the disintegration had been absorbed by
12 the stable regional polities which had emerged in most parts. From the 1750s major political
realignments had started occurring under the growing hegemony of the Company. This The Eighteenth Century
process continued till the 1820s by which time all major indigenous regimes had been in Indian History
either annexed or had become subsidiary allies of the Company. Thus in terms of its
political significance the eighteenth century encompassed the last two decades of the
seventeenth and the first three decades of the nineteenth centuries. From the economic
perspective too a ‘long’ view is a worthwhile one. There is now substantial evidence to
show that political regeneration in the provinces was accompanied by regional economic
reorientation. While some places declined, economic growth occurred in other areas and
this was spearheaded by local landed and commercial classes; and compared to a prevalent
view which stresses economic dislocation from the middle of the century, recent research
shows that despite the pressures being imposed on indigenous structures by the ascendancy
of the Company, prospects of economic growth were not abruptly closed. Even in Bengal,
where the Company’s regime was at its most intrusive, commercial and agricultural
expansion continued though in somewhat modified forms. Such was the situation till first
two decades of the nineteenth century, when by all accounts the slow growth of the
eighteenth century was coming to an end.
A third meaningful perspective, which has been of a recent vintage, is to see the relationship
between the Indian economy and the global economy. The Indian Ocean was part of an
elaborate commercial network with the Atlantic and the Pacific, and it was the increasing
Europeanisation of early modern trade that set the tone and the future of India’s commercial
life in the eighteenth century. In its long engagement with this commerce, the Indian side had
always provided goods and the services, but under conditions of demand which were mediated
by the global networks of European commerce. The profits were significant from the Indian
point of view, and much wealth flowed into India through this channel. From the perspective
of understanding the eighteenth century, these developments are significant. A substantial
part of the problem of continuity between the Mughal and post-Mughal and from there to the
early-colonial can be understood if one remembers that Indian commercial life and merchant
capital was deployed in the service of wider networks of connections whose impulses were
determined as much as from Africa, South-east Asia and Europe as they were from Agra
and Delhi. The early-colonial intervention deepened this incorporation. One instance
of this was transformation in the networks of the intra-Asian trade in the middle of
the eighteenth century when the earlier linkages between India and west Asia were
now redirected towards east and south-east Asia under the directions of British
commerce. Since the eighteenth century was period of global economic expansion
(compared to the seventeenth century which is commonly recognized a period of
crisis), and since India’s overseas trade also increased phenomenally in this period,
any view which sees the eighteenth century only as a period of economic disjuncture
or crisis is a questionable one.

1.3 THE 18TH CENTURY DEBATE

Given the rapidity and the significance of the changes which occurred in the 18th century,
it is natural that there are differing interpretations of almost every issue involved. Broadly,
the debate follows the traditional division of this century into two halves and the protagonists
of different points of view can be divided into two broad groups. For the period up to 1750
one can divide them into those who hold an empire-centric view and those who hold a
region-centric view. For the period after 1750, the views can be held to broadly conform to
the Indianist and Europeansist positions. In other words, for the first half of the 18th
century, there are historians whose view of the 18th century is based on the centrality of
the Mughal Empire and its institutions in the workings of the society and economy of the
country. In this view the decline had catastrophic results. While the extreme edge of this
view would interpret the decline as one of political chaos and anarchy, recent interpretations
see it more in terms of a structural collapse but with very little positive emerging from the
rubble. The regional formations, which succeeded the empire, are ascribed with little potential
for improving their performances beyond the levels already achieved as Mughal provinces,
whereas oppositional movements like the Jats, Sikhs and Marathas are considered nothing
more than predatory-formations with very little positive to speak for them. 13
Historiography and Economy In contrast are those who view the developments from the perspective of the provinces
and localities. Instead of giving the empire a superordinate role, as is done in the
empire-centric perspective, the region-centric approach focuses on how social groups
inhabiting different areas of the empire became active agents in determining the course of
the political and economic trajectories for their own ends. At one level, the structures of
Mughal provincial government was fundamentally transformed which led to the creation
of autonomous kingdoms in Bengal, Awadh and Hyderabad. At another level there arose
those polities, like the Marathas and Sikhs, whose genesis lay in opposition to the Mughals,
but who, ironically, created political systems within the imperial domains which also made
use of many of the administrative methods of the Mughals. All these modified provincial
authorities gave the erstwhile Mughal grandees new opportunities to deepen their hold on
power in the regions, and in addition, their clients and family members were also able to
amass large bundles of proprietary rights and rights to farm revenue from the state which
in course of time became hereditary estates. A process of commercial growth in the
regions underpinned all this.
For the post-1750 situation, the Europeanist explanation gives primacy of place to the
ascendancy of a triumphant, expansionist Europe (especially Britain) defeating an India in
chaos and disarray. This is by far the most dominant view amongst Indian nationalist and
Marxist historians, and provides the foremost historical perspective on the roots of India’s
economic backwardness. The nationalist view overwhelmingly has been to see the anarchy
in eighteenth century India as a momentary but catastrophic lapse in an otherwise unfolding
saga of nation building in India’s history which allowed a foreign power to conquer and to
colonise the country. While the more traditional Marxist view was to see the rise of British
rule as a necessary evil as it ended much of the ‘feudal’ disintegration of society in the
eighteenth century, more recent variants see it as a system relentlessly driven by the
search for profits, commodities and markets, with no ‘progressive’ aspects to its credit.
But some common assumptions are embedded in both historiographical perspectives as
far as the eighteenth century is concerned. The first is the assumption shared by both that
order and stability could exist only in large, pan-Indian political structures; and since this
disappeared in the eighteenth century, it was a period of chaos, anarchy and decline. The
second commonly shared ground is that of discontinuity. Both see British rule as a
fundamental disjuncture: a completely foreign and alien system of domination, totally
removed from the traditions of Indian governance or culture.
On the other hand, the Indianist perspective tries to adopt a more differentiated perspective
of this transition to colonialism. The rise of the British power is seen not as a one-sided
process of conquest and subjugation, but also as a result of Europe’s (especially Britain’s)
deep engagement with India over a long period. Instead of a forced grafting of a foreign
regime on Indian soil, the emphasis is on the way in which conditions in Indian society
determined the emergence and form of British India. In this argument, the shape of British
rule in India was determined as much by the metropolitan interests as it was by Indian
agency. Instead of seeing the eighteenth century as a period of unchecked anarchy, the
Indianist perspective devotes great attention to the political stability imparted by the
‘successor’ states of the Mughal Empire. Instead of seeing a picture of economic regression
in the disintegration of the empire, the Indianist view is that India’s commercial and military
sophistication continued in the eighteenth century and the Company used this to its advantage.
While there was strong indigenous resistance to this intrusion, Indian agency was a vital
ingredient in ensuring the ultimate success of British rule in India. British rule was based
on Indian norms of governance, modes of agro-commercial management and the skills of
its human resources, but it successfully modified these for its own purposes. Thus in the
Indianist view, the eighteenth century was not a century of ruptures, but a century of
deep continuities in which past institutions and structures continued albeit in substantially
redeployed forms in the midst of vastly expanding commercial opportunities. Those
subscribing to this view are often infelicitously referred to as the ‘Cambridge School’
as many of the protagonsists are situated in North America and a number of Indian
historians also share this perspective. However, together they constitute what is
14 commonly referred to as ‘revisionist’ historians.
 The Eighteenth Century
1.4 THE MUGHAL EMPIRE, ITS DECLINE AND THE in Indian History
GENESIS OF THE EIGHTEENTH CENTURY
Much has been written about the decline of the Mughal Empire. As stated earlier, theories
of moral turpitude, weak rulers and communal policies need not be taken seriously as they
are empirically unsustainable. Later Mughal emperors, for example Farrukh Siyar, tried in
their own way to stem the rot. There is no evidence to suggest that these emperors
abdicated their responsibilities, but events were moving too fast for a single person to
handle. The other theories focus on a rapidly disintegrating structure, a severe crisis in the
Empire’s fiscal and jagirdari systems, which severely compromised the institutions of
governance. This has been written about extensively and Irfan Habib’s arguments have
been the most influential. For Habib, while the capacity of the economy to expand was
self-limiting, there was an unrestrained tendency of the Mughal fiscal system to appropriate
greater and greater amounts of the peasants’ surplus. This sparked off a tri-polar
confrontation between the imperial ruling class, the hereditary land holding classes (the
zamindars) and peasants, which soon went beyond the capacity of the system to contain
or control. Satish Chandra provided important reason when he explained the empire’s
demise in the inability of state functionaries to ensure the desired efficiency of the
assignment (jagir) system, thus leading to intense factional struggles. In a similar vein
Athar Ali saw the crisis as a result of a growing shortage of jagirs and the inability of the
system to accommodate the growing number of aspirants to the assignment system in the
aftermath of Aurungzeb’s Deccan campaigns. However, an important corrective to this
was provided by John Richards who showed that be-jagiri (jagir-less) wasn’t a problem
in the Deccan as it was not a deficit area, but it was the larger failure to devise a viable
system of accommodating local elites in the Deccan which was proving to be the Empire’s
major drawback in the Deccan. In this view, the crisis arose because of an imperfect
imperial consolidation, visible in the failure of the state to effectively incorporate the local
agrarian elite, thereby creating deep fissures in the empire.
An interesting argument made by Marshall Hodgson is that the three Islamic empires –
the Ottoman, the Safavid and the Mughal – were successful not because of their adherence
to a single formal religion, but because of their successful control over the deployment of
gunpowder, and the reason why they atrophied or failed ultimately was because of their
inability to keep up with the changing technologies of warfare that were happening in the
western hemisphere. Can this be applied to the Indian case? Recently, Iqtidar Alam Khan
has drawn our attention to the simultaneous correspondence between gunpowder,
centralization and resistance: while access to muskets, cannons and gunpowder strengthened
the sinews of imperial power, these were simultaneously used by its more powerful subjects
to arm themselves and to resist the intrusion of the state. It was logistically impossible to
prevent such crucial technology from percolating downwards. Therefore, any notion of
the state’s exclusive control over firepower as a prescription of its success tends to break
down as zamindars, chaudhuris, and dominant-peasant groups controlled large numbers
of armed militia. The Marathas, the Sikhs and the Jats used muskets, as did most other
rural-magnates. One must also remember that these people enjoyed various traditional
rights and perquisites because of their social/caste standing in the countryside. This made
them capable of drawing additional human resources to augment their military strength
if necessary, which they did regularly. Though the Mughal army controlled a great
amount of military hardware, as a collectivity the local magnates were always a
serious military threat, especially considering their strategic location in the countryside.
By the eighteenth century the terms of reference between the state and rural magnates,
as far as military technology was concerned had equalized because of the concerted
upsurge in the countryside. Stewart Gordon has shown how the Marathas were
successful in tapping into a vast and heterogeneous military labour market, including
the one being provided by Europeans, in the eighteenth century.
Therefore, in order to understand the process of Mughal decline one has to take both a
long-term view and a conjunctural view. The long-term view is that the Mughal Empire
provided a number of institutions ostensibly to centralize power, but unfortunately those led 15
Historiography and Economy to periodic crises in institutional and fiscal arrangements of the empire, which the Mughals
were unable to sort out effectively. Some examples of this are the inability of the state to
affect parity between assessment of revenue (the jama) and what was actually collected
(the hasil), or its failure to prevent transmission losses of up to 20 percent of its revenue
from the countryside. There was also the more structural inability of the empire between
a set of enduring systems between the agrarian elite and the state. Both existed in a state
of perennial contradiction. Of course, there were instances of rapprochements between
the two. For example, there was the so-called Rajput policy of Akbar; but even this did not
cover the whole of Rajputana or the entire grid of Rajput clans, nor was it able to contain
a potent source of political friction. This was further aggravated by the inability of the state
to strike out workable (consensual) arrangements with a myriad of small zamindars
scattered even in the heartland of the empire as well as all over the country, and this
accentuated problems. Mawasat and zor-talab (perennially refractory areas) thus existed
cheek by jowl with sir-i hasil lands. These were the long-term structural problems.
The conjunctural problem assumed the form of the Deccan crisis, and the sustained
oppositional movements of the Jats and the Mewatis in the north India, particularly in the
Ganga-Yamuna Doab, and of the Sikhs in the Punjab. Other places, like eastern India,
where great commercial advances had taken place in the seventeenth century, there was
the difficulty of getting adequate tribute as zamindars had been able to use a slack revenue
system to their advantage. Though this did not cause political instability, it accentuated the
financial problems of the empire. This was accompanied by the convergent crisis in two
other Asiatic empires which disrupted the established and highly profitable commercial linkages
between India and west Asia. In fact in one influential explanation of the economic problems
being faced by the great Mughal port of Surat is ascribed to the crisis of these empires.
The conjunctural crises intensified the long-term conflicts between the imperial imperative
and the local imperative and brought the empire to its knees.
What is being suggested here is that to understand the endogenous processes of
centralization, decentralization, and crisis in the Mughal Empire, the constantly changing
and negotiated relationship between the centre and the localities, and the perpetual tensions
between the imperial ruling class and the local magnates, have to be kept in mind. These
relationships were never fixed at the dictates of the state; they were constantly changing
and unfolding. The analysis of the Mughal Empire as an establishment of negotiated
political relationships means that there was greater flux in its interstices, and this fluidity
allowed for a greater constellation of social groups in different parts of the empire and this
explains the various social configurations in different parts of the empire. Studying the
empire in terms of the fluidity of the relationship between the centre and the provinces
allows us to understand articulation between the regions and the centre. The more the
empire tried to centralize, the gainers were the regional groups, which latched on to this
process of centralization and benefited from it. As the empire generated enormous wealth
through its revenue mechanisms, the tussle between its maximization and the attempts to
retaining larger and larger proportions of this wealth in the localities grew stronger.

1.5 THE PROCESS OF REGIONALIZATION

If one adopts a region-centric perspective, alternative versions of the empire and its collapse
begin to emerge. Even in the Persian language sources, there are possibilities of reading
more decentralized and vulnerable versions of the empire. For example, Andre Wink’s
advances the notion of fitna to argue that the system was constantly being subverted from
within, and that there were forces of factionalism and centrifugalism constantly pulling
away from the centre. Stephen Blake’s description of the Mughal system as a ‘patrimonial-
bureaucratic’ edifice is another such variant reading. What this means is that the Mughals
were always walking a tightrope while attempting to balance an elaborately personalized
style of rule (the patrimonial) with a highly militarized and centralized vision of the empire.
This created a peculiar contradiction, and as M.N. Pearson has argued, the Mughals failed
to bridge the gap between a paternalistic, highly personalized form of government and its
16 military aspirations; that while trying to be militarily effective it was not able to carve out a
system of rule based on an autonomous military-bureaucratic system. Muzaffar Alam also The Eighteenth Century
shows how the imperial process was continuously being subverted by the aims and in Indian History
aspirations of the local gentry constantly attempting to consolidate themselves at the expense
of the imperial ruling class.
What we now see is a whole range of pressures pulling away from the Mughal state:
these ranged from factions at the centre to the independent consolidation of the local
and regional elite. The nature of the elite was not the same everywhere. While in
Awadh such people belonged to the upper echelons of the social system (the ashraf),
elsewhere they could include more ‘subaltern’ elements like the Jat peasantry in the
Punjab or the Sadgop zamindaris on the fringes of the settled zones in Bengal. Merchants
and bankers played a crucial role in underwriting them for a consideration. It is this
diversity which appears as a striking feature of the newly constituted regional elite in
the eighteenth, thus giving us a picture of a system buffeted by multi-polar tensions.
The crisis now can be seen as the one created by resurgent aspirations of groups below
composed of what C.A. Bayly has described as ‘many types of military, merchant and
political entrepreneurs’ all coming together to ‘capitalise on the buoyant trade and
production of the Mughal realm’. This resurgence did not mean a decline; it meant the
social displacement at the top combined with the replacement of some institutions and
the reconstitution of others.
The basic point is that seeds of change germinated within the Mughal institutions themselves.
Paradoxically, the institutions of centralization generated their own counter-tendencies.
Much of the process of regionalization can be explained by the consolidation of the imperial
elite who took advantage of the disintegrating jagirdari-mansabdari complex for their
own purposes. Similar tendencies were at work in the zamindari system too. While the
Mughals sought to make the zamindars work as intermediaries in their land revenue
administration, these local elites, highly armed and ruling over substantial domains like
petty kings, generated alternative, localized, sub-imperialisms. Also recent researches,
particularly in the Mughal provinces of Awadh and Bengal, have done much to revise the
older views of zamindars as a class of rural exploiters. On the contrary, they were active
agents in local economies as financiers, entrepreneurs and consumers. They financed
agricultural reclamation, set up markets and traded, and consumed in cash. Their retainers
became a sub-elite between them and the peasants, as they were usually given prebends,
which they used to extend small zones of high-value consumption in the countryside. They
thus rose in rebellion to defend the fruits of their prosperity from the intrusive pressures of
state fiscalism. These in turn were used by the provincial satraps to enhance their powers
vis-à-vis the centre. In Awadh, the provincial subahdar enhanced his power by using
such agrarian disturbances as a bargaining counter against the centre. In Bengal, the
subahdar used the pressing financial needs of the empire and the recalcitrance of some
local zamindars to augment his power base.
Recent studies of the political processes in eighteenth century have indicated the growth
of three types of regimes. First, there were those that replicated the former imperial
structures. Ruling these ‘successor’ states that nominal Mughal governorships: the nawabs
of the Deccan, Awadh, and Bengal who tended to perpetuate Mughal forms and practices.
The second types of regimes were the polities whose origins were independent of the
Mughal Empire. These were the Maratha, the Jat and the Sikh regimes, whose crystallization
established new systems, thus representing a real and persistent danger to the Mughal
Empire. The third political complex was extremely significant. This comprised many local
principalities of Muslim, Hindu or tribal origin located in the frontiers of the semi-autonomous
states. As burgeoning Jat zamindars began to push them out of the Ganga-Yamuna Doab,
Rajput clans began establishing petty- kingdoms from Gujarat in the west to Awadh in the
north through a process of conquest, migration and settlement. In Rohilkhand and Bhopal,
Afghan chiefdoms were established by an innovative combination of conquest,
revenue farming and trading with the northwest frontier. Agricultural colonization, revenue
farming and commercial dealings were also instrumental in the consolidation of the Banaras
Raj and the great zamindari households of Burdwan or Qasimbazar in Bengal. On the
northeast frontier of India Mughal expansion was stopped in the 1680s by the Ahom dynasty 17
Historiography and Economy that maintained an independent Assam under a Hindu tradition of kingship until the British
annexed it in the early nineteenth century.
In the south, while the really great royalist concentration occurred only from the 1760s in
Mysore, the situation before that, as David Ludden shows, was characterised by petty
kingdoms being formed by the Telugu-speaking nayakas, who had been subordinate to
Vijayanagar and had established their autonomy on its downfall, or from palayakkarans
(poligars) who managed to carve out small domains from the territory of the nayakas,
based on temples and a highly militarised population. On the Malabar coast, the situation
was an uneasy alliance between the coastal kingdoms and the land-owning households
held together by a mutual sharing of profits from trade, land and labour. An intrusive
monarchical system was introduced in this region only after the invasion by the aggressive
Mysore state under Haidar Ali and Tipu Sultan.

