Processes of Accumulation in Pre-Colonial and Colonial India

Introduction 

The processes of accumulation in precolonial and colonial India is itself a topic which could easily help us differentiate between the Mughals as sovereign of India and how radically different was the British colonial structure which replaced it to impoverish the Indian nation. Marx argues that with an increase in the scale of production there would be subsequent accumulation of wealth. It was from India only that Marx’s theory of ‘reproduction on a progressively increasing scale’ without any capital accumulation came about. As Irfan Habib has pointed out, there existed flourishing conditions for the growth of a capitalist economy even under Mughal period with three out of the four conditions necessary for it being fulfilled and the only feature lacking in the country was that of technological advances. Keeping this in mind we can definitely note that surplus extraction and accumulation was taking place prior to the British advent as well but it was only under British that the processes of accumulation took such forms as to debilitate the economic structure. It is for this reason that Irfan Habib asks us to bear in mind two things. The first is the mode of production, especially the system of extraction of surplus (or, to use the more convenient term, exploitation) existing in India on the eve of the British conquests. The other is the nature of British imperialism, which was itself subject to change as British economy was transforming under the impact of the lndustrial Revolution. We shall look at how the land tax mostly constituted accumulation in the precolonial times and subordinate accumulation was built into it. The situation altered after the establishment of colonial rule. Tribute constituted the primitive accumulation under the colonial rule but it was a significant drain upon the economy of India. This phase with certain modifications lasted till 1813. After this it was replaced by accumulation through opium which Indians were forced to cultivate and the Chinese forced to consume. 

Accumulation in Precolonial India

It was land which formed the basic means for accumulation as it was through land-rent and land-revenue that accumulation started. For the zamindars who were responsible for the realisation of the revenue, the share could amount to one-tenth of the total produce but through various means like nankars etc, accumulation took place at the intermediate scale as well.

The reproduction on a progressively increasing scale could take place here only if the absolute size of surplus product that was partly converted into craft products and partly consumed as wages by the labourers, increased constantly. This increase – unless the magnates constantly reduced the share of the surplus product directly consumed by themselves – could come only out of constantly increasing the revenues of the magnate. This, in turn, implied either an increase of the proportion of total agricultural product taken as ‘tribute or rent’ or an increase in the total number of peasants and the area of land cultivated by them (or an improvement in cropping), leading, in both cases, to an increase in the absolute size of tribute/rent. Land revenue or rent enhancement would thus be the basic form of accumulation here, with no intervention of capital. There would still be no intervention of capital in the main relationship, even if commodity relations were to replace the ‘natural’ relations implicit in Marx’s illustration. The peasants would now pay the rent not in kind but in money, and the ‘magnate’ would accordingly accumulate wealth in the form of money, by which he would buy craft products or employ artisans on money wages and buy material for their work in the market. As per Marx it was the grain rent which kept up the stationary social conditions whereas with cash coming in, the production processes would have undergone transformation. The Zamindars would often extend tacavvi loans to the peasants which would ensure accumulation through tax rent but often the repayment of  loan proved to be quite difficult. Marx believed that where the magnate himself furnished the raw materials and grain wages to the artisan, he acquired by this simple means the artisan’s surplus product as well. The most commonly cited example being that of royal karkhanas. According to Marx’s definition, peasants could also qualify as petty producers. When the weavers as a class of artisans took their cloth to the market or ganj, the merchants, in order to ensure supply, advanced loans to weavers to enable them to buy yarn. This was known as the dadani system in Bengal and was prevalent in other parts of India ains well. Much of the artisan’s surplus product thus passed into the hands of the merchants and merchant moneylenders in   the form of ‘surplus value’. 

