THE LOOTING OF INDIA

Durant’s outrage – the conquest of India by a corporation – the East India Company – the deindustrialization of India – destruction of Indian textiles – extraction, taxes and diamonds – Clive and Plassey – the ‘nabobs’ – corruption – revenue collection and the drain of resources – the Permanent Settlement – Indian military contributions to Empire – Naoroji’s indictment – the destruction of shipping and shipbuilding – stealing from Indian steel – how India missed the Industrial Revolution – the Scots benefit

In 1930, a young American historian and philosopher, Will Durant, stepped onto the shores of India for the first time. He had embarked on a journey around the world to write what became the magnificent eleven-volume The Story of Civilization. But he was, in his own words, so ‘filled with astonishment and indignation’ at what he saw and read of Britain’s ‘conscious and deliberate bleeding of India’ that he set aside his research into the past to write a passionate denunciation of this ‘greatest crime in all history’. His short book, The Case for India, remains a classic, a profoundly empathetic work of compassion and outrage that tore apart the self-serving justifications of the British for their long and shameless record of rapacity in India. As Durant wrote:

The British conquest of India was the invasion and destruction of a high civilization by a trading company [the British East India Company] utterly without scruple or principle, careless of art and greedy of gain, over-running with fire and sword a country temporarily disordered and helpless, bribing and murdering, annexing and stealing, and beginning that career of illegal and ‘legal’ plunder which has now [1930] gone on ruthlessly for one hundred and seventy-three years.

 

THE CONQUEST OF INDIA BY A CORPORATION

Taking advantage of the collapse of the Mughal empire and the rise of a number of warring principalities contending for authority across eighteenth-century India, the British had subjugated a vast land through the power of their artillery and the cynicism of their amorality. They displaced nawabs and maharajas for a price, emptied their treasuries as it pleased them, took over their states through various methods (including, from the 1840s, the cynical ‘doctrine of lapse’ whenever a ruler died without an heir), and stripped farmers of their ownership of the lands they had tilled for generations. With the absorption of each native state, the Company official John Sullivan (better known as the founder of the ‘hillstation’ of Ootacamund, or ‘Ooty’, today known more correctly as Udhagamandalam) observed in the 1840s: ‘The little court disappears—trade languishes—the capital decays—the people are impoverished—the Englishman flourishes, and acts like a sponge, drawing up riches from the banks of the Ganges, and squeezing them down upon the banks of the Thames.’

The India that the British East India Company conquered was no primitive or barren land, but the glittering jewel of the medieval world. Its accomplishments and prosperity—‘the wealth created by vast and varied industries’—were succinctly described by a Yorkshire-born American Unitarian minister, J. T. Sunderland:

Nearly every kind of manufacture or product known to the civilized world—nearly every kind of creation of man’s brain and hand, existing anywhere, and prized either for its utility or beauty—had long been produced in India. India was a far greater industrial and manufacturing nation than any in Europe or any other in Asia. Her textile goods—the fine products of her looms, in cotton, wool, linen and silk— were famous over the civilized world; so were her exquisite jewellery and her precious stones cut in every lovely form; so were her pottery, porcelains, ceramics of every kind, quality, color and beautiful shape; so were her fine works in metal— iron, steel, silver and gold.

She had great architecture—equal in beauty to any in the world. She had great engineering works. She had great merchants, great businessmen, great bankers and financiers. Not only was she the greatest shipbuilding nation, but she had great commerce and trade by land and sea which extended to all known civilized countries. Such was the India which the British found when they came.

At the beginning of the eighteenth century, as the British economic historian Angus Maddison has demonstrated, India’s share of the world economy was 23 per cent, as large as all of Europe put together. (It had been 27 per cent in 1700, when the Mughal Emperor Aurangzeb’s treasury raked in £100 million in tax revenues alone.) By the time the British departed India, it had dropped to just over 3 per cent. The reason was simple: India was governed for the benefit of Britain. Britain’s rise for 200 years was financed by its depredations in India.

It all began with the East India Company, incorporated by royal charter from Her Majesty Queen Elizabeth I in 1600 to trade in silk and spices, and other profitable Indian commodities. The Company, in furtherance of its trade, established outposts or ‘factories’ along the Indian coast, notably in Calcutta, Madras and Bombay; increasingly this involved needing to defend its premises, personnel and trade by military means, including recruiting soldiers in an increasingly strife-torn land (its charter granted it the right to ‘wage war’ in pursuit of its aims). A commercial business quickly became a business of conquest, trading posts were reinforced by forts, merchants supplanted by armies.

The first British ‘factor’, William Hawkins, found himself treated with scant respect, his king mocked and his assets scorned. When the first British ambassador, Sir Thomas Roe, presented his credentials in 1615 at the court of the Mughal Emperor Jehangir, the Englishman was a supplicant at the feet of the world’s mightiest and most opulent monarch. The Mughal empire stretched from Kabul to the eastern extremities of Bengal, and from Kashmir in the north to Karnataka in the south. But less than a century and a half later, this Mughal empire was in a state of collapse after the spectacular sacking of Delhi by the Persian Nadir Shah in 1739 and the loot of all its treasures. The Mughal capital was pillaged and burned over eight long weeks; gold, silver, jewels and finery, worth over 500 million rupees, were seized, along with the entire contents of the imperial treasury and the emperor’s fabled Peacock Throne; elephants and horses were commandeered; and 50,000 corpses littered the streets. It is said that when Nadir Shah and his forces returned home, they had stolen so much from India that all taxes were eliminated in Persia for the next three years.

Amid the ensuing anarchy, provincial satraps asserted control over their own regions, and rivals for power (notably the Marathas) asserted themselves at the expense of the central authority, many calling themselves maharajas and nawabs while owing nominal allegiance to the Mughal emperor in Delhi. In 1757, under the command of Robert, later Lord, Clive, the Company won a famous victory in Plassey over a ruling nawab, Siraj-ud-Daula of Bengal, through a combination of superior artillery and even more superior chicanery, involving the betrayal of the nawab by one of his closest nobles, Mir Jafar, whom the Company duly placed on his throne, in exchange for de facto control of Bengal. Clive was soon able to transfer the princely sum of £2.5 million (£250 million pounds in today’s money, the entire contents of the nawab’s treasury) to the Company’s coffers in England as the spoils of conquest.

In August 1765, the young and weakened Mughal emperor, Shah Alam II, was browbeaten into issuing a diwani that replaced his own revenue officials in the provinces of Bengal, Bihar and Orissa with the Company’s. An international corporation with its own private army and princes paying deference to it had now officially become a revenue-collecting enterprise. India would never be the same again.

In the hundred years after Plassey, the East India Company, with an army of 260,000 men at the start of the nineteenth century and the backing of the British government and Parliament (many of whose members were shareholders in the enterprise), extended its control over most of India. The Company conquered and absorbed a number of hitherto independent or autonomous states, imposed executive authority through a series of high-born Governors General appointed from London, regulated the country’s trade, collected taxes and imposed its fiat on all aspects of Indian life. In 1803, Company forces marched into Delhi to find the old and terrified Mughal monarch cowering under a royal canopy. In the eight years after he took over as the Company’s Governor General in 1847, Lord Dalhousie annexed a quarter of a million square miles of territory from Indian rulers.

Till an open revolt occurred against them in 1857, leading to the takeover of British domains by the Crown in the following year, the East India Company presided over the destinies of more than 200 million people, determining their economic, social and political life, reshaping society and education, introducing railways and financing the inauguration of the Industrial Revolution in Britain. It was a startling and unrivalled example of what, in a later era, Marxists in the 1970s grimly foretold for the world: rule of, by and for a multinational corporation. Though the Mughal emperor’s firman referred to the directors of the East India Company as ‘the high and mighty, the noblest of exalted nobles, the chief of illustrious warriors, our faithful servants and sincere well-wishers, worthy of our royal favours, the English Company’, no royal favours were required, other than signing on the dotted line. Shah Alam II and his successors lived on the sufferance of the Company, prisoners and pensioners in all but name. ‘What honour is left to us?’, the historian William Dalrymple quotes a Mughal official named Narayan Singh as asking after 1765, ‘when we have to take orders from a handful of traders who have not yet learned to wash their bottoms?’ But honour was an irrelevant concern for his emperor’s ‘faithful servants and sincere well-wishers’. The Company ran India, and like all companies, it had one principal concern, shared by its capitalist overlords in London: the bottom line.

