Book II, Chapter 8: Trade and Manufacture

CHAPTER VIII

TRADE AND MANUFACTURE

LORD CANNING undertook a great reform in the Indian Tariff. In February 1857, a year after his arrival in India, he addressed the Court of Directors on the subject. He proposed to equalise the duties on British and foreign merchandise, on raw and manufactured articles. He desired to exempt from duty a large number of articles which produced little revenue. He wished to abolish export duties, and to augment import duties. The proposals remained in abeyance during the Mutiny of 1857; and, in 1858, the East India Company ceased to rule.

Lord Stanley, the first Secretary of State for India under the Crown, replied to Lord Canning in April 1859. The liabilities of India had vastly increased in consequence of the Mutiny, and the financial difficulties were greater. Lord Stanley, therefore, modified Lord Canning’s proposals, so as to secure a larger revenue. British and foreign manufactures should be treated equally by raising the duties on British goods to the foreign rates. Duties on petty articles should not be abolished. Export duties should not be abandoned. Import duties should be increased.

Before receipt of this despatch, the Indian Government had already passed Act vii. of 1859, raising the duties on British goods to foreign rates, and taking power to levy the increased duties even on current contracts. And on receipt of the Secretary of State’s despatch, Lord Canning replied that the Act recently passed was virtually in accordance with the instructions contained in the despatch.

But the Act gave great dissatisfaction to British merchants in India; and when James Wilson, the first Indian Finance Minister, went out to India, he had instructions to try and allay the irritation which had been caused.¹ Accordingly, in 1860, he abolished the export duties on Indian raw products, and considerably reduced import duties on manufactures. British merchants were conciliated; and India suffered a loss of revenue at the time of her sorest need.

In the same year, a committee was appointed to inquire into the subject of Indian tariffs generally. Two British merchants of Calcutta and Bombay formed the committee, and Ashley Eden, afterwards Lieutenant-Governor of Bengal, presided. The committee submitted their report in 1860, and suggested a uniform tariff and important customs reforms. A second committee was appointed in 1867, and submitted a revised tariff. A third tariff was prepared in 1869, and in the following year Lord Mayo’s Government passed Act xvii. of 1870. The Act fixed the import duties generally at 7½ per cent. on manufactured goods and raw material, at 3½ per cent. on twist and 5 per cent. on piece goods, at 1 per cent. on iron and 10 per cent. on tobacco. The principal export duties were 6s. on a Maund (82 lbs.) of indigo, 3d. on a Maund of grain, 4 per cent. on lac, and 3 per cent. on oils, seeds, cotton goods, hides, and spirits.

Further changes were made in the following year by Act xiii. of 1871. The principal import and export duties, fixed by the Act, are given on p. 338.

Valuable evidence on the operation of these duties on trade was given before the Select Committees of the House of Commons which sat in 1871, 1872, 1873, and 1874. It is necessary therefore to refer to some portions of this voluminous evidence.

John Nutt Bullen, a prominent Calcutta merchant who had sat on Ashley Eden’s Tariff Committee of 1860, complained of the export duty of 4½d. per maund (82 lbs.) of grain, and said it fell on the grower of rice, and was, to that extent, an addition to the Land Tax. The import duty of 5 per cent. on cotton piece goods was, he considered, moderate and unobjectionable.² There were only two or three cotton spinning and weaving mills in Calcutta.

Sir Bartle Frere spoke guardedly on the effect of keeping down the import duty on cotton piece goods in order to foster the sale of British goods. “There is this difficulty,” he said, “that the interests of India and of England on that point seem rather at variance. No doubt some considerable increase of revenue might be realised by increasing the import duties, say, upon piece goods and yarns, but the direct result of that would be to diminish consumption and to stimulate production on the spot.”³

On the other hand, Walter Cassels, who had been a Bombay merchant and a member of the Bombay Legislation Council, argued that even the small import duty of 5 per cent. on cotton piece goods operated as a protective duty. And he looked with a jealous eye on the growth of the cotton spinning and weaving industry in Bombay. “I say they are protective duties. I do not advocate their abolition solely for that reason. I do not know whether you are aware that, for instance, in the Bombay Presidency there are 12 cotton mills, employing (a very small amount, of course, for Manchester) 319,394 spindles, 4199 looms, and 8170 hands, consuming, I think, 62,000 bales of cotton of 400 lbs. each annually.”⁴

