Economic rise and fall of Indo Pakistan.
By: Tarique Khan Javed
President, Overseas Pakistani Investors Forum.

From 30 to 3% in 200 years.
When Britishers took control of India, around 1750, India accounted for 30% of world economy by the time they left in 1947, its share in world GNP was reduced to 3%. How and why this massive decline happened is the subject of this study.

In 2007 when China has already emerged as an Economic Super Power, after suffering similar set back during Colonial rule and India and Pakistan are now poised to become significant Economic Powers, a study of causes of previous set back must be taken.
The British Rule was a successful commercial under taking devoid of any moral consideration. East India Co needed to give good return to its share holders at any cost. The performance of Co Officials was judged on how much they managed to send to England in the form of Exports (investment) and how many jobs they were able to give to Britishers. During the Rule some soft hearted Officials advocated some relaxation in extraction but they were ignored and their career shortened.
By imposing a very high tax(80 to 90%) on agriculture, monopolizing all well paid jobs, restricting local trade, systematically destroying local industries and transferring almost 50% of the tax to Britain every year; Indian Economy shrank rapidly during the British Rule.
During this period some 30 million people died due to hunger in famines. The famines were caused by lack of purchasing power and not because there was shortage of food grain in the country, as a whole. While millions died in India, export of food grain to UK continued as usual. To pay the heavy land tax farmers were compelled to sell the grain and starve.
As the British Rule spread from Bengal to Madras, Bombay and Northern India famines followed. Ten million people died in Bengal during early years of British Rule followed by 5 million each in Madras and Bombay by 1906.
It is estimated that some $ 8 trillion was taken away from India during this period to Britain thus making Britain very rich and India very poor.
The above bitter facts were suppressed by almost all British writers, except few, while only couple of natives has written on the subject. Romesh Dutt an ex high Civil Servant and later Professor in London, wrote on the subject extensively upto 1906, thus he stands out as an independent source of information on the subject. British Parliament Records are another source of information. Embarrassing facts like bribe taken by Co Officials and other misdeeds; brought out during investigations are well recorded.
As this is a controversial issue and there is no match between the brain power of British writers and us, the best way to support the above arguments is to quote British Officials and contemporary writers.

Observations below are worth quoting.

India at the time of arrival of the British:

Pgrard observed that:
“Claim that products of Indians looms clothed every man and a woman from Cape of Good Hope to China seems exaggerated”.

Moreland remarked that:
“Cotton weaving was by far the most extensive industry in India and its aggregate production was one of the great facts of industrial world of the year 1600. During 17th and 18th centuries its technology of silk spinning and weaving so improved as to win praise from European.”

Romesh Dutt observed that:
“India had developed an all India monetary organization by end of 16th century independently of European penetration. This differed little from other parts of the world.
Excess of exports over imports tilled the balance of trade in India’s favor. Western European could exchange billion because of America’s riches so the chief feather of India’s foreign trade was the absorption of precious metals; once it was believed that she was their sink.
Baharji Bohra was richer than English East India Co. The capital of same Indian Cos in 17th century ranged from 50,000 to 750,000 thanks to fairly advanced moneterized economy and the merchant capital had great mobility, but it did not lead to industrial capital.”

Immediate impact of British rule:

Romesh Dutt mentioned that:
“In many ways the sources of national wealth in India have been narrowed under British rule. India in the eighteen century was a great manufacturing as well as a great agricultural country and this product of the Indian loom supplied the markets of Asia and the Europe”.
It was officially estimated by the members of the Council after they had made a circuit through the country to ascertain the effects of famine that about one third of the population of Bengal or about 10 million people had died in this famine.
And while no systematic measure were undertaken for the relief of the sufferers perishing in every village, road side and bazaar, the mortality was heightened by the action of company servants. Their Gomashtas not only monopolized the grain in order to make high profits from the distress of the people, but they compelled the cultivators to sell even the seed requisite for the next harvest.

Warren Hastings wrote thus to the Court of Directors on 3rd November 1772.
“Notwithstanding the loss of at least one third of the inhabitants of the province and the consequent decrease of the cultivation the net collection of the year 1771 exceeded even those of 1768… It was naturally to be expected that the diminution of the revenue should have kept an equal pace with the other consequences of so great calamity .That it did not was owing to its being violently kept up to its formers standard.” India Office Records.

Romesh Dutt observed in 1906:
“A famine, the most intense and the most widely extended yet known, desolated the country in 1897.The famine was not over till 1898.There was a pause in 1899.A fresh famine broke out in 1900 over a large area and continued for a longer period. The terrible calamity lasted three years and millions of men perished. Tens and thousands were still in relief camp when the Delhi Durbar was held in January 1903.”
“The poverty of the Indian population at the present day is unparalleled in any civilized country; the famines, which have desolated India within the last quarter of the nineteenth century, are unexampled in their extent and intensity in the history of ancient or modern times. By a moderate calculation the famines of 1877to 1889, 1892, 1897 and 1900 have carried off fifteen million people. The population of fairly sized European country has been swept away from India within thirty-five years. Population equal to half of that of England has perished in India within a period, which men and women still in middle age can remember”.

By 1813 Napoleon Bonaparte had excluded British manufacturers from the continental ports; the merchants and manufacturers of England were labouring under difficulties; the country was menaced with distress unless some new venue for the sale of its industrial products could be discovered. So the monopoly of the co was ended in 1813 and a large number of traders invaded India at the cost of local manufacturers.