 

THE DEINDUSTRIALIZATION OF INDIA: TAXATION, CORRUPTION & THE ‘NABOBS’

The British government assisted the Company’s rise with military and naval resources, enabling legislation (prompted, in many cases, by the Company’s stockholders in Parliament), loans from the Bank of England and a supportive foreign policy that sought both to overcome local resistance and to counter foreign competitors like the French and Dutch. But as the Company’s principal motive was economic, so too were the major consequences of its rule, both for India and for Britain itself.

Britain’s Industrial Revolution was built on the destruction of India’s thriving manufacturing industries. Textiles were an emblematic case in point: the British systematically set about destroying India’s textile manufacturing and exports, substituting Indian textiles by British ones manufactured in England. Ironically, the British used Indian raw material and exported the finished products back to India and the rest of the world, the industrial equivalent of adding insult to injury.

The British destruction of textile competition from India led to the first great deindustrialization of the modern world. Indian handloom fabrics were much in demand in England; it was no accident that the Company established its first ‘factory’ in 1613 in the southern port town of Masulipatnam, famous for its Kalamkari textiles. For centuries the handloom weavers of Bengal had produced some of the world’s most desirable fabrics, especially the fine muslins, light as ‘woven air’, that were coveted by European dressmakers. As late as the mid-eighteenth century, Bengal’s textiles were still being exported to Egypt, Turkey and Persia in the West, and to Java, China and Japan in the East, along well-established trade routes, as well as to Europe. The value of Bengal’s textile exports alone is estimated to have been around 16 million rupees annually in the 1750s, of which some 5 to 6 million rupees’ worth was exported by European traders in India. (At those days’ rates of exchange, this sum was equivalent to almost £2 million, a considerable sum in an era when to earn a pound a week was to be a rich man.) In addition, silk exports from Bengal were worth another 6.5 million rupees annually till 1753, declining to some 5 million thereafter. During the century to 1757, while the British were just traders and not rulers, their demand is estimated to have raised Bengal’s textile and silk production by as much as 33 per cent. The Indian textile industry became more creative, innovative and productive; exports boomed. But when the British traders took power, everything changed.

In power, the British were, in a word, ruthless. They stopped paying for textiles and silk in pounds brought from Britain, preferring to pay from revenues extracted from Bengal, and pushing prices still lower. They squeezed out other foreign buyers and instituted a Company monopoly. They cut off the export markets for Indian textiles, interrupting long-standing independent trading links. As British manufacturing grew, they went further. Indian textiles were remarkably cheap—so much so that Britain’s cloth manufacturers, unable to compete, wanted them eliminated. The soldiers of the East India Company obliged, systematically smashing the looms of some Bengali weavers and, according to at least one contemporary account (as well as widespread, if unverifiable, belief), breaking their thumbs so they could not ply their craft.

Crude destruction, however, was not all. More sophisticated modern techniques were available in the form of the imposition of duties and tariffs of 70 to 80 per cent on whatever Indian textiles survived, making their export to Britain unviable. Indian cloth was thus no longer cheap. Meanwhile, bales of cheap British fabric—cheaper even than poorly paid Bengali artisans could make—flooded the Indian market from the new steam mills of Britain. Indians could hardly impose retaliatory tariffs on British goods, since the British controlled the ports and the government, and decided the terms of trade to their own advantage.

India had enjoyed a 25 per cent share of the global trade in textiles in the early eighteenth century. But this was destroyed; the Company’s own stalwart administrator Lord William Bentinck wrote that ‘the bones of the cotton weavers were bleaching the plains of India’.

India still grew cotton, but mainly to send to Britain. The country no longer wove or spun much of it; master weavers became beggars. A stark illustration of the devastation this caused could be seen in Dhaka, once the great centre of muslin production, whose population fell from several lakhs in 1760 to about 50,000 by the 1820s. (Fittingly, Dhaka, now the capital of Bangladesh, is once again a thriving centre of textile and garment production.)

British exports of textiles to India, of course, soared. By 1830 these had reached 60 million yards of cotton goods a year; in 1858 this mounted to 968 million yards; the billion-yard mark was crossed in 1870—more than three yards a year for every single Indian, man, woman or child.

The destruction of artisanal industries by colonial trade policies did not just impact the artisans themselves. The British monopoly of industrial production drove Indians to agriculture beyond levels the land could sustain. This in turn had a knock-on effect on the peasants who worked the land, by causing an influx of newly disenfranchised people, formerly artisans, who drove down rural wages. In many rural families, women had spun and woven at home while their men tilled the fields; suddenly both were affected, and if weather or drought reduced their agricultural work, there was no back-up source of income from cloth. Rural poverty was a direct result of British actions.

Apologists for Empire suggest that Indian textiles were wiped out by the machines of Britain’s Industrial Revolution, in the same way that traditional handmade textiles disappeared in Europe and the rest of the world, rather than by deliberate British policy: in this reading, if they hadn’t collapsed to British power, the weavers would have been replaced within fifty years by Indian textile mills using modern machinery. India’s weavers were, thus, merely the victims of technological obsolescence.

It is plausible that, in due course, handlooms would have found it difficult to compete with mass-produced machine-made textiles, but they would surely have been able to hold on to a niche market, as they do to this day in India. At least the process would have occurred naturally and gradually in a free India, perhaps even delayed by favourable protective tariffs on English imports of mill-made textiles, rather than being executed brutally by British fiat. And many Indian manufacturers would surely have imported technology themselves, given the chance to upgrade their textile units; the lower wages of Indian workers would always have given them a comparative advantage over their European competitors on a level playing field. Under colonialism, of course, the playing field was not level, and the nineteenth century told the sad tale of the extinction of Indian textiles and their replacement by British ones.

Still, inevitably, Indian entrepreneurs began to set up their own modern textile mills after 1850 and to produce cloth that could compete with the British imports. The American Civil War, by interrupting supplies of cotton from the New World, set off a brief boom in Indian cotton, but once American supplies resumed in 1865, India again suffered. As late as 1896, Indian mills produced only 8 per cent of the total cloth consumed in India. By 1913, this had grown to 20 per cent, and the setbacks faced by Britain with the disruptions of the World War I allowed Indian textile manufacturers to slowly recapture the domestic market. In 1936, 62 per cent of the cloth sold in India was made by Indians; and by the time the British left the country, 76 per cent (in 1945).

But for most of the colonial era, the story of Indian manufacturing was of dispossession, displacement and defeat. What happened to India’s textiles was replicated across the board. From the great manufacturing nation described by Sunderland, India became a mere exporter of raw materials and foodstuffs, raw cotton, as well as jute, silk, coal, opium, rice, spices and tea. With the collapse of its manufacturing and the elimination of manufactured goods from its export rosters, India’s share of world manufacturing exports fell from 27 per cent to 2 per cent under British rule. Exports from Britain to India, of course, soared, as India’s balance of trade reversed and a major exporting nation became an importer of British goods forced upon the Indian market duty-free while British laws and regulations strangled Indian products they could not have fairly competed against for quality or price.

The deindustrialization of India, begun in the late eighteenth century, was completed in the nineteenth and only slowly reversed in the twentieth. Under the British, the share of industry in India’s GDP was only 3.8 per cent in 1913, and at its peak reached 7.5 per cent when the British left in 1947. Similarly, the share of manufactured goods in India’s exports climbed only slowly to a high of 30 per cent in 1947. And at the end of British rule, modern industry employed only 2.5 million people out of India’s population of 350 million.

EXTRACTION, TAXATION AND DIAMONDS

But the ill effects of British rule did not stop there. Taxation (and theft labelled as taxation) became a favourite British form of exaction. India was treated as a cash cow; the revenues that flowed into London’s treasury were described by the Earl of Chatham as ‘the redemption of a nation…a kind of gift from heaven’. The British extracted from India approximately £18,000,000 each year between 1765 and 1815. ‘There are few kings in Europe’, wrote the Comte de Châtelet, French ambassador to London, ‘richer than the Directors of the English East India Company.’

Taxation by the Company—usually at a minimum of 50 per cent of income—was so onerous that two-thirds of the population ruled by the British in the late eighteenth century fled their lands. Durant writes that ‘[tax] defaulters were confined in cages, and exposed to the burning sun; fathers sold their children to meet the rising rates’. Unpaid taxes meant being tortured to pay up, and the wretched victim’s land being confiscated by the British. The East India Company created, for the first time in Indian history, the landless peasant, deprived of his traditional source of sustenance.