British administrators in India marked with satisfaction, rather than with jealousy, the growth of the infant cotton industry of Bombay; but in matters of Indian administration they were the servants of the British merchant and the British voter. The veteran Sir Charles Trevelyan, who had served India with credit and distinction under a former generation of rulers, and who had, at a later period of his life, been Governor of Madras and Finance Minister of India, spoke with some warmth against the sacrifice of legitimate Indian revenues under the mandate of British manufacturers. “Although the trade of India,” he said, “increased in these ten years from £60,000,000 to £106,000,000, the Customs yielded £1,013,500 less. If Customs Duties are a legitimate source of revenue, so small an amount as £2,400,000 for the whole of India is simply ridiculous.”⁵

Lord Lawrence, too, felt deeply on this point. As Viceroy of India he had tried to raise the export duties on jute and other Indian products in 1865, to get a little additional revenue and save the country from a deficit. But British interests had been too strong for him, and the Secretary of State for India had disallowed his proposals. Eight years after, when he was questioned as a witness by Mr. Fawcett, he guardedly expressed his painful impressions of the influence of British trade over the financial policy of India.

Henry Fawcett.—With reference to export duties; if an attempt was made to increase the export duties, to put an export duty, for instance, upon cotton or upon jute, it would, pro tanto, place the trade of India in a, comparatively speaking, unfavourable position, and would bring to bear against the Government of India the very powerful pressure of the commercial classes in England, would it not?

Lord Lawrence.—That is quite true.

Henry Fawcett.—Do you think, considering that India is scarcely represented at all in this House, that it is only indirectly represented in the House, and that the commercial classes of England are powerfully represented in it, that any Government would, for one moment, be likely to resist an opposition, brought to bear upon them from people who have votes, against putting on such an export duty?

Lord Lawrence.—I think not.

Henry Fawcett.—Therefore, considering how India is governed, that India is governed by the House of Commons, and that India is governed by the Secretary of State, who, after all, is a Member of the Cabinet whose existence depends upon the votes of the House of Commons, you cannot rely upon the imposition of an export duty as giving you an increase of revenue in India, can you?

Lord Lawrence.—I am afraid not.⁶

It is necessary to make one more extract here from Mr. Fawcett’s examination of Lord Lawrence to indicate the extent to which the Secretary of State and his Council did, and could, safeguard Indian interests against British commercial interests. The passage in question illustrates a painful truth which is as relevant to-day as it was thirty years ago.

Fawcett.—With regard to the relations between the Secretary of State and his Council, I understood in your previous examination that you said, speaking, for instance, as a typical case in reference to the Indo-European Telegraph, that when it was proposed to throw the whole expense of that telegraph on India, instead of making England bear a part of it, there would be no use in the Council of the Secretary of State objecting, because they had no political influence, and they were unable to resist the pressure which was brought to bear upon the Secretary of State from outside ?

Lord Lawrence.—I said that was the practical result ; I think the Council did act in many cases as a very considerable buffer between the people pressing on expenditure in India and the Secretary of State, and in many ways helped the Secretary of State to resist that pressure ; but when it came to be a very important matter, in which the interests and the feelings of merchants in England were enlisted, then, I think, the Council could not resist it with any effect.

Fawcett.—But were they not appointed, and was not this great charge thrown upon the revenues of India, with no other object than that they should resist ? That was the chief object with which they were appointed, was it not ? If not, the duties which they performed might be performed, as they are in other Government Departments, by the permanent officials, the Under-Secretaries. Why, therefore, should they not, if they thought that this expenditure was wrong, say : " We are receiving a salary from the revenues of India ; we care nothing about the political pressure that may be brought to bear upon the Secretary of State ; no power on earth shall induce us to sanction an expenditure of money which we think is wrong, so far as the interests of India are concerned"?

