Economic History of India 1857- 1956

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IT is a pleasure and privilege to write a Foreword to this volume edited by an able and distinguished pupil, now a valued colleague at the University. The encyclopedic work telescopes the vast moving panorama of Indian economic life and history, covering the last hundred years. My pleasure in penning these lines is enhanced by the fact that about half a century back my Foundations of Indian Economics (1916) exposed the British pattern of colonialism and of directed underdevelopment, and pleaded for a School of Indian Economics that could guide our economic growth free from the incubus of British and British sponsored deductive theorizing at the Universities, In a way the present volume supplements and brings up to date the picture given by a ,similar collaborative work Economic Problems of Modern India in two volumes ( Macmillan, 1939) edited by me about three decades back. Dr. V. B. Singh's new treatise Indian Economy: Yesterday and Today, ( New Delhi, 1964) also succintly discusses colonialism and economic stag-nation in the earlier British regime and what he aptly characterizes as `pseudo-development' before Independence. His plea for a fresh integration and coordination of the interests of the peasantry with those of the urban workers and the middle classes, Old and New, counteracting the vested private capita-list interests is timely for the implementation of the Fourth Plan.

India is now on the high road of economic and social advance, and it is most important to assess both the progress-accelerating and progress-retarding factors in a broad historical and socio-logical perspective. No country can belie its historical inheritance, nor erase the basic social and economic structure that is the product of the accumulated force of environment and tradition.

I have in the past strongly and repeatedly emphasized institutional economic theory from different angles. In spite of the clamant demands of new economic concepts and theories in the context of modern planning, when we must have to choose between different rival and competing economic institutions, economic theory in our country today is still sundered from its grass-roots in economic history. If this volume can correct the present divorce between economic theory and economic practice, and evolve a systematic theory of planning, grounded in history, traditions and values as revealing the enduring forces of growth, and in the integration of economics with sociology on the basis of a perception of the unity and interdependence of social institutions, it will serve its major purpose.

The unevenness and lop-sidedness of Indian economic growth are obviously related to certain enduring features in our social and economic structure. Neither economic theory nor economic planning can be sound as long as derivative thinking, not rooted in the soil, persists. The village community is well nigh disrupted due to the forces of British centralization and the creation of an upper class of zamindars, intermediaries, mahajans and protected tenants with the consequent proletarianization of the peasantry that were historically traced in my Democracies of the East (1923) and the Land Problems of India (1933) three decades back. The village cannot easily and quickly be transformed into the modern panchajati-raj. The legacy of the previous economic order cannot be wiped out soon. The agricultural proletariat are still increasing in numbers comprising today about one-fifth of the rural population. These do not benefit at all from the community development programmers. In large pockets of agriculturally depressed regions, the sinister combination of caste distance and segregation with hereditary, agrestic bondage or serfdom, characteristic of the fuedal regime, still persists, unaffected by our Plans and recent legislative enactments. New leadership cannot also be immediately developed because of the stubborn character of the social cleavage, on one side, and the heritage of the haves and have-nots in the villages which neither our new land reforms nor ceilings on holdings nor again, the prohibition of sub-letting have been able to correct. Yet the success of panehayati-raj on which we rightly place such high hopes largely rests on the success of land reforms. A new agrarian policy vigorously pushed, combating the present trends of growth of share crop-ping and of absentee cultivation through tenants, an intensive country-wide movement of the cooperativization of agriculture can alone offset the stubborn features of our past agrarian history.

Modern planning is also defeated by the relatively low rate of agricultural growth in relation to population increase and the low rate of increase of working population in relation t( total population. The increase of rural unemployment and underemployment, a most pernicious heritage of the British Indian economic system, has proved too hard a nut to crack. This is perhaps the most formidable issue for our economic future; here also the obstacles to progress are rooted in the long past. Neither agro-industrialization nor a dispersed pattern of industrial development has so far been successfully introduced, nor a policy of dovetailing of commercial agriculture into the industrial system planned.

In the Economic History of India (1600-1800) the picture of India as the agricultural mother of Asia and the industrial work-shop of the world in the 17th and 18th centuries was delineated by me. Britain's systematic policy of planned underdevelopment has left lacunae and gaps that will take a long time to fill unless economic theory and policy are brought in line with the historical and institutional conditions. The distribution of the railway net, the freight rate for railway goods, the marketing organization and the banking system, all helped the British economic regime to replace the products of Indian cottage industries and handicrafts, especially handloom weaving, and facilitate the import of British textile goods and export of raw material. Only a 'thorough planned development in all sectors of economy can remedy the long period consequences of planned exploitation and underdevelopment, so vividly brought out by various countributors from different angles.

Between 1857 and 1900, it is estimated by M. Mukerjee, the figures of average per capita income in India at 1948-49 prices increased from 169 in 1857 to 210 in 1876 and was reduced to 188 in 1900. The figure was 203 in 1905 and 275 in 1955. I worked out the movement of real wages between 1600 and 1900 in Northern India. The unskilled workers' real wages declined from 52 in 1850 to 43 in 1903, taking 1600 as base. A study of the Indian Statistical Institute shows that the real agricultural wages declined from 97 in 1888 to 88 in 1900, using 1890 as base.

THIS book is being published in the belief that it will meet the urgent need for a comprehensive book on the Economic History of India, covering the period 1857-1956. The various chapters seek to identify and interpret the main trends in Indian Economy under British Rule, that is characterized by stagnation and underdevelopment; and, in the post-Independence period, that witnesses the dawn of a national democratic and dynamic economy-symbolized by the Second Five Year Plan of India. In the theoretical field the book seeks to underline the importance of a two-way flow between Economic History and Economic Theory. It is hoped that this will be useful to specialists, students and general readers. This work was conceived in 1959. I wish the gestation period could have been shortened.