Accumulation in colonial India

All this was to change under the British, the extraction of tribute by whom has been described by Marx as the primitive accumulation of capital. While the colonial structure sought to create conditions for the emergence of indigenous capitalism, it suppressed it once indigenous capital had shown itself, resulting in stagnation. This primitive accumulation had a dual aspect in the first place, it was a transfer of wealth, originating from non-capitalist sources (that is, from outside the capitalist production); and, second, it implied the coming into being of certain new conditions, such as the creation of the proletariat within the proto-capitalist economy of the colonizing country, for otherwise the transferred wealth could not be transformed into capital. With the growth of colonial countries in the eighteenth and nineteenth centuries, the absolute size of the primitive accumulation grew. The sheer plunder of accumulated treasures and revenues of Indian potentates by the East India Company and its servants (those profiting in the famous ‘Plassey plunder’ and the Carnatic debts) constituted tribute in its early phase immediately after the Battle of Plassey. It had been the military fiscalism of the East India company which had profited the merchants and bankers quite a lot but now they were asked for tributes by the company at rates which were excruciatingly high at times. The British hereafter so taxed the territories they conquered that the surplus extracted could be invested in Indian goods to be sold all over the world. Through this method the total drain has been estimated by Furber at £ l.78 million a year during the decade 1783-84 to 1792-93. The precolonial tax-rent was being used to finance exports in this primitive form of accumulation. India lost use values together with exchange values, when these products went out of the country with no return received for them. The Indian commercial class was also at a loss because there was a substantial shift from the inland commerce handled by Indian merchants to external commerce controlled by the East India Company. Cornwallis himself admitted to the country’s commerce being thrown into the languor with the Company’s heavy drain. 

With England reaching the fruition of the first stage of the Industrial revolution, the second phase of accumulation began in India known as the opium phase. This phase remained in existence from 1813-1858 during which India, unable to export in the face of tough competition from America and West Indies, could not provide the British with the tribute. Thus, a new way was designed with the introduction of opium cultivation and the Chinese being forced for its consumption. In this phase the British began to rely on tax-rents of which the Utilitarians following the lead of James Mill were the foremost proponents. Tax-rent extraction began intensifying even in the non-zamindari areas, commodity relations began increasing since the rent was asked for in money only disallowing the use of any ‘kinds’ being paid. Markets for the British goods began springing up as agricultural crafts based economy began collapsing. Marx remarks here that the Chinese having escaped direct British rule was the only reason for their survival. Primitive accumulation thus laid the basis for a market for British industry just as it continually fed it with a stream of tribute capital. At the same time, rent accumulation absorbed much of local usurer and merchant capital. The very fact that moneylenders and merchants began extensively to buy land, or foreclose mortgages on zamindaris meant that their capital ultimately passed as land revenue into the hands of the Company. The moneylenders’ and bankers’ entry into the ranks of zamindars represented a curtailment of merchant capital rather than its penetration of land or agriculture. Events such as increased annexation, the rebellion of 1857 etc led to the era of imperialism of free trade. Just as the triumph of the cotton textile industry in England closed the initial phase of British colonialism in India, so the triumph of railways in England in the 1840s began another phase, that of the ‘imperialism of free trade’, with fundamental effects on the pattern of primary accumulation and the entire economic structure of India. Railway construction was the lynchpin of the free trade regime. British capital was used to build major railway lines (with state-built railways also of sizeable length), and the capital was guaranteed a minimum return,that too at 5% annual return which cost the Indian tax-payer Rs 568 million between 1849 and 1900. It cost India nearly double the price to lay railways on a much better terrain than that at which America lay railway tracks on a much harsher terrain of South America. The cost of state railways was helped by the raising of loans in London and this imposed a further burden upon the colonized country. At the same time the cost of ‘good government’ was continuously on the rise, constantly swelling the home charges. There was thus a steady increase in the drain, marked by recurring trade surpluses for which the country received no return. The annual drain during this period has been estimated for various years by people like Dadabhai Naoroji, Y.S. Pandit and S.B. Saul and A.K. Banerji. Taking estimates based on the balance of payments alone, Saul’s figure for 1880 amounts to 4.14 per cent of the Indian national income as estimated by A. Heston for the year 1882-83. Thus, India was bound to have a savings rate of 4% which was the reason for the low income and not the lack of internal capacity because of which the British could not lead India to an economic growth as postulated by some of the historians. Though in the post-mutiny phase as the British embarked on a policy of befriending the zamindars and there were long periods between adjustment of revenue settlements, there was a gradual decline in the land tax or rents but a simultaneous increase in the indirect taxes. The total annual revenue was lifted considerably from Rs 360.6 million in 1858-59 to Rs 514.1 million in 1870-71, while the share of land revenue in total revenue declined from 50 percent to 40 percent. The total revenues rose again from Rs 619.7 million in 1877-78 to Rs 1145.2 million in 1901-02, while land revenue rose only from Rs 198.9 million to Rs 274.3 million. This clearly indicates that a shift in the sources of primitive accumulation had taken place. The dire consequences of this scale of fiscal exploitation of the Indian people for the purposes of tribute could be seen in the 1890s when India was compelled to export 2 to 3 million tons of wheat in years in which her own people died in millions mostly in famines. A capitalist sector gets established initially through primitive or primary accumulation after which capital begins to expand by virtue of surplus value generated by capitalist production itself. A part of the surplus value which assumes the form of profits gets converted into additional capital called ‘extended reproduction’ by Marx. 