Lord Lawrence.—“I think if you had no Council that practically there would be a great difficulty in that way. The Council may not be a perfect machinery, or a perfect buffer between those who want unduly to put expenditure on India and the Secretary of State, still they do a great deal in that way. I am sure from my experience of the five years that I was in Council, that had there not been a Council, a very great deal would have been put on India, which was not put on it, in consequence of the remonstrances of the Council.

Fawcett.—But still, without now discussing whether the Council do any good whatever, or whether it would not be desirable completely to abolish them, I want to know why was it not their first duty to the interests of India to resist—and how can it be said that they were not disregarding an important trust if they did not resist—this political pressure that you refer to, and did not say that no power on earth should induce them to sanction an expenditure which they thought wrong towards the people of India? For what other purpose did they receive their salaries except to do that?

Lord Lawrence.—That seems theoretically a very simple way of acting; but I think in practice it is extremely difficult; and I think, moreover, that if the Council had acted in that kind of way, they would not have succeeded. Some movement would have been made in Parliament, or elsewhere, whereby they would have been perhaps done away with, or their powers would have been so shackled that, in point of fact, they would have been less able to work than they hitherto did work.⁷

The total imports and exports of India during the last years of the Company’s administration have been given in a preceding chapter. We exhibit below the figures for the first nineteen years of the Queen’s administration, from 1859 to 1877. These figures are taken from the “Statistical Abstracts relating to British India” annually published and presented to Parliament.

It will appear from these figures that, during the first two years after the Mutiny, India received much more than she sent out, and that during the two succeeding years her imports were about equal to her exports. This equilibrium did not last long; in the year ending in April 1863 India exported nearly six millions more than her imports, and this difference went up to over sixteen millions in 1864, and to twenty millions in 1865. The difference decreased then for five years; but after 1870 it settled down to a figure generally between fifteen and twenty millions sterling a year. This heavy and impoverishing Economic Drain from India, which followed so soon after the commencement of the Crown administration, presented a melancholy contrast to the comparatively light tribute which India had paid under the Company’s administration. For the difference between the imports and the exports of India during the last years of the Company’s administration was something between three and four millions a year, as we have seen in a previous chapter.

Within twelve years after the change in administration, the Economic Drain from India had increased fourfold. India suffered this steady and increasing drain, and prepared herself for those frequent and widespread famines which marked the last quarter of the nineteenth century. They were the natural economic results of a continuous drain such as no country on earth could bear.

And while India suffered, the British nation, as a nation, did not gain. The manufacturers and operatives of Great Britain, who formed the nation, would have obtained larger profits from an increasing trade with India if the country had grown in wealth and prosperity. But a poor people are poor consumers of foreign articles. The total merchandise imported into India from all countries of the world showed a slight increase from 36 millions in 1868 to 37½ millions in 1877. Over one-half of this was British produce, and the consumption of British produce therefore scarcely increased a million in ten years.

The true character of the trade with India will appear more clearly if we pass in review the principal articles of import and export. The principal imports are exhibited in the table on the opposite page.

The import of cotton goods into India, which was arrested during the Mutiny years at a figure under five millions sterling, went up by a bound to eight millions in 1859, and rose to double that figure in ten years. The people of India did not use much more cotton clothing in 1869 than they did in 1859; and the increase of imports indicated a corresponding decrease in Indian manufacture. From an economic point of view, the people had gained by obtaining cheaper clothing, while they had lost to a much larger extent by the loss of their weaving industry. For the loss was not replaced by any new industry; and millions of weavers sank to the level of agricultural labourers, and increased the pressure on the soil.

The same remark applies to the consumption of silk and woollen goods. The imports of the former increased from two to six hundred thousand pounds, and of the latter from three to eight hundred thousand pounds—displacing to that extent the weaving industries of India.

The fall in the imports of the last year, i.e. of the year ending March 31, 1877, was owing to a widespread distress in Southern India, which deepened into the terrible famine of 1877. Twenty years of peace had brought no prosperity to India; and the year chosen by Lord Lytton for his Delhi

Durbar festivities was unhappily a year of the worst famine that India had yet known within the century.

The table on p. 347 shows the principal exports from India to all countries of the world between 1859 and 1877. We have selected only those articles the export of which exceeded two millions sterling in 1877.