I am thankful to the contributors who have readily responded to my request to co-operate in this venture. I am specially grateful to my teacher, Professor Radhakamal Mukerjee, the doyen of Indian Social Sciences, for kindly writing the Foreword.

THE Book begins with a discussion on the Nature and Scope of Economic History, and attempts to explain History by Economic Theory and Economic Theory by History, which helps us to generalize, predict and draw lessons-and so to find out the general in unique. Since the past, the present and the future are parts of the same time-span, the present is also treated as history. The relationship between Economic History and History of Economic Thought is a two-way flow and Economic Science is to be 'adapted' to the "real" phenomena of life in varying times and circumstances. For example, during the last century, the Indian Classicists laid the tradition of linking economic problems with the socio-political processes of the country-a tradition given up with the turn of the century. By the end of the thirties the economic ideas of the national leadership had gone ahead of the Indian Economists. The evolution of Indian economic ideas has been discussed to emphasize the view that Economic Theory is rooted in Economic History.

The history of man is a record of his conquest over Nature. Man creates wealth while he acts upon Nature. This poses the problem of the utilization of natural resources by a given country. Professor Sahii (Chapter 2) tells us that fortunately India's existing resources and future potential are practically unlimited. With this perspective he presents a glimpse of our forest, soil and mineral resources. The British power, soon after settling down in India, turned its attention to the exploitation of the mineral resources-the beginning was made with coal. Speaking retrospectively, however, it can be said safely that the post-Independence era is far more striking than the preceding hundred years. We have progressively begun to realize that it is not the imported capital obtained by oTorting our raw mineral ores, but their utilization within the country, which will lay the foundation of our economic independence.

The mode of exploiting natural resources by a people is obviously an aspect of their social history, and hence cannot be fully comprehended without a reference to it. It is this crucial problem that Dr. Madan discusses in Chapter 3. He analyzes the changing patterns of Hindu joint family and caste, and their impact on economic development. The author dismisses, as righteous indignation, rather than sociological acumen, the view that the systems of caste and joint family are responsible for Indian economic backwardness. He concludes: "When economic and social historians point out that, among other factors, social institutions like caste and joint family have retarded economic development in India, they are right. But when they assert that these institutions have precluded growth, they not only give undue importance to them but also suggest that they are unchanging.

" Like caste and joint family, village community too is a part of the Indian social heritage. The form and disintegration of the Indian village community is the subject of Chapter 4. While a process of internal dissolution was going on, the British con-quest ( backed by a more developed techno-economic power, in the wake of the Industrial Revolution) struck the final blow. The introduction of centralized administration, and the revenue system, the institution of police and law courts, and the expansion of modern means of communication broke the isolation of the villages. Local produce began to be exported and imports found their way in the countryside. High rents and increasing indebtedness pushed the village youth to seek employment in urban areas; which became possible on account of industrialization. The migration from the village was further accelerated by the disintegration of village handicrafts. The independence of villages was never complete; but in the changed situation it became impossible. Thus came the end of the `self-sufficient' village community, which, in its traditional form, was an ancient agency of social control and social security. After Independence there has been a three-pronged attempt to reconstruct and re-vitalize the village community by abolishing landlordism; by introducing village panchayats (elected councils) and Community Development Programmers and Rural Extension Services. The result has been that some islands with lop-sided development have emerged from the vast ocean of the agricultural sector. It is to be realized that the village communities are a nucleus of social change and the problem of reconstruction is the problem of change in the organic whole.

From Kautalya to modern economists-all have emphasized, with varying accents, the role of manpower in economic development. Hence is the importance of a scientific study of the demographic trends. Dr. Sinha divides the period under review into two sharply contrasted phases. The pre-1921 period is characterized by recurrent famines and epidemics, which retarded population growth. The post-1921 period is characterized by a decline in mortality, without an accompanying change in fertility; which is responsible for accelerated growth of population. High fertility, coupled with diminishing mortality, have provided an age structure in conducive t the growth of labor force. During the first half of the present century there has been a total increase of population by 50 per cent, whereas the working population has increased only by 21 per cent. This implies a fall in labor force participation rate. The occupational structure of the working population has shown only a little change. The extension of cultivated area and rise in agricultural productivity have failed to keep pace with population growth. Consequently, the per capita agricultural output as well as food supply have shown a decline. This situation has, however, partly been compensated by a remarkable increase in industrial production. The share of industrial output in the gross (as well as net) national product being small, the rate of growth of Indian Economy, after Independence, has been slow (in spite of the stagnation being broken).

The low rate of agricultural growth is, therefore, the chief bottleneck in the rapid development of the Indian Economy. Dr. Bhatia discusses the problem (Chapter 6) with special reference to land tenure, commercialization of agriculture, food supply, marketing, agricultural indebtedness and the (British) government-sponsored co-operative movement. The land revenue system introduced by the British caused a revolution in property -relation in land. A new proprietary class, consisting mainly of businessmen, came on the scene, who looked upon Zamindari as an income-yielding asset. This class had neither the knowledge of agriculture, nor was it interested in making durable improvements in land. It was a class of absentee landlords whose sole interest lay in maximizing the rent burden on the peasantry. The commercial revolution " in India synchronized with the Civil War in North America, which E.H....H.