The surplus value contained in the value of the product of capitalist production is ‘realized’ when the product is sold. This can only be done once continuous capitalist accumulation starts to take place. This requires continuous expansion of the market for capitalist products. This implies a corresponding contraction, if not total elimination of the market for products of non-capitalist sectors of production, specifically of those called ‘petty producers’ by Marx which includes artisans and peasants. Petty producers are with this process converted into proletariats who are available for labour on providing wages. Since peasants could not gain any profit out of this capital formation, any investment coming from their side was no option. Even the moneylenders could do as much as raise a bit of profit through usury or themselves acquiring land but their capital was getting limited. However, there wasn’t a complete absence of a rising proto-capitalist class which we can gauge from Amiya Kumar Bagchi’s study of the rise of Indian capitalists. The Parsis who dominated the cotton textile industry of Bombay in its earlier phase are believed to have accumulated their capital first from the opium trade and then from the cotton trade, particularly during the American Civil war. The predicament has been aptly summed up by Irfan Habib when he writes-“It needs to be recalled that ever since Plassey, Indian merchant capital had been under pressure. The old pattern of domestic and foreign trade had been destroyed; the most profitable lines of commerce had been captured, first by the East India Company, and then by European private firms. Indian merchant capital receded into pockets, such as Bombay, where trade in Malwa opium and Deccan cotton offered some opportunities of survival and growth. Thus, if Indian industrial capital was chiefly to come out of merchant capital, its size could only be small, its germination confined to western India and its field of action to the cotton textile industry of Bombay and Ahmedabad. India’s low per capita income or the quality of her entrepreneurship had little to do with the limited size and slow growth of indigenous capital. On the one hand, the low per capita income did not deter the realization of the tribute; on the other, the example has yet to be offered where entrepreneurs have emerged in any country, despite a lack of availability of capital.” 

Conclusion 

Colonialism thus created a paradoxical situation: as it first created the objective conditions necessary for the emergence and spread of capitalist accumulation—the enlargement of a labour reserve army, modern transport, and modern education. Simultaneously, however, by extraction of tribute, by intensifying non-capitalistic modes of accumulation and by a deliberate policy of free trade, colonialism greatly narrowed the limits within which capitalist accumulation could in fact develop. The limits were still narrower for indigenous capital but despite this, the indigenous capital class when it emerged though on a lower scale came into conflict with the British quite frequently as both theirs interests stood at crossroads. An example is the protest on 3 May 1879 organized by the mercantile community of Bombay against the abolition of import duties on Lancashire goods.

Bhavuk is PhD Candidate at The Department of History, AMU