Chapter XVI: External Trade (1813-1835)

CHAPTER XVI

EXTERNAL TRADE (1S13-1835)

An Act was passed in 1813 which directed a separation of the East India Company’s Territorial Accounts from Commercial Accounts. It was directed that the Territorial Revenues should be applied (1) to Military Expenditure; (2) to Civil and Commercial Establishments; and (3) to the payment of Interest on the Indian Debt. And the Commercial Profits were to be applied (1) to the payment of Bills of Exchange and the current payment of other debts; (2) to the payment of Dividends; and (3) to the reduction of the Indian Debt or Home Bond debt¹

The Territorial Revenues of India during fifteen years from 1813 to 1828 were:—

This gives us an average annual Territorial revenue of over twenty millions sterling. The “Home Charges” spent in England out of this Indian Territorial Revenue came to an annual average of £1,693,472; and the total Territorial expenditure exceeded the total Territorial revenue, showing an annual average deficit of £1,227,343. Within this period of fifteen years the Territorial Debt had increased from thirty to forty-seven millions sterling; and the gradual and steady increase of the Company’s Territorial Debt during thirty-seven years is shown in the following figures:

It will thus appear that large additions to the Debt were made during the warlike administrations of Lord Wellesley and Lord Hastings. The surplus Commercial Profit of the Company, after payment of Bills of Exchange and Dividends, was applicable to the reduction of the India Debt or the Home Bond Debt, as stated before. But this surplus Commercial profit, which exceeded a million sterling in 1814, 1817, and 1818, gradually declined with the extension of the Empire and the decline of the Company’s trade, and was between £3000 and £42,000 only, between 1828 and 1830. After 1824, the Company ceased to export merchandise to India, and their only exports were military and political stores. The reason for discontinuing their export trade to India was the difficulty of obtaining any article of Indian produce or manufacture in return. Indian industries had declined, and the only articles which the Company continued to import into England from India were raw silk, some silk piece-goods, saltpetre, and indigo. The indigo was purchased at Calcutta, raw silk and saltpetre were prepared in their factories, and silk piece-goods were obtained by contracts with head weavers Even the import of Indian sugar into England had been discontinued. This steady decline of the Company’s commerce with India led to the final extinction of their trade when their Charter was renewed in 1833.

As the Company’s Indian trade declined, it gradually passed into the hands of private merchants to whom it was first opened in 1813. During sixteen years after that date, the Company’s trade averaged £1,882,718 annually, while private trade averaged £5,451,452 annually. The private trade was therefore three times as great as the Company’s, and private traders thus proved themselves fitter to carry on the trade with India than the territorial masters of India. The process of the extinction of Indian manufactures went on, however, under the new arrangements; in 1813 Calcutta exported to London two millions sterling of cotton goods; in 1830 Calcutta imported two millions sterling of British cotton manufactures. The first import of British cotton twist into India was in 1823, in 1824 it was 121,000 lbs.; in 1828 it rose to 4,000,000 lbs. Woollen goods, copper, lead, iron, glass, and earthenware were also imported. British manufactures were imported into Calcutta on payment of a small duty of 2½ per cent., while the import of Indian manufactures into England was discouraged by heavy duties ranging up to 400 per cent. on their value.¹

The duties which were imposed on the import of Indian manufactures into England between 1812 and 1832 on various articles of trade are shown in the following tables:²

Table

Petitions were vainly presented to the House of Commons against these unjust and enormous duties on the import of Indian manufactures into England. One petition against the duties on sugar and spirits¹ was signed by some four hundred European and Indian merchants, among whose names we find Ram Gopal Ghore, which is probably a misprint of the name of the well-known Indian publicist Ram Gopal Ghose. An application to the British Government to reduce the duties on the cotton and silk fabrics of India, signed by a very numerous body of respectable Indians, was rejected; and some London merchants thereupon applied to the East India Company to allow a drawback of 2½ per cent. on these fabrics on their import into England.¹ The application was equally fruitless.

To what extent the unjust commercial policy of England discouraged and ruined the manufactures of India will appear from the following table of exports shipped from the port of Calcutta during thirty years. The figures represent the exports into the United Kingdom only:²

Table

These figures will show that while the manufacture of indigo by European planters increased, and the export of raw silk held its ground, that of silk piece-goods showed a decline. The export of cotton, too, was on the decline, but the most marked decrease was in that of cotton piece goods. In the first four years of the nineteenth century, in spite of all prohibitions and restrictive duties, six to fifteen thousand bales were annually shipped from Calcutta to the United Kingdom. The figure rapidly fell down to 1813. The opening of trade to private merchants in that year caused a sudden rise in 1815; but the increase was only temporary. After 1820 the manufacture and export of cotton piece-goods declined steadily, never to rise again. A similar decline took place in the export of Indian piece-goods to the other countries of the world, notably to America, Denmark, Spain, Portugal, Mauritius, and the markets of Asia. The export to America declined from 13,633 bales in 1801 to 258 bales in 1829; Denmark, which took 1457 bales in 1800, never took more than 150 bales after 1820; Portugal, which took 9714 bales in 1799, never took over a thousand bales after 1825; and the exports to the Arabian and Persian Gulfs, which rose to between four and seven thousand bales between 1810 and 1820, never exceeded two thousand after 1825.

On the other hand, as India lost her manufacturing industry, she began to import British and other foreign piece-goods, paying for it in food grains. The following figures are significant:¹

Table

Some British and Foreign Goods imported through Calcutta into Bengal.

