External Trade of India During The High Noon of Imperialism

Introduction 

When it comes to India, it is natural to expect that with such a massive size of its geographical extent and population, the volume of inland trade would have greatly exceeded the amount of foreign trade. However, India had an important say in the market as its exports were by no means meagre. Angus Maddinson, a British economic historian estimated India’s share in the total exports of the world in 1800 to be around 23%, second only to China. Exports led to the development of certain sectors of production,and determined the state of money supply within the country and money in circulation as a crucial determinant in the levels of prices within the country. Indian textiles attracted huge attention and money from around the world because of the fine quality especially of its silk and muslin and the variety of products it offered. However, we do find that by 1850, India had turned from a net exporter to the primary importer of finished goods and its only role as an exporter was that of supplier of raw material to Industrial Britain. We will examine here the causes of the decline in India’s external trade and how a systematic decline took place.

Around 1600, as much as a fifth in value of Indian urban manufacturers was dependent on foreign demand, and the proportion is likely to have increased significantly by the first half of the eighteenth century, as trade with Europe underwent considerable expansion. The silver originating in Mexico and Peru and obtained by Spanish rulers was being imported into India for its exports. This influx of silver led to an increase of north India’s coined silver stock,from an estimated 4,552 metric tons in 1595 to 10,729 metric tons in 1705. This meant that coined silver stock per capita nearly doubled between 1595 and 1705. The British began to use this trade in the hope of maximising its profits but when it found the French superseding them in terms of profits gained then it came to the conclusion that through the use of military and naval power it had to expand its territorial possessions. Slowly and gradually a process levying high duties on imports from India and confessions to imports from England into India turned the tide into so favourable situation for India. We see that once industrialisation was completed in England it was ready to turn the balance completely in favour of England and in this it was helped by the Charter Acts of 1813 and 1833. 

India’s External Trade

In terms of economic ideas, Ricardo’s theory had been doing rounds in the political and administrative circles of Britain during this time. The theorem rests on the proposition that a country specializes in the production and export of those goods in which it has a cost advantage in terms of factor inputs. The quantity of goods which a country would export or import is of course determined by demand conditions and both these things were ideally being provided by the cheaper raw materials India provided to Britain and the vast markets India offered to the finished goods of Britain. The Industrial revolution having provided Britain with an excellent launching platform to export its products over the globe. In this regard for this period in Indian economic history, attention was centred on three inter-related problems: (i) the mechanism whereby the transformation of India from an exporter of manufactured goods to one of primary commodities is effected, (ii) the gain or loss from this change and its impact on the domestic economy, particularly on the real wages of the various factors of production, and (iii) the long-term growth implication inherent in a theory of international economic specialization based on free trade. 

We have already seen how important the exports were but they were systematically depleted which we shall deal with here. Indigo was one of the chief items which replaced other items like silk to be exported to the west where the newly emerging clothe industry needed it. It began being exported from 1780 onwards and by 1810 as much as 5 million lbs(2,268 tons) of dye was annually exported to Britain alone and one thing which was even more concerning for India was that they were coming almost all of it from European planters. Another crop which had gained prominence was opium which was needed for export to China. It was made a monopoly of Company’s government in 1773 and thereafter peasants were often forced to cultivate poppy(as it is obtained from opium poppy plant) against their will by contractors. The price paid to contractors rose from nearly Rs 415 per chest in 1798-99 to Rs 1860 per chest in 1813-14 and at the same time the quantities exported to China also increased. 

Another aspect we must not forget is that earlier India had maximum amount of its trade as overland trade controlled and regulated by Indian merchants which gradually began declining with the foreign sea- dominated trade controlled by the Europeans. This had an adverse impact on the great financial houses like those of the Jagatseths of Murshidabad. In 1795-6 the value of exports,including those of the Company, had stood at Rs. 20.5 million. Next year it had fallen by a quarter to Rs. 15.4 million and continued to decline until 1798-9. The decline can be attributed to unsettled business conditions created by wars in India and Europe. However, in 1799-1800 exports had increased to Rs. 25.7 million and continued to expand steadily until 1803-4 when they amounted to Rs. 35.4 million. The rate of expansion seems to have slowed down thereafter due to the intensification of the Napoleonic Wars, and in 1811-12 the total exports from Bengal were no more than Rs. 34 million. The history of the imports was almost identical.The process of commercialization of Indian agriculture which meant, raising of certain agricultural crops for the market so as to enable the tribute to Britain to be paid directly or indirectly and to pay for British textiles and other manufactures that were now being imported on an ascending scale. This latter function is of pivotal importance to us. The export market was just partially in Britain as a third point of this triangle was in China. China in return for imports from India supplied Britain with a major raw material (silk) and a major wage-good (tea). Charles Grant, one of the most important and longest serving directors of the company stated in a parliamentary enquiry in 1821- “I take the liberty to offer one remark; we have, by protecting duties at home, and our improvements in machinery, almost entirely excluded from this country the cotton fabrics of India, which were formerly their great staple; and if we use the power we have over that country now, to introduce into it the fabrics of this country, so as to exclude their own, it may be questioned how far we act justly with respect to our Indian subjects; for it may be taken for granted, that if they were under an Indian government they would impose protecting duties upon their own fabrics, in their own markets, as we have done in ours.” 