1.6 HOW ‘MUGHAL’ WERE THESE REGIMES?

Recent studies of regional government and administration have shown that the political
changes in north India in the first half of the eighteenth century denoted no sudden deviation
from the established Mughal pattern of politics in the regions. Some of the developments
which led to the transformation of the Mughal provinces of Bengal, Hyderabad and Awadh
into virtually autonomous kingdoms can be traced back to the end of Aurangzeb’s reign
and together represented a long-term process of change towards a regional fragmentation
of power. The rulers of successor states who were nominal Mughal governors, the Nawabs
of the Deccan, Awadh, and Bengal, naturally transplanted many of the cultural idioms of
the imperial court to their new capitals. These regimes tended to utilise Mughal forms and
practices of governance. Even the Nawabs of Arcot, whose rule was propped-up by the
support they could garner from the English, was introducing Mughal principles of
administration for the first time in this region. The Marathas, who claimed sovereign
rights for themselves in their territories, nevertheless collected revenue on Mughal principles,
even if they used different names for their officials. Although the Sikhs developed distinct
community institutions like the khalsa, which were strongly opposed to Mughal claims,
they still collected revenue on Mughal principles and alienated large blocks of land in
Mughal-style jagirs. Persian remained the official language of diplomacy, of high-level
administration, and of high culture in each of these regimes.
Yet there were major differences. Though these regimes replicated Mughal institutions in
their own territories they were not regionalised prototypes of Mughal rule. They used
Mughal norms but only to a very limited extent and in highly redeployed forms. There
were many specific differences.
First, though many of the larger provincial regimes (the nawabis) were established by
Mughal grandees, they were highly suspicious of that very institution on whose back they
had ridden to power, namely, the jagirdari system. Each of the subahdars (governors)
therefore either broke with its essentials, or modified it enormously to suit his designs. In
Bengal, Murshid Quli Khan resumed all imperial jagirs and transferred the holders to
Orissa. In Awadh, the structure of the jagirdari system was maintained, but large
jagirdaris were broken-up and reallocated among smaller assignees and the nawabs
maintained close control over jagirdari officials (the amils, revenue collectors). In
Hyderabad the power of jagirdars were curtailed by the appointment of officials like the
daftardars (record keepers) and taaluqdars who were directly under the control of the
Nawab himself. Secondly, the Mughal practice of separating the executive and fiscal
powers of different office-holders in the provinces was henceforth broken. Murshid Quli
Khan appropriated the dual functions of the diwan and subahdar, as did Asaf Jah in the
Deccan, while in Awadh, Burhan-ul Mulk combined the high offices of subahdari and
faujdari (commandant).
The second major difference lay in the sphere of fiscal management, and this was
ubiquitously widespread notwithstanding the difference in the size of the regime. While
the central financial prop of these regimes was the assessment and collection of the
18
land-tax in cash, the management and its execution was given over to revenue-farmers
(ijaradari) in preference to paid officials or landed intermediaries. The practice of ijaradari, The Eighteenth Century
thoroughly disapproved by the Mughals, exploded all over India in the eighteenth century. in Indian History
The ambits of tax-farms were extended beyond mal (land-revenue) to include sair
(non-agricultural) taxes as well as various types of public offices and positions. Though
the conventional view of historians has been to see ijaradari as a ruinous expedient, the
evidence on which this view is based is far from conclusive. In Rajasthan, where Dilbagh
Singh has extensively studied the spread of this system, an ijara contract was reckoned
not on the assessed revenue (jama, which was often unrealistic) but on the basis of the
actual collections (hasil) of the previous five to seven years. This would provide an
in-built check on rack-renting though there were bound to be loopholes in the system.
Studies of Awadh and Banaras have shown that ijaradari raised revenue and ensured a
higher return for the state while minimizing its administrative overheads. It also provided
the scope for a diverse range of people to become implicated in the interstices of the
state’s fiscal system. Successful zamindars could extend their holdings by farming extra
land and people with money developed a stake in agrarian management, either by taking
on farms themselves or, as was the more common practice, by advancing money to those
who did. Revenue farming seems to have expanded in a big way in the Coromandel from
the middle of the century, with the ‘landed and military gentry’ taking the lead in bidding
for such farms.
This introduces the third element of difference between the Mughal system and the new
ones. In all the regional polities, irrespective of their size or geographical location, there
developed an extremely close nexus between the state and people with money at their
disposal. According to Karen Leonard, the period of imperial decline coincided with the
increasing involvement of banking firms in revenue collection at regional and local levels.
This involvement increased in the first half of the eighteenth century. By 1750 bankers
were the ones who controlled access to the actual collection of land revenue, through
provision of credit or cash. They provided the funds that enabled people to become tax
farmers and had their own agents into the countryside to collect from the land given to
them as security or mortgage. Throughout India the richest merchants and bankers were
gaining a stake in the new political order, and in several of the smaller eighteenth-century
states trader-bankers had become the key political group by the 1760s. In the larger
states, like Bengal, individual merchants were given monopoly rights over commodities
like salt and saltpetre and wielded political authority in the saltpetre districts. Why did this
reorientation occur? Stable regional centres began to attract banking capital. Bankers
migrated from the Mughal core to places like Farrukabad, Lucknow, Murshidabad, Patna
and Banaras where they began extending credit to rulers and ijaradars (revenue farmers)
and guaranteed the remittance of revenue from where it was collected by bill of exchange
to the ruler’s capital or wherever else it was needed. In areas characterised by political
instability like Gujarat, Rajasthan or the western Deccan, merchants quickly found
alternative avenues of investment and patronage. The vulnerability of the Mughals against
the Marathas led merchants and bankers to migrate from Surat to other cities. Many
shifted to Poona, the capital of the Peshwas and to other cities, like Baroda, in the Maratha
Confederacy. Credit transactions were quickly extended to the European companies,
particularly to the English, who were emerging as major players in the regional politics of
this period.
The fourth area of difference was the gradual but steady insinuation of the European,
especially British, element in the fabric of Indian political life. This was an important
development, whose implications have constituted one of the principal concerns of the
Indianist reading of the eighteenth century. Instead of being a great disjuncture, the logic
of the events of the middle of the eighteenth century can only be understood as part of a
long pre-history of the interface between Europe and India. Though based primarily in
commercial transactions, Indian rulers were no strangers to the skills of the Europeans in
land warfare as well as at sea. Numerous Europeans were employed in the artillery wing
and in the armouries of Mughal armies. During the eighteenth century the situation began
to change as many of the larger regional polities began developing massed infantry drilled
and armed in the European fashion with European technical and logistical expertise, and 19
Historiography and Economy Europeans, as P.J. Marshall, says, began to ‘infiltrate regimes that were willing to hire
services for cash’.
Its full manifestation occurred in the 1740s. As the tussle between the Nawab of Carnatic
Anwaruddin Khan and his son Muhammad Ali Wallajah, on the one hand, and the Deccani
Navaiyitis, a major administrative family led by Chanda Sahib, flared up in 1740s, the British
and the French became drawn into the politics of regional state formation. The British
supported the Wallajah of Arcot, the French propped up Chanda Sahib. British troops were
also hired out to the Wallajah to enable him to consolidate his control over the southern
Poligars and even in an abortive attempt to procure for him the very rich lands of Tanjore.
Chanda Sahib was defeated and killed in 1752. By 1763, British naval supremacy and financial
clout had become virtually unassailable in the Carnatic. In return for their services, the
British were rewarded with leases of revenue from enormously productive tracts of land
(called ‘subsidies’) and allowed to station their military garrisons in the lands of the Nawab.
Equally significant was another dimension of this relationship. British personnel in Madras
privately loaned enormous sums of money to the Nawab: money which was borrowed in
turn from Indian and European investors, thereby giving rise to, what Bayly describes as ‘a
paradox typical of eighteenth-century India’ in which ‘indigenous capital penetrated into the
emerging Muslim state system through the good offices of British speculators’.