Table

In his evidence before the Commons’ Committee in 1813, Thomas Munro had laughed at the idea of Paisley shawls replacing the excellent shawls of India. In 1824 he was Governor of Madras, and must have noticed with concern the introduction of European shawls, as well as of muslins and piece-goods, broadcloths and woollens, to replace the manufactures of India. An equally sympathetic administrator, Sir John Malcolm, was the Governor of Bombay in 1830, and he, too, marked with consternation the ruin of Indian industries and the growing poverty of the Indian people.

“In the despatch of the Court [of Directors] it is observed that their attention has been directed in a special manner to this subject, and to look to India for the means of rendering great Britain independent of foreign countries for a considerable portion of raw material, upon which her most valuable manufactories depend….

“I must add, that it is only by the introduction of produce like silk, by our improvement of the staple of cotton, and the success of our recent efforts to make and refine sugar, that we can restore heart to many of our districts, and maintain our territorial resources…

“It is only by encouraging richer produce, such as that to which I have alluded, and other articles besides grain, reviving commerce, and inducing men of wealth and enterprise to remain or settle in the interior, that we can give heart to the country, and enable it to pay its revenue. There is no want either of talent or spirit among the native population subject to our rule and control to accomplish this object, but it requires to be drawn forth; and to effect this it is necessary to exert all the activity, energy, and enlarged policy of a Government which understands how to combine its own prosperity with that of the community subject to its authority.” ¹

Even Sir John Malcolm did not see, or perhaps did not care to state, that the industrial prosperity of a subject population was impossible when the settled policy of the ruling nation was to convert India into a land of raw produce only, for the purpose “of rendering Great Britain independent of foreign countries for a considerable portion of raw material upon which her most valuable manufactories depend.”

Public men and public writers in England never spoke or wrote of this policy pursued in India. The great political economists of the time, headed by Ricardo, had nothing to say on the subject. The leaders of the agitation against the Corn Laws, who rightly and successfully fought against the landlords of England for a measure which would bring cheap bread to the workman and labourer, said little and knew little of the policy which took the bread out of the mouths of millions of weavers and artisans in India. Cobden and Bright, the most large-hearted, sympathetic, and enlightened Englishmen of their time, carried the agitation against the Corn Laws to the successful issue; and Sir Robert Peel, who repealed those Laws in 1846, trusted that his name would be remembered by Englishmen who would “recruit their exhausted strength with abundant and untaxed food, the sweeter because no longer leavened with a sense of injustice.” But the bread of the Indian artisan and manufacturer is still leavened with a sense of injustice, and no statesman has yet seriously endeavoured to protect, foster, and revive their old and ruined industries.

Continental economists were able to take a more unbiassed view of the situation, and to speak more openly and freely. In a great work on Political Economy written in Germany in 1844, while the injustice of the Corn Laws was occupying the minds of English economists, a German economist pointed out the graver injustice which had been perpetrated in India.

“Had they sanctioned the free importation into England of Indian cotton and silk goods, the English cotton and silk manufactories must, of necessity, soon come to a stand. India had not only the advantage of cheaper labour and raw material, but also the experience, the skill, and the practice of centuries. The effect of these advantages could not fail to tell under a system of free competition.

“But England was unwilling to found settlements in Asia in order to become subservient to India in manufacturing industry. She strove for commercial supremacy, and felt that of two countries maintaining free trade between one another, that one would be supreme which sold manufactured goods, while that one would be subservient which could only sell agricultural produce. In the North American colonies, England had already acted on those principles in disallowing the manufacture in those colonies of even a single horse-shoe nail, and still more, that no horse-shoe nails made there should be imported into England. How could it be expected of her that she would give up her own market for manufactures, the basis of her future greatness, to a people so numerous, so thrifty, so experienced and perfect in the old systems of manufacture as the Hindus ?

“ Accordingly, England prohibited the import of the goods dealt in by her own factories, the Indian cotton and silk fabrics. The prohibition was complete and peremptory. Not so much as a thread of them would England permit to be used. She would have none of these beautiful and cheap fabrics, but preferred to consume her own inferior and more costly stuffs. She was, however, quite willing to supply the Continental nations with the far finer fabrics of India at lower prices, and willingly yielded to them all the benefit of that cheapness ; she herself would have none of it.

“ Was England a fool in so acting ? Most assuredly, according to the theories of Adam Smith and J. B. Say, the Theory of Values. For according to them, England should have bought what she required where she could buy them cheapest and best ; it was an act of folly to manufacture for herself goods at a greater cost than she could buy them at elsewhere, and at the same time give away that advantage to the Continent.

“ The case is quite the contrary, according to our theory, which we term the Theory of the Powers of Production, and which the English Ministry, without having examined the foundation on which it rests, yet practically adopted when enforcing their maxim of importing produce and exporting fabrics.

“ The English Ministers cared not for the acquisition of low-priced and perishable articles of manufacture, but for that of a more costly and enduring Manufacturing Power.”¹

The above extract will show that while British Political Economists professed the principles of free trade from the latter end of the eighteenth century, the British Nation declined to adopt them till they had crushed the Manufacturing Power of India, and reared their own Manufacturing Power. Then the British Nation turned free traders, and invited other nations to accept free trade principles. The other nations, including the British Colonies, know better; and are now rearing their Manufacturing Power by protection. But in India the Manufacturing Power of the people was stamped out by protection against her industries, and then free trade was forced on her so as to prevent a revival.

Footnotes

¹ Evidence taken before the Commons’ Committee, 1832, vol. ii., Appendix 7.

² Ibid., Appendix 31.