The first article of export in the table is raw cotton, and the extraordinary variation in the quantities exported is both striking and instructive. Great Britain, desirous of creating a self-contained empire, had long endeavoured to obtain from the tablelands of Berar and Bombay the cotton required by the looms of Lancashire. A Parliamentary Committee had been appointed, as our readers will remember, in 1848, and John Bright, Chairman of the Committee, had held out no hopes of India largely adding to her supply to the cotton mills of England. The idea of a self-contained empire had proved a dream; England had to obtain her raw material from the country which grew it cheapest and best; and America produced the best cotton for the Lancashire looms. When the British nation were settling down to this sane economic conclusion, the Civil War of America suddenly disturbed and restricted the supply of cotton from that country. India then came to the rescue; and she supplied what America failed to supply. The export of cotton from India rose from ten to eighteen millions sterling in 1862–1863; to thirty five millions in the next year; and to thirty-seven millions in the year following. There were people who hoped at the time that Great Britain might dispense with American cotton in the future, and that her Indian Empire would henceforth supply the requirements of the Lancashire operatives. But the hope was soon dispelled. Peace returned to America; and trade returned to its natural channel. The export of Indian cotton fell as suddenly as it had risen; and by 1866–67 it had fallen no less than twelve millions. It was unfortunate for Bombay that the revision of her land-settlements began in the very years when accidental causes had brought about a temporary prosperity. Settlement Officers were induced to make those enormous enhancements in the Land Tax which have been described in another chapter, and which led to hardship and misery, and to rioting and disturbance, in 1875. The incident illustrates forcibly the evils of a varying Land Revenue demand in a country which is mainly agricultural. A nation of cultivators can never permanently improve their own condition if the State is ever ready to screw up its demands with the first signs of prosperity.

While the export of raw cotton underwent these variations, the export of Indian cotton goods, including twist and yarn, slowly improved. In 1858–59 the value of the export was £813,604; in 1863–64 it had risen to £1,167,577; in 1869–70 it was £1,298,757; and in 1876–1877 it had risen to £1,935,198, or nearly two millions. This aroused the jealousy of Manchester, and led to fiscal legislation which will be described in a future chapter.

The export of rice, wheat, and other food grains rose from under three millions to nearly eight millions in the nineteen years under review. Such a rise, in a country maintaining its commercial independence, is an indication of prosperity; but the commerce of India was forced and artificial. India had to meet a heavy drain which flowed annually into Great Britain without a direct commercial equivalent; she was unable to meet this demand by manufactured articles; and she met it therefore with the food supply of the people to a larger extent than she would have otherwise exported.

It is instructive, if somewhat painful, to watch how this process works. The annual Economic Drain to Great Britain is met directly from the revenues of India. A great part of the revenues of India is derived from the soil in the shape of the Land Revenue. The Land Revenue is realised, generally, from cultivators in Southern India, and from landlords in Northern India who in their turn exact rents from their tenants. Cultivators pay their revenue or their rents by selling a large portion of the produce of their fields, keeping an insufficient stock for their own consumption. Exporting merchants have their agents all over the country to buy what the cultivators are compelled to sell; and railways rapidly transport these purchases to seaports whence they are exported to Europe. India presents a busy scene to the winter globe-trotter when these transactions take place in every large town and market; but under the cheering appearance of a brisk grain trade lies concealed the fact that the homes and villages of a cultivating nation are denuded of their food to a fatal extent, in order to meet that annual tribute which England demands from India.

It thus happens that, even on the eve of great famines, the export of food goes on as briskly as ever, because the grain has to be sold to meet a rigid Land Revenue demand. In 1876-77, when India was on the brink of one of the severest famines of the century, she exported a larger quantity of food grains, as will appear from the foregoing table, than she had ever done in any preceding year. And even a province, actually suffering from famine, will continue to export food to an extent which bears some proportion to the amount of the Land Revenue realised from the province during the famine.