Ironically, Indian rulers in the past had largely funded their regimes not from taxing cultivators but from tapping into networks of trade, both regional and global. The Company’s rapacity was a striking departure from the prevailing norm.

Corruption, though not unknown in India, plumbed new depths under the British, especially since the Company exacted payments from Indians beyond what they could afford, and the rest had to be obtained by bribery, robbery and even murder. Everybody and everything, as the 1923 edition of the Oxford History of India noted, was on sale.

Colonialists like Robert Clive, victor of the seminal Battle of Plassey in 1757 that is seen as decisively inaugurating British rule in India, were unashamed of their cupidity and corruption. On his first return to England Clive took home £234,000 from his Indian exploits (£23 million pounds in today’s money, making him one of the richest men in Europe). He and his followers bought their ‘rotten boroughs’ in England with the proceeds of their loot in India (‘loot’ being a Hindustani word they took into their dictionaries as well as their habits), while publicly marvelling at their own self-restraint in not stealing even more than they did.

Clive came back to India in 1765 and returned two years later to England with a fortune estimated at £400,000 (£40 million today). After accepting millions of rupees in ‘presents’, levying an annual tribute, helping himself to any jewels that caught his fancy from the treasuries of those he had subjugated, and reselling items in England at five times their price in India, Clive declared: ‘an opulent city lay at my mercy; its richest bankers bid against each other for my smiles; I walked through vaults which were thrown open to me alone, piled on either hand with gold and jewels… When I think of the marvellous riches of that country, and the comparatively small part which I took away, I am astonished at my own moderation.’ And the British had the gall to call him ‘Clive of India’, as if he belonged to the country, when all he really did was to ensure that a good portion of the country belonged to him.

The scale and extent of British theft in India can be gauged by the impact of Indian-acquired wealth upon England itself. In his biographical essay on Clive, the nineteenth-century politician and historian Lord Thomas Babington Macaulay went beyond the details of Clive’s life to inveigh against some of the larger forces his success had set in motion. (This is not to say Macaulay was an opponent of Empire. He served the East India Company in various capacities, and called it ‘the greatest corporation in the world’.) His diatribe was aimed at the ‘nabobs’, the term applied to East India Company employees who returned to England after making fortunes in India. It was a term famously given currency by Edmund Burke in his ferocious denunciation of the Company’s Governor General, Warren Hastings, who was impeached by Parliament in 1788 for rampant corruption and abuse of power. The word ‘nabob’, Macaulay knew, was a mispronounced transliteration of a high Indian title, nawab or prince, carrying associations of aristocracy and authority that Macaulay found problematic. Nabobs, he wrote, ‘had sprung from obscurity…they acquired great wealth…they exhibited it insolently…they spent it extravagantly’ and demonstrated the ‘awkwardness and some of the pomposity of upstarts’. They ‘raised the price of everything in their neighbourhoods, from fresh eggs to rotten boroughs…their lives outshone those of dukes…their coaches were finer than that of the Lord Mayor…the examples of their large and ill-governed households corrupted half the servants of the country…but, in spite of the stud and the crowd of menials, of the plate and the Dresden china, of the venison and Burgundy, [they] were still low men’.

It didn’t take much to make money if you were a Briton in India. Company official Richard Barwell boasted to his father in 1765 that ‘India is a sure path to [prosperity]. A moderate share of attention and your being not quite an idiot are (in the present situation of things) ample qualities for the attainment of riches.’ Nabobs were often Company officials who indulged in private trade on their own account while on the Company’s business. This was extraordinarily lucrative, given the Company’s monopoly on its own territories: profits of 25 per cent were regarded as signs of a moderate man, and vastly higher sums were the norm.

Clive’s father followed his son’s career in India closely, recognizing that the family’s fortunes depended on Indian loot. ‘As your conduct and bravery is become the publick [sic] talk of the nation,’ he wrote to his son in 1752, ‘this is the time to increase your fortune, make use of the present opportunity before you quit the Country.’ He did, buying his father and himself seats in Parliament, and acquiring a peerage (it was only in Ireland, so he renamed his County Clare estate ‘Plassey’.) The Whig politician and author Horace Walpole wrote: ‘Here was Lord Clive’s diamond house; this is Leadenhall Street, and this broken column was part of the palace of a company of merchants who were sovereigns of Bengal! They starved millions in India by monopolies and plunder, and almost raised a famine at home by the luxury occasioned by their opulence, and by that opulence raising the prices of everything, till the poor could not purchase bread!’

The Cockerell brothers, John and Charles, both of whom served the East India Company in the second half of the eighteenth century, built an extraordinary Indian palace in the heart of the Cotswolds, complete with a green onion-shaped dome, umbrellashaped chhatris and overhanging chhajjas, Mughal gardens, serpent fountains, a Surya temple, Shiva lingams—and with Nandi bulls guarding the estate. The mansion, Sezincote, designed by a third Cockerell brother, the architect Samuel Pepys Cockerell (who, unlike his siblings, had never been to India), still stands today, an incongruous monument to the opulence of the nabobs’ loot.

But it was Indian diamonds, which the nabobs brought back to Britain with them, that made the Empire real to the British public. They were the insignia of new money, indications that as Britain was becoming an imperial power, the country was being transformed. But old money was contemptuous of the new; many in the establishment did not want diamonds to sully the hands of good Englishmen. As Horace Walpole sneered in 1790: ‘What is England now? A sink of Indian wealth.’ Walpole hoped his nation would endeavour to act ‘more honestly’ than the nabobs did in bringing home ‘the diamonds of Bengal’. He would not, he wrote, behave like the nabobs ‘for all Lord Clive’s diamonds’.

In the late eighteenth and early nineteenth centuries, the nabobs’ diamonds were not hailed as jewels in Britain’s imperial crown or prized imperial symbols, as the famed Kohinoor diamond would later be. Instead they were both envied and attacked as imports that pinched the purses of domestic Britons—and threatened to change British politics fundamentally.

Perhaps the earliest Company employee to bring Indian diamonds into the headlines (and thereby consecrate Indian diamonds as an imperial trope) was Thomas Pitt, the governor of Madras. In 1702, Pitt acquired (for £24,000, it was said, itself a considerable sum beyond the reach of 99 per cent of Englishmen) a diamond said to be ‘the finest jewel in the world’. Pitt shipped the 400–carat gem to Britain, referring to it in his letters as ‘my greatest concern’ and ‘my all’. Soon after his diamond’s safe arrival in Britain, he gave up his governorship, purchased a grand estate and paid handsomely for a seat in Parliament. The British historian John Keay tells us that ‘wild rumours’ swirled around Pitt’s diamond, one suggesting that it had been ‘snatched from the eye socket of a Hindu deity or smuggled from the mines by a slave who hid it in a self-inflicted gash in his thigh’. Like the purloined jewel in the title of Wilkie Collins’s 1868 novel The Moonstone, the Pitt Diamond became a legend. It represented the wealth that was widespread in India, Britain’s power to extract that wealth, and the luxury that came with power in India—especially if you were British.

The traditional British view of wealth based it on the ownership of land, which, through its solidity, connoted an earthy stability, and since land was held for a long time, reflected hierarchy and implied a sense of permanence. This had changed somewhat thanks to the advent of the mercantile classes, but the Pitt Diamond represented a dramatically alternative model, based on something far more adventurous—colonial exploits, if not exploitation. The owners of these diamonds escaped the confinement of traditional sources of wealth for something that could be acquired by colonial enterprise rather than traditional inheritance. Fifteen years after he had brought the diamond from India, Thomas Pitt sold it to the Regent of France, the Duc d’Orléans, for the princely sum of £135,000, almost six times what he had paid for it. The astronomical amount (worth multiple millions in today’s money) bought the Pitt family a new place in English society. An Indian diamond thus gave a financial springboard to a British dynasty that would, in very short order, produce two prime ministers—his grandson William Pitt, 1st Earl of Chatham, and Chatham’s own son, William Pitt ‘the Younger’.

In other words, the nabobs and their money were changing British politics during the late eighteenth-century expansion of Britain’s Indian empire. As an essay in The Gentleman’s Magazine reported in 1786, ‘the Company providentially brings us home every year a sufficient number of a new sort of gentlemen, with new customs, manners, and principles, who fill the offices of the old country gentlemen [sic].’ The danger was that these new men would remake Britain: ‘It is plain that our constitution, if not altered, is altering at a great rate.’ The East India Company was no longer just a trading concern and had gone well beyond the terms of its original charter. Some in Britain were concerned and alarmed: they summoned Clive before Parliament to explain his actions in India and the fortune he had made there. In impeaching Hastings, Burke commented pointedly: ‘Today the Commons of Great Britain prosecutes the delinquents of India. Tomorrow these delinquents of India may be the Commons of Great Britain.’

