CHAPTER 2

 

Historical Background

 

            India is an ancient civilisation with a bright history.  It is world’s largest and most heterogeneous country.  H.V. Hodson1 in his ‘Dis-economics of Growth’ says  “We talk about “less developed’ and ‘more developed’ countries regardless of what they have developed from and what they are developing into.  Thus India, because its average income is low, is rated a ‘less developed country’ compared to Britain or America.  What an extraordinary use of words that is!  India is poorer, certainly, but her civilization is far older, and may well prove more durable.  India was ‘developed’ when our northern countries were forests and bogs and the home of savages”.

 

2.2.       Paul Kennedy2 indicates in the following Tables the share of various countries, including India, in the manufacturing output of the world and per capita level of industrialization during the century and a half between 1750 A.D. and 1900 A.D.

Table 2.1

Relative Shares Of World Manufacturing Output 1750-1900

                                                                                               (In percentage)

 

1750

1800

1830

1860

1880

1900

(Europe as a whole)

23.2

28.1

34.2

53.2

61.3

62.0

United Kingdom

1.9

4.3

9.5

19.9

22.9

18.5

Habsburg Empire

2.9

3.2

3.2

4.2

4.4

4.7

France

4.0

4.2

5.2

7.9

7.8

6.8

German States/

 Germany

2.9

3.5

3.5

4.9

8.5

13.2

Italian States/ Italy

2.4

2.5

2.3

2.5

2.5

2.5

Russia

5.0

5.6

5.6

7.0

7.6

8.8

United States

0.1

0.8

2.4

7.2

14.7

23.6

Japan

3.8

3.5

2.8

2.6

2.4

2.4

Third World

73.0

67.7

60.5

36.6

20.9

11.0

China

32.8

33.3

29.8

19.7

12.5

6.2

India/ Pakistan

24.5

19.7

17.6

8.6

2.8

1.7

 

Table 2.2

Per Capita Levels Of Industrialization, 1750-1900

(Relative To UK In 1900=100)

 

1750

1800

1830

1860

1880

1900

 

(Europe as a whole)

8

8

11

16

24

35

United Kingdom

10

16

25

64

87

[100]

Habsburg Empire

7

7

8

11

15

23

France

9

9

12

20

28

39

German States/

 Germany

8

8

9

15

25

52

Italian States/ Italy

8

8

8

10

12

17

Russia

6

6

7

8

10

15

United States

4

9

14

21

38

69

Japan

7

7

7

7

9

12

Third World

7

6

6

4

3

2

China

8

6

6

4

4

3

India

7

6

6

3

2

1

But the following Tables which are in stark contrast to the 18th century prosperity of India indicate the decline.  Amongst the causes for the decline are, prominently, the colonial exploitation and the inherent inability of India to cope with and manage the forces of change:

 

Table 2.3

India’s Share In World Trade And Tariffs

Year

Merchandise exports (US $ billion)

Share in world

 

Merchandise exports (%)

Average tariff (%)a

Refeb 1990=100

India

World

 

 

1985

9.14

1872.00

0.488

-

60.27

1986

9.40

2046.40

0.459

-

70.90

1987

11.30

2401.40

0.470

-

75.82

1988

13.33

2742.00

0.486

-

83.88

1989

15.85

2981.50

0.531

-

92.09

1990

17.98

3395.30

0.529

127.7

102.33

1991

17.66

3489.10

0.506

127.6

124.30

1992

19.56

3730.20

0.524

94.0

139.85

1993

21.55

3877.30

0.556

71.0

139.09

1994

25.08

4260.00

0.589

55.0

135.65

1995

30.76

5122.90

0.601

40.8

142.13

1996

33.05

5352.30

0.618

38.6

138.39

1997

34.25

5534.90

0.619

34.4

130.54

1998

33.05

5450.00

0.606

40.2

138.13

a   Data for fiscal year April-March

 b Real effective exchange rate, based on the IMF’s Information Notice System   (INS) methodology.

Note:Tariffs before 1990 were in excess of 100 per cent.  The mean tariff to 1999-2000 is 39.6  per cent.

Source: World Bank staff estimates; IMF, IFS Yearbook 1998 and IFS Bulletins, February   1999-April 1999.

