Authors: Tirthankar Roy
Consequently, most measures of drain remain highly indirect ones, and treat the entire surplus of Indian commodity exports over commodity imports as looted money. This is a mistaken reading of the balance of payments. One would have to be a really naïve economist to treat any income repatriated by foreigners as drain. To use the whole export surplus as a wasteful expenditure misreads Indian history in a fundamental respect. To see how, we need to consider the potential contribution that these payments could make to the economy.
The real puzzle about nineteenth-century India was not that it was a poor country. With the productivity of agricultural land reduced to abysmally low levels by geographic and climatic factors, a rapid economic growth and increasing prosperity without new agricultural technology would have been nothing short of a miracle. No past regime had the necessary knowledge or the resources to bring it about. The real puzzle about India was rather that within the tropical world, which faced quite similar obstacles to economic development, India forged ahead by some key definitions of economic modernization. Compared with colonized Africa and large parts of Asia, India industrialized. In the nineteenth century, employment in factories increased from near zero to more than a million. Cotton textile mills dotted the landscape of Bombay, the mills having been started by merchants and bankers who had been major beneficiaries of Indo-European enterprise. In the same century, India developed one of the biggest railways and telegraphic systems, and had some of the best banks, ports, universities and hospitals in the contemporary world.
By the developing world standards, this efflorescence was exceptional. India at 1800 had goods to sell abroad, but lacked the capital, the skills and the knowledge needed for the establishment of factories, banks, railways
and universities. This development was made possible because the scarce inputs were purchased from Britain. The cotton traders of Bombay, for example, sold cotton in Manchester, and procured from Manchester the machinery and the foremen to process cotton in India. In the long run, Indian industrialists reduced the dependence, thanks to the growth of technical and university education within India. The teaching staff in these institutions again was hired from Britain, and their salaries were paid in sterling. In this fashion, nineteenth-century Indian economic growth was reliant on the purchase of services from abroad with money earned by selling goods abroad. A part of these services was tied to the imperial administration and defence. But the major part was payment for services rendered to foreign trade, modern business, education and health.
Dismissing these purchases as a form of tribute might be a patriotic act, but it would be a wrong reading of history. Should we call the salary of the Nobel laureate, Ronald Ross, an employee of the Indian Medical Service, a drain? Should the repatriated profits of tea and jute industries, which provided livelihoods to more than a million Indian peasants, workers and merchants, be described as wasted money? Interest on public debt was another often cited example of drain. All regimes in this time raised loans to finance railway construction and
warfare. The true cost of debt depended on which market the loan was raised from, and by this benchmark, London loans were particularly economical. In a broader and long-term perspective, the payment that British India made to Britain for the services of doctors, engineers and professors was a price for skill-building. The return of that process of skill-building is being reaped today in the form of the net income that India receives by selling highly skilled services to the world. It is hard to explain the second kind of flow without the first, colonial, kind.
Much of this development was a later affair. The East India Company started the trajectory, but had neither envisioned nor actively planned for the development of India. Until the 1830s, the Indian administration did not have a serious conception of how to develop India. The Company nevertheless initiated a pattern; it created some of the enabling conditions for an industrialization to unfold in the second half of the nineteenth century. The fact that 80 per cent of factory employment in 1900 was located in or near Bombay, Calcutta and Madras was evidence enough of the enduring legacy of the Company in creating a truly cosmopolitan business culture in India.
All this should not mean that the Company provided the best kind of rule by the eighteenth-century standards.
Conceivably, as a government it could do more than it actually did. Moreover, as Adam Smith and Edmund Burke rightly argued, officers of the state would be unfit to govern if they were allowed to conduct trade on the side. The truth of that proposition was evident enough in the 1770s. To many contemporaries in Britain, the Company rule represented an oppressive regime for its Indian subjects because of the confusion between private interests and public interests.
Indians today know well from the experience of their own world of politics that such confusion can sustain corruption on a large scale; even if the mix is not always injurious to private enterprise.