The government of the Earl of Chatham, Pitt’s descendant, sought to assert parliamentary supremacy over the Company in 1766, but thanks to his own ill health and since many MPs were in fact East India Company shareholders, this attempt was not too successful. Indeed, it was not until the passage of Lord North’s Regulating Act of 1773 that Parliament gained some measure of control over the Company’s activities in India. But even then, a majority of MPs stood to gain from the Company’s successes, and they passed enabling legislation rather than restrictive laws. William Pitt the Younger would finally pass an India Act in 1784, establishing a Board of Control with power to endorse or dictate orders to the Company, to bring to heel the kinds of practices that had enriched his own ancestor. However, for all the talk of reform, the London Chronicle listed, in 1784, the names of twenty-nine members of Parliament with direct Indian connections; there were many more who owned shares in the Company.

The playwright Richard Sheridan was scathing in his denunciation of the Company, whose operations ‘combined the meanness of a pedlar with the profligacy of a pirate… Thus it was [that] they united the mock majesty of a bloody sceptre with the little traffic of a merchant’s counting-house, wielding a truncheon with the one hand, and picking a pocket with the other’.

Nor were Company officials unaware of the impact of their actions. Baron Teignmouth, who as John Shore went on to serve as Governor General of India from 1793–97, pointed out in a Minute as early as 1789 that the East India Company were both merchants and sovereigns in India: ‘in the former capacity, they engross its trade, whilst in the latter, they appropriate its revenues’. Teignmouth pointed to the iniquity of the policies of extraction, the drain of currency (silver) and resources from the country to Europe, and the resultant collapse of India’s internal trade, which had flourished before the Company’s depredations.

There are many accounts of the perfidy, chicanery and cupidity with which the Company extracted wealth from the native princes, and went on to overthrow them and take over their territories; it would be tiresome today to regurgitate stories that have been in circulation since the late eighteenth century, when the British Parliament unsuccessfully impeached Warren Hastings, arguably one of the most rapacious of the Company’s many venal Governors General. But a couple of examples will serve to illustrate the point I’m making. Hastings accepted substantial personal bribes and then went on to wage war against the bribe-giver (one wonders whether to deplore his avarice or admire him for the fact that despite being ‘paid for’, he refused to be ‘bought’). His brazenness in such matters compels admiration: when he tortured and exacted every last ounce of treasure from the assets of the widowed Begums of Oude, Hastings duly informed the Council that he had received a ‘gift’ of 10 lakh rupees (£100,000 in those days, a considerable fortune) from the spoils and requested their formal permission to keep it for himself. The Council, mindful no doubt of the larger sum that would go on the Company’s balance sheet, readily concurred.

Burke, in his opening speech at the impeachment of Hastings, also accused the East India Company of ‘cruelties unheard of and devastations almost without name…crimes which have their rise in the wicked dispositions of men in avarice, rapacity, pride, cruelty, malignity, haughtiness, insolence’. He described in colourfully painful detail the violation of Bengali women by the British-assigned tax collectors—‘they were dragged out, naked and exposed to the public view, and scourged before all the people… they put the nipples of the women into the sharp edges of split bamboos and tore them from their bodies’—leading Sheridan’s wife to swoon in horror in Parliament, from where she had to be carried out in distress. More indictments followed in the mellifluous and stentorian voices of Sheridan and Charles James Fox, but in the end, Hastings was acquitted, restoring the image of the Empire in the eyes of the British public and serving to justify its continuing rapacity for a century and a half more.

But the problem went well beyond Hastings. The preacher William Howitt speaking in 1839, while the Company was still in power, lamented that ‘the scene of exaction, rapacity, and plunder which India became in our hands, and that upon the whole body of the population, forms one of the most disgraceful portions of human history… There was but one object in going thither, and one interest when there. It was a soil made sacred, or rather, doomed, to the exclusive plunder of a privileged number. The highest officers in the government had the strongest motives to corruption, and therefore could by no possibility attempt to check the same corruption in those below them… Every man, in every department, whether civil, military, or mercantile, was in the certain receipt of splendid presents.’

Even Lord Macaulay (who, as we have seen, thought very highly of the Company, and was employed by it for several years) was moved to write: ‘the misgovernment of the English was carried to such a point as seemed incompatible with the existence of society… The servants of the Company forced the natives to buy dear and sell cheap… Enormous fortunes were thus rapidly accumulated at Calcutta, while thirty millions of human beings were reduced to the extremity of wretchedness. They had never [had to live] under tyranny like this…’ Macaulay added that whereas evil regimes could be overthrown by an oppressed people, the English were not so easily dislodged. Such an indictment, coming from a liberal Englishman and an architect of the Empire, with whom we will have other bones to pick later, is impossible to contradict.

 

REVENUE COLLECTION AND THE DRAIN OF RESOURCES

It is instructive to see both the extent to which House of Commons debates on India were dominated by figures of the revenues from India, which seemed to many to justify every expediency the East India Company’s officers resorted to; and the extent to which, at the same time, contemporary observers were horrified by the excesses occurring in their country’s name.

The prelate Bishop Heber (whose contempt for idol-worship led him to author the famous lines about a land ‘where every prospect pleases / And only Man is vile’) wrote in 1826 that ‘the peasantry in the Company’s provinces are, on the whole, worse off, poorer, and more dispirited, than the subjects of the Native princes’. In an extraordinary confession, a British administrator in Bengal, F. J. Shore, testified before the House of Commons in 1857: ‘The fundamental principle of the English has been to make the whole Indian nation subservient, in every possible way, to interests and benefits of themselves. They have been taxed to the utmost limit; every successive province, as it has fallen into our possession, has been made a field for higher exaction; and it has always been our boast how greatly we have raised the revenue above that which the native rulers were able to extort.’

Many of those ‘native rulers’ may well have been ineligible for a modern UN good governance award, but the Company, as Shore admitted, was decidedly worse. Where the British did not choose to govern directly themselves, they installed rulers of ‘princely states’ who were circumstantially allied with their cause. These potentates were charged copious ‘fees’ in exchange for installing them on their thrones and for security from enemy states—an imperial version of the ‘protection money’ racket since practised by the Mafia. (The British called it, more prosaically, a policy of ‘subsidiary alliances’.) The princes were allied with the Company and paid generously for the British contingents in their kingdoms that were placed there for their security. If they did not, these contingents could be turned against them.

In early nineteenth-century Hyderabad, for instance, the ruling nizam was dragooned into signing up for British protection at the inflated costs the Company chose to charge (the commander, for instance, received an exorbitant £5,000 a month). All the payments to the British were debited to his treasury, which in turn was made to borrow, at a 24 per cent interest rate, from a bank established in 1814 by an associate of the Governor General. Before he knew it, the nizam owed millions to the bank and rueful voices had coined the catchphrase, ‘Poor Nizzy pays for all’. A similar arrangement laid low the Nawab of Arcot further south, whose ‘debts’ to the Company so exceeded his capacity to pay that he had to cede the British most of his territories as a form of repayment.

Having acquired rights to collect revenue early on in the Company’s overlordship, the British proceeded to squeeze the Indian peasant dry. On the one hand they had very few officials who were deployed into the countryside to collect revenue. On the other hand, they couldn’t trust these agents entirely, and increasingly a code of written rules began to govern the collection of revenue. Where local leaders had once understood local conditions, making due allowances for droughts and crop failures or even straitened family circumstances and such exigencies as deaths and weddings, now British revenue collectors ruled with a rule book that allowed no breathing space for negotiation or understanding local problems at a given time. ‘The aim of the new system was to secure the Company’s collection of revenue without the need to negotiate with India’s local elites… The idea was to replace face-to-face conversation with written rules. The rules insisted landholders paid a fixed amount of money each month with rigorous punctuality, and did not disturb the peace… But the system undermined the negotiation and face-to-face conversation which had been so essential to the politics of eighteenth-century India. As a result, it brought dispossession and the collapse of a once-rich region’s wealth.’

