The Phases of COLONIAL RULE IN INDIA

Britain’s relationship with her Indian colony was of political subordination and economic exploitation that continued for almost 200 years and finished with the independence of our country in 1947. 

The Colonial exploitation was carried on broadly through three phases. The first phase (1757 – 1813) was direct plunder or mercantilism in which surplus Indian revenues were used to buy Indian finished goods to be exported to England. In the second phase (1813 – 1857) it was free trade, when India was converted into a source of raw material and a market for British manufactured goods. The third phase (1858 – 1947) was one of financial imperialism in which British capital controlled the Indian banks, foreign trading firms and management agencies. 

This phased exploitation was carried out through a range of economic policies, primarily in the industrial and agricultural sectors of the colonial economy helped by the iron grip on the administration of the country. 

The First Phase of British Colonialism (1757 – 1813) 

The first phase is generally dated from 1757, when the British East India Company acquired the rights to collect revenue from its territories in the eastern and southern parts of the subcontinent, to 1813, when the Company’s monopoly over trade with India came to an end. 

The British had come to India in the 17^th Century, purely as a trading company backed by an exclusive royal charter to trade with India from their Queen, Elizabeth I. They had set up their first factory on the banks of the Hugli River in Bengal and managed to acquire permits from the Mughal Emperor that exempted it from paying duties on its trade. This led to heavy revenue losses of the Mughals and later Nawabs. This was also one of the main reasons for the Battle of Plassey in 1757.

The primary function of the British East India Company in this period was to buy spices, cotton and silk from India and sell them at huge profits to the large British market. Since there was no British made goods saleable in Indian market, the trade saw outflow of the bullion from Britain. The grant of Diwani (to collect taxes) in Bengal, Bihar and Orissa allowed by the Mughal King after the Battle of Plassey and Buxar in 1765 helped them to continue with their business in India despite of outflow of the bullions. 

After the grant of Diwani of Bengal, Bihar and Orissa in 1765 to the East India Company, the British administration changed its primary objective from trading to revenue collection. The colonial administration started to try out various land revenue policies and ultimately zeroed on Permanent Settlement, introduced by Lord Cornwallis. Under this system, the Zamindars who earlier had only the rights to collect revenue were established as proprietor of the land or the owners. The state’s demand for land revenue was fixed permanently. If the zamindars failed to pay this fixed tax, there land were taken away by the administration and auctioned. 

Through this system the state tried to create an enterprising class of loyal landowners, who would try to improve crop production in their fields to earn profits. Besides, the administration now had to deal with only these handfuls of landowners instead of loads of peasants directly. But this system created havoc for the cultivators because of the high revenue assessment. Later to weed out the intermediaries between the zamindars and the state, Ryotwari system was started in Madras Presidency and later Mahalwari System in north and west part of the colonial government. 

The acquisition of Diwani Rights meant that the Company could now tap the wealth of local rulers, zamindars and merchants in the rich province of Bengal and use them to buy goods that would be shipped to Britain for sale. The greed for incomes from land revenue also led the Company to pursue an aggressive policy of territorial expansion in India. A lot of money thus earned was also used to advance the cause of Industrial Revolution in England.  

The Second Phase of British Colonialism (1813 – 1858) 

The ‘Second Phase’ is generally seen to have begun with the Charter Act of 1813, when the East India Company lost the monopoly of trading rights in India and ended in 1858, when the British crown took over the direct control and administration of all British territories in India after the Great Revolt of 1857. 

As the Company’s profits grew, the support they enjoyed from the British government became precarious. There was soon unrest in the British Parliament regarding access to the free trade in India. This led to the passing of the Charter Act of 1813, which ended the monopoly of the East India Company, while subordinating Company’s Indian territorial; possession to the overall sovereignty of the British crown. 

Free trade changed the nature of the Indian colony completely, through a dual strategy. Firstly, it threw open Indian markets for the entry of cheap, mass produced, machine made British goods, which had no tariff restrictions. And secondly, British Indian territory was developed as a source of food stuff and raw material for Britain. These changes reversed the favourable balance of trade that India had enjoyed earlier. This phase laid the foundations of a colonial economy that led to the commercialization of the agriculture and deindustrialization in India. 

From early 1850s the nature of agricultural produce in India was determined by the demands of the overseas markets for Indian primary products. The production of cash crops like indigo, cotton, tea replaced the earlier mass production of food grains and raw jute. This led to the increased export trade, now done by the support of the British traders, who controlled shipping, banking and insurance taking away all revenues to their country. Those who benefited in the colony were big farmers, Indian moneylenders and some traders. The biggest drawback of this was the disaster caused by the famines, which were frequent due to the shift of cultivation pattern from food crops to cash crops. 

In 1856, Lord Dalhousie decided to build railways to improve trade networks. The construction of railways in India only further strengthened the colonial nature of India’s economic development. The railway network was primarily geared to serve the interest of foreign trade. The railway network connected the interior markets with the port cities facilitating the export and in frontier region railways helped army movement. Moreover, the whole project was developed by the British capital, and British investors were allowed 5% return on investment, that was paid out of the Indian revenue. Also the railway network brought the British made goods to the interior market and thus gave a stiff competition to the indigenous crafts and industry.

The Third Phase of British Colonialism (1858 – 1947) 

The third phase is seen to have begun from the early 1860s when the British India became part of the ever-expanding British Empire and was placed directly under the sovereignty of the British crown. This period was one of ‘finance imperialism’ where the British capital was invested in the colony. The capital was organized through a closed network of British banks, export-import firms, insurance firms and shipping and transportation firms. The third phase was merely the consolidation of the trends of the second phase. Also this phase saw the fierce competition among the European nations to acquire new colonies for the uninterrupted supply of the raw materials and new markets for their industries. This dwindled the lead of Britain. 

High tariff restrictions in other developing capitalist countries led to a contraction of markets for British manufactured goods. And the need for heavy imports of agricultural products into Britain, was making her position vulnerable in her trade with other countries. India proved crucial in solving this problem of Britain’s deficit. Britain’s control over India ensured that there would always be captive market for its finished goods. Before the WW1 (First World War) British investors and agencies controlled 75% of industrial capital, and most of the profits from this limited industrialization were also sent back to Britain.   

However, this phase also saw the rapid growth of Indian entrepreneurs. It was during the First World War that some Marwari businessmen from Calcutta, like G. D. Birla and Swarup Chand Hukum Chand invested in the jute industry. Gradually their control started expanding into other areas like coal mines, sugar mills, paper industry and they even could buy some European Companies. The great success of Indian capital was seen in the cotton industry in western India, which took advantage of high demands during the war years (1914-18) to consolidate its successes and eventually was in competition with Lancashire of Britain. Certain traditional trading communities like Gujarati, Banias, Parsis, Bohras and Bhatias became important in this sector.

Conclusion 

India in 1947 was not at a pre-industrial stage, and so her post independence economic growth patterns may not be compared with process of industrialization in the west. In 1947, India had already been a part of capitalist development in the west for 200 years, but in the capacity of a colony. So in 1947independent India embarked into a process of modernization from a colonial mode rather than a traditional mode, which was structurally backward and underdeveloped.