1600 | East India Company receives charter. |
1601–03 | James Lancaster leads the first voyage. |
1604–06 | Second voyage takes place. |
1605 | Accession of Jahangir. |
1607 | Third voyage under David Middleton and others. William Hawkins reaches Agra with a letter from James I. |
1608 | Fourth voyage. |
1608–10 | Factories established in Surat, Pulicat and Masulipatnam. |
1609 | Fifth voyage. |
1609 | Renewal of charter by James I, charter valid in perpetuity. |
1610 | Sixth voyage under Henry Middleton. |
1611–12 | The seventh, eighth and the ninth voyages take place. |
1612 | Thomas Best defeats the Portuguese off Surat (Battle of Swally). |
1612 | The system of separate voyages ends. Joint-stock voyages begin the next year. |
1614–15 | Nicholas Downton of the first joint-stock voyage defeats the Portuguese fleet off Surat. |
1615–18 | Thomas Roe leads mission to India. |
1619 | First Anglo-Dutch peace treaty. |
1622 | Company forces defeat the Portuguese in Hormuz. |
1623 | The ‘massacre’ of Amboyna. |
1627 | Accession of Shah Jahan. |
1630 | Anglo-Portuguese peace treaty of Madrid. |
1630 | Surat declared the headquarters of the Company’s Indian Ocean interests. |
1632 | Hooghly, a Portuguese settlement, sacked by Shah Jahan. |
1633 | A party under Ralph Cartwright receives permission to set up a factory in Balasore. |
1639 | Francis Day builds Fort St George in Madras. |
1642 | The chief establishment on the east coast officially shifted from Masulipatnam to Madras. |
1650 | First Company settlement starts in Hooghly. |
1653 | Madras becomes a ‘presidency’. |
1654 | Second Anglo-Dutch peace treaty. |
1657 | Renewal of charter by Oliver Cromwell; the joint-stock principle sanctioned. |
1659 | Accession of Aurangzeb. |
1661 | Bombay ceded by the Portuguese to the English. |
1664 | Tea imported by the Company. |
1664 | Shivaji attacks Surat. |
1665 | Holland and England at war. |
1669 | Bombay becomes a property of the Company. |
1674 | François Martin establishes Pondicherry. |
1678 | Holland and England restore peace treaty. |
1685 | The chief establishment on the western coast shifted from Surat to Bombay. |
1686 | Renewal of charter. |
1687 | Aurangzeb’s Deccan campaign begins; Golkonda falls to the Empire; trade from Masulipatnam suffers. |
1687 | Chief establishment in Bengal shifts from Hooghly to Calcutta. |
1687 | Battle between Aurangzeb and the Company. |
1688 | The Glorious Revolution. |
1692 | The Commons petitions the king to revoke the charter of the Old Company. |
1693 | Renewal of charter. |
1698 | The New East India Company forms. |
1700 | Parliamentary regulation prohibiting Indian silks. |
1707 | Aurangzeb dies. |
1707 | The Company lends money to the British government. |
1708 | Formation of the United Company of Merchants Trading to the East Indies. |
1715 | Factory at Canton. |
1716 | The Company receives, from the Mughal emperor Farrukhsiyar, license to trade for a fixed fee. |
1726–28 | Mayor’s courts started in Bombay, Madras and Calcutta. |
1740–48 | War of the Austrian Succession. |
1746–48 | First Carnatic War, the Company loses possession of Madras, moves to Fort St David. |
1741 | Dupleix appointed governor of Pondicherry. |
1744 | Robert Clive arrives in Madras. |
1748 | Treaty of Aix-la-Chapelle ends the War of the Austrian Succession. Madras is restored to the British. |
1749–54 | Second Carnatic War. |
1756–63 | Third Carnatic War, Seven Years’ War in Europe. |
1756 | Accession of Siraj-ud-Daula in Bengal. |
1756 | Clive takes charge as governor of Fort St David. |
1757 | Battle of Plassey or Palashi (13 June). |
1764 | Battle of Buxar. |
1766 | The Company receives ‘dewanny’ rights of Bengal, Bihar and Orissa. |
1765–69 | Clive holds office as governor of Bengal. |
1766–69 | First Anglo-Mysore War; fought on behalf of a combined Maratha-Hyderabad force and lost. |
1770 | Great Bengal Famine. |
1772–73 | Warren Hastings is governor of Bengal. |
1773 | Regulating Act of Lord North. The offices of governor general and Council, and a Supreme Court, created. |
1773 | Tea Act, intended to establish the Company’s monopoly to tea trade in the British empire leads to the Boston Tea Party. |
1773 | Opium trade declared a government monopoly. |
1774–84 | Hastings holds office as the first governor general. |
1775–82 | First Anglo-Maratha War; fought over the Peshwa succession dispute between Raghunathrao (whom the Company helped) and his rivals. |
1776 | Wealth of Nations |
1780–84 | Second Anglo-Mysore War—an extension of the Anglo-French rivalry during the American Revolution—ends with the Peace of Versailles; honours shared. |
1781 | Select Committee established to report to the Parliament on Indian administration. |
1786 | William Pitt’s East India Company Act formally secures the Parliament’s authority to regulate all civil, military and revenue affairs of the Company’s territories in India. |
1793 | Renewal of charter. |
1789–92 | Third Anglo-Mysore War fought on behalf of Travancore against Tipu Sultan. Tipu loses and cedes large territory. |
1799 | Tipu Sultan dies in the Fourth Anglo-Mysore War. |
1803–05 | Second Anglo-Maratha War fought on behalf of Raghunathrao’s son Bajirao II with Sindhia, Bhonsla and Holkar forces. |
1805 | Establishment of Haileybury College to train civilians bound for India. |
1813 | Promulgation of the Charter Act, leading to the end of the monopoly trading rights in India. |
1817–19 | Third Anglo-Maratha War, fought with a combined Maratha force. |
1833 | The Company’s commercial powers abolished. |
1833 | Banking panic in Calcutta following a recession in the indigo trade. |
1846 | A second panic in Calcutta. |
1857 | The Indian mutiny. |
1858 | Government of India Act, 1858; direct British rule of India begins. |
1874 | The East India Company formally dissolved. |