The British ran three major types of revenue systems: zamindari, mostly in eastern India and a third of the Madras Presidency; raiyatwari or ryotwari in much of the south and parts of the north; and mahalwari in western India. The British introduced the permanent settlement of the land revenue in 1793 as part of the zamindari system. Under this scheme, the Indian cultivators were charged not on the traditional basis of a share of crops produced but by a percentage of the rent paid on their land. This system meant that if the farmer’s crop failed, he would still not be exempt from paying taxes. On occasion, the tax demanded by the British, based on the potential rather than actual value of the land, exceeded the entire revenue from it. In the ryotwari and mahalwari areas, the revenue demand was not permanently settled, but rather periodically revised and enhanced, with even more onerous results. To make matters worse, the revenue had to be paid to the colonial state everywhere in cash, rather than kind (whether directly by the peasants or through zamindari intermediaries) and there was a revenue or rent offensive everywhere until the 1880s, after which even larger amounts were extracted from the peasantry from the 1880s to 1930 by the mechanism of debt. William Digby calculated that ‘the ryots in the Districts outside the permanent settlement get only one half as much to eat in the year as their grandfathers did, and only one-third as much as their great-grandfathers did. Yet, in spite of such facts, the land tax is exacted with the greatest stringency and must be paid to the Government in coin before the crops are garnered!’

Bishop Heber acknowledged in 1826, ‘No native prince demands the rent which we do’. The English-educated Romesh Chunder Dutt, an early Indian voice of economic nationalism, acknowledging that some earlier Muslim rulers had also levied swingeing taxes, pointed out that ‘the difference was this, that what the Mahomedan rulers claimed they could never fully realize; what the British rulers claimed they realized with vigour’. The land tax imposed in India averaged between 80–90 per cent of the rental. Within thirty years, land revenue collected just in Bengal went up from £817,553 to £2,680,000. The extortion might have been partly excused if the taxes were being returned to the cultivators in the form of public goods or services, but the taxes were sent off to the British government in London. The ‘permanent settlement’ proved repressive for the Indian economy and all but destroyed Indian agriculture. Taxation and the general conditions of life under the East India Company were so unpleasant and onerous that, as I have mentioned earlier, as many as could fled their traditional homes for refuge in domains beyond the Company’s remit, whereas the migration of Indian peasants from the ‘native states’ to British India was unheard of through most of the nineteenth century.

The Company did not care about the superstitions, the social systems or the indignities that Indians practised upon each other so long as they paid their taxes to the Company. Taxes were officially levied for the express purposes of improving the towns, building bridges and canals, reservoirs and fortifications, but (as Burke pointed out in Parliament) the work was soon forgotten and the taxes continued to be levied. A committee of the House of Commons declared ‘that the whole revenue system resolved itself, on the part of the public officers, into habitual extortion and injustice’, whilst ‘what was left to the ryot (peasant) was little more than what he was enabled to procure by evasion and concealment’.

The ryotwari and mahalwari systems of taxation had the additional feature of abolishing all private property which had belonged both to the affluent as well as the inferior cultivating classes, thereby abolishing century-old traditions and ties that linked people to the land. As we have seen, Pitt’s India Act was passed in 1784 and formalized British authority to collect revenue from India. In Bengal, the British ignored the hereditary rights of the zamindars and sold their estates by auction to enhance the Company’s revenues.

As long as the East India Company was in charge, its profits skyrocketed to the point that its dividend payouts were legendary, making its soaring stock the most sought-after by British investors. When its mismanagement and oppression culminated in the Revolt of 1857, called by many Indian historians the First War of Independence but trivialized by the British themselves as the ‘Sepoy Mutiny’, the Crown took over the administration of this ‘Jewel in the Crown’ of Her Britannic Majesty’s vast empire. But it paid the Company for the privilege, adding the handsome purchase price to the public debt of India, to be redeemed (both principal and generous rates of interest) by taxing the victims, the Indian people.

And the objective remained the same—the greater good of Britain. The drain of resources from India remained explicitly part of British policy. The Marquess of Salisbury, using a colourful metaphor as Secretary of State for India in the 1860s and 1870s, said: ‘As India is to be bled, the lancet should be directed to those parts where the blood is congested… [rather than] to those which are already feeble for the want of it.’ The ‘blood’, of course, was money, and its ‘congestion’ offered greater sources of revenue than the ‘feeble areas’. (Salisbury went on to become prime minister.)

Cecil Rhodes openly avowed that imperialism was an essential solution to the cries for bread among the unemployed working-class of England, since it was the responsibility of colonial statesmen to acquire lands to settle the surplus population and create markets for goods from British factories. Swami Vivekananda, the Indian sage, reformer and thinker, saw the British as a caste akin to the Vaisyas, governed by the logic of commerce and purely pecuniary considerations, who understood the price of everything they found in India but the value of nothing. The Bengali novelist Bankim Chandra Chatterjee wrote of the English ‘who could not control their greed’ and from whose vocabulary ‘the word morality had disappeared’.

***

By the end of the nineteenth century, India was Britain’s biggest source of revenue, the world’s biggest purchaser of British exports and the source of highly paid employment for British civil servants and soldiers all at India’s own expense. We literally paid for our own oppression.

Taxation remained onerous. Agricultural taxes amounted at a minimum to half the gross produce and often more, leaving the cultivator less food than he needed to support himself and his family; British estimates conceded that taxation was two or three times higher than it had ever been under non-British rule, and unarguably higher than in any other country in the world. Each of the British ‘presidencies’ remitted vast sums of ‘savings’ to England, as of course did English civil servants, merchants and soldiers employed in India. (After a mere twenty-four years of service, punctuated by and including four years of ‘home leave’ furloughs, the British civil servant was entitled to retire at home on a generous pension paid for by Indian taxpayers: Ramsay MacDonald estimated in the late 1920s that some 7,500 Englishmen were receiving some twenty million pounds annually from India as pension.)

While British revenues soared, the national debt of India multiplied exponentially. Half of India’s revenues went out of India, mainly to England. Indian taxes paid not only for the British Indian Army in India, which was ostensibly maintaining India’s security, but also for a wide variety of foreign colonial expeditions in furtherance of the greater glory of the British empire, from Burma to Mesopotamia. In 1922, for instance, 64 per cent of the total revenue of the Government of India was devoted to paying for British Indian troops despatched abroad. No other army in the world, as Durant observed at the time, consumed so large a proportion of public revenues.

It is striking how brazenly funds were siphoned off from India. Even accounting tables were subject to completely euphemistic entries to mask extraction: thus while trade figures showed a significant surplus, the subtraction of vast amounts under the headings ‘Home Charges’ and ‘Other Invisibles’ [sic] gave India a huge net deficit. Paul Baran calculated that 8 per cent of India’s GNP was transferred to Britain each year.[1] No wonder the nineteenth-century Indian nationalist Dadabhai Naoroji found evidence even in the published accounts of the British empire to evolve his ‘drain theory’ of extraction and indict the colonialists for creating poverty in India through what he diplomatically termed their ‘un-British’ practices. Naoroji argued that India had exported an average of £13,000,000 worth of goods to Britain each year from 1835 to 1872 with no corresponding return of money; in fact, payments to people residing in Britain, whether profits to Company shareholders, dividends to railway investors or pensions to retired officials, made up a loss of £30 million a year. What little investment came from Britain served only imperial interests. India was ‘depleted’, ‘exhausted’ and ‘bled’ by this drain of resources, which made it vulnerable to famine, poverty and suffering. The extensive and detailed calculations of William Digby, the British writer, pointed to the diminishing prosperity of the Indian people and the systematic expropriation of India’s wealth by Britain— including the telling fact that the salary of the Secretary of State for India in 1901, paid for by Indian taxes, was equivalent to the average annual income of 90,000 Indians.

Angus Maddison concluded clearly: ‘There can be no denial that there was a substantial outflow which lasted for 190 years. If these funds had been invested in India they could have made a significant contribution to raising income levels.’ Official transfers and private remittances to the UK from Indian earnings were compounded by excessively high salaries for British officials. It did not help, of course, that the British Raj was a regime of expatriates, whose financial interests lay in England. In the past, and had an Indian administration been in power, income from government service would have been saved and spent locally; instead it all went to foreigners, who in turn sent it abroad, where their real interests lay. In most societies, the income of the overlords is an important source of economic development since it puts purchasing power into the hands of people who can spend it for the local good and indirectly promote local industry. But the lavish salaries and allowances of the Government of India were being paid to people with commitments in England and a taste for foreign goods in India. This increased imports of British consumer items and deeply damaged the local industries that had previously catered to the Indian aristocracy—luxury goods makers, handicraftsmen, fine silk and muslin weavers, who found limited or no taste for their offerings among the burra sahibs (and especially their prissy English memsahibs).