1.7 THE ECONOMY OF THE EIGHTEENTH

CENTURY
Two problems have engaged much of the debate on the economy of eighteenth century
India. The first is the economic context in which such diverse patterns of regionalization
took place, or whether the processes of regionalization were symptoms of economic
expansion, crisis or stasis? The second concerns the state of the economy in the early-
colonial transition.
The creation of post-Mughal polities wasn’t always a smooth process. From the descriptions
contained in contemporary literature, the impression one gets is that of a serious breakdown,
anarchy and economic uncertainty. But some of it appears to be exaggerated. The transitions
in Bengal and Awadh were largely peaceful, though serious disruptions occurred in the
Punjab and the eastern Deccan. Most serious accusations were levied against the Marathas.
Their armies ravaged the rich commercial province of Gujarat in the early parts of the
century, followed by plundering raids into eastern India in the 1740s and Rajasthan in the
late eighteenth century. But whether these, and other instances of temporary dislocations
were enough to cause a serious reversal from the levels of prosperity in the seventeenth
century is a debatable issue. As Stewart Gordon’s study of Malwa shows, once conquest
had been completed and Maratha rule was secure, effective administration and a regulated
revenue demand on Mughal principles was installed. Agriculture was encouraged and
trade revived. The domains of leaders like Sindhia, the Gaekwads or the Bhonsles supported
powerful armies sustained by effectively administered revenue systems by the late eighteenth
century. Elsewhere too the situation was mixed. Punjab was clearly beginning to recover
from its travails in the late eighteenth century, whereas Rajasthan, whose economic problems
began at that time, was thriving during the process of the Empire’s disintegration. Stable
regimes had also been formed in Rohilkhand, Farrukhabad and in Banaras. Expansionism
was ingrained in many of these regimes. Awadh managed to usurp vast territories from
the Afghans of Rohilkhand. In the south, Mysore under the Sultans annexed most of the
Malabar coast, and Arcot spread along the south-eastern coast to grab the domains of the
southern Nayakas. Such a differentiated process of political formation does not support
notions of the decline of the Mughal Empire as an unmitigated economic disaster.
Emergence of New Town Centres
Given the absence of concrete indicators of growth, it is very difficult to clinch an argument
either way, but some broad parameters can be considered. Though the economy continued
to be predominantly agricultural, the levels of urban growth seemed to have expanded not
20 declined in the eighteenth century. Contemporaries lamented the decline of Shahjahanabad,
while other cities, like Sirhind in the Punjab definitely suffered. Mathura which was considered The Eighteenth Century
a prosperous and populous city till the middle of the eighteenth century suffered a major blow in Indian History
after it was sacked by Abdali’s forces in 1756; yet further down the Yamuna, the great
imperial city of Agra was still considered by many in the 1760s to be the richest city in the
Mughal empire, not having been plundered by either the Afghans or the Marathas. On the
other hand, there is evidence to show that smaller places like Ballabhgarh, Bharatpur and
Kumbher were growing, and existing trading centres like Hathras or Panipat actually expanded.
Even if north India presents a mixed picture of urban existence, it is impossible to find
urban contraction in other parts. Contemporary observers talked eloquently of the increase
in Calcutta’s population and importance, and while Calcutta’s case may be dismissed as a
colonial enclave, Dhaka had about 450,000 people living within its environs in 1765 and
continued to be as thickly populated later on. In 1756, Murshidabad was declared as ‘one
of the richest cities in the world’; and in 1764 it was described, by no less a person than
Clive himself, as ‘[a city] as extensive, populous, and rich as the city of London, with this
great difference that there are individuals in the first possessing infinitely greater property
than in the last named city’. In addition to these premier places, Bengal also had cities
which were positioned at medium levels of consumption. Towns such as Bhagwangola,
Azimganj, Katwa, Kalna, Chinsura and Chittagong were swiftly becoming intermediate
centres of consumption, trade and habitation in the eighteenth century.
In western India, the partial decline of Surat was more than offset by the rise of Bombay.
There also appears to have been no demonstrable correlation between political turbulence
and urban contraction in central India. In Malwa, Maratha depredations in the 1720s had
not prevented a pattern of urban growth along an axis different from the previously established
Mughal sarkar towns. By the 1760s Ujjain expanded as Sindhia’s capital and Indore
became the base for the Holkar’s, and by all accounts this city grew into a large and
prosperous trading centre in the last decades of the century. Poona became the new outlet
for Chanderi silk during its rapid growth from a small town to the capital of the Marathas.
Burhanpur which had earlier served as an entrepot for trade along the Agra-Surat axis
now shifted its hinterland to include Pune and Nagpur and Lucknow and Allahabad in the
east. In the south, where the decline of the Empire had only a tangential resonance, towns
continued to grow. Madras expanded at a phenomenal pace, and under the new regime
Hyderabad witnessed remarkable growth, both as a place of elite residence and as a node
of great commercial importance. While the decline of the Empire seems to have had an
initially disturbing effect on some centres on the Coromandel, places like Masulipatnam,
Nagapatnam and Devanapatnam quickly recovered under the political stability provided
initially by Nayakas of Ginji and later by the better-developed regional kingdom of Tanjore.
Therefore, the eighteenth century may actually have witnessed a net accretion as far as
town life, and presumably an urban-economy, are concerned.
Expansion of Overseas Trade
The other indication of India’s economic vitality was the considerable expansion of its
overseas trade. In the early 18th century there were disruptions with the damage to the
great port of Surat caused by the Maratha invasions and by the crisis in west Asia.
Anglo-French conflicts caused temporary setbacks in the Carnatic, but despite this India’s
overseas trade with Europe increased steadily. Om Prakash has recently shown that while
the exports by the Dutch East India Company (VOC) from Gujarat suffered a steady
decline between 1700 and 1750, these were counterbalanced by the enormous expansion
of exports from Bengal between 1700 and 1752. These fell subsequently, but hovered at
an average of about 2 million florins a year till 1785, which was still substantially higher
than the value of exports at any point of time in the seventeenth century. While the Dutch
ascendancy had certainly ended by the middle of the century, English trade was undergoing
its most phenomenal expansion: expanding from £ 1.15 million in 1698-1700, to £ 1.92
million in 1738-40, £ 2.1 million in 1758-60 and £ 5.8 million in 1777-79. The pride of place
had now shifted to Bengal. Some historians believe that prior to the British conquest of
Bengal, the component of Bengal’s export trade under European control was secondary
compared to the trade with Asian markets, but there is very little evidence to substantiate 21
Historiography and Economy such a claim. On the contrary, contemporary estimates of bullion imported into pre-Plassey
Bengal show that of the annual importation worth Rs. 10 million, the share of bullion from
Asia seldom exceeded Rs.2 million. India’s trade was structurally linked to Europe much
before the fact of colonization, and the major fall-out of this linkage was an unprecedented
export-expansion accompanied by massive injections of bullion into the Indian economy.
On an average, the Dutch pumped in 4.69 million florins worth of bullion in the Indian
economy between 1700 and 1760. The English East Company brought in a total of £ 8.72
million worth of bullion into India between 1701 and 1721; this had gone up to £ 12.9 million
between 1733 and 1756. The victory at Plassey introduced changes to the structure of this
trade, but as will be discussed below, these were temporary closures.
The economic implications of such a massive expansion in trade have yet to be worked out
for the eighteenth-century as a whole, but they are likely to have been positive. At a
subcontinental level, Om Prakash visualizes the impact to have generated expansions in
‘income, output and employment’. In Bengal alone he estimates that full-time employment
opportunities in the artisanal sector increased at least by 10 per cent by the middle of the
century. Though he discounts any inflationary impact of this massive influx of bullion, a
rise in prices of commodities like rice and sugar is suggested in the prices of provisions
listed in the purchases made by the English company around Calcutta. This would suggest
that increases in money supply occasioned by larger and larger amounts of silver-bullion
being pumped into the economy might have led to a simultaneous rise in both output and
prices in the province. It seems Bengal wasn’t an isolated instance as Prasannan
Parthasarathi has recently detected a similar tendency on the Coromandel coast from the
1720s.
The important point is that bullion was flowing to recharge provincial economies. While
substantial amounts of this were being sent to the imperial centre as tribute, most of it
tended to stick in the provinces. Early Company observers estimated that such injections
of bullion had resulted in a net accretion of at least 25 crores rupees (£ 25 million) to the
Bengal’s monetary reserves by the middle of the century. Provincial reorganization could
thus occur in the midst of expanding regional economies. This would explain why the
hallmark of the eighteenth century ‘regional centralization’ was an increase in the
assessment (jama) in the provinces and the propensity of the state to collect revenue
in cash.
An overwhelming consensus among historians in India is the view that political turmoil of
the eighteenth century had disrupted networks of trade, particularly along the east-west
and Agra-Surat axes. While some disruption cannot be ruled out, what is not clear is the
extent or the depth of its adverse impact. Extremely fragmentary evidence about rising
rates of insurance in the eighteenth century have been provided by Irfan Habib to show an
increasing vulnerability of trade in this region, but this does not clinch the issue. Revenues
showed no signs of declining. From Rs. 460,000 in 1571-72, Surat’s revenue had increased
to Rs. 700,000 lakhs in 1721. Cambay’s revenue had gone up from Rs. 120,000 in 1719 to
Rs.285,000 lakhs in 1755, while Broach’s revenue, which was 45,000 rupees in 1714,
stood at Rs. 50,000 in 1726; it hovered around Rs. 25,000 between 1750-60, but had
jumped to a phenomenal Rs. 400,000 by the 1780s. Disruptions in western and central
India had largely subsided by the 1720s, and according to Sumit Guha that trade increased
in the Maratha territories from about that time, and commodity circulation and credit flows
significantly affected village production and consumption. Elsewhere too, trade doesn’t
seem to have been critically disrupted. As Jos Gommans has shown, the Afghans developed
the route to central Asia via Multan and Shikarpur. This supplied India with huge numbers
of horses and the caravans of Indian merchants passed westward through their territory.
Taking an overview of the economy at the middle of the century, there is no ground to
believe that the regionalization had diluted the tenuous commercial integration of the previous
century. The Mughal highways operated with minimal disruption, and disruption in one
area tended to be compensated by integration in another. Banjaras (transporters of grain)
continued to ply their trade between Banaras and the Deccan through Mirzapur throughout
the century, thus suggesting integrated circuits of long-distance trade even in cheap bulk
22
commodities and foodgrains. For all the alleged problems caused by the Marathas,
remittance networks through bills of exchange (hundis) between western India, Malwa, The Eighteenth Century
Rajasthan and Upper India seems to have held up well. Hundi dealers also dominated the in Indian History
complex network of remittances of tribute within the Marartha territories themselves, as
they did with the revenues flowing out of eastern India. Credit could still be extended and
money remitted over long distances. Bengal’s rice and sugar were being traded for textiles
from the Coromandel coast, cowrie shells from the Maldives, and for money from the Red
Sea. Regional specialization in textile production seems to have intensified in this century,
with the lower end of the market increasingly being catered from small, largely rurban,
production centres. Production was increasingly getting tied to advance contracts. Raw
materials, seed or the money were advanced to weavers and cultivators by the rich and
neighbours or by the agents of merchants, who received the crops or textiles as finished
products in repayment.
What was the situation in the countryside? In the absence of any sustained technological
improvement to enhance productivity, higher output could only have arisen by expanding
the area under cultivation, or by intensive marketing, or by devising newer devices to
control agricultural labour. The eighteenth century shows the existence of all three, either
separately or in various combinations. While the Punjab was undergoing a phase of
contraction, and the surroundings of Delhi and Agra were suffering sharp vicissitudes,
agricultural reclamation on an extensive scale seems to have been underway in the Deccan
and in territories controlled by the Marathas. Rajasthan saw fairly impressive agricultural
growth in the first half of the century. Prices rose faster than the level of revenue demand
providing the incentive for increasing the area under cultivation and for growing more
valuable crops. Both, grain taken by the state as taxation and cash crops were traded out
of the province in large quantities. In Bengal, Richard Eaton has identified a marked extension
of cultivation in response to the eastward shift of the course of the Ganges delta, which
created favourable conditions for opening up new rice growing lands, whose produce
went to feed the growing city of Calcutta and textile manufacturing districts of the west.
In Awadh and Allahabad evidence of increasing prosperity in both country and towns is
adduced in the higher revenue yields and the creation of new market centres extending
even as far to the east as Bihar.
Reclamation was being organized by many agencies, ranging from the state to the
landed-magnates, revenue-farmers and merchants. New market centres – peths, bazaars,
and ganjs – were being established, or old ones were being reorganized under new owners
on an extensive scale in Maharashtra, Awadh, Bihar and Bengal. Particularly important
seems to have been the proliferation of village level markets, the haat, as these allowed
exchange networks to percolate right up to the village level. Sharecropping seems to have
expanded in a big way. In the Maratha Deccan, the term used for sharecropping was
vatekari, whereas in eastern India, sharecroppers were known adhiar or bargadar.
Client-labour was in widespread usage in Awadh and eastern India, while agrarian servitude
and bondage was on the rise in areas of expanding irrigated agriculture in south India.
Such a situation leaves very little scope for doubt about indigenous eighteenth-century
regimes witnessing significant measures of economic growth. While data for demographic
growth are scarce, there is little ambiguity about the extension of cultivation, or expansion
of trade in these regimes. On the whole, therefore, the situation would support the recent
‘revisionist’ view that the process of the imperial fragmentation had very little to do with
the economies of the localities, except in some core regions. The regional economies
continued to be buoyant. Pan-Indian networks of trade thrived in the changed political
scenario and in some cases may even have expanded, and areas of growth seem to have
adequately compensated for areas of decline.
The period after 1757 is usually seen a major watershed in the Indian economy. A recent
reassessment of the Company’s rule in eighteenth century Bengal by P.J. Marshall finds
that in the Company’s scheme of political dominance, the primary imperatives were (a) to
ensure that their trading privileges were reformulated in terms of absolute rights, (b) to
convert limited territorial grants into its outright property, (c) to maximise what it obtained
from grants of revenue, and (d) to maintain armed forces at a level which would guarantee
23
its security. Yet, its initial optimism and grandiose self-perceptions were considerably tempered
Historiography and Economy ‘by caution in using these powers, which inclined the British to non-intervention and to
conserve Indian states as they understood them’. In addition, there were ‘severe practical
restrictions on what a foreign regime, even with a monopoly of overt force, could achieve
in conditions in which had only limited contact with the mass of the population’.
In order to understand the role of the Company in determining the fate of the late
eighteenth-century Indian economy, one must put its ascendancy in proper context. The
decline of the Mughal Empire facilitated the Company’s bid for power; it did not cause it.
The old idea that there was complete chaos after the collapse of the empire now stands
sufficiently revised. Some chaos there was, but it was geographically limited and was
offset by the growth of stable and commercially viable regimes at different levels. The
Company’s success lay in battening on to such processes for commercial benefit and in
using the rhetoric of chaos to augment its military presence and utility among the contenders
of local dominance. They did this with consummate skill in south India in the 1740s and
that experience was to serve them well throughout the century. In fact, most of the
commercial concessions which the Company later used for political capital (like the firman
of 1717 in Bengal) were consciously granted by the Mughals or their subahdars in the
provinces; and the growth of fortified settlements in the east, south and western parts of
India occurred in the full gaze of the empire, then at the zenith of its power. This meant
that the Company’s commercial and military interests were inseparably linked from an
early stage of its existence, and that its enterprise in India was geared to ensuring that it
was maintained at an optimum level. Therefore the transition to early-colonialism was
underpinned by the success already achieved by the Company in ensuring the compliance
from its indigenous political and commercial collaborators to the furtherance of its
military-fiscal requirements. Conquest was the great facilitator of the transition, not its
creator.
One has also to keep the territorial dimension of the early British Empire in mind in order
to understand the economic implications of its rule. The British Empire unfolded over a
period of a hundred years, and, like its predecessor, grew through a process of conquest,
collaboration and co-option of indigenous systems into a gradually evolving pan-Indian
framework of rule. Out of a possible 4.2 million square kilometres of territory, the Company
had managed to control only about 388,500 square kilometres between 1757 and 1792,
most of it located in northern and eastern India. Between 1798 and 1805, Richard Wellesley
added another 50,000 square kilometres of territory per year to the British Empire between
1798 and 1805, thus inaugurating, what C.A. Bayly has termed, ‘the harder edge of British
empire-building’ in India. This occurred under unprecedented demands being placed on
Great Britain for resources during the Napoleonic Wars, and was characterized by ‘a new
single-mindedness of the power and dignity of the state, the morality of conquest and
British racial superiority’. It also brought to an end the rampant opportunism of the Empire
under Clive, of the cautious protectionism, which had characterized Hastings’ governorship,
and the defensive pragmatism of Cornwallis’ tenure. 3.42 million square kilometres of
India still lay outside the ambit of the Company’s control at the turn of the century, and it
wasn’t before 1815 that the big push to swallow a large part of it began. With 2.56 million
square kilometres under its belt by 1856, the job of imperial expansion had been successfully
completed, though forty per cent of India still lay outside its direct ambit.
But this view of the Company as a relatively loose structure and its initial vulnerabilities cuts no ice
with most historians in India. For them, this regime ‘of blue-blooded European ancestry’ was
different for three reasons: first, it was driven by a relentless urge to maximize revenue; secondly,
it reversed the established patterns of trading between India and Europe; and thirdly, it introduced
the drain of wealth – the one-way flow of tribute – from India to Britain. The economic impact
of such a cohesive system of exploitation was deleterious: impoverishing, deflationary and ruinous
to both craft-production and agriculture. Let us examine these issues individually. Naturally, most
of the discussion of this would centre on Bengal, which was the primary centre of the Company’s
rule in the eighteenth century as well as its principal financial pump.
On the question of revenue maximization, the evidence from Bengal, which was the initial
laboratory of the Company’s fiscal experiment, shows that on an average, 40 to 45
24
per cent of the agricultural output was collected as land revenue. The demand was also
raised. With 1755 as base equal to 100, the index of the amount assessed stood at 135 in The Eighteenth Century
1770, 155 in 1778 and 168 in 1783, but had dropped to 156.01 in 1790. The amount of in Indian History
revenue collected also went up but not significantly enough to constitute a radical departure
from existing practices. The Company’s collections seldom exceeded 85 percent of the
assessment, which compares well with situation under the Nawabs who were successful
in collecting anything between 90 per cent and 65 per cent of their assessments. The
collection was made exclusively in cash, significantly furthering the process of monetisation
in the province. But one aspect of the Company’s financial behaviour constituted a radical
break from the past. During periods of price slumps, the Mughal revenue officials often
accepted payment of revenue in kind in order to reduce the real burden on the peasantry.
That element of flexibility was now dispensed with. The Company insisted on all revenue
being paid in cash, irrespective of the nature of the agricultural season. This tended to
have serious consequences on the poorer cultivators during harvest failures.
Given the fact that collections were made exclusively in cash, the question of maximization
of revenue would depend on whether or not the tax-burden had increased in real terms,
and this would be a factor of the prevailing state of prices. The consensual view of this
period is that the real burdens had increased, as this period was one of price-deflation
caused by the extraction of tribute; but this is based on a very selective use of the evidence
and goes against contemporary accounts, which show a substantial rise in the prices of
both agricultural and non-agricultural goods in this period. A study of price figures available
from the Dutch settlement of Chinsura and the prices of provisions near Calcutta leave
little doubt about the inflationary tendencies at work in eighteenth century Bengal, especially
from the middle of the eighteenth century. By the most conservative estimate, agricultural
prices had more than doubled during the course of the century with the price-crest stretching
between 1750 and 1795. Prices dipped somewhat after 1790 but remained well above the
level at the middle of the century level, and continued to be so till 1795; and it was only by
1800 that prices tended to fall, but not below the 1736-40 level. Such increases blunted the
edge of the Company’s demands on many sections of rural society. While the smaller and
marginal peasants suffered considerably, landed-magnates and the merchants weathered
the Company’s pressures quite well, and in fact prospered. Some historians have also
ascribed the rise of a ‘rich-peasant class’, the jotedars, to this period.
Turning to the question of the pattern of trading between Britain and India, the picture is one
of overall continuity. Bullion supplies were never discontinued after the battle of Plassey.
They were reduced, and even that restriction seems to have been partial. The Company
imported £2.46 million of treasure between 1758 and 1768, £1.3 million between 1769 and
1779, £3.83 million between 1779 and 1789. But between 1790 and 1805 the Company
pumped in £9.14 million worth of bullion into India of which Bengal’s share was a whopping
£5.77 million. Bengal had never received such huge supplies at any other time in the past.
Private European trade was responsible for the arrival of £5.2 million worth of silver to
Bengal between 1796 and 1806, and despite their trade being on a downward slope, the
Dutch still imported 4.24 million florins worth of bullion per year to pay for their merchandize
between 1790 and 1794. Contemporary grievances, and modern convictions, that a severe
shortage of money in the late-eighteenth century was caused by this great reversal of India’s
pattern of trade need to be seriously countenanced against this evidence. The rate of agio
(batta) being charged by money-changers for converting Arcot rupees into the Bengal sicca
seldom exceeded 7 per cent in the 1770s, which was considerably less than the rates being
charged in the 1720s when Bengal, ostensibly, was receiving huge amounts of bullion.
Commercial reports from the Company’s Bengal’s manufactories (aurangs) in 1773
revealed that the combined investments by the English, the Dutch and the French companies
and those made by private European merchants ‘exceed double the quantity which can
possibly be made in the year’. Customs receipts collected by the Board of Trade in the late
1790s showed that Bengal’s exports had trippled between 1777 and 1797, and that most of
it was still based on an exchange of textiles, foodstuffs and other raw materials for precious
metals and certain manufactured goods. Bengal was still far from becoming a source of
raw materials or a receptacle of the finished products of an industrialising Britain in this
period, and K.N. Chaudhuri’s general assessment that during the ‘half century following 25
Historiography and Economy the revolution of 1757, trade continued to flow along the traditional channels’ conforms
well with the evidence on the ground. The vitality of Bengal’s commercial economy remained
substantially unaltered throughout the eighteenth century.
Elsewhere, too, commercial transactions appear to have remained robust. Nagpur,
Bundelkhand, Ghazipur and Mirzapur were functioning as important nodes for the distribution
of Bengal goods in western India and the Deccan at the end of the century. In the late
1780s, nearly 43 percent of the textiles produced in Banaras were being vended in western
India, 49 percent was being sent to Bengal for shipment overseas, and the remaining 8
percent was destined for the Deccan and the northern provinces. Considering the fact that
the markets for the luxury-end of Banaras textiles, its silk, was traditionally located in
north and western India, whereas Bengal received its medium-priced cottons, this regional
division of the trade from Banaras does not show a major change in India’s internal market
for textiles. By the 1790s, cotton wool from Gujarat and central India, and Malwa opium
and indigo had started becoming an important part of India’s overseas trade, and may have
even partly compensated for the decline of some of the old staples. The North American
market for Indian goods was expanding, and in Asia the demand from Europe was being
supplemented by the demand from the Indonesia, while the west Asian markets revived by
1790. The attempt by the Company to monopolize the production of the ‘new’ international
staples like opium may not have worked as efficiently as believed by some later historians.
As B.B.Chaudhuri has shown, the production or the sale of such cash crops through the
advance-payment system did not prevent ‘market conjunctions’, especially prices, in
determining the autonomous response of the cultivators towards these crops; nor could the
monopolistic policies of the state obstruct indigenous sources of credit from percolating
into these sectors of production. In fact, cultivators often found advances to be an assured
source of income and even welcomed them. International demand had also induced an
element of regional specialization in the production of indigo. Bengal, Bihar and Banaras
produced the finer variety, Awadh produced the ‘middling’ sort, whereas the ‘ordinary’
sort was being produced in the Doab and further west.
Other continuities existed. A major one, the financial relationships between the state and
the bankers, which had been established during the process of regional growth was
continued and even deepened in this period. Indigenous bankers supported the Company
during the Plassey ‘revolution’, and once in place some changes occurred. Though the old
banking establishment of the Jagat Seth had declined, the East India Company’s Bengal
revenue still depended on the advances of Indian bankers, above all on the support of the
great Benares businesses. Their capacity to transfer funds all over India by bills of exchange
or hundi made it possible for armies from Bengal to operate in western India or in the
south. One shouldn’t underestimate the resilience of the Indian banking system nor its
capacity to resist the Company’s financial machinations. Recent research in the banking
sector of late-18th century Bengal has shown that Bengal’s bankers (shroffs) continued
to operate in the framework of their traditional business practices. They cooperated with
the Company, but only on their own terms, and it was their intransigence which was the
main reason why the Company’s repeated attempts at reforming the currency of Bengal
remained unfulfilled till 1835.
Bengal was not an isolated instance. Studies of banking in other parts of India have also
shown the persistence of the relationship between indigenous capital and the early-colonial
state. In Bihar, the change in the political regime in eastern India seems to have adversely
affected some wealthy provincial merchants, but substantial banking firms of Patna and
other cities of Bihar survived and thrived as their remittance business increased under the
aegis of the Company. Like their counterparts in Bengal, shroffs continued to do good
business, taking advantage of the multiplicity of coins. In western India, the linkage stemmed,
paradoxically, not from the strength but from the weakness of the Company’s finances.
Here, the Company was facing an acute shortage of money and this made them turn
inevitably to the financial assistance of the indigenous bankers.
The steady expansion of English trade, particularly English private trading towards China
in the 1780s cemented this relationship. The share of private trade, which was 7.6 per cent
26
of the total overseas trade of Bengal between 1752-58, 6.8 per cent between 1759-1764, and
5.96 percent between 1766 and 1772, rose to 41.88 per cent between 1790 and 1799. Some The Eighteenth Century
of this trade was undertaken by the import of bullion, but such huge increases necessitated in Indian History
internally generated funds. Commercial opportunities thus expanded for people with money.
These were available in good measure from Indian financiers who provided private traders
with ready-money loans, or invested in the agency houses, which were growing in Calcutta
and Bombay mainly to finance the growing trade of opium and cotton to China.
In southern India, the documentation on the relationship between the Company and bankers
is not very clear, but the larger nexus relationship between the Company and indigenous
finances seems to have occurred initially in the context of its participation in indigenous
state building, particularly in Arcot, reference to which has been made earlier. Prasannan
Parthasarathi does not see bankers playing a major role in the Company’s finances in the
south, but he detects an expanding relationship between it and merchant-financiers, which
became critical for the rise of English power. The Company also received financial support
from other groups. Using the expanding opportunities of political-profiteering opened by
the Company, dubashes (brokers/interpreters) drawn from the Komati commercial
community of the Andhra region made large fortunes, much of it which they pressed back
into the services of the Company’s finances, and on the Coromandel, Chetty merchants
and Brahman ijaradars (revenue farmers) served as part-financiers and account-keepers
of the Company’s trade. On the Malabar coast, the systems of renting monopolies and an
array of new taxes on valuable agricultural produce which had been established during the
occupation of this region by Mysore, was used by the Company and private British interests
in Bombay to set up lucrative trade in peppers and cardamoms with the help of the indigenous
merchants, who had also provided the commercial support base of the previous regime on
the Malabar coast. Thus it would seem that in south India too the early-colonial system
had the backing of a diverse group of commercial and powerful indigenous people.
For such people, the late eighteenth century was a period of expanding commercial
opportunities. The case of Bengal illustrates this well. Here the Company effectively
intervened to free the internal market of restrictions imposed by zamindari control during
the previous regime. These had taken the forms of a proliferation of zamindari outposts
(chowkies) to collect tolls at various rates dictated by the financial predilections of an
individual zamindar and continuous conflicts between merchants and zamindars over the
rate of tolls, over market jurisdictions and the movement of commodities. By taking a
number of interventionist measures to regulate the administration of non-agricultural taxes,
the Company was able to take a number of steps between 1773 and 1790 to rectify this
situation. The chief of them was the abolition of the myriad duties which were levied at
the various chowkies upon articles of internal consumption, and their consolidation at the
final point of destination. The management of such duties was to be under five customs
houses to be established at Calcutta, Hughli, Murshidabad, Dhaka and Patna. The other
problem, of the control exercised by the zamindars and the taalluqdars over markets,
was redressed in 1790, when the Company introduced a separation between rent collected
in the markets so controlled and the taxes collected there on trade. While rent could
continue to be collected on a private basis, the right to tax was henceforth to be vested in
the Company. These measures streamlined the structure of internal trade, and enabled a
rationalization of incomes between the state, the landed-magnate and the merchant. The
combined result of these policies was a proliferation of market places all over Bengal.
The increase in their numbers or their establishment in previously deficient areas enabled
the peasantry to relate more easily to wider markets, and merchants could move more
easily through them with their networks of credit.
Landed proprietors, who set up markets in the interior areas, provided loans to cultivators
and generally underwrote the finances for agricultural reclamation, also joined the commercial
bandwagon. This was certainly the case in Bengal. Markets created by the petty gentry and
great nobles alike were appearing in Awadh, Maharashtra and peninsular India in the much
less propitious circumstances of the late eighteenth century. In Maharashtra such places
grew into ‘little towns’ (in the words of Sumit Guha) where a whole range of people could
spread themselves into commerce, land holding and revenue farming in equal measure.
Landed magnates also tried their hand at the direct cultivation of indigo when markets 27
Historiography and Economy looked favourable, but most of them preferred to latch on to opportunities opened by the
newly expanding horizons in the trade in indigo and opium by routing some of their monies
into provisioning the agency houses who raised much of their capital locally.