Romesh Dutt noted that:
“It is unfortunately true that the East Indian Company and British parliament following the selfish commercial policy, discouraged Indian manufacturers in the early years of British rule in order to encourage the rising manufacturers of England. Their fiscal policy during the last decades of the 18th century and 1st decade of 19th century was to make India subservient to the industries in Great Britain and to make Indian people grow row produce only in order to supply material for the looms and manufacturers of G.B.
This policy was pursued with unwavering resolution with the fatal success; orders were sent out to force Indian artesian to work in the company’s factories; commercial residents were legally vested with extensive powers over villages and communities of Indian weavers; prohibitive tariffs excluded Indian silk and cotton goods from England. English goods were admitted into India free of duty or on payment of a nominal duty.”
“The East India Company’s trade was abolished in 1833 and the Co-abolished in 1858 but their policy remained. Their capital was paid off; loans which were made into an Indian debt on which interest was paid from Indian taxes. The Empire was transformed from Co to the Crown, but the people of India paid the purchase price. The Indian debt which was Ps 51,000,000 in 1857 rose to Ps 97, 000,000 in 1862.within the forty years of peace which have succeeded the Indian debt has increased continuously and now (1901) amount to Ps200, 000,000.The “Home charges” remitted annually out of Indian revenue to Great Britain increased to 16 million. The pay of European officers in India, virtually monopolizing all the higher services comes to Ps 10 millions. Only half of the net revenue of India, which is now Ps44m flows annually out of India.

Place any other country under the same condition, with crippled industries, with agriculture subject to a heavy and uncertain land tax, and with financial arrangements requiring one half of its revenue to be annually remitted out of the country and the most prosperous nation on earth will soon know the horrors of famine”.

The British manufacturers in the words of the historian H.H Wilson
“employed the arm of political injustice to keep down and ultimately strangle a competitor with whom it could not have contended on equal terms; million of India artesian lost their earnings; the population of India lost one great source of their wealth. It is a painful episode in the history of British Rule in India; but it is a story, which has to be told to explain the economic condition of the Indian people, and the present helpless dependence on Agriculture. The invention of power loom in Europe completed the decline of the Indian industries and when in recent years the power loom was set up in India, England once more acted towards India with unfair jealousy. An excise duty has been imposed on the production of cotton fabrics in India, which disables the Indian manufacturers from competiting with the manufacturers of Japan and China which stifles the new steam mills of India.”

Sir Thomas Munro on 31st December 1824 recorded minutes on Madras Province.
“ With what grace can we talk of our paternal Government if we exclude them from every important office and say, as we did till very lately that in a Country containing fifteen million of inhabitants, no man but a European shall be entrusted with so much authority as to order the punishment of a single stroke of a rattan. Such an interdiction is to pass a sentence of degradation on a whole people for whom no benefit can ever compensate. There is no instance in the world of so humiliating a sentence having ever been passed upon any nation.”

Col.John Briggs’s observations:
“A land tax like that which now exists in India” wrote Colonel Briggs in 1830,’ professing to absorb the whole of landlord’s rent was never known under any Government in Europe or Asia.”
He pointed out that “every ancient nation, the Greeks, the Romans and Persian and the Chinese. The right of the State consisted in laying a tax of one tenth of produce Among the Ancient Hindus the right of the King or the State was to levy of grain 1/8 part or, a 1/6 or 1/12 according to the difference of the soil and the labor necessary to cultivate it.
That the occupation of the land alone was its sole proprietor; that the demand on him for contributory to the support of the State was a sort of income tax viz a limited portion of the produce of his estate; and that this portion was fixed in time of peace, but liable to increase in time of war and that under all circumstances it left a certain surplus profit to the owner equivalent to a rent. Moreover I hope I have established that the sovereign never claimed to be the proprietor of the soil, but of the land tax.”
The disregard of this cardinal principle by the Co. and their endeavors to sweep away the entire profit from the land, leaving to cultivators barely enough to support their lives, were regarded by John Briggs as the main causes of the poverty of India under the British Rule.

Conclusion:
“I am sure that I can save the country and that no one else”. So spoke the great William Pitt, not boastfully, but with the consciousness of power, and that clear provision of great events which some times come to men inspired by a lofting mission. He ruled from 1757 to 1761, the year when the Empire rose.
Against the wishes and decree of Holy Roman Pope the English came out of their small and clumsy island to improve the standard of living of their countryman.
They succeeded splendidly indeed and Britain became the richest country in the world. Colonies provided well paid jobs and brought in trillions of Pounds.
We the conquered Nations gave up easily and served the Empire happily. We were easily divided by religion and ethnicity while Britishers remained united in their mission whether they were Catholic or Protestant, Irish, Scottish or English. We would have remained under their rule, if Colonial powers had not collided among themselves, in First and Second World wars.
After independence all Nations have done well. There has been no famine and gradually standards of living are improving. People have regained their self respect and are working hard to regain their lost economic power, against the many hurdles placed by Ex Colonial powers in the form of trade barriers and subsidies.
China after transformation into a rational society without the baggage of old traditions and religion is marching fast to regain its position as the biggest economy of the world in 16th century.
India, Pakistan, Bangladesh, Sri Lanka and Nepal are still struggling to get rid of the old traditions and religion and therefore have been left behind. It will take ages before sub continent produces 30% of world GNP, as was done in 1750.
The process can be accelerated if these countries make concerted efforts to rationalize their societies and get rid off wooly thinking.
Unity and cooperation between SAARC countries leading to a common market and currency can also help a lot. The reduced spending on defense can be diverted towards social needs like health and education to increase the pool of skill workers to face international challenges.