In 1901, William Digby calculated the net amount extracted by the economic drain in the nineteenth century, with remarkable (and inevitably, bitterly contested) precision, at £4,187,922,732. While that would amount, in today’s money, to about a ninth of Minhaz Merchant’s calculations, it only accounted for the nineteenth century. Worse was to follow in the twentieth.

***

 

A small digression is in place here. That India contributed such a significant amount to Britain’s imperial expansion can be seen from the frequency with which troops were dispatched overseas for wars which had nothing to do with India and everything to do with protecting or expanding British interests. And all this was accomplished by Indian funds, especially land revenue wrested from the labour of the wretched peasantry or collected from various princely states through ‘subsidiary alliances’.

A list of Indian Army deployments overseas by the British in the nineteenth century and the first decade of the twentieth is instructive: China (1860, 1900–01), Ethiopia (1867–68), Malaya (1875), Malta (1878), Egypt (1882), Sudan (1885–86, 1896), Burma (1885), East Africa (1896, 1897, 1898), Somaliland (1890, 1903–04), South Africa (1899, but white troops only) and Tibet (1903). Some significant numbers worth mentioning include: 5,787 Indian troops contributed to the Chinese War of 1856-57 that ended in the Treaty of Tientsin (1857) and control of Canton; 11,000 troops sent in 1860 to China, whose campaign ended in the capture and control of Peking; 12,000 troops to release British captives from Abyssinia (Ethiopia); 9,444 troops and over 1,479,000 rupees contributed in the suppression of rebellion in Egypt in 1882 and 1896; and 1,219 soldiers dispatched to quell mutiny in East Africa. Britain used the British Indian Army to complete its conquest of the Indian subcontinent in the Kandyan War of 1818 in Ceylon (Sri Lanka); and the Burmese War of 1824-26, in which six of every seven soldiers of the British Indian Army fell as casualties to sickness or war. As late as World War II, among the ‘few of the few’ who bravely defended England against German invasion in the Battle of Britain were Indian fighter pilots, including a doughty Sikh who named his Hurricane fighter ‘Amritsar’.

The British had a standing army of 325,000 men by the late nineteenth century, two thirds of which was paid for by Indian taxes. Every British soldier posted to India had to be paid, equipped and fed and eventually pensioned by the Government of India, not of Britain. There were significant disparities in the rank, pay, promotion, pensions, amenities and rations between European and Indian soldiers. Biscuits, rice, flour, raisins, wine, pork and beef, authorized to the European soldier, came from Indian production.

In addition to soldiers, India’s labour and commercial skills helped cement imperial rule in many of the British colonies abroad. Indian labour was used to foster plantation agriculture in Malaya, southeast Africa and the Pacific, build the railways in Uganda, and make Burma the rice bowl of Southeast Asia. Indian retailers and merchants developed commercial infrastructure with lower overheads than their European counterparts. Indians also administered, in junior positions of course, the colonies in China and Africa. In the nineteenth century, large numbers of them were forced to migrate as convicts or indentured labourers to faraway British colonies, as we shall see in Chapter 5.

But India was denied any of the rewards or benefits of imperialism. The sacrifice that Indian troops made for the advancement of British interests, the results of which linger even today, was acknowledged neither in compensation to them nor the families they left behind, nor by any significant accretion to the well-being of India. (And this does not even take into account the huge contributions made by India and Indian soldiers in the two World Wars, which I will discuss later.)

***

In the era of Company rule, the British disregard for treaties, solemn commitments, and even the payment of sums they had demanded in exchange for peace, became legendary: Hyder Ali, a warrior prince whom they had attacked without provocation, considered them to be ‘the most faithless and usurping of mankind’. William Howitt deplored ‘how little human life and human welfare, even to this day, weigh in the scale against dominion and avarice. We hear nothing of the horrors and violence we have perpetrated, from the first invasion of Bengal, to those of Nepaul and Burmah; we have only eulogies on the empire achieved: “See what a splendid empire we have won!”’[2]

The assumption of responsibility by the Crown also witnessed the dawn of a new language of colonial justification—the pretence that Britain would govern for the welfare of the Indian people. When an Englishman wants something, George Bernard Shaw observed, he never publicly admits to his wanting it; instead, his want is expressed as ‘a burning conviction that it is his moral and religious duty to conquer those who possess the thing he wants’. Durant is scathing about this pretence: ‘Hypocrisy was added to brutality, while the robbery went on.’

And went on it did. The British liked to joke, with self-disparaging understatement, that they had stumbled into a vacuum and acquired their empire in India ‘in a fit of absence of mind’, in the oft-quoted words of the Cambridge imperial historian John Seeley. (Seeley, in his Expansion of England, had claimed disingenuously that the ‘conquest of India was not in its proper sense a conquest at all’.) But the reality was starker and more unpleasant: large-scale economic exploitation was not just deliberate; it was only possible under an umbrella of effective political and economic control. The Company’s expansion may well have flowed from a series of tactical decisions made in response to events and in a desire to seize opportunities that presented themselves to the beady eyes of Company officials, rather than from some imperial master plan. But they followed a remorseless logic; as Clive said to justify the expansion of his British empire in India, ‘To stop is dangerous; to recede ruin.’ As we have seen, kingdom after kingdom was annexed by the simple expedient of offering its ruler a choice between annihilation in war and a comfortable life in subjugation. When war was waged, the costs were paid by taxes and tributes exacted from Indians. Indians paid, in other words, for the privilege of being conquered by the British.

William Howitt wrote indignantly in 1839: ‘The mode by which the East India Company has possessed itself of Hindostan [is] the most revolting and unchristian that can possibly be conceived… The system which, for more than a century, was steadily at work to strip the native princes of their dominions, and that too under the most sacred pleas of right and expediency, is a system of torture more exquisite than regal or spiritual tyranny ever before discovered.’

But as Ferdinand Mount—a descendant of a famous Company general himself—recently explained, it was all the simple logic of capitalism: ‘The British empire in India was the creation of merchants and it was still at heart a commercial enterprise, which had to operate at profit and respond to the ups and downs of the market. Behind the epaulettes and the jingle of harness, the levees and the balls at Government House, lay the hard calculus of the City of London.’

In his Poverty and Un-British Rule in India, Dadabhai Naoroji—who in 1892 became the first Indian elected to the British House of Commons, there to argue the case for India in the ‘mother of parliaments’ (and also to support Irish Home Rule) by appealing futilely to the better nature of the English—laid out the following indictment based entirely on the words of the British themselves:

Mr. Montgomery Martin, after examining…the condition of some provinces of Bengal and Behar, said in 1835 in his Eastern India: ‘It is impossible to avoid remarking two facts as peculiarly striking, first the richness of the country surveyed, and second, the poverty of its inhabitants… The annual drain of £3,000,000 on British India has amounted in thirty years, at compound interest, to the enormous sum of £723,900,000. So constant and accumulating a drain, even in England, would soon impoverish her. How severe then must be its effects on India when the wage of a labourer is from two pence to three pence a day…

Mill’s History of India (Vol. VI, p. 671; ‘India Reform Tract’ II, p. 3) says: ‘It is an exhausting drain upon the resources of the country, the issue of which is replaced by no reflex; it is an extraction of the life blood from the veins of national industry which no subsequent introduction of nourishment is furnished to restore.’

Sir George Wingate has said (1859): ‘Taxes spent in the country from which they are raised are totally different in their effect from taxes raised in one country and spent in another. In the former case the taxes collected from the population… are again returned to the industrious classes… But the case is wholly different when the taxes are not spent in the country from which they are raised… They constitute [an] absolute loss and extinction of the whole amount withdrawn from the taxed country… [The money] might as well be thrown into the sea. Such is the nature of the tribute we have so long exacted from India.’

Lord Lawrence, Lord Cromer, Sir Auckland Colvin, Sir David Barbour, and others have declared the extreme poverty of India…

Mr. F. J. Shore’s opinion: ‘the halcyon days of India are over; she has been drained of a large proportion of the wealth she once possessed, and her energies have been cramped by a sordid system of misrule to which the interests of millions have been sacrificed for the benefit of the few… The gradual impoverishment of the people and country, under the mode of rule established by the British Government, has hastened their fall.’