1.8 THE INDIAN ECONOMY IN THE LATE

EIGHTEENTH CENTURY: THE EMERGING
DIFFERENCES
While such a picture does not square well with the notions of devastation and decay which
reside so dominantly in the received wisdom of early-colonialism, it would be quite wrong
to think that nothing had changed in India, or that every change was for the better. The
Company’s regime was aggressively mercantilist whose orientation was European, not
Indian. State policy was financially driven and all institutions were to be streamlined to
ensure this ultimate objective. Notwithstanding the great rhetoric which accompanied it,
the Permanent Settlement was a feat of mercantilist social engineering to stabilize Bengal’s
revenue for the purposes of the Company’s commerce. Under its terms the Mughal right
of taxation, traditionally devolved upon the zamindars by the state was fused to their
milkiyat, their ‘private’ domains, both of which could now be sold. Though this enlarged
the ‘rule’ of private property in Bengal’s countryside, the dip in agricultural prices after
1790 exacerbated matters and left the ordinary cultivator to receive the rough-end of the
stick. There is no doubt that agrarian distress had increased considerably in the immediate
aftermath of the Permanent Settlement.
What this indicates is that while the early-colonial regime buttressed regimes of indigenous
landed and commercial properties; it did so by increasing the vulnerability of many at the
poorer ends of society. The case of Bengal illustrates this process well. The Company
was unrelenting in revenue being collected in cash irrespective of the conditions of the
current harvest. This removed an important cushion, which the peasant had during the
previous regime and became a major cause of mortality and distress during the famine of
1769-70. But notions of universal agrarian distress and a devastated peasantry would be
over-pessimistic. The situation on the ground was more complex. Agricultural
reclamation along the northern edges of the province and along its estuaries was
continuing robustly and the fruits of it were being mopped up by the zamindars and
the jotedars. Their positions, especially that of the zamindars’, were becoming
stronger in relation to sharecropping tenants and day labourers. Though the evidence
for this is patchy, some historians believe that jotedars in the northern fringes were
behaving like ‘kulak-landlords’: providing credit and engaging in agricultural trade
over short distances. Rural stratification had increased in the course of the century,
and its pace appears speeded-up during the latter part.
In south India, British intervention, while widening and deepening the circuits of cash
transactions, consolidated the position of the leading mirasdars (peasant-proprietor) as
‘village contractors’. As David Ludden tells us, these mirasdars now began combining
cultivation with revenue farming and local level agrarian management. ‘Mahajan’ mirasdars
used their control over land, labour and various commercial assets to accumulate financial
resources that enabled them to contract for village revenues. But this was accompanied
by a drastic change in the social conditions of the less privileged groups who were pushed
into social and economic subordination. David Washbrook shows how the Company’s
direct intervention in south India consolidated two apparently contradictory elements:
traditional social relations and modern laws of contract. The first was designed to preserve
the existing social structure, while the second was geared to expanding commercial
opportunities, and both these were detrimental to the position of labour. While custom was
upheld to legitimize traditional bonds of labour control, agricultural wages were determined
by laws of supply and demand, and enforced by a system of contracts. The labourers,
especially those belonging to the marginatised-castes, thus stood doubly deprived.
The Company was also a hard commercial taskmaster. In its dealings, the Company as a
28 monopolist-trader was extremely harsh with producers under its control, relentlessly
enforcing the delivery of what was due to it and constantly attempting to depress the The Eighteenth Century
wages of the weavers in its employment. This made them extremely vulnerable to any in Indian History
sharp changes in the prices of food: highest famine mortalities were usually recorded
among artisans working at the Company’s manufactories. In south India, Parthasarathi’s
study of weavers in the Coromandel also draws a picture of growing artisanal vulnerability
under the new dispensation. He shows that under the Company the weavers entered a
new regime of labour control, which removed many of their past entitlements, and this led
to a sharp decline in their wages and economic status.
But what we must also remember that this harsh regime did not cover the majority of
cotton-textile weavers, at least not in Bengal, and many artisans managed to find loopholes
in the system. There was a huge internal market for the more common varieties of cotton
textiles, while the luxury-end of production hadn’t completely dried up; and these meant
that cotton textile producers and upcountry cotton merchants could still do well even
under these trying circumstances. The silk industry is another good example of this
differential impact. While Bengal’s silk exports to Surat had shrunk from Rs. 0.45 million
in 1766 to Rs.0.03 million in 1789, the north Indian market seems to have held up well. In
1789 the upcountry consumption of raw silk from Bengal was worth Rs. 1.99 million; in
1790 it was pegged at Rs.1.68 million. In the meantime, the Company’s investments for
Bengal’s silk had increased from Rs. 0.92 million 1766 to Rs.5.54 million in 1789. This had
induced a structural shift of Bengal’s silk from an internal to an international market with
somewhat serious consequences. Any drop in the Company’s investment for silk had
serious repercussions for the silk-growers (chassars) and the winders’ incomes, and
contrary to cotton, the existence of a small internal market for silk held out slim prospects
of a limited recovery. Any improvement depended on the vagaries of the international
market. A partial upturn in the 1790s was offset by a depression caused by the outbreak
of the Napoleonic Wars in Europe, and it was only after 1813 that silk exports began to
pick up from Bengal once gain. By that time silk production in places like Murshidabad
and Rajshahi had already gone into steep decline.
Thus, despite increasing the scope, scale and volume of commercial transactions, the
end-result of the Company’s intercession was to tie the Indian economy into the north
European cycles of trade and production. This integration wasn’t new. It had begun with
the increasing trend in the seventeenth century with the steady expansion of European
trading in India, and its great expansion in the early eighteenth century had speeded up the
process considerably. The difference now was that key sectors of India’s economy were
henceforth tied into the vicissitudes of this global-economy, and downturns in the latter
caused harm to these important components of the Indian economy or foreclosed the
possibilities of their autonomous growth. While many Indians were able to enrich themselves
enormously in the process, much of the profits accruing from expanded commercial
opportunities were siphoned away from India with little or no corresponding benefits to the
country. There was rampant fiscal and commercial profiteering. Private British and European
individuals made huge profits from revenue farming, from the expanding trade in opium or
indigo, and from political corruption. These were mostly pumped out of India to East Asia,
especially to Macao and Canton (port cities on the southern edge of China) through the
agency of private British shipping and Portuguese commercial houses, where it was used
to make further fortunes for the European expatriates. The agency houses became the
front through which the salaries, perquisites and often illegally made money by
individuals was siphoned out of India. £17.67 million were taken out of Bengal alone
through these channels between 1757 and 1796. Much of the Indian capital in the
service of private trade was thus dissipated through such remittances.
The remittances of private fortunes were accompanied by the official transfer of substantial
amounts of India’s surpluses to Britain as tribute. This was the drain of wealth in its classic
sense, which, understandably, has come to occupy centre-stage in understanding the impact
of the early-colonial system on the India economy. While an estimate places the combined
(that is, on private and official accounts) transfer under this head at £4 million in the 1780s
and 1790s, lower estimates ranging between £1.8 million and £1.92 million per year have
been suggested by others for the period between 1757 and 1793. Given the nature of the 29
Historiography and Economy data, it is difficult to establish incontrovertible figures, but these were indeed enormous.
They were also unprecedented not just because of their magnitudes alone. Enormous
amounts of up to 1 crore rupees (£1 million) a year had been sent to Delhi from Bengal in
the 1720s. The difference of the transfers under the tribute of the late-eighteenth century
arose on the grounds that for the first time official channels of trade were used to transfer
private fortunes. Additionally there was no mobility of labour and capital between Britain
and India to partially compensate for this loss as would have existed in the past when
enormous amounts of imperial tribute being remitted from Bengal to Delhi in the past.
General economic indices however do not suggest that this drain had succeeded in
paralysing the Indian economy. As discussed earlier, commodity prices held up well till the
end of the century and there was no shortage of money. But what is indisputable is that
transfers of such magnitudes from India were easing the massive deficits on Britain’s
balance of trade with both India and China, thus leaving the Company free to divert its
finances to the aggrandizement of India by enlarging the scale of its subsidies from Indian
powers and by borrowing money from private Indian and European capital in India. India
was now subsidising the colonisation of its own economy.

1.9 SUMMARY
The eighteenth century was marked by the decline of the Mughal Empire, giving rise to the
emergence of several regional centres of power. Towards the middle of the century another
factor came into the forefront with the establishment of the political power of the British
East India Company, which had much deeper implications. The eighteenth century is
interpreted by the historians from two angles, one set of historians, following an
empire-centric approach, argue that the decline of the Mughal empire was catastrophic
resulting in ‘chaos and anarchy’. The other set of historians, who have followed a
region-centric approach, emphasize that though the empire declined, this did not result in
‘chaos and anarchy’. Regions became vibrant centres of socio-economic activities and
the Indian economy continued to expand despite the political problems. This process was
not substantially disrupted under early British rule, though numerous changes did emerge
which were subjecting the Indian economy to unprecedented financial burdens.

1.10 GLOSSARY
Chaudhuri Semi-hereditary pargana level official, mainly
concerned with revenue collection.
Florin A silver coin first struck in twelfth century
Florence, and noted for its beauty. In India, this
coin was widely used by the Dutch traders and
was valued at about forty cents.
Jagat Seth Lit. Bankers to the world. It was the title wielded
by the famous Jain bankers of Bengal. It was
during Siraj-ud Daulah’s reign, the then Jagat
Seth played a pivotal and treacherous role
together with Siraj’s maternal uncle Mir Jafar,
Umichand and Rai Durlabh in determining the
outcome of the battle of Plassey in 1757.
Jagirdari system The assignments given in lieu of salary to the
nobles. The areas thus assigned were called jagir
and its holder jagirdar. However, jagirdar was
not allotted the land instead he received the
income/revenue from the area assigned to him.
Jagirs were frequently transferable.
Jotedars Village landlord. The jotedars used to take lands
on long-term leases from the zamindars and then
got that cultivated on contract on a sharecropping
30
 basis. The lease so granted by the zamindar for The Eighteenth Century
the purpose of bringing the land back into in Indian History
cultivation at concessional rates. However,
peasants’ rights in the jotes were recognized by
a set of customary codes.
Mansabdari system Mansab means rank. Each individual entered in
the Mughal bureaucracy was allotted a mansab.
It has dual ranks – zat and sawar. Zat determined
the status of its holder in the official hierarchy
and the personal pay of the holder. Sawar rank
denotes how much contingent (horses, horsemen,
and equipment) a mansabdar was supposed to
maintain.
Taalluqdars Substitute for zamindar. The term came into
usage during the late 17th century.
Zamindars Hereditary superior right holder. The zamindar
was entitled to a percentage of the total revenue
collected. It was generally 10% (though varies
upto 25%) of the total revenue collected. When
the zamindar was collecting the revenue for the
state it was known as nankar and when the state
was directly collecting the revenue by-passing
him he was entitled to malikana.

1.11 EXERCISES
1) ‘The eighteenth century was a century of universal decline.’ Comment.
2) Critically analyse the ‘empire-centric’ approach. Do you agree with a view that the
eighteenth century was a century of ‘anarchy and chaos’?
3) How would you view the eighteenth century in the context of the regions emerging as
vibrant centres of socio-economic activities.
4) Examine the region centric approach of historians in the context of the eighteenth
century.
5) Analyse the state of Indian Economy during the eighteenth century.
6) What continuities and changes do you see in the Indian economy in the late eighteenth
century?

1.12 SUGGESTED READINGS

Alam, Muzaffar, The Crisis of Empire in Mughal North India, Awadh and the Punjab
1707-1748, Delhi, 1986.
Alavi, Seema (ed.), The Eighteenth Century in India, Delhi, 2002.
Ali, M. Athar, ‘The Eighteenth Century: an Interpretation’, Indian Historical Review, vol.
5, nos. 1-2, 1978-79.
Bayly, C.A., Rulers Townsmen and Bazaars: North Indian Society in the Age of British
Expansion 1770-1801, Cambridge, 1983.
Habib, Irfan, ‘The Eighteenth Century in Indian Economic History’, in Seema Alavi, The
Eighteenth Century in India, Delhi, 2002.
Marshall, P.J. (ed.), The Eighteenth Century in Indian History, Evolution or Revolution,
Delhi, 2003.
Singh, Chetan, ‘A Critique of Revisionist Approaches’, Proceedings of Indian History
Congress, 52nd Session, Delhi, 1991.
Stein, Burton, ‘State Formation and Economy Reconsidered’, Modern Asian Studies, vol.
31
19, no. 3, July, 1985.
Historiography and Economy
UNIT 2 HISTORIOGRAPHY OF THE
COLONIAL ECONOMY*
Structure
2.1 Introduction
2.2 Main Trends
2.3 Issues and Themes in Historiography
2.4 New Trends
2.5 Summary
2.6 Exercises
2.7 Suggested Readings

2.1 INTRODUCTION
The economy of India has been the subject of economic analysis from the time the English
East India Company began trading with India. There is ample evidence that the economists
in England, including Adam Smith in The Wealth of Nations, explored the implications of
the import of Indian products by Britain. Critics in the British parliament denounced
Company rule in Bengal in the late 18th century and the origins of the drain of wealth from
India can be traced to this period. The negative impact of colonial rule was very sharply
criticized by Indian nationalists in the 19th and 20th century from Dadabhai Naoroji to
Mahatma Gandhi. Marxists like R.P. Dutt and Ramakrishna Mukherjee have also been
concerned about the transformation of India into a colonial economy and the argument
has been developed more substantially in the works of later scholars.
Recently liberal and neo-liberal economists have tried to modify the critique of colonial
rule in India developed by the left and nationalist historians of India. The left-nationalist
position has been articulated in texts like Bipan Chandra’s India’s Struggle for
Independence and Sumit Sarkar’s Modern India. The Cambridge Economic History
of India, Vol II, c.1757-1970 edited by Dharma Kumar and Meghnad Desai and
Economic History of India, 1857-1947 by Tirthankar Roy can be considered important
contributions to the liberal understanding of the Indian economy in the colonial period. The
left nationalist perception of the colonial economy has been subjected to critiques in recent
works but the more substantive issues raised by this group of historians have not been
fully addressed by the new economic historians.