 In the earlier period, the most important group of exports were the cotton and silk textiles. The exports to Europe were almost entirely dominated by the latter. But by 1812, although textiles were still the most important single item on the export list, other articles had begun to increase in value and some new commodities had appeared, such as indigo, opium, and raw cotton. By 1831 the quantity of opium from Malwa exported to China was double that from Bengal. Another crop of prominence was cotton and quantities of raw cotton to be transported over land for being put aboard ships became many times larger. Bombay exported 27,211 tons of cotton in 1825-26 and as much as 61,224 tons of cotton by 1847-48. With the passage of the charter act of 1813, the monopoly of the Company ended and so English textile manufactures invaded the Indian markets, they began to affect adversely the indigenous demand for raw cotton. Thus, the inter-regional trade through which Gujarat and central India supplied cotton to Bengal collapsed as a result of which government’s annual customs collection from this trade at Mirzapur declined from Rs 70,000 in 1820-21 to Rs 17,682 by 1834-35. Bengal had itself began exporting raw cotton and thus in 1825-26 India exported more than 45,000 tons of raw cotton of which Bombay accounted for 27,500 tons. India’s annual export of cotton to Britain increased to about 35,580 tons in 1846-50. However, the amount of cotton imported by Britain from United States was much larger in comparison. It was only during the Civil war in America that cotton exports from India exceeded that from United States. Another important item of export was indigo. The indigo exports from Bengal to England increased from 40,000 maunds in 1800 to 1,18,111 maunds in 1826-30. William Bentick, the governor general in 1830 put its total production at 1,49,285 maunds. The peasants were however oppressed to a great degree and received treatment not far from slavery. Their plight has been eloquently portrayed in Dinabandhu Mitra’s famous play Nildarpan in 1860. 

For the period from 1829-30 to 1839-40 for Bengal, we find the opening of trade led to a considerable increase in the value of both exports and imports. The exports reached a peak in 1817-18 when they were 40 per cent higher than in 1813-14. Such a rate of expansion could not be long maintained and next year they fell by fourteen points. There was a change in this period largely due to the termination of the East India Company’s trading activities in 1833 and the collapse of all the major trading houses in Calcutta. Although the Charter Act of 1813 had officially abolished the exclusive monopoly of the Company, it had continued to trade. The Charter Acts both of 1813 and 1833 brought about many changes which profited industrial Britain but led to the dislocation of Indian manufacturing sector by profligation of merchants from England to India. The effect of these dislocating factors can be seen in the index of total Indian exports between 1828 and 1840. Taken as a whole, the value of the exports show a certain rise in 1829-30, but the index number for the total fell to 95 and then to 88 respectively during the next two years. It improved in 1832-3 and again in 1833-4, and declined slightly in the following year. During 1835-6 and 1836-7 there was a tremendous expansion in total exports, the index numbers standing at 125 and 143 respectively. But in the last three years of the period, there was another sharp decrease, though the figures never fell below the levels of 1828. The behaviour of the imports was similar, but their exact movements did not coincide with those of the exports. The worst year for the imports, for example, was 1833-4, while that of the exports was 1831-2. Again, the rate of recovery which began in 1835-6 was much less marked in the case of imports. A detailed analysis of the trade figures for this period indicates that the actual volume of trade fell less rapidly during the height of the depression than the value. Thus price movements were largely responsible for the fall in export values. Import prices also seem to have declined, but again less than those of the exports, confirming even at this early date the experience of recent years which shows that, in a trade depression, the prices of manufactured goods fall less fast than those of primary commodities.

Bhavuk is a PhD Candidate at The Department of History, AMU

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