From 1600 to 1757 the East India Company’s role in India was that of a trading corporation which brought goods or precious metals into India and exchanged them for Indian goods like textiles and spices, which it sold abroad. Its profit came primarily from the sale of Indian goods abroad. Naturally, it tried constantly to open new market for Indian goods in Britain and other countries. Thereby, it increased the export of Indian goods and thus encouraged their production. This is the reason why Indian rulers tolerated and even encouraged the establishment of the Company’s factories in India.
But from the beginning, the British manufacturers were jealous of the popularity that Indian textiles enjoyed in Britain. They put pressure on their government to restrict and prohibit the sale of Indian goods in England. Several laws were passed to curb the sale of Indian goods in England. In spite of these, Indian silk and cotton textiles still held their own in foreign markets, until the middle of the 18th century when the English textile industry began to develop on the basis of new and advanced technology.
After 1757, the pattern of the Company’s commercial / economic relation with India underwent a qualitative change. After defeating the Nawab of Bengal in the Battle of Plassey in 1757 and after the Battle of Buxar the Company could now use its political control over Bengal to acquire monopolistic control over Indian trade and production and to push its Indian trade. Moreover, it began to utilize the revenues of Bengal to finance its export of Indian goods.
The Indian merchants were gradually squeezed out, while the weavers and other craftsmen were compelled either to sell their products at uneconomic rates or to hire themselves out to the Company at low wages.
The Industrial Revolution in Britain completely transformed Britain’s economy and its economic relations with India. During the second half of the 18th century and first few decades of the 19th century, Britain underwent profound social and economic transformation, and British industry developed and expanded rapidly on the basis of modern machine, the factory system and capitalism.
As a result of the Industrial Revolution an entirely new class of society, the industrial capitalist was born. This new class of society, the industrial capitalists owned the factories and workers who hired themselves out their labours on daily wages. The rise of these new powerful classes had an important impact on British economic relations with India. The interest of this class in the Empire was very different from that of the East India Company. It did not gain from the monopolization of the export of Indian handicrafts or the direct appropriation of Indian revenues. As this class grew in number and strength and political influence, it began to attack the trade monopoly of the Company. Since the profits of this class came from manufacturing, not from trading, it wanted to encourage, not imports of manufactures from India, but exports of its own products to India as well as imports of raw material from India. They looked upon the East India Company to be the chief obstacles in the fulfillment of their dreams. Between 1793 and 1813, they launched a powerful campaign against the Company and its commercial privileges and finally succeeded in 1813 in abolishing the Company’s monopoly of Indian trade.
With this new event, a new phase in Britain’s economic relations with India began. Agricultural India was to be made an economic colony of industrial England.
The Government of India now followed a policy of free trade or unrestricted entry of British goods. Indian handicrafts were exposed to the fierce and unequal competition of the machine-made products of Britain and faced extinction. India had to admit British goods free or at nominal tariff rates. The free trade imposed on India was one-sided. While the doors of India were thrown wide open to foreign goods, Indian products which could still compete with British products were subjected to heavy import duties on entry into Britain. Instead of exporting manufactures, India was now forced to export raw materials which British industries needed and served as a market for British manufactures.
Thus the commercial policy of the East India Company after 1813 was guided by the needs of British industry. Its main aim was to transform India into a consumer of British manufactures and supplier of raw materials.
By the middle of the 19th century, British economic policy with India underwent changes. The development of its trade and industry, the extended exploitation of colonies and colonial markets began to produce an unlimited accumulation of capital which was increasingly concentrated in fewer banks, corporation, trusts and cartels. The need for investment of this capital brought about changes in the British-India economic relation. After 1850, a very large amount of British capital was invested in railways, loans to the Indian Government, and to a smaller extent in tea plantations, coal mining, jute mills, shipping industry, trade and banking. India now served as an area for investment of foreign capital.