2.2 MAIN TRENDS

The Colonial Viewpoint
The men who ruled India and the colonial scholars who assessed that rule were at great
pains to emphasize that the advent of British rule had brought peace and good government
to the subcontinent. Pax-Britannica and the enormous public investment in the country
brought about the development of a modern transport and communications network that
laid the foundations of a modern economy. The railway network and irrigation system
introduced by the British was the bedrock on which a modern economy was built in India.
The British conferred the benefit of western science and education and prepared the
Indians for eventual self-government. Scholars like Vera Anstey and Theodore Morison
were willing to admit that there was an element of tribute in Britain’s economic relations
with India but that on the whole British rule was beneficial for the Indians. In any case
their main purpose was to provide a defence against the charges brought out by the
nationalists and nationalist economists against colonial exploitation.
The Nationalist View
Nationalist economists like Dadabhai Naoroji, Mahadev Govind Ranade, and J.V. Joshi
were strong proponents of a theory of drain of wealth from India to Britain. Naoroji
32 *Dr. Rohit Wanchoo, St. Stephen’s College, University of Delhi, Delhi
developed the argument about the drain of wealth from India in Poverty and Un-British Historiography of the
Rule in India. They argued that British rule led to the impoverishment of India and that Colonial Economy
the Indian economy was subordinated to meet the needs of the British economy. A policy
of free trade led to de-industrialisation and the growth of landless agricultural labour and
the decline of employment in the secondary sector of the economy. A policy of high land
revenue to meet the heavy expenditures on defence and civil administration led to the
exploitation of the peasantry and the decline in per capita income during the period of
British rule. The nationalist and economic historian, R. C. Dutt, had a debate with the
Viceroy, Lord Curzon, on the nature of colonial rule in India along these lines. The substantive
critique was developed in Dutt’s The Economic History of India published in the early
years of the twentieth century. Bipan Chandra explored the economic ideas of the Indian
nationalists in The Rise and Growth of Economic Nationalism in India published in
1966. B.N. Ganguly used modern economic theory to assess the contributions of the
nationalists to economic thought in Indian Economic Thought: Nineteenth Century
Perspectives [Delhi, 1977].
The growth of commercial agriculture, often under physical or economic coercion, led to
the growing dependence of the peasantry on merchants and moneylenders. This process
of commercialisation of agriculture led to differentiation of the peasantry, growth of
sharecropping and tenancy as well as landlessness. It also resulted in exploitation by both
merchants and moneylenders and increase in the number of famines and rise in mortality.
Most nationalists and nationalist economists attributed the devastating famines of the 19th
century to the ill effects of colonial exploitation. The British rulers pursued a policy of free
trade in order to promote the interests of British industry, most notably the Lancashire
cotton textile industry, which flooded the markets in India.
The nationalists generally dealt with the neglect of public investment in irrigation and
agriculture and the lack of support for scientific and technical education in the country.
They argued that Britain was trying to transform India into an adjunct of the British
economy as a valuable source of raw materials and a consumer of British manufactured
goods. They did criticize the control over India’s money supply, interest and exchange
rates but that was much later in the twentieth century and particularly in the inter-war
period. The primary focus of the nationalists was on the need for tariff protection and the
measure of protection that was actually provided by the colonial Tariff Boards during the
inter-war period to specific industries like cotton, steel, paper and sugar. In the final analysis
the retardation of the Indian economy was attributable to the policies pursued by the
British in India, not any failures on the part of the Indians.
The Marxist Perspective
The Marxist understanding of the colonial economy was that it was linked to broad changes
in the British economy. The phases of capitalist development in Britain determined the
features of imperialism in the colonial world. The phase of merchant capitalist development
led to the exploitation and plunder of the resources of the non-European world. The
exploitation of Bengal, after the battle of Plassey in 1757, was responsible for the ‘drain
of wealth’ to Britain in the second half of the 18th century. The resources from India
contributed substantially to the accumulation of capital that was essential for the British
industrial revolution in its early stages. These ideas with minor variations can be found in
the works of R.P. Dutt, Ramakrishna Mukherjee, Irfan Habib and Utsa Patnaik.
Marx himself had argued that colonialism would have a destructive phase in the beginning
and it would be followed by a regenerative phase in which the colonial economy was
transformed over time. The nationalists and the majority of Indian Marxists argued that
the impact of colonial rule in India was basically negative. Colonialism led to the immense
exploitation of the Indian people and the immiserisation of the population. Some Marxists,
like Hamza Alavi and Jairus Banaji, briefly argued for a new or an additional stage in the
schema of historical evolution offered by Marx, namely the colonial mode of production
[Utsa Patnaik (ed), Delhi, 1990]. Indian Marxists, most notably Irfan Habib, did not accept
the suggestion that in India there was an Asiatic mode of production instead of feudalism,
but the idea of a colonial mode of production died within a decade of its appearance. 33
Historiography and Economy Bipan Chandra argued that excessive colonial exploitation of India in the early phase of
capitalist development in Britain led to the retardation of the Indian economy. Therefore
the utility of India for Britain in the next stage of its historical development diminished.
The Marxists share many ideas with the nationalists – the drain of wealth, deindustrialisation,
forced commercialisation of agriculture and the exploitation of the common people by
colonial rule. Where they differ is in developing a systematic critique of the Indian capitalist
and landowning classes on the question of economic growth, land reforms and
anti-moneylender and anti-landlord legislation in the colonial period. Also the Marxists
invariably link their critique of colonialism to capitalism and imperialism. Many nationalist
economists too refer to these terms but they do so in a less rigorous and comprehensive
manner than the Marxist economists. The Marxists also consider alternatives to the path
of economic development adopted by the mainstream Indian nationalist leadership. They
have a different assessment of the possibilities of economic and political development
within colonialism from that of the nationalist economic historian.
The work of Latin American economists and historians like Andre Gunder Frank [1967]
and Celso Furtado [1970] has been quite significant in shaping the understanding of
colonialism. The most significant and popular argument was that underdevelopment was
not a natural condition and that there had been over time the development of
underdevelopment. It was argued that European capitalist imperialism from the 17th century
onwards had been exploiting the resources of the non-European world. The economies of
the countries that came under the grip of these capitalist forces were systematically
exploited and distorted over several centuries. Therefore to describe the third world
economies after the Second World War as underdeveloped was a blatant distortion of
history. The work of Samir Amin [1974] and Immanuel Wallerstein [1976, 1979] also
shaped discussions of colonialism in Asia, Africa and Latin America right through the
1970s and 1980s in the Third world.
The ‘dependency school’ was not very popular in India partly because it was unacceptable
to Indian Marxist scholars. Even in the west Marxists like Bill Warren had criticized the
dependency school argument in Imperialism: Pioneer of Capitalism published in 1980.
The Indian Marxists felt that this school was working with an understanding of capitalism
based on exchange relations rather than production relations within an economy. They
also found the attitude towards economic growth too rigid and deterministic. The
‘world-system’ and ‘world economy’ approach of Wallerstein, with its division of the
world economy into core, periphery and semi-periphery, was also perceived as too schematic
and rigid. The immense complexity of the society and economy of South Asia also made
arguments at this level of analysis unacceptable to the majority of Indian left-wing scholars.
The body of empirical work already done by Indian Marxists also made them disinclined
to pursue the lines of enquiry offered by the dependency and world-system theorists.
Liberal and Neo-Liberal Interpretation
In the 1980s the ‘counter-revolution’ in economic history gained momentum in the
Anglo-American world. The rise of monetarist theories and the growing rejection of
Keynesian economics led to a revaluation of major issues in the economic history of
Britain and other countries. The revaluation of imperialism also began in this period and
scholars like Cain and Hopkins [1993], Patrick O’Brien, [1988 ] Davis and Huttenback
[1986] began to question some of the staunchly held views of the Marxist and left-liberal
intelligentsia about the nature of colonialism. British colonialism did not in this view appear
as exploitative as it did from the left-nationalist viewpoint. It has been argued that the
economic exploitation of the colonies was not beneficial to the British people as a whole;
that the availability of markets for British industrial goods in the colonial world and capital
investment in overseas markets may have discouraged domestic investment and delayed
the development of the ‘new’ industries in Britain. In fact in the Past & Present of 1988
O’Brien went so far as to argue that Britain would have been better of if it had abandoned
its Empire in 1846 as the free traders like Cobden and Bright were arguing at that time.
The recent emergence of liberal or neo-liberal ideology is not only a hardheaded look at
34 the economics of empire, there has been much concern about the application of economic
theory and neo-liberal theory in order to look at the economic issues explored by an earlier Historiography of the
generation of left-nationalist scholars. Tirthankar Roy’s examination of the issue of Colonial Economy
de-industrialisation in colonial India takes up self-consciously a non-Marxist viewpoint
based on the ideas of Adam Smith. Gregory Clark [1987] examines the question of
labour productivity in Indian mills as a factor affecting their ability to compete against
British imports despite very low wages. The links between economic processes and
social stratification and change is also explored in recent literature.
The earlier economic historians explored the broad trends in economic development of
the country. Over time there has been a proliferation of empirical work on a whole
range of themes and subjects that only received cursory treatment in broad surveys of
the colonial economy earlier. Secondly, the use of economic theory has increased in the
study of economic issues. New concepts have emerged and the same data has also
been examined from a fresh point of view. Thirdly, the level of rigour in the use of
statistical data has improved over time. In the 1970s there was the emergence of rigorous
quantitative economic history in the study of the economies of the west.
These quantitative historians, known as the cliometricians, made use of econometrics
and statistics to interpret economic data in a manner that had not been possible earlier.
The use of counterfactuals to interpret changes in economic processes also grew in the
1980s. The second edition of The Economic History of Britain Since 1700 in three
volumes published in the mid 1990s actually integrates quantitative techniques and
counterfactual arguments to make assessments of British economic performance, of
the costs and benefits of British imperialism and the value of British overseas investments.
These techniques were not important when the first edition of this work, The Economic
History of Britain Since 1700, edited by Floud and McCloskey, was published in two
volumes in 1981.
Economic Theory, Anthropology and Ecology
In Indian economic history we find theoretical sophistication in the work of Amit Bhaduri
[1999 ] and Krishna Bharadwaj [1974] in their discussions of agricultural development.
The use of quantitative techniques can be found in the works of Omkar Goswami and
Shrivastava at the level of the regional economy and the works of Blyn, Heston and
Sivasubramanian at the level of the Indian economy as a whole. There has also been
the use of anthropological evidence to interpret economic and social change. In his
study of the emergence of bonded labour in the Gaya and Shahabad districts of Bihar
Gyan Prakash has used the oral Lorik literature of the bhuinyan landless labourers to
reconstruct the past and understand the kamia-malik relations in the region. Dipesh
Chakravarty has used ideas of Marx and Heidegger to interpret the Vishvakarma puja
by industrial workers.
The study of ecology and environment was considered important for scholars of ancient
India. Scholars of ancient India considered the implications of geography for Indian
history very important even fifty years ago. In the study of modern India the role of
ecology and environment, though not totally absent, was not given more than a passing
reference until about two decades ago. Agronomists and industrial economists were
always concerned about specific aspects of the environment even fifty years ago, but a
wide-ranging concern has emerged only in the last two decades. Ecological aspects of
poppy and indigo production can also be found in the study of the commercialisation of
agriculture in Bengal by Binoy Bhushan Chaudhuri in the late 1960s but the primary
concern was not with ecology and environment.
A major early text, Agrarian Conditions in Northern India by Elizabeth Whitcombe
published in 1972, was concerned with ecology. It studied the ill effects of the spread of
irrigation in the United Provinces. However the main contribution came from
Ramachandra Guha and Madhav Gadgil in This Fissured Land [1992]. In recent years
Richard Grove [1998], M. Rangarajan [1996], Sumit Guha [1999] and K.
Sivaramakrishnan have worked on these themes. Ludden’s Agrarian History of South
Asia is also an attempt at integrating economic, agronomic and ecological themes.
35
Historiography and Economy
2.3 ISSUES AND THEMES IN HISTORIOGRAPHY
The Eighteenth Century and Colonialism
One of the major concerns in South Asian historiography has been the potentiality of
capitalist development in the region. Irfan Habib discussed this in the late 1960s. He
did not think that there was the possibility of capitalist development in India despite
several favourable features of the economy of 18th century India. Several scholars
have challenged the viewpoint that regarded the west as the model for economic
development. The transition from feudalism to capitalism is no longer discussed in
terms of the two paths that Marx had described and Dobb had discussed in his Studies
in the Development of Capitalism. [London, 1963] Terence Byres has argued that
there are several historical paths from feudalism to capitalism. Even more radical a
perspective has emerged over the last decade. The historical explanations for the rise
of capitalism in Europe have been questioned and the gap between the west and the
rest of the world has been challenged. This has been cogently argued in The Great
Divergence published in the year 2000 by Pomeranz. Although this deals with the
similarities in the levels of development in south China and England until the second
half of the 18 th century the critique of Eurocentric history has finally emerged.
After the publication of the works of Bayly, Marshal [1998], Alam and Subrahmanyam
it is no longer possible to regard the 18th century as a period of decline and decay.
They have argued that the period was not marked by stagnation and destruction
although recurring warfare did have negative effects. The advent of colonialism was
not a sudden or disruptive event but a gradual process. Further, European trade had
expansionary effects on the economy of India and was not as exploitative as the
nationalists and Marxists like N.K. Sinha [1965] and Ramakrishna Mukherjee [1974]
had argued. Capitalism did not develop in India but the living standard of the artisans
and the rural population was hardly as dismal as early colonial accounts had suggested.
Parthasarthy has argued that the conditions of weavers in South India were as good
as that of weavers in Britain at the end of the 18th century [Past & Present, 1998].
The 18 th century was a period of agricultural expansion and scholars like Muzaffar
Alam [1986] and Stewart Gordon [1994] have argued that there was expansion of
acreage in several regions despite the decline of the Mughal empire and frequent
warfare.
In a recent survey Bayly has argued that Europe did have a lead over the non-European
world. The Birth of the Modern World argues that the industrial revolution, changes
in the nature of warfare and the role of the state in Europe in the 17th and 18th centuries
may have as much to do with the edge that European states enjoyed in the
non-European world as the so-called industrial revolution. Bayly has argued that 18th
century India was far more dynamic than was believed earlier but it was not in a
position to compete with the East India Company in India. In his earlier works, Rulers,
Townsmen and Bazaars and Imperial Meridian Bayly has not looked at the question
of exploitation and drain of wealth from India. In his 2004 publication he does cite
O’Brien to argue that the transfer of resources to Britain could have constituted
about 5% to 15% of the capital formation in Britain towards the end of the 18th
century. The revisionist work of Bayly and the Marxist critique may have come as
close to each other on this issue as is possible given the difference in the perspectives
of the two traditions, liberal and Marxist.
Impact of Colonial Rule
The nationalist economists had argued that British rule had impoverished the country. All
the nationalist estimates of per capita income under colonial rule brought out the decline in
per capita income in the country after a century of rule. The colonial apologists pointed
out that this had to do with the backwardness of the country before the advent of colonial
rule and the tremendous increase in population that pulled down the per capita output and
consumption of foodgrains in the country as well as the per capita income. Various estimates
36 have been made about India’s overall performance. One scholar thought it fit to divide the
assessments on the basis of their conclusions into optimists and pessimists.t: The optimists Historiography of the
found evidence of economic progress in terms of infrastructure for a modern economy, Colonial Economy
the emergence of a class of rich peasants in various parts of the country, the rise of
modern industry and institutions. D.K. Fieldhouse and Niall Ferguson are the liberal scholars
who take a more optimistic view of the overall progress under colonialism or Anglo
globalisation as Ferguson [2003] chooses to call it in his book Empire.
There is no doubt that colonial rule did not lead to remarkable economic progress.
The Marxist argument was that the British industrial capitalists did not want India to
compete against the industries of Britain and therefore followed a policy of free
trade. Dadabhai Naoroji, D.R. Gadgil, [1969] R.P. Dutt, A.K. Bagchi [1972] and
Rajat Ray [1979] emphasize the importance of the policies of the colonial state,
regardless of the other factors responsible for retardation of the economy. The
nationalists and Marxists agree that a measure of tariff protection and state support
for industry would have led to substantial industrial growth before the First World
War. The British had a stake in thwarting India’s industrial development but the utility
of India as a market for British manufactured goods depended on the purchasing
power of the Indian population.
Barrat Brown [1974 ] and David Washbrook [1981] explored the implications and reasons
for the stagnation of Indian agriculture. Brown argued in the late 1970s that the slow
development of the Indian economy and specially agriculture diminished the opportunities
in India for the British export industries. Washbrook argued that whenever the impulse for
modernisation and development of the colonial state came up against the need to maintain
political stability the state invariably chose the latter instead of the former. The reasons
for the limited public investment in irrigation in the pre-World War I period had to do with
the official requirement of an adequate rate of return on investment in irrigation projects
after a certain period. The nationalists argued that the British neglected irrigation in favour
of the railways because the latter industry directly served the interests of the British
economy. Whatever the reasons for it the performance of Indian agriculture was dismal
and the optimists and the pessimists have very marginal differences in their estimates of
the overall growth rate and per capita growth rates of output, productivity and yields of
agriculture in the period 1900-1947.
It was argued by the Marxists that the impact of the Great War and the Great
Depression weakened Britain’s grip over India and allowed the Indian industries to
develop. In recent years the argument of scholars has been that in the closing years
of British rule in India foreign capitalists and expatriate businessmen in India were
willing to invest in industry but were constrained by the absence of sufficient demand
for the products of industry. Tomlinson argued this more than two decades ago with
regard to the plan to set up a second steel plant in India to rival the Tata plant at
Jamshedpur during the mid-1930s. In the late colonial period while several factors
favoured import-substitution industrialisation economic nationalists and left wing
scholars have continued to emphasize the rearguard action of the declining staple
industries like Lancashire cotton to try and retain its market in India. Basudev
Chatterjee and Aditya Mukherjee emphasize the struggle of Indian businessmen and
nationalist politicians to try and protect Indian interests against the interests of foreign
capitalists. Limited growth of industry takes place despite the negative role of vested
interests and the colonial state.
Deindustrialisation
In the early left nationalist assessments of the decline of the traditional artisanal industries
in India it was argued that manufactured imports led to a significant decline in the number
of people engaged in the secondary sector and the growth of landless agricultural labour.
S.J. Patel [1952] had used the Census of India Reports to argue that landlessness in India
had increased dramatically. Daniel Thorner used the same Census Reports from 1881 to
1931 in Land and Labour in India [Bombay 1962 ] to argue that the decline in secondary
employment during this period was not more than one or two per cent. The misreading of
Census categories was behind the high estimates of decline in the secondary sector. The 37
Historiography and Economy focus of scholarly attention thereafter shifted to the decline in employment in the
pre-Census period.
In 1968 Morris David Morris argued that the discussion of deindustrialisation was
uninformed by economic theory. Even with substantial increases in cotton imports into
India during the 19th century an increase in population, per capita income and per capita
cloth consumption could have led to an expansion in the size of the domestic market for
cloth. Therefore the argument for deindustrialisation based on rising manufactured imports
into the country would not hold. The Indian Economic and Social History Review
[1968] carried sharply critical responses by Tapan Raychaudhuri and Bipan Chandra.
They pointed out the immense amount of empirical information that was available in
official reports and unofficial accounts of the decline in the income, employment and
output of weavers. The use of cheaper imported yarn to produce cloth would not help
Indian weavers compete against the products of Lancashire unless the weavers substantially
improved their productivity or accepted a lower income according to an estimate by
Meghnad Desai for the mid-19th century.
Bagchi [1976 ] used the Buchanan-Hamilton survey of 1809-11 and the Census of 1901
to conclude that the number of people in the secondary sector declined from 18.6% to
8.5%. Sumit Guha [1989 ] argued that Bagchi over-estimated the extent of the decline
based on his assessment of the conversion ratios of raw cotton to cloth and the quality of
cloth produced in the region. During the 1980s numerous studies brought out the regional
variations in deindustrialisation. Krishnamurty [1985], Specker [1989], Harnetty [1991]
and Yanagisawa contributed to it. Specker’s study of handlooms in the Madras presidency
showed that the number of handlooms did not decline but the number of people engaged
in weaving declined and there was a movement towards coarse-cloth production. The
decline in spinning and weaving in this account were dependent on the conditions of
agriculture and the relative prices of raw cotton, cloth and food crops. Imports were not
the sole cause in the decline of the weavers but the economic fluctuations in the agricultural
sector and famines contributed to the decline of artisanal production and employment.
In several recent articles and books it has been argued that the pessimistic assessments
of the handloom sector in India in the 19th and specially the 20th century may not be
justified. In Artisans and Industrialisation Tirthankar Roy [1993] argued that the handloom
sector managed to hold its own against both the foreign and Indian mill sector during the
inter-war period. In fact the market share of handlooms in cloth consumption in terms of
value probably increased during the 1930s. Roy has done detailed work on the traditional
industries of India to argue that many of them managed to cope with foreign competition
fairly well. There was a growing use of superior technology like the fly shuttle and imported
yarns and dyes. The artisans benefitted by congregating in towns and improved their
bargaining position vis-à-vis financiers and merchants. The number of weavers declined
but the output remained substantial based on rising productivity. Industries like brassware
and leatherwork managed to adjust to the changing environment and prospered in the
urban centres.
Although recent literature, like Roy’s Traditional Industry in the Economy of Colonial
India [Cambridge,1999], has provided a detailed account of the history of Indian crafts
and their dynamism the substantial decline of Indian artisanal production in the 19th century
is undeniable. The period 1850-1880 witnessed the most significant decline in output and
employment in the handloom sector as Twomey [1983] has pointed out. Revisionist work
has not been able to undermine the validity of the nationalist argument that during the 19th
century there was a tremendous decline in Indian artisanal production and employment.
Drain of Wealth
The idea of tribute from India to Britain emerged in the late 18th century and Sir John
Shore and Rammohan Roy also made some rough estimates of the sums that went out of
the country. The theory of the drain is however associated with Dadabhai Naoroji who
estimated that by the late 19th century 1500 million pounds had been taken away in the
form of drain. He argued in his book, Poverty and Un-British Rule in India [London,
38 1901], that the country was impoverished because of this drain and the capital that Britain
invested in the country was a small part of the money that Britain had taken out earlier. Historiography of the
The British made huge profits on the export of commodities and these also constituted a Colonial Economy
form of drain. In his analysis there was also an internal drain as resources were sucked
up by a few urban centres. The ‘home charges’, the expenditure that the Government of
India incurred in Britain as contractual expenses overseas, were directly related to the
fact of colonial rule.
Of special importance was the argument about the unrequited export surplus. The
nationalists believed that the maintenance of a substantial export surplus was a necessary
mechanism for the drain of wealth from India. These ‘unrequited exports’ were a measure
of the drain of wealth from India. Many nationalists believed that the entire export surplus
represented a drain from India because there was nothing that India got in exchange for
this surplus. The drain was in its widest definition a term that implied all the ways in which
the fact of colonial rule imposed a financial burden on India. The entire exploitative
mechanism established by colonial rule – ranging from high defence expenditure, costly
civil administration, high land revenue demand, neglect of development and irrigation,
guaranteed railway loans – were all indirectly related to the drain from India.
The colonial apologists were critical of both the wider and narrower definition of the drain
theory. They argued that strictly speaking only some of the Home Charges, the expenditure
incurred by the Secretary of State in London on behalf of the Government of India,
constituted ‘tribute’ or the drain from India to Britain. The expenditure incurred under
Home Charges was a small fraction of the total value of India’s foreign trade and could
not be regarded as a major burden. The annual remittances of interest on railway loans
and public debt in pound sterling could not be regarded as a drain. The loans were taken
for productive purposes and the rates at which the capital was provided was lower than
what India might have got even if it had been an independent country. India benefited by
having access to the cheapest capital market in the world and payment of interest on debt
did not constitute exploitation or drain.
Vera Anstey in Economic Development of India [London, 1921] and Theodore Morison
in Economic Transition in India [London, 1911] also argued that there was no question
of unrequited exports since India received payment for all its exports. The nationalists did
not take into account the huge import of gold and silver into the country that made India a
sink for precious metals. The export surplus was used to pay for the imports of treasure
and payment for banking and financial services that appeared in the balance of payments