Table 2.4

     Share In World Exports:  India And Selected Countries, 1998

 

 

Value of exports (US $ billion)

Share in World exports (%)

 

1996

1997

1998

1996

1997

1998

World

5352.30

5534.90

5450.00

100.00

100.00

100.00

India

33.05

34.25

33.05

0.62

0.62

0.61

China, Mainland

151.20

182.88

183.59

2.82

3.30

3.37

China,

Hong Kong

180.75

188.06

173.99

3.38

3.40

3.19

Brazil

47.75

52.99

51.12

0.89

0.96

0.94

Argentina

23.81

26.37

25.23

0.44

0.48

0.46

Korea

129.72

136.16

133.22

2.42

2.46

2.44

Malaysia

78.33

78.74

73.30

1.46

1.42

1.35

Pakistan

9.33

8.73

8.50

0.17

0.16

0.16

Tanzania

0.76

0.72

0.67

0.01

0.01

0.01

Turkey

23.22

26.25

25.94

0.43

0.47

0.48

Kenya

2.07

2.05

1.99

 

 

 

US

625.07

688.70

682.50

11.68

12.44

12.52

Canada

201.63

214.42

214.33

3.77

3.87

3.93

 Source:  IMF, IFS, various issues.

                       

2.3.       Many Western powers built their great economic  fortunes on the exploitation of the countries under their colonisation.  “The fountain and origin of British foreign investments” and “the main foundations of England’s foreign connections,” John Maynard Keynes observed, “was the piracy of the Elizabethan plunderers – terrorists, in contemporary lingo”. Countries under colonial rule were “de-industrialised,” essentially by force.  Bengal, the first part of India to be conquered by Britain, “was destabilized and impoverished by a disastrous experiment in sponsored government,” observes John Keay in his history of the East India Company.  Robert Clive, described the textile center of Dacca in 1757 “as extensive, populous, and rich as the city of London”; by 1840 its population had fallen from One lakh fifty thousand to thirty thousand.  Sir Charles Trevelyan testified before the House of Lords, “and the jungle and malaria are fast encroaching ……Dacca, the Manchester of India, has fallen from a very flourishing town to a very poor and small town.”  At the time of the English takeover, India was comparable to England in industrial development.  The conqueror industrialized while Indian industry was destroyed by British regulations and interference.   Had they not been undertaken, Horace Wilson wrote in his History of British India in 1826, “the mills of Paisley and Manchester would have been stopped in their outset, and could scarcely have been again set in motion, even by the power of steam”.  They were created by the sacrifice of Indian manufacturers.  Lord Bentinck, observed, “I should say that the ‘Permanent Settlement,’ though a failure in many other respects and in most important essentials, has this great advantage, at least, of having created a vast body of rich landed proprietors deeply interested in the continuance  of the British Dominion  and having complete command over the mass of the people,”.  Manufacturing industries which had been comparable to the British at the time of conquest not only failed4 to develop but also were largely eliminated as “India sunk” into poverty and  misery.  India finally gained Independence : destitute, overwhelmingly agrarian with a population, which was abysmally poor suffering from mortality rates which were amongst highest in the world. Pandit Nehru described India’s pathetic situation  as under:

 

“A servile state, with its splendid strength caged up, hardly daring to breathe freely, governed by strangers from afar; her people poor beyond compare; short - lived and incapable of resisting disease and   epidemic; illiteracy rampant; vast areas devoid of all sanitary or medical provision; unemployment on a prodigious scale, both among the middle classes and the masses.”.

 

 

 

Piracy and Plunder

 

q       India was developed when some of the most industrialized countries of the day were forests and bogs and homes of savages.

 

q       India was far superior to United Kingdom in the share of World Trade between 1750 AD to 1830 AD but by 1900 its share in World Trade was less than one-tenth of the share of United Kingdom.

 

q       Dacca -Textile Center of India was in 1757 as extensive and rich as the city of London but by 1840, it was reduced to a very poor and small town.

 

q       At independence, overwhelming majority of Indians were illiterate and abysmally poor.  Life expectancy was very low and the mortality rates were amongst the highest in the world.

 

 



1 H.V. Hodson – The Diseconomics of Growth, Ballantine Books, New York.

2  Paul Kennedy – The Rise and Fall of the Great Powers – page 149.

4  Noam Chomsky – World Orders, Old and New (Oxford) page-113