 

THE DESTRUCTION OF SHIPPING AND SHIPBUILDING

It was bad enough that the theft was so blatant that even Englishmen of the time acknowledged it. Worse, Indian industry was destroyed, as was Indian trade, shipping and shipbuilding. Before the British East India Company arrived, Bengal, Masulipatnam, Surat, and the Malabar ports of Calicut and Quilon had a thriving shipbuilding industry and Indian shipping plied the Arabian Sea and the Bay of Bengal. The Marathas even ran a substantial fleet in the sixteenth century; the navy of Shivaji Bhonsle defended the west coast against the Portuguese threat. Further south, the seafaring prowess of the Muslim Kunjali Maraicars prompted the Zamorin of Calicut in the mid-sixteenth century to decree that every fisherman’s family in his kingdom should bring up one son as a Muslim, to man his all-Muslim navy. The Bengal fleet in the early seventeenth century included 4,000 to 5,000 ships at 400 to 500 tonnes each, built in Bengal and employed there; these numbers increased till the mid-eighteenth century, given the huge popularity of the goods and products they carried. This thriving shipping and shipbuilding culture would be drastically curbed by the British.

To reduce competition after 1757, the Company and the British ships that they contracted were given a monopoly on trade routes, including those formerly used by the Indian merchants. Duties were imposed on Indian merchant ships moving to and from Indian ports, not just foreign ones. This strangled the native shipping industry to the point of irrelevance in everything but some minor coastal shipping of low-value ‘native’ goods to local consumers.

The self-serving nature of British shipping policy was made apparent during the Napoleonic Wars, which led to a severe shortage of British merchant vessels. (The war of 1803 destroyed 173,000 tons of British shipping, forcing the government in London to employ 112,890 tonnes of foreign vessels to conduct British commerce.) Expediently, Indian shipping was now deemed to be British and Indian sailors were reclassified as British sailors, allowing them access to British trade routes under the Navigation Acts. But as soon as the Napoleonic Wars ended, the Navigation Acts were again amended to exclude Indian shipping and the industry once again declined.

The story was repeated in the early twentieth century, when V. O. Chidambaram Pillai in Madras was allowed to set up a shipping company in the run-up to World War I. His success set the alarm bells ringing, however, and when regulations alone did not destroy his business, he was quickly jailed for his nationalist views, breaking his spirit as well as the back of his enterprise. The nascent Indian shipping line was driven out of business. The experience of Indian shipping confirms that British authorities cynically and deliberately exploited Indian industries in their time of need and otherwise suppressed them.

Indian shipbuilding (which had long thrived in a land with such a long coastline) offers a more complex but equally instructive story. After an initial period of stagnation and decline after the advent of the East India Company to power, Indian shipbuilding revived in Bengal in the last quarter of the eighteenth century. This was thanks to British entrepreneurs, who realized the advantages of constructing their vessels in Calcutta itself, using Indian workers. By 1800, Governor General Wellesley reported that the British Indian port of Calcutta had 10,000 tonnes of cargo shipping built in India. Between 1801 and 1839 a further 327 ships were built in Bengal, all British-owned.

The reasoning for this commercial British-led activity in India was purely professional and based on sound economic calculations. Indian workmanship and the country’s long shipbuilding tradition were highly valued by British shipwrights, who found themselves adopting many Indian techniques of naval architecture in constructing their own vessels. The Indian vessels, a contemporary British observer wrote, ‘united elegance and utility and are models of patience [sic] and fine workmanship.’ Indian workers were considered expert in all shipbuilding materials— wood, iron and brass (high-tensile brass was indispensable to the building of wooden ships, since it was used for ship fittings, source-water pumps, shaft liners and even nails). And their work proved remarkably durable: the average lifespan of a Bengal-built ship exceeded twenty years, whereas English-built vessels never lasted more than eleven or twelve, and often had to be rebuilt or repaired at Indian ports. (Part of the reason for this may have lain in the quality of the hardwood Indians used in shipbuilding, mainly teak and sal, as opposed to the British oak and fir.)

This meant that not only was the cost of production of vessels made in India lower than that of British, but depreciation took longer, adding to the value proposition for British entrepreneurs. As a result of their lower costs, they were also able to charge lower rates for freight than companies using ships made in England. So attractive was it for British entrepreneurs to build ships in India that by the second decade of the nineteenth century, there was rising unemployment in the shipbuilding industry at home— shipwrights, caulkers, sawyers and joiners in their hundreds were reported on the unemployment rolls in London.

British-based businesses simply could not compete, and so they petitioned Parliament for a ban on Indian shipbuilding. The first legislative act in their favour came in 1813 with a law that prohibited ships below 350 tonnes from plying between the Indian colonies and the United Kingdom. That took some 40 per cent of Bengal-built ships out of the lucrative India-England trade. A further Act in 1814 denied Indian-built ships the privilege of being deemed ‘British-registered vessels’ to trade with the United States and the European continent. Though they could still, in theory, trade with China, that sector had become unprofitable, since the previous practice had been to sail from Calcutta with Indian goods to China, load up on tea there for London, and then return to Calcutta with British goods; with the London sector banned to them, these ships could only sail from Calcutta to China and back, but there was no market for Chinese goods in India (Indians were not yet tea-drinkers!) and the ships, denied access to London, often had to return empty.

Meanwhile Indian sailors, for good measure, were also deemed non-British and companies were discouraged from recruiting them for voyages to England, where they were likely to be exposed to licentious behaviour by the locals that would ‘divest them of the respect and awe they had entertained in India for the European character’. (Morality and racism could always be used to dress up naked commercial interests.) Though, given the lack of available British seamen in Indian ports, these sailors could be allowed to crew the larger vessels upon issuance of a certificate from the governor that no British substitutes were available, the law required the ship-owner to hire a British crew for the return journey from England, significantly driving up the journey’s costs—both because he, in effect, had to pay for two crews and because the British sailors charged much higher wages.

The advantages for British companies of building ships in India and operating them from there, in other words, began to disappear as a result of policies of deliberate legislative discrimination. India’s once-thriving shipbuilding industry collapsed, and by 1850 was essentially extinct. This had nothing to do, as some have suggested, with changing technology that India could allegedly not keep up with: the collapse began well before steamships had begun to overtake sailing vessels, and in any case Bengal had proved adept at building steam vessels too, before the new laws and the resultant reduction in market opportunities made such activity unremunerative. As the Victorian commentator William Digby was to observe, the Mistress of the Seas of the Western world had killed the Mistress of the Seas of the East.

Other commercial enterprises were no exception to the practice of discrimination. One form of colonial discrimination that was almost ubiquitous and extremely effective was the use of currency to separate British businesses from Indian ones, and regulate the opportunities available to each. The division of businesses into ‘sterling’ (companies operating out of London) and ‘rupee’ (companies that operated out of India) created a commercial gulf that could not easily be bridged. Only the British could invest in sterling companies, while rupee companies were open to both British and Indian investment. Sterling companies tended to focus on utilities, tea and jute; this meant that there were significant barriers to entry for Indians in these markets, which the British reserved for themselves. Moreover, all sterling companies were required to have a British managing agent to oversee them before London-based investors would commit capital. Indian investors were simply kept out. Thus, of 385 joint stock companies in the tea industry in India as late as 1914, 376 were based in Calcutta; and all were owned by the British. Scholars have established that in 1915, 100 per cent of the jute mills in India were in British hands; by 1929 this was down to 78 per cent, still enshrining British dominance.

British India occupied a unique position in the imperial trade and payments system. From 1910 to 1947, the Indian economy underwent a series of monetary and exchange rate experimentations. These included, amongst others, a transition from gold bullion to a sterling exchange standard; a controversial fixed-exchange rate system to manage the deliberate depreciation of the rupee; a gradual improvement in a weakly functioning formal banking system; and finally, the establishment of the Reserve Bank of India (1934/35) with limited authority. Buffeted by global and imperial forces of demand and supply, India suffered severe price volatility of some 20–30 per cent a year. The British used the fixed exchange rate regimes as it suited them, basically to accommodate British current account deficits and other domestic exigencies, with scant regard for their Indian subjects. Such policies exacerbated India’s financial instability, adding to the miseries endured by Indians under the Raj.