accounts. The tribute was a small price to pay for the peace and good government that
the British gave to India. The investments in the railways, plantations, mines and public
debt of India aided the modernisation of the country. The colonial view found no economic
justification for the nationalist theory of the drain.
Liberal and neo-liberal economists and historians have supported these arguments of the colonial
apologists. K.N. Chaudhury [1968] in an article in 1968 had argued that the Home Charges
constituted only about 1.5% of the value of India’s exports at the beginning of the twentieth
century. Since only the Home Charges constituted a drain in the strict sense of the term the tribute
was not a very significant burden. In the Cambridge Economic History of India, Vol II [Delhi,
1983], Chaudhury argued that the poverty and lack of economic development of the country
could not be understood primarily in terms of a theory of drain of wealth from India. Goldsmith in
The Financial Development of India, 1860-1977 argued that the drain was not very significant
and broadly agreed with the views of Anstey. Although B.R. Tomlinson cites the work of nationalist
and Marxist scholars on the drain from India it does not strike him as a very significant burden in
his New Cambridge History of India volume entitled The Economy of Modern India,
1860-1970.
For the Marxists the drain of wealth is an important factor in the critique of colonialism.
Irfan Habib [1985], Utsa Patnaik and Sunanda Sen have developed their arguments against
the liberal and colonial viewpoint. Although discussion of the drain is found in the works of
earlier scholars like Gurtoo [1961] and Banerji [1982 ] the works of the three scholars
mentioned above have acquired greater influence. Irfan Habib emphasized the importance
of the drain from India for the capital formation in Britain during the early stages of the 39
Historiography and Economy industrial revolution. He also critiqued the CEHI Vol II for its inability to perceive colonialism
in its survey of the economy. Utsa Patnaik [2000] pointed out that between one-sixth and
three-tenths of the total taxation revenues of British India were transferred abroad for the
entire duration of colonial rule starting in 1765. She argues that a surplus budget was used
by the colonial state to pay for expenditures incurred abroad. Commercialisation of
agriculture was encouraged to pay for these expenditures overseas by means of export
surpluses. This led to famines in the nineteenth century and the decline of per capita food
availability in the twentieth century [Utsa Patnaik, 1990].
Sunanda Sen has argued that though the economic nationalists of the 19th century
misunderstood the mechanism of the drain they were right in assuming that the remittances
under the Home Charges constituted a drain of wealth from India. Sen has argued in
Colonies and the Empire: India 1890-1914, published in 1992, that the nationalists
were wrong in assuming that India’s exports were not being paid for. Also the payment of
interest on productive loans cannot be regarded as a drain. However the decision of the
Select Committee of the British Parliament had led to a change in accounting practices of
the Indian government in 1867. According to this new practice the revenue surpluses of
India were to be used to retire the unproductive debts of India that were deliberately
classified under productive works. As a result of these accounting practices what was in
fact being paid out of Indian revenues was not interest on productive debt at all. Therefore
the nationalist hunch that the entire amount of the remittances under Home Charges
constituted the drain was justified. The drain amounted to about 19.8 million pounds per
year on average during the period 1898-1908. This was about 2.3% of India’s national
income at that time. The drain of wealth from India is an issue that the left-nationalists are
unwilling to abandon and it would appear with good reason.
Commercialisation of Agriculture
There was commercialisation of agriculture even in the pre-colonial period, but it grew
enormously during the colonial period. The nationalists argued that commercialisation of
agriculture was encouraged to make India a supplier of cheap food and raw material for
Britain and also to provide the trade surpluses with other countries like the U.S.A. These
trade surpluses of India would help Britain meet its balance of payments difficulties with
Europe and America. The nationalists also argued that the production of crops like opium
and indigo in the 18th and early 19th century was based on a system of physical coercion
and economic compulsions. Left-nationalist scholars called this ‘forced’ commercialisation
of agriculture. An important study was the one edited by K.N. Raj and others entitled
Essays on the Commercialisation of Indian Agriculture [Delhi, 1985].
Benoy Bhushan Chaudhuri in Growth of Commercial Agriculture in Bengal,
1760-1900 [Calcutta 1964], has discussed the system of loans and advances that was
used to provide economic inducement as well as financial pressure to compel the peasants
to produce cash crops like indigo and opium. The peasants had to be coerced to produce
opium because the East India Company had a monopoly over opium and used it to buy the
crop at low prices. The peasant could not get adequate remuneration because of this
policy. On the other hand the producers of opium in the Malwa region that was not under
British control and where the peasants were not subject to this monopoly, were able to
profit by the sale of the crop. Amar Farooqui has also discussed the subject. In the case
of indigo too physical and economic coercion was involved.
The nationalists and the Marxists have also argued that the need to pay high land revenue
in cash also created pressure on the peasantry to produce crops for sale. The timing of
the payment of the revenue was a factor that compelled the peasantry to borrow from the
moneylender. Shahid Amin [1982 ] has drawn attention to this problem in his study of the
small-holding peasantry engaged in the production of sugarcane in Gorakhpur. The Marxists
have emphasized the importance of the rent-revenue-credit squeeze as a factor that
compelled the peasantry to produce cash crops. The need to pay rent to the state, revenue
to the landlord and interest to the moneylenders compelled the peasantry to produce for
the market even if they did not find the prospect too attractive in terms of the financial
40 rewards and risk involved.
The work of B.B.Chaudhury [1984], Sugata Mukherjee, Partha Chatterjee [Ashok Sen, Historiography of the
Partha Chatterjee and Saugata Mukherji, Three Studies on the Agrarian Structure in Colonial Economy
Bengal, 1850-1947, Calcutta 1982] and others has brought out the element of economic
and non-economic pressures influencing the production for the market in Bengal.
The British introduced the Permanent Settlement in Bengal in 1793 in order to encourage
the development of agriculture on capitalist lines. Instead, there was the growth of
sub-infeudation, rack-renting, absentee landlordism and merchant-moneylender domination.
In the ryotwari and mahalwari areas too the production for the market did not lead to the
development of capitalism in agriculture. Despite production of cash crops like cotton,
sugar, jute, oilseeds, groundnut and cereals like rice and wheat for the market on a
substantial scale after the mid-19th century there was no significant transformation of the
technical basis of production or the clear articulation of capitalist social relations of
production in agriculture. Instead, there was debt subordination of the peasantry and
merchant moneylenders sought to exploit the labour power of the peasantry rather than to
take over their lands.
Jairus Banaji argued in the Economic and Political Weekly [1977] that the merchant
moneylenders in the Deccan cotton producing area preferred to reduce the peasantry to
debt bondage rather than take over their lands because this would enable the peasant to
exploit family labour to supplement the below subsistence income that he derived from
cultivation. If the moneylenders were to evict the peasants and turn them into landless
workers they would have to be paid a higher subsistence wage and this would raise costs
of cultivation. If the social relations of production were not transformed despite production
for the market over almost a century this was because of economic preferences of the
potential capitalists.
The early nationalists argued that high land revenue demand, the timing of the payment of
the revenue installments and the growing production of cash crops created for the peasant
a compulsion to borrow. The ubiquitous moneylender that the British sought to restrain
through anti-moneylender legislation was in fact a direct consequence of British land
revenue policies. It was argued that this was leading to a social revolution in the countryside
that produced the anti-moneylender riots in the Poona and Ahmadnagar districts of the
Deccan in 1875.
Charlesworth [ 1972] argued that the moneylenders were not taking over the land of the
peasantry and that they were interested in income from the land and not the possession of
land per se. In numerous subsequent studies of agriculture the distinction between the
urban and rural or agriculturist moneylender became a commonplace one. While the
urban moneylender was not keen to acquire lands that he could not cultivate, the successful
peasant producer or rich peasant was eager to expand and buy lands of defaulting debtors.
Sugata Bose [1986], N. Charlesworth [1985] and N. Bhattacharya [1985] have made this
distinction in studies of Indian agriculture. The rich peasants, who constituted a thin stratum
in rural society, were keen to expand acreage but not to make substantial capital investment
in land. Therefore the nature of agricultural production was not altered by the emergence
of more substantial peasants over time.
The emergence of a class of peasants who had prospered owing to the commercialisation
of agriculture was not initially acceptable to nationalist and left wing scholars.
Left-nationalist scholars received the arguments of Charlesworth in Peasants and Imperial
Rule and C. Baker [1984] in The Tamil Countryside with much skepticism. Over time
the argument of a rich peasant stratum has been accepted though it does not seriously
alter the pessimistic assessments of the aggregate long-term performance of Indian
agriculture. As Tomlinson acknowledged in The Economy of Modern India, 1860-1970,
the emergence of the rich peasant does not alter the perception of overall stagnation in
Indian agriculture. In his introduction to Growth, Stagnation or Decline?: Agricultural
Productivity in British India [Delhi 1992] Sumit Guha argued that the performance of
agriculture during the colonial period was dismal and the gap between the estimates of the
two sides in the debate was not very wide.
41
Historiography and Economy The estimates of agricultural growth by Blyn, Mukerji and Sivasubramanian were on the
low side while those of Heston and Maddison were on the higher side. Even the revised
estimates of the performance of agriculture by Sivasubramanian in The National Income
of India in the Twentieth Century [Delhi, 2000] reveal a dismal performance.
Sivasubramanian had earlier estimated that agricultural output at 1938-9 prices had grown
by 10.8% between 1900-1947. In his estimates of 2000 he revised the GDP growth rate
to 17.3% for this period. While the growth of real GDP in the primary sector, not just
agriculture, was 0.5% per year during the first thirty years of the twentieth century it was
0.2% for the next two decades.
The result of various factors – production of cash crops for the market, the
rent-revenue-credit squeeze, environmental degradation and natural factors like rainfall levels
– led to frequent famines in nineteenth century India. The incidence declined during the
twentieth century, but famines did not disappear. Some of the decline was attributable to the
creation of a national market and the movement of foodgrains from surplus to deficit areas.
Several scholars like B.M. Bhatia [1965], David Arnold [1988], Amartya Sen [1981], Paul
Greenough, [1982] Omkar Goswami [1991] and Sanjay Sharma [2001] have explored the
history of Indian famines. The responsibility of the colonial state, of deindustrialisation and
the advent of the railways has also figured in discussions of famines. Amartya Sen analyzed
the impact on mortality and the moral economy of sharing of food within families. Goswami
has argued that the famine of 1943 in Bengal was a problem of distribution and price not of
production and supply. Sharma has explored the discourse of the colonial state regarding
famines and the responsibility of the state in early nineteenth century United Provinces.
Growth of Modern Industry
The nationalists argued that Britain pursued a policy of free trade in India in order to
promote the products of British industry in India. If India had been a free country it would
have been able to industrialize behind tariff walls as the U.S.A. and Germany did in the
late nineteenth century. R.C. Dutt, R.P Dutt and D.R. Gadgil made these arguments in a
vigorous manner. The policies pursued by the British in India retarded the development of
Indian industry indirectly by allowing the income and purchasing power of the country to
stagnate. The colonial state did not in fact follow a policy of free trade because it promoted
the interests of British industry by encouraging the cultivation of cotton in western India
after the supply from America was cut off by the outbreak of the Civil War. The Government
of India also gave a guarantee of a 5% rate of return on investments in railways, regardless
of the actual returns on investment, to encourage British investors to put their money in
Indian railways. According to Sabyasachi Bhattacharya [1965] the British followed a
policy of ‘discriminatory interventionism’.
After the First World War the government granted Tariff Autonomy to India. Following
the publication of the Report of the Indian Industrial Commission in 1918 the state tried to
encourage Indian industry by a more favourable stores purchase policy and guaranteed
purchase of some steel rails from Jamshedpur for the railways. Clive Dewey [1978]
regarded this trend as a major factor favouring indigenous enterprise. The policy of tariff
protection did provide a measure of protection to Indian industry and cotton, steel, tinplate
and sugar were among the industries that benefited by it as even A.K. Bagchi has
acknowledged in Private Investment in India, 1900-39.
The pressure from the British business groups to promote British manufacturing interests
in India did not disappear as a result of tariff autonomy. The government came up with a
policy of Imperial Preferences to provide lower duties on imports from Britain and the
Empire compared to the non-Empire countries like Germany, Japan and the United States.
The idea came up in the 1920s and led to changes in policy by the 1930s. Basudev
Chatterjee [1992 ] has presented detailed evidence on the long battle that the Lancashire
industry fought to ensure that it was not squeezed out of the Indian market during the
1930s.
Colonial scholars and economists were apt to blame social and cultural values for the
slow development of modern industry in India. Weber felt that Hindu religion and culture
42 produced values that discouraged the development of capitalism and industry. Caste and
religion hindered economic as well as industrial development. The leisure preferences of Historiography of the
labour and reluctance to accept the discipline of industrial production created problems of Colonial Economy
the adequate supply of labour for modern industries. Indians were also lacking in what
McClelland called ‘achievement motivation’. The sociologists of the Chicago school offered
sociological explanations for the lack of modern industrial development in the 1960s. In
1972 Private Investment emphasized that Indian economic development had to be explained
in economic terms. The performance of industry in India could be understood in terms of
economic variables alone.
The main argument of Bagchi was that the emphasis on supply side factors was misplaced
and unjustified. The principal reason why Indian industry could not develop was because of
the demand constraint or the limited size of the market for manufactured goods in the
country. The level of industrial development was not limited by the supply of labour. Morris
David Morris had argued earlier that there was no dearth of labour for the cotton mills of
Bombay in The Emergence of an Industrial Labour Force in India [Berkeley and Bombay
1965]. However, the supply of labour for the tea plantations of Assam was a problem. This
has been acknowledged even by recent studies like those of Ranjit Dasgupta and Rana
Behal and Mohapatra [1992]. The imports of machinery too were not a serious problem and
the industries were not held back owing to a serious shortage of capital and funds. The
principal reason why industries could not grow during the period 1900-39 was the limited
purchasing power of the people and the lack of effective demand for industrial products.
It has been argued that the level of industrialisation could have been higher if the country
had tariff protection and if some of the equipments for the railway sector had been
produced within the country. As Lehmann had pointed out in 1965 the Indian steel industry
could have grown substantially if a certain proportion of the locomotives imported had
been produced domestically. The backward and forward linkages of the Indian steel industry
were limited and it struggled for survival till it received a measure of state support in the
1920s. During the Great Depression there was a slow-down in industrial activity in the
developed capitalist countries, but it led to import-substitution industrialisation in India.
Liberal and Marxist economists are in agreement on this though they use different
conceptual categories to record this development. The liberals refer to the effects of
protective tariffs, the relatively greater fall of agricultural prices during the depression,
reducing the raw material costs of industry and increasing the purchasing power of fixed
wage urban consumers. The Marxists refer to the crisis of capitalism and the breaking of
links with imperialism and to the significance of the redeployment of merchant capital.
Colin Simmons [1985] and Amiya Bagchi both record the growth of Indian industries
during the 1930s owing to the decline in imports from metropolitan countries. Levkovsky
in Capitalism in India, [Delhi, 1966] and Dietmar Rothermund in India in the Great
Depression, 1929-39 [Delhi, 1992] have highlighted the manner in which there was a
redeployment of merchant capital towards industries. Merchant capital, which had been
engaged in the movement of agricultural commodities earlier, moved into petty commodity
production and industry because the rate of return on investment now appeared adequate
and foreign competition somewhat less severe. Christopher Baker in The Imperial Impact
edited by Dewey and Hopkins had argued along these lines for the impact of the depression
in Madras presidency even in the late 1970s.
The behavior of Indian merchant capitalists and expatriate businessmen has frequently
been contrasted. Rajat Ray has pointed out that there has been a controversy about
which of the two were used to a higher rate of return and therefore reluctant to invest in
industry until the 1930s, when there was a decline of income for both groups because of
the depression [Ray (ed), Entrepreneurship and Industry in India, 1800-1947]. The
expatriate businessmen were used to high returns because of their dominant position in
the export enclave and the merchant capitalists had derived substantial profits from financing
the movement of commodities and from usury. The indigenous merchants were attracted
to industry during the depression because of the shrinkage in opportunities in the agricultural
sector and the possibilities of industrial investment in certain industries that opened up
because of protection and decline in imports.
43
Historiography and Economy Several scholars have investigated the consequences of colonialism for the development
of Indian business groups. The earlier nationalist scholars believed that there was a sharp
negative impact of colonialism on indigenous business groups in the early years of colonial
rule. The monopolies created by the East India Company, the Agency Houses and
subsequently the Managing Agencies played a major role in the Indian economy and
dominated that of eastern India. This reduced the opportunities for the indigenous mercantile
community. The decline of the indigenous mercantile community was far greater in eastern
India than it was in western India as pointed out by scholars like Bagchi and Tripathi. In
The Oxford History of Indian Business Dwijendra Tripathi has covered several of
these issues.
Rajat Ray has drawn attention to the role of the bazaar economy or the indigenous sector
of the economy in a few articles. In the Modern Asian Studies in 1995 he argued that the
migration of Indian merchants to East Africa and West Asia and to Hong Kong, Burma
and Malaya within the British Empire helped Indian mercantile groups to grow and
accumulate capital in the informal sector of the economy. The Gujaratis, Memons,
Nattukottai Chettiars were able to accumulate capital which they subsequently used to
invest in India as well as overseas. Claude Markovits in The Global World of the Indian
Merchants, 1750-1947 traced the migration of the Shikarpur Sindhi merchants to Central
Asia and Sindhis from Hyderabad to Egypt and Europe and their fanning out from Panama
to Japan. Colonialism permitted the limited accumulation of capital within the informal and
agricultural sectors of the Indian economy. Omkar Goswami has drawn attention to the
manner in which Marwari merchants engaged in the jute trade in eastern India were able
to acquire both the capital and the knowledge required to try and buy out the shareholders
of the jute mills of Calcutta during the 1930s. The Marwaris were moving from trade to
industry in Bengal in the 1930s. The 1930s witnessed the movement from trade to industry
in several parts of the country.
The Second World War gave a great boost to industrial production in India. The wartime
demand for the products of industry boosted output but restrictions on the use of foreign
exchange and difficulties in the supply of machinery from Britain meant that the installed
capacity of the Indian industrial sector could not be increased. Industrialists amassed
huge profits during the war and nursed ambitions of embarking on new projects in the
post-war period. The businessmen came up with the Bombay plan for India’s
industrialisation based substantially on the private sector. The Government of India and
the Congress party were more concerned with a mixed economy, supportive of
nationalisation of some industries and a strong role for the state in the economy.
Although the industrialisation of the country was never the purpose of British rule in India
during the closing years of colonial rule British private business groups and companies
were willing to assist in India’s industrial development. Some experts have attributed this
to the changing relationship between Britain and India. Aditya Mukherjee, while recognizing
this new trend, argues that it was the outcome of anti-imperialist struggles and not the
magnanimity of the colonial rulers.
Money and Finance
The critique of colonial rule that achieved great popularity with Indian nationalists focussed
on the tariff policy of the government – the policy of free trade imperialism during the
nineteenth century and the policy of limited protection and Imperial Preferences during
the inter-war period. In the 1920s and 1930s there was also a discussion of the
rupee-sterling exchange rate and the negative consequences of the high exchange rate. It
was argued that fixing the rupee at one shilling and six pence instead of one shilling and
four pence was harmful to Indian economic interests. The higher exchange rate would
reduce the earnings of agriculturist exporters who would get 12.5% less in terms of
rupees for the produce that they sold.
The nationalists argued that the benefit of cheaper imports, as a result of the higher
exchange, would not benefit the masses as they consumed only 10% of the imports. The
upper estimate was 40%. Representatives of business like G.D. Birla, Purshottamdas
44 Thakurdas and B.F. Madon were aware that a lower ratio, though it would adversely
affect the importers was not in the larger interests of the country. The agriculturists, Historiography of the
exporters and debtors would be adversely affected by the higher ratio though it would Colonial Economy
help the importers and creditors. It would also increase the real burden of debt in the
countryside.
The nationalists also criticized the argument that the higher ratio would lighten the burden
of sterling obligations or improve the revenue position of the government, as it would be
able to meet its remittance requirement with fewer rupees. Aditya Mukherjee has argued
in Imperialism, Nationalism and the Making of the Indian Capitalist Class,
1920-1947 [Delhi, 2002] that the Indian capitalists criticized this argument in the same
manner as Dadabhai Naoroji had in the late nineteenth century. Naoroji had argued that
the burden of the sterling obligations could be reduced only if gold prices were to fall. The
burden could be reduced only if the same amount of gold could be procured by exporting
less produce. Bipan Chandra too had cited Naoroji’s views in this regard in his book on
economic nationalism. B.F. Madon pointed out that India paid for its sterling obligations
through commodity exports and not in rupees. As far as the amount of sterling obligations
and the produce necessary to meet them were concerned, it did not matter whether the
exchange rate was one shilling six pence or one shilling four pence.
In John Bullion’s Empire [1996] G. Balachandran has argued that the rupee-sterling
ratio was not as much of an issue as some of the nationalists had argued. The colonial
government did want to encourage cotton imports into India and to restrain efforts to put
up barriers against British imports. However, the primary objective of British officials
was to reduce imports of gold into the country rather than to increase imports of cotton
cloth. Further, cotton imports were encouraged mainly to ensure that gold imports were
reduced. With a rupee revaluation all cotton imports into India would become cheaper, not
only the products of British industry. In so far as revaluation led to depressed incomes
both cloth and gold imports would be adversely affected. Balachandran argues that until
the depression the nationalists failed to link the issues of trade and liquidity. Their espousal
of a lower exchange rate appeared to be a case of special pleading because of this
failure.
According to Balachandran the principal objective of British policy was to prevent the
outflow of gold to India that could adversely affect the position of the pound sterling after
the First World War. The attempt to stabilize the currency at 18 pence led officially to a
decline of 120 million rupees in terms of coins and notes during the 1926/27 busy season.
The true extent of the contraction was probably as high as 220 million rupees. The need
to preserve the high exchange rate led to monetary contraction. Indian trade surplus
halved between 1925/6 and the two years thereafter. Indian gold imports declined from
52 million pounds in 1924 to 15 million pounds per year on an average between
1926-1929. It was as a result of these policies that the expansionary effects in the world
economy after the mid-1920s bypassed India.
During the depression the pro-cyclical macro-economic policies of the government led to
sustained gold exports from India. These gold exports were important for Britain’s balance
of payments. Indian gold exports had an expansionary influence globally as Keynes had
prophesied much earlier. Without the inflow of gold from India the British economy would
have been vulnerable to competitive American depreciation. Britain was thus able to use
private Indian gold reserves as an important contra-cyclical device during the depression.
Mukherjee, Rothermund and Balachandran have criticized the negative consequences of
the deflationary policies that the British government pursued in India.
R.P. Dutt in India Today had argued that the crisis of capitalism during the depression
and the Second World War had reduced the importance of the Indian market for British
business. He had also highlighted the struggle of the Indian people against colonial rule.
Tomlinson in The Political Economy of the Raj, 1914-47 argued that the decline in
Britain’s economic stake in India, because of the progressive shrinking of the Indian
market for British exports, made it easier for the British to make the decision to quit India.
In both the early Marxist and the liberal perception the economic value of India during the
inter-war period, from the British standpoint, declined slowly but steadily. On his part 45
Historiography and Economy Balachandran has argued that Britain derived tremendous benefit during the inter-war
period from the control over Indian currency and exchange. Although the value of India
as a market for Britain’s staple industries was declining during the interwar period Britain
was able to manipulate Indian monetary and currency policy to promote British economic
interests. The liquidation of private Indian gold reserves helped to shore up the position of
the pound sterling and to make the Sterling Area of the 1930s a viable proposition.
In their wide-ranging survey of the British Empire Cain and Hopkins argue that the
competitive advantage of Britain lay in finance rather than industry after the First World
War. Therefore it made sense for the ‘gentlemanly capitalists’ who controlled the British
state to attach greater priority to overseas financial interests rather than markets for
industrial goods. The decision to protect the position of the pound sterling as an international
currency and to create the Sterling Area represented the dynamism rather than failure of
British capitalism. The empire helped Britain maintain its position as the provider of finance
and services. The manipulation of the monetary and exchange policies of India helped in
sustaining the British economy. Unlike other economists, who believe that the cushion for
Britain’s industrial exports provided by the empire hastened its industrial decline, Cain and
Hopkins argue that the empire helped Britain maintain its position as the supplier of finance
and services. The British economic stake in India had not declined as much in the
inter-war period as the scholars had argued earlier. The process of winding up the empire,
at least in India, cannot be explained in terms of a steady decline in Britain’s economic
stake in the inter-war period.