There are other far-reaching results of the demand of Indian rice and wheat in Europe which it is interesting to watch. The demand has had some effect in extending cultivation; and where the Land Revenue is permanently settled, this means a substantial increase to the wealth of the people. There can be little doubt that the people of Bengal are more resourceful in the present day than they were a century ago, owing to the large increase of cultivation in Bengal. The same remark can scarcely be made in respect of Madras and Bombay, where extension in cultivation leads to increase in the Land Revenue, sometimes out of proportion to the benefits obtained. It is sometimes forgotten that the lands last taken up are inferior in productive powers; and increase in the Land Revenue in proportion to the cultivated area is an increase out of proportion to the produce. When such blunders are committed, the extension of cultivation makes the people poorer, not richer.

Again, the demand of Indian produce in Europe affects the prices of the food grains. As the population of India is mainly a grain-producing nation, the rise in the price of food grains is an economic gain to the nation. But in this case also, a reservation has to be made. The signs of agricultural prosperity often induces Settlement Officers to screw up the Land Revenue, and the cultivators are left poorer when the prices fall again. All these considerations show the effects of a varying Land Revenue on the welfare of an agricultural nation.

The export of hides and skins went up from half a million sterling to three millions. This was an economic gain to the people in one way, but involved a loss in another direction; for the export of so much of skins indicated the decline of the leather industry in India. The export of jute also went up from a million to three or four millions in the early ‘seventies. Most of the jute was grown in a few districts in Bengal; and while this new article of export added to the resource of cultivators, it restricted the area of land under rice cultivation.¹¹

The export of opium was steady, and even showed an increase during the period under review; and as the Government had the monopoly of that article, the profits from the export was a gain to the revenues of India.

The export of seeds increased from two to five millions during the nineteen years, and this was a loss of manure to India. The refuse of oil seeds, after the oil is expressed, is one of the best manures that can be used; and if the seeds had been used in India and the oils exported, an ample supply of manure would have been available for the purposes of cultivation. To export the entire seed is, in the words of Dr. Voelcker, “to export the soil’s fertility.”¹²

The indigo and tea exported were mainly grown and prepared by British capital and by Indian labour. The profits of the capital went to the shareholders in England; the wages of labour remained with the people of India. The many acts of coercion and oppression, by which an unwilling peasantry was forced to grow indigo by planters in Bengal, led at last to a serious disturbance and rioting in 1860. Dina Bandhu Mitra, an Indian writer, exposed the oppression in a drama of remarkable power; and the Rev. James Long translated it into English, for which public-spirited act he was fined and imprisoned by the High Court of Calcutta. The Hon. Ashley Eden, afterwards Lieutenant-Governor of Bengal, supported the cause of the oppressed cultivators; and an inquiry made by a Commission disclosed the many evils of the system. The question came up through Lord Canning to Sir Charles Wood, then Secretary of State for India, and that strong and upright administrator exerted himself to remove the evils which had stained the history of this industry. Large classes of the Bengal cultivators freed themselves, and refused to grow indigo under compulsion. The figures given in the table above will show that the export of indigo steadily went down between 1859 and 1862, and that it was not till 1869 that it showed indications again of a steady rise. A different cause—the invention of artificial indigo—finally ruined this industry in India at the close of the century.

On the other hand the export of tea showed no fluctuations, but a steady and rapid rise—the export increased fortyfold in nineteen years, from £60,000 in 1858-59, to over 2½ millions in 1876-77. The rise was continuous and uninterrupted—every year within this period ended in a larger export than the preceding year. Many wild wastes in hills and valleys have been thus converted into gardens, and hundreds of thousands of poor people have found employment in these gardens. But a dark stain is cast on this industry by what is known as the “slave-law” of India. Ignorant men and women, once induced to sign a contract, are forced to work in the gardens of Assam during the term indicated in the contract. They are arrested, punished, and restored to their masters if they attempt to run away; and they are tied to their work under penal laws such as govern no other form of labour in India. Hateful cases of fraud, coercion, and kidnapping, for securing these labourers, have been revealed in the criminal courts of Bengal, and occasional acts of outrage on the men and women thus recruited have stained the history of tea-gardens in Assam. Responsible and high administrators have desired a repeal of the penal laws, and have recommended that the tea-gardens should obtain workers from the teeming labour markets of India under the ordinary laws of demand and supply. But the influence of capitalists is strong; and no Indian Secretary of State or Indian Viceroy has yet ventured to repeal these penal laws, and to abolish the system of semi-slavery which still exists in India.

Footnotes