The manipulation of currency, throughout a feature of the colonial enterprise, reached its worst during the Great Depression of 1929-30, when Indian farmers (like those in the North American prairies) grew their grain but discovered no one could afford to buy it. Agricultural prices collapsed, but British tax demands did not; and cruelly, the British decided to restrict India’s money supply, fearing that the devaluation of Indian currency would cause losses to the British from a corresponding decline in the sterling value of their assets in India. So Britain insisted that the Indian rupee stay fixed at 1 shilling sixpence, and obliged the Indian government to take notes and coins out of circulation to keep the exchange rate high. The total amount of cash in circulation in the Indian economy fell from some 5 billion rupees in 1929 to 4 billion in 1930 and as low as 3 billion in 1938. Indians starved but their currency stayed high, and the value of British assets in India was protected.

At other times, the steady depreciation of the rupee was a deliberate part of British policy to strengthen the purchasing power of the pound sterling and weaken the economic clout of those who earned only in local currency. A currency which had once been among the strongest in the world in the seventeenth century was reduced to a fraction of its former value by the end of the nineteenth. Even Miss Prism in Oscar Wilde’s 1895 play The Importance of Being Earnest could not fail to take note, instructing her impressionable ward Cecily to ‘read your Political Economy in my absence. The chapter on the Fall of the Rupee you may omit. It is somewhat too sensational. Even these metallic problems have their melodramatic side.’

 

STEALING FROM INDIAN STEEL

The story of the Indian steel industry demonstrates how the exploitation continued into the late colonial period, which has sometimes been represented by apologists for Empire as a more enlightened period of colonial rule. Oppression and discrimination had merely become more sophisticated.

The British were unalterably opposed to India developing its own steel industry. India had, of course, been a pioneer of steel; as early as the sixth century, crucible-formed steel, which came to be known as ‘wootz’ (a corruption of the Kannada word ‘ukku’, mistranscribed in English as ‘wook’ and mangled into ‘wootz’) steel was made in the country, and Indian steel acquired global renown as the world’s finest. (The establishment by Arabs of a steel industry based on Indian practices in the twelfth century gave the world the famous Damascus steel.) Indian-made swords were legendary. Indeed, in the early days of British colonial expansion into India, Indian swords were so far superior to European ones that English troopers in battle would often dismount and swap their own swords for the equipment of the vanquished foe. The British learned as much of the technology as possible and then shut down India’s metallurgical industries by the end of the eighteenth century. Attempts to revive it met with resistance and then with racist derision.

When Jamsetji Tata tried to set up India’s first modern steel mill in the face of implacable British hostility at the turn of the century (he began petitioning the British for permission in 1883, and raised money from Indian investors; after repeated denials and delays it finally began production in 1912 under his son Dorabji), a senior imperial official sneered that he would personally eat every ounce of steel an Indian was capable of producing. It’s a pity he didn’t live to see the descendants of Jamsetji Tata taking over what remains of British Steel, through Tata’s acquisition of Corus in 2006: it might have given him a bad case of indigestion. (Tata Steel’s subsequent decision to pull out of Britain, and the British government’s frantic scurrying to salvage the detritus of its steel industry, might also prompt a soupçon of schadenfreude in some Indians.)

When the Tatas went ahead anyway, inspiring other Indians, the British devised effective ways to curb their growth. The two biggest consumers of steel in India, the government and the railways (both controlled by the British) insisted on British Standard Specification Steel (BSSS), which was of much higher quality than the Non-British Standard Specification Steel (NBSSS) used by most of the rest of the world. The requirement for BSSS was originally designed to exclude cheaper continental steel from the colonial Indian market, but it also served to hamper Indian steelmakers. Domestic producers of steel in India, such as Tata, were forced to meet these higher standards or be excluded from contracts with the government and railways.

By focusing on producing BSSS, as required by law, Indian firms could not simultaneously produce the cheaper NBSSS that was used throughout most of the non-British world. The high-cost base of India’s domestic production as a result of BSSS production rendered Indian steel uncompetitive in the wider international market, both during the Great Depression and the late 1930s recovery. Other developing countries in a comparable situation to India in the 1930s developed their steel industries using NBSSS without major problems.

They could, of course, export BSSS steel to Britain, which the British steel industry would not welcome. So restrictions were placed by Britain on Indian steel imports. The British demonstrated brilliantly that they could have their steel cake and eat it too.

India was, in other words, forced to make and use steel that was surplus to its requirements, restricted in its ability to find overseas markets for it, and curbed in every attempt at expansion. Indian companies such as Tata Steel thus had few opportunities to grow within the British economic ecosystem.

As we know, some apologists for British rule argue that the condemnation of Britain for its destruction of Indian industry and economic growth is unjustified. Britain, they claim, did not deindustrialize India; India’s share of world GDP merely went down because India ‘missed the bus’ for industrialization, failing to catch up on the technological innovations that transformed the West. India had a significant world share of GDP when the world was highly agrarian. As the world changed, they argue, other countries overtook India because of scientific and industrial progress that India was unable to make.

That is a highly disputable proposition. As I have demonstrated, deindustrialization was a deliberate British policy, not an accident. British industry flourished and Indian industry did not because of systematic destruction abetted by tariffs and regulatory measures that stacked the decks in favour of British industry conquering the Indian market, rather than the other way around. The economic exploitation of India was integral to the colonial enterprise. And the vast sums of Indian revenues and loot flowing to England, even if they were somewhat less than the billions of pounds Digby estimated, provided the capital for British industry and made possible the financing of the Industrial Revolution.

Left to itself, why wouldn’t existing Indian industry have modernized, as industry in other non-colonized countries did? None of those criticizing India’s lack of technological innovation can explain why a country that was at the forefront of innovation and industrial progress in other eras suddenly lost its ability to innovate in the eighteenth and nineteenth centuries. I have touched upon the skills of Indian steelmakers and shipbuilders, but under other rulers and regimes that fostered innovation, Indians excelled at mathematics, physics, medicine, mining, metallurgy and even rocketry (under Tipu Sultan and Hyder Ali).

True, there could only have been scientific and technological innovation if a forward-looking Indian ruler had endowed the country with educational and scientific institutions where such research would have taken place. The British, however, failed to create such institutions; the foremost Indian research institution under the British empire, the Indian Institute of Science, was endowed by the legendary Jamsetji Tata, not by any British philanthropist, let alone by the colonial government. And if competition with an industrializing Europe was a challenge, why wouldn’t a free India have used a level playing field to its own advantage, levying its own tariffs when protection was needed, giving its own subsidies and developing its own existing global markets?

It is preposterous to suggest that India’s inability to industrialize while the Western world did so was an Indian failure, the result of some sort of native deficiency, rather than the deliberate result of systematically planned policies by those who ruled India, the British. If India’s GDP went down because it ‘missed the bus’ of industrialization, it was because the British threw Indians under the wheels.

There is an ironic footnote to the issue of Britain’s economic exploitation of India, in these days of Scottish nationalism and feverish speculation about the future of the Union. It is often forgotten what cemented the Union in the first place: the loaves and fishes available to Scots from participation in the colonial exploits of the East India Company. Before Union with England, Scotland had attempted, but been singularly unsuccessful at, colonization, mainly in Central America and the Caribbean. Once Union came, India came with it, along with a myriad opportunities. A disproportionate number of Scots were employed in the colonial enterprise, as soldiers, sailors, merchants, agents and employees. Though Scots constituted barely 9 per cent of Britain’s people, they accounted for 25 per cent of those employed by the British in India. Their earnings in India pulled Scotland out of poverty and helped make it prosperous. The humming factories of Dundee, the thriving shipyards, and the remittances home from Scots working in India, all stood testimony to the profitable connection. Sir Walter Scott wrote of India as ‘the corn-chest for Scotland’. With India gone, no wonder the Scottish bonds with England are loosening…

[1] This dubious distinction has now been inherited by the Pakistan Army, which today consumes a greater proportion of national resources than any army in the world. Perhaps some Pakistanis can blame this on the British legacy!

[2] India’s immense contributions to World War I are discussed in detail in Chapter 2. The figures for World War II are also instructive. At the beginning of the war (in 1939), the Indian Army stood at 194,373 men; it was raised to 2,065,554 men by 1945, serving both in India and overseas. The air force employed another 29,201 soldiers and the Royal Indian Navy had 30,478. (Bhatia, 1977, pp. 234–235.) Indian Army battle casualties were high, amounting to 149,225 between 1 Sept 1939 and 28 Feb 1945. Material assistance was also significant. One ironic detail, given Britain’s attempts to strangle India’s steel industry: India shipped 7,000 tonnes of steel sheet rolls to the UK after British steel shipments were lost at sea.

 

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