2.4 NEW TRENDS

Labour
The recent works in economic history has been exploring themes that were not completely
absent in earlier studies but did not produce a substantial body of work. Chandavarkar,
Chakravarty and Clark have explored the role of labour and the working class over the
last decade or so. The high proportion of casual workers in the industrial workforce of
Bombay in the early twentieth century can be explained in terms of the preference of the
owners and the managers of enterprises. Chandavarkar has argued in The Origins of
Industrial Capitalism [Cambridge, 1994] that managers chose to have a large temporary
workforce in order to control variable costs in a climate where there were fluctuations in
demand. It was not the lack of commitment of the workers but the attitude of management
that was responsible for a large casual labour force. On the other hand Wolcott and Clark
have argued [1999 ] that the performance of cotton mills in the 1930s was affected by the
inability of managers to bring down nominal wages in the depression years when the real
wage had risen. Industrial competitiveness was hampered by the inability of management
to bring about a downward adjustment in nominal wages. The opportunity costs of labour
were not very high in the 1930s and therefore Wolcott and Clark argue that industrial
wages were higher than they should have been. The argument can also be understood in
terms of the worse economic conditions in agriculture during the depression as has been
pointed by several studies. This appears a reasonable response to the argument of Clark
since the wages of agricultural workers were used to estimate the opportunity cost for the
mill workers.
In Rethinking Working Class History, Bengal, 1890-1940 [Princeton and Delhi, 1989]
Dipesh Chakravarty argued that since the mill owners did not provide basic amenities to
the workers jobbers played a significant role not only in providing employment but also
housing, provisions and patronage. In the absence of modern bourgeois values the workers
did not produce stable trade unions. Only in periods of strikes and struggle did the workers
join the unions in large numbers. Once the movement had subsided, regardless of whether
it had been successful or not, the unions collapsed. The values of the workers were not
shaped by ideas of class and even the leaders of the jute workers, who often came from
middle class and radical backgrounds, referred to workers as the underprivileged and the
poor, the daridra-narayan, rather than the proletariat. Patrician values influenced the
46 attitude of the leaders from outside the working class.
There have been studies of the emergence of landless agricultural labour from the standpoint Historiography of the
of ideology as in Bonded Histories by Gyan Prakash. In this study of the emergence of Colonial Economy
landless labour in Gaya and Shahabad districts of Bihar the origin myths of the bhuinyans
were explored as well as the changes in their economic situation over time. Lorik literature,
spirit cults and kamia-malik relations were explored in both economic and anthropological
terms. Dharma Kumar in Land and Caste in India pointed out the emergence of a
landless labour force in India, even in the pre-colonial period, as early as 1965. She argued
that despite the availability of cultivable land a class of landless labour existed in the early
nineteenth century in Madras presidency because of caste restrictions that prevented
lower caste groups from cultivating land on their own. The role of gender was explored in
Sen’s study of the jute industry.
The role of caste in relation to the performance of artisanal work has been explored in
several studies. A class of people engaged in the production of household utensils became
more prominent in Bengal in the 19th and early 20th century. The demand for bronze/copper
vessels increased after the import of imported metal sheets made it possible to produce
utensils of good quality at a reasonable price. The kansarias became a more numerous
caste as many were attracted to this occupation. Tirthankar Roy and Harnetty have pointed
it out that skilled artisans like the Padmasalis and Momins preferred to carry on with artisanal
production rather than accept low skilled jobs in industry or work as agricultural labour.
They managed to survive by adopting techniques suitable for enhancing productivity. Gyan
Pandey explored the connection between the decline of artisanal production and communal
attitudes in the United Provinces in his study of the ‘bigoted julaha.’
Irrigation
The study of irrigation and forests has always been important from the standpoint of economic
and social history. Although a lot of work had been done on the various economic aspects of
irrigation by agronomists earlier the matter has received more attention from the standpoint
of caste, ecology and technology. Although Elizabeth Whitcombe had drawn attention to the
harmful effects of overuse of irrigation water by peasants and the blocking of drainage
channels by rail and road development. Ian Stone had brought out the overall beneficial
consequences. In Canal Irrigation in British India: Perspectives on Technological
Change in a Peasant Economy he brought out the fact that the higher level of agricultural
development in the western districts of the United Provinces as opposed to the eastern
districts accounted for the difference in the economic dynamism of the two regions.
Imran Ali in The Punjab under Imperialism, 1885-1947 [Delhi, 1989] brought out the
connection between irrigation, colonisation and military recruitment in the Punjab from
the late 19th century onwards. The creation of Canal Colonies played an important role in
reducing congestion in the heavily populated areas of Punjab and for some time widening
the support base for colonial rule. The rural-urban divide in the Punjab could not have
been possible without the role of irrigation and colonisation. Gilmartin [1995] has argued
that the colonial state tried to incorporate indigenous local and ‘natural’ communities into
a larger scientifically defined hydraulic environment. In the process of doing so the colonial
state undermined the local environmental foundations of the local communities it claimed
to rely on. Many movements of cultural and political reform in the rural areas were
coordinated responses to both state policy and environmental transformation in the Indus
Basin. Economic historians like Mufakharul Islam [1997] focus on technological and
economic change in Irrigation and Agriculture in the Punjab. Islam and Mukherjee do not
accept that the long term benefits were substantial. A Century of Change examines
social and economic change in the irrigated areas of the Madras presidency. Yanagisawa
argued that there was a decline in the ownership of land by the upper caste Brahmin
groups over a period of time.
The ecological context of agricultural production has been explored in several studies. In
Peasant Labour and Colonial Capital: Rural Bengal Since 1770 [Delhi, 1993] Sugata
Bose had argued that the eastward movement of the Ganges river over time produced the
rich alluvial delta of East Bengal. The rich soil enabled the smallholding peasantry to
engage in jute cultivation successfully year after year. The crop had a ready market and 47
Historiography and Economy despite the dominant position of the merchants yielded an adequate income in cash. The
cultivation of jute was a survival strategy for the peasantry since it yielded an adequate
income from tiny plots of land. The eastward movement of the Ganga and the blocking of
the natural drainage channels owing to the building of railway tracks and embankments in
western Bengal led to the spread of malaria. Goswami in Industry, Trade and Peasant
Society: The Jute Economy of Eastern India, 1900-1947 [Delhi, 1991] has argued that
during the first two decades of the twentieth century the jute cultivating peasantry did
prosper from successful production for the market. In the account of the comparability of
the living standards of weavers in late18th century Britain and South India Parthasarthy
emphasized the productivity of agriculture in the Past & Present of 1998. The production
of substantial output, based on the natural fertility of the soil and double cropping, enabled
Indian weavers to maintain an adequate standard of living.
Environment and Forestry
In recent years the study of forests, tribes and ecological change has become important
for economic and social historians. Ramachandra Guha studied the chipko movement in
the Garhwal Himalayas in The Unquiet Woods [Delhi, 1989]. Although this was not the
first study of popular protest against forest policies and felling of trees it was important in
the rise of environmental history in India. This Fissured Land: An Ecological History
of India in 1992 by R.Guha and Madhav Gadgil in Nature, Culture, Imperialism edited
by David Arnold and R. Guha in 1995 are important contributions to the subject. Several
scholars including David Hardiman, Ajay Skaria and Sumit Guha have explored the
relationship between forest people, settled agriculturists and the colonial state.
Some of the issues of tribal protest and reactions against the patterns of colonial forest
use had emerged even earlier in scattered studies. Ranajit Guha’s Elementary Aspects
of Peasant Insurgency in Colonial India [Delhi, 1983] and the volume edited by A.R.
Desai entitled Peasant Struggles in India [Bombay, 1979] had also referred to tribal
movements and their response to colonial policies, both economic and political. The protests
by Santhals, Mundas and Oraons were also incorporated in the history of anti-colonial
struggles by Shashi Bhushan Chaudhuri in his study of civil rebellions and popular protest
before the Revolt of 1857 and by Kumar Suresh Singh in his study of Birsa Munda.
The substantial study of the interaction of tribal groups to settled agriculturists and centralizing
states adjoining forest polities has been studied by Ajay Skaria in Hybrid Histories:
Forests, Frontiers and Wildness in Western India. The sharp distinction made between
tribal groups and a settled agricultural community is not historically justified. The difference
between the dang, the desh and Gujarat was not very substantial. The people of the
plains and the Dangs in western India frequently left land fallow, moved to areas where
more land was available, abandoned villages when the rulers became oppressive, and
moved from field to field within the same village. Skaria goes so far as to argue that the
giras claimed by the forest chiefs was like the chauth claimed by the Marathas. Both
were sustained through raids and were about shared sovereignty. The movement of
communities, like the Konkanis and the Bhils, between the forest and the plains also
accounted for the physical and cultural similarities of the two regions.
The role of forest polities was substantial in the western region where there were a
number of small states. In Ethnicity and Environment in India Guha takes a long term
view of the changing relationship of the tribal and peasant societies and polities of western
India from the pre-colonial to the late colonial period. It reinforces recent work that argues
that the tribal and forest people were never isolated and primitive groups. In fact the
decline in the status of several tribal groups was the product of changes during the colonial
period. Bhil chiefs played a substantial role in supporting or threatening the position of
smaller states. Bhils and Rajputs were not as sharply differentiated in the pre-colonial and
early colonial period. Rajput chiefs were willing to enter into matrimonial alliances with
powerful Bhil lineages. By the 20th century the position of the Bhils had declined.
The object of British policy was to exploit the natural resources of India and to develop
the colony as a useful adjunct to the British economy. The establishment of colonial rule in
48 the Doab in 1801 led to the destruction of the ecology of the region within thirty years.
The destruction of the thick forests in the central and lower Doab, in the region between Historiography of the
Delhi and around Kanpur, led to climatic change. The severe drought of 1837-38 was a Colonial Economy
product of natural and man-made causes. Deforestation made the pre-monsoon winds
hotter and led to soil erosion, drying of the river sources and the warming of the soil.
Salinisation led to the abandonment of whole villages. Intensive farming and deforestation
led to the decline in yields during this period [Michael Mann, ‘Ecological Change in North
India: Deforestation and Agrarian Distress in the Ganga-Yamuna Doab, 1800-1850’, in
Grove, Damodaran and Sangwan (eds), Nature and the Orient, Delhi, 1998].
Skaria takes a position on British forest policy that does not accept the viewpoints of
either Guha or Grove. While the former argued that scientific forestry in India was nothing
more than commercial forestry, Grove argued that desiccations ideas about the need to
conserve forest cover to prevent droughts and soil erosion shaped official forest policy.
Rangarajan argued that some of the differences between the two perspectives could be
understood in terms of the different time periods that the two authors explored. Grove’s
analysis was for the mid-nineteenth century while Guha explored the period from the late
nineteenth century onwards. According to Skaria forest policy was a product of both
desiccationism and commercial considerations and the concern for the ‘rational use’ of
forests. Scientific forestry was not merely the logical culmination of imperial desiccationism,
but by the early twentieth century it helped in securing some of its objectives. Teak became
dominant in the Dangs forest, but not to the extent chir trees became dominant in the
Kumaon region. The policies of the period have been characterized as a form of green
imperialism because they worked against the interests of the poor local communities that
lived in and around the forest.
In an article in 1987 C.A. Bayly observed that there was a process of peasantisation of
nomads in the nineteenth century. This formulation denies the traditional argument about
the proletarianisation of peasants. Neeladri Bhattacharya [1995] has argued that both the
viewpoints assume that the process of commercialisation of agriculture and agrarian
expansion led to the transformation of vulnerable indigenous groups. In one account the
peasants become paupers and in the other the nomads become peasants. The transformation
in fact was far more complex since pastoralists turned to cultivation, trade and wage
labour. Others tried to continue with their pastoral activities despite the changing legal and
social context in which the state claimed forests and ‘wastes’ as state property. The
pastoralists, who had both collective and segmented rights to use pastures based on a
pattah in the pre-colonial period, had to pay grazing dues to the state which rose over
time during the colonial period.
There was a relationship of interdependence that developed between the pastoralist and
agrarian zones in the Punjab. While the Canal Colonies and the central Punjab zone
provided foodgrain and fodder to the pastoral zones the south-east semi-arid zone provided
the bullocks for ploughing and drawing of water from wells. The pastoralists retained
their cows for breeding and for the milk that they provided. As the colonial state developed
its regime of property on the basis of agricultural property rights the rights of the nomadic
pastoralists became increasingly incomprehensible and illegitimate. Over time the enclosure
of forests and expansion of acreage led to a crisis in the pastoral economy and to soil
erosion and shrinking of pasture land that was overgrazed. The rights to use forest and
pasture declined and the agricultural sector too suffered because of the decline in the
availability of manure and plough cattle.
Women in the Colonial Economy
Environmental history has attracted a lot of attention since the late 1980s. The study of
women in the economy has yet to attract the same sort of academic attention. The enormous
growth of women’s study has been focussed on questions of culture, literature, education
and legal rights. There are some studies that explore the role of women in the productive
sphere of the economy, like Women in Colonial India: Essays on Survival, Work and
State edited by J. Krishnamurthy, but there are few major texts. The role of women in the
traditional industry of India has been the subject of study for quite some time. The role of
the women in spinning, basket weaving, rope making, pottery et al. has been the subject of 49
Historiography and Economy mainstream economic history as well. The role of women spinners in the 19th century and
the classification of female workers in the Census of India reports formed a part of the
debate on deindustrialisation in the works by Thorner, Bagchi and Marika Vicziany. The
discussion of the concept of full time job equivalent or FTJE would not have emerged but
for the role of part time workers in the secondary sector. Many of these casual or part
time workers were women.
The Factory Acts of the 1880s did not have any impact on the pattern of employment of
women workers in factory employment. According to Morris the proportion of women
and children combined in factory employment hovered around 20% during the 1892-1946
period [CEHI Vol. II. P. 645]. On the other hand Chandavarkar had argued in The Origins
of Industrial Capitalism that the inflow of female labour into the Bombay mills was
indeed restricted by the Factory Act. The period 1871-1921 was marked by high mortality
rates throughout the country. The mortality of females was higher than that of males in
this period. This can be attributed to the lower life expectancy at birth of females in both
the colonial and pre-colonial period according to Pravin Visaria in the CEHI, Vol. II, pp.
498-500]. In the northern region the deficit of females was as high as 15% in some areas.
This was substantially influenced by female infanticide and by marriage practices.
The role of women in agriculture is undeniable and has been acknowledged in the literature.
Bina Agarwal [1994] has explored the attitude towards women with regard to land rights
and property rights. However, most studies bring out the role of women in broadcast
sowing, transplanting of rice, the task of threshing of the crop, work in the production of
household goods and handicrafts. There are few substantial texts devoted to the study of
women workers although their role in peasant and tribal movements has been the subject
of several studies. Samita Sen [1999] and Chitra Joshi [2002] have explored the role of
women in the jute mills of Calcutta and the cotton mills of Kanpur. On the whole the role
of women in the economy of the colonial period needs more detailed exploration. In the
literature of the post-independence period the participation of women in the economy as
well as in the environmental movement has been studied with greater vigour and enthusiasm.

2.5 SUMMARY
The British colonial scholars were proud of the achievements of the British Empire in
India. The nationalists were sharply critical of the negative consequences of British rule
for the Indian economy. British rule did not modernize India and the drain of wealth from
India impoverished the people. The Marxists developed their critique of colonialism in
terms of a certain understanding of capitalism and phases of capitalism. The arguments
of colonial as well as neo-liberal economists are not acceptable to Marxist scholars.
Nevertheless some of the arguments of the left nationalist school are not as convincing
today in the light of new works.
The eighteenth century is no longer a period of decline and decay. The economy was
growing and the political turmoil did not lead to economic decline. There were negative
trends in the Indian economy during the nineteenth century – deindustrialisation, drain of
wealth, and increase in famines. The Indian economy made some progress in the twentieth
century in terms of industrial growth. Recent works on the Indian economy are concerned
with issues of environment, labour and gender. The linkages of the economy with society
and the environment have become more important in recent times.

2.6 EXERCISES
1) Give a critical account of the major trends in colonial historiography.
2) Discuss the Marxist interpretation of the colonial viewpoint. Evaluate the neo-liberals’
critique of Marxist historiography.
3) What are the dominant features of the 19th century colonial economy?
4) In what ways was commercialisation of agriculture based on a system of economic
50 compulsions and physical coercion?
5) Give a historiographical sketch of the economic impact of colonial rule. Historiography of the
Colonial Economy
6) Discuss the new historiographical trends in the study of the economic history of the
colonial period.

2.7 SUGGESTED READINGS

Agarwal, Bina (1994), Gender and Land Rights in South Asia, CUP, Cambridge.
Alam, Muzaffar (1986), The Crisis of Empire in Mughal North India: Awadh and the
Punjab, 1707-48, OUP, Delhi.
Ali, Imran (1989), The Punjab under Imperialism, 1885-1947, Delhi.
Amin, S. (1982), Sugarcane and Sugar in Gorakhpur, Delhi.
Amin, Samir (1974), Accumulation on a World Scale, New York.
Anstey, Vera (1921), Economic Development of India, London.
Arnold, David (1988), Famine: Social Crisis and Historical Change, London.
Arnold, David and R. Guha (ed.) (1995), Nature, Culture, Imperialism: Essays on the
Environmental History of South Asia, OUP, New Delhi.
Bagchi, A.K. (1972), Private Investment in India, 1900-1939, Cambridge.
Bagchi, A.K. (1976), ‘De-industrialisation in Gangetic Bihar, 1809-1901’, in Barun De et
al. (eds), Essays in Honour of S.C. Sarkar, New Delhi.
Behal Rana and Prabhu Mohapatra (1992), ‘‘‘Tea and Money versus Human Life’’: The
Rise and fall of the Indenture System in the Assam Tea Plantations 1840-1908’, The
Journal of Peasant Studies, Vol.19, Nos. 3-4.
Balachandran, (1996), John Bullion’s Empire: Britain’s Gold Problem and India
Between the Wars, Curzon Press.
Banaji, Jairus (1977), ‘Capitalist Domination and the Small Peasantry: Deccan Districts in
the Late Nineteenth Century’, Economic and Political Weekly, Vol.12.
Banerji, A.K. (1982), Aspects of Indo-British Economic Relations, Bombay.
Bhaduri, Amit (1999), On the border of Economic Theory and History, Delhi.
Bharadwaj, Krishna (1974), Production Conditions in Indian Agriculture, Cambridge.
Bhatia, B.M. (1965), Famines in India, Bombay.
Bhattacharya, Neeladri (1995), ‘Pastoralists in a Colonial World’, in Arnold and Guha
(eds), Nature, Culture, Imperialism, Delhi.
Bhattacharya, N. (1985),‘Lenders and Debtors: Punjab Countryside 1880-1940’, Studies
in History, Vol. 1, No. 2.
Bhattacharya, S. (1965), ‘Laissez Faire in India’, IESHR, Vol. 2, No. 1.
Bose, Sugata (1986), Agrarian Bengal: Economy, Social Structure and Politics,
1919-1947, Cambridge.
Bose, Sugata (1993), Peasant Labour and Colonial Capital: Rural Bengal Since 1770,
Delhi.
Brown, Barrat (1974), The Economics of Imperialism, Harmondsworth.
Cain, P. J. and A. G. Hopkins (1993), British Imperialism: Innovation and Expansion,
1688-1914, Vol. 1 and British Imperialism: Crisis and Deconstruction, 1914-1990,
Vol .2, London.
Chakravarty, Dipesh (1989), Rethinking Working Class History, Bengal, 1890-1940,
Princeton and Delhi.
Chandavarkar, Rajnarayan (1994), The Origins of Industrial Capitalism, Cambridge. 51
Historiography and Economy Chandra Bipan (1968), ‘Reinterpretation of Nineteenth Century Indian Economic History,’
IESHR, Vol. 5, No.1.
Charlesworth, N. (1985), Peasants and Imperial Rule: Agriculture and Agrarian Society
in the Bombay Presidency, 1850-1935, Cambridge.
Charlesworth, N. (1972), ‘The Myth of the Deccan Riots of 1875’, Modern Asian Studies,
Vol. 6, No. 4.
Charlesworth , N. (1985), Peasants and Imperial Rule: Agriculture and Agrarian
Society in the Bombay Presidency, 1850-1935, Cambridge.
Chatterjee, Basudev (1992), Trade, Tariffs and Empire: Lancashire and British Policy
in India, 1919-1939, Delhi.
Chaudhuri, B.B. (1984), ‘Rural Power Structure and Agricultural Productivity in Eastern
India, 1757-1947’, in Desai, Rudolph and Rudra (eds), Agrarian Power and Agricultural
Productivity in South Asia, Delhi.
Chaudhuri, Benoy Bhushan (1964), Growth of Commercial Agriculture in Bengal,
1760-1900, Calcutta.
Chaudhuri, K.N. (1968) ‘India’s International Economy in the Nineteenth Century: A
Historical Survey’, Modern Asian Studies, Vol. 2, No. 1.
Chaudhury, K.N. (1983), ‘India’s Foreign Trade and Balance of Payments’, in Kumar,
Dharma, and Meghanad Desai, The Cambridge Economic History of India, Vol. 2,
Cambridge.
Clark, Gregory (1987), ‘Why Isn’t the Whole World Developed? Lessons from the Cotton
Mills’, Journal of Economic History, Vol. 47, No. 1.
Davis, E. and Robert A. Huttenback (1986), Mammon and the Pursuit of Empire: The
Political Economy of British Imperialism, 1860-1912, Cambridge.
Desai, A.R (1979), Peasant Struggles in India, Bombay.
Dewey, C.J. (1978), ‘The End of the Imperialism of Free Trade: The Eclipse of the
Lancashire Lobby and the Concession of Fiscal Autonomy to India’, in Dewey, C. and
A.G. Hopkins (eds), Imperial Impact: Studies in the Economic History of Africa and
India, London.
Ferguson, Niall (2003), Empire: How Britain Made the Modern World, Penguin.
Floud, R. and D. N. McCloskey (ed.) (1981), The Economic History of Britain Since
1700, in two Volumes, CUP, Cambridge.
Frank, Andre Gunder (1967), Capitalism and Underdevelopment in Latin America,
New York.
Furtado, Celso (1970), Economic Development of Latin America: A Survey from
Colonial Times to Cuban Revolution, Cambridge.
Gadgil, D.R. (1969), The Industrial Evolution of India in Recent Times, 1860 to 1939,
Bombay.
Gilmartin, David (1995), ‘ Models of the Hydraulic Environment: Colonial Irrigation, State
Power and Community in the Indus Basin’, in Arnold, David and R. Guha (eds), Nature,
Culture, Imperialism: Essays on the Environmental History of South Asia, Delhi.
Goldsmith, Raymond W. (1983), The Financial Development of India, 1860-1977, Delhi.
Gordon, Stewart (1994), Marathas, Marauders and State Formation in Eighteenth
Century India, Delhi.
Goswami (1991), Industry, Trade and Peasant Society: The Jute Economy of Eastern
India, 1900-1947, Delhi.
Goswami, Omkar (1991), Industry, Trade and Peasant Society: The Jute Economy of
52 India, 1900-1947, Delhi.
Greenough, Paul (1982), Prosperity and Misery in Modern Bengal: the Famine of Historiography of the
1943-1944, New York. Colonial Economy

Grove, Richard, Vinita Damodaran and Satpal Sangwan (ed.) (1998), Nature and the
Orient: The Environmental History of South and Southeast Asia, Delhi.
Guha, Ramachandra (1989), The Unquiet Woods, Delhi.
Guha, Ramachandra and Madhav Gadgil (1992), This Fissured Land: An Ecological
History of India, Delhi.
Guha, Ranajit (1983), Elementary Aspects of Peasant Insurgency in Colonial India,
Delhi.
Guha, S. (1989), ‘The Handloom Industry of Central India: 1825-1950’, IESHR, Vol. 26,
No. 3.
Guha, Sumit (1999), Environment and Ethnicity in India, 1200-1991, Cambridge.
Guha, Sumit (1992), Growth, Stagnation or Decline? Agricultural Productivity in British
India, Delhi.
Gurtoo, D.N. (1961), India’s Balance of Payments, 1920-1960, Delhi.
Habib, Irfan (1985), ‘Studying a Colonial Economy without Perceiving Colonialism’,
Modern Asian Studies, Vol. 19, No. 3.
Harnetty, Peter (1991) ‘De-industrialisation Revisited: The Handloom Weavers of the
Central Provinces of India, c. 1800-1947’, Modern Asian Studies, 25, 3.
Islam, M. (1997), Irrigation, Agriculture and the Raj: Punjab, 1887-1947, Delhi.
Joshi, Chitra (2002), Lost Worlds: Indian Labour and Its Forgotten History, Permanent
Black, New Delhi.
Krishnamurthy J. (1985), ‘De-industrialisation in Gangetic Bihar: Another Look at the
Evidence’, IESHR, Vol. 22, No. 4.
Krishnamurthy, J. (ed.) (1989), Women in Colonial India: Essays on Survival, Work
and State, OUP, Delhi.
Levkovsky (1966), Capitalism in India, Delhi.
Mann, Michael (1998), ‘Ecological Change in North India: Deforestation and Agrarian
Distress in the Ganga-Yamuna Doab, 1800-1850’, in Grove, Damodaran and Sangwan
(eds), Nature and the Orient, Delhi.
Markovits, Claude (2000), The Global World of the Indian Merchants, 1750-1947,
CUP, Cambridge.
Marshall, P.J. (ed) (1998), The Oxford History of the British Empire, vol. 2: The
Eighteenth Century, Oxford.
Morison, Theodore (1911), Economic Transition in India, London.
Morris, David Morris (1965), The Emergence of an Industrial Labour Force in India,
Berkeley and Bombay.
Morris, David Morris (1968), ‘Towards a Reinterpretation of Nineteenth Century Indian
Economic History’, IESHR, Vol. 5, No.1.
Mukherjee, Aditya (2002), Imperialism, Nationalism and the Making of the Indian
Capitalist Class, 1920-1947, Delhi.
Mukherjee, Ramakrishna (1974 edition), The Rise and Growth of the East India Company
in India, London.
O’Brien, Patrick (1988), ‘The Costs and Benefits of British Imperialism, 1846-1914’,
Past and Present, No. 120.
Patel, S.J. (1952), Agricultural Labourers in Modern India and Pakistan, Bombay.
53
Historiography and Economy Patnaik, Utsa (2000), ‘New Estimates of Eighteenth-Century British Trade and their
Relation to Transfers from Tropical Colonies’, in Panikkar, K.N., Terence Byres and
Utsa Patnaik (eds), The Making of History: Essays presented to Irfan Habib, Delhi.
Patnaik, Utsa (ed) (1990), Agrarian Relations and Accumulation: The Mode of
Production Debate in India, Delhi.
Patnaik, Utsa (ed) (1990), Agrarian Relations and Accumulation, Delhi.
Prakash, Gyan (1990), Bonded Histories: Genealogies of Labour Servitude in Colonial
India, Cambridge.
Raj, K.N. (1985), Essays on the Commercialisation of Indian Agriculture, Delhi.
Rangarajan, M. (1996), Fencing the Forest; Conservation and Ecological Change in
India’s Central Provinces, 1860-1914, Delhi.
Ray, Rajat (ed) (1992), Entrepreneurship and Industry in India, 1800-1947, OUP,
Delhi.
Ray, Rajat (1979), Industrialisation in India, Delhi.
Ray, Rajat (1995), ‘Asian Capital in the Age of European Domination: The Rise of the
Bazaar, 1800-1914’, Modern Asian Studies, Vol. 29, No. 3.
Raychaudhuri, Tapan (1968), ‘A Re-interpretation of Nineteenth Century Indian Economic
History?’, IESHR, Vol. 5, No.1.
Rothermund, Dietmar (1992), India in the Great Depression, 1929-39, Delhi.
Roy, Tirthankar (1999), Traditional Industry in the Economy of Colonial India,
Cambridge.
Roy, Tirthankar (1993), Artisans and Industrialisation: Indian Weaving in the Twentieth
Century, Delhi.
Sen, Amartya (1981), Poverty and Famines: An Essay in Entitlement and Deprivation,
Oxford.
Sen, Ashok, Partha Chatterjee and Saugata Mukherji (1982), Three Studies on the
Agrarian Structure in Bengal, 1850-1947, Calcutta.
Sen, Samita (1999), Women and Labour in Late Colonial India: The Bengal Jute
Industry, CUP, Cambridge.
Sen, Sunanda (1992), Colonies and the Empire: India, 1890-1914, Hyderabad.
Sharma, Sanjay (2001), Famine, Philanthropy and the Colonial State: North India in
the Early Nineteenth Century, Delhi.
Simmons, Colin (1985), ‘“Deindustrialisation”, Industrialisation and the Indian Economy,
c. 1850-1947’, Modern Asian Studies, Vol 13, 3.
Sinha, N.K (1965), Economic History of Bengal, Calcutta.
Sivasubramanian, S. (2000), The National Income of India in the Twentieth Century,
OUP, Delhi.
Skaria, Ajay (1999), Hybrid Histories: Forests, Frontiers and Wildness in Western
India, OUP, Delhi.
Specker, Konrad (1989), ‘Madras Handlooms in the Nineteenth Century’, IESHR,
Vol. 26, No. 2.
Stone, Ian (1984), Canal Irrigation in British India: Perspectives on Technological
Change in a Peasant Economy, Cambridge.
Thorner, Daniel (1962), Land and Labour in India, Bombay.
Tomlinson, B.R. (1993), New Cambridge History of India volume entitled, The Economy
of Modern India, 1860-1970, Cambridge.
54
Tomlinson, B.R. (1979), The Political Economy of the Raj, 1914-47, Macmillan, London. Historiography of the
Colonial Economy
Tripathi, Dwijendra (2004), The Oxford History of Indian Business, Delhi.
Twomey, M.J. (1983), ‘Employment in Nineteenth Century Indian Textiles’, Explorations
in Economic History, Vol. 20, No. 3.
Wallerstein, Immanuel (1976), The Modern World System: Capitalist Agriculture and
the Origins of the European World Economy in the Sixteenth Century, New York.
Wallerstein, Immanuel (1979), The Capitalist World-Economy, Cambridge.
Washbrook, David (1981), ‘Law, State and Society in Colonial India’, Modern Asian
Studies, Vol. 15, No. 3.
Whitcombe, Elizabeth (1972), Agrarian Conditions in Northern India, Vol.1, The United
Provinces under British Rule, 1860-1900, Berkeley.
Wolcott, Susan and Gregory Clark (1999), ‘Why Nation’s Fail: Managerial Decisions and
Performance in Indian Cotton Textiles, 1890-1938’, Journal of Economic History,
Vol. 59, No. 2.

55