Urban Indian economy after 1858
During this period, the Indian economy essentially remained stagnant, growing at the same rate (1.2%) as the population. India also experienced deindustrialization during this period. Compared to the Mughal era, India during the British colonial era had a lower per-capita income, a large decline in the secondary sector, and lower levels of urbanization. India’s share of the world economy and share of global industrial output declined significantly during British rule.
Some of the important features of Indian urban economy during this period are as follows:
Deindustrialization
In the seventeenth century, India was a relatively urbanised and commercialised nation with a buoyant export trade, devoted largely to cotton textiles, but also including silk, spices, and rice. India was the world’s main producer of cotton textiles and had a substantial export trade to Britain, as well as many other European countries, via the East India Company. Yet as the British cotton industry underwent a technological revolution during the late 18th to early 19th centuries, the Indian industry stagnated and deindustrialized. India also underwent a period of deindustrialization in the latter half of the 18th century as an indirect outcome of the collapse of the Mughal Empire. Even as late as 1772, Henry Patullo, in the course of his comments on the economic resources of Bengal, could claim confidently that the demand for Indian textiles could never reduce, since no other nation could equal or rival it in quality. However, by the beginning of the nineteenth century, a beginning of a long history of decline of textile exports is observed .
A commonly cited legend is that in the early 19th century, the East India Company (EIC), had cut off the hands of hundreds of weavers in Bengal in order to destroy the indigenous weaving industry in favour of British textile imports (some anecdotal accounts say the thumbs of the weavers of Dacca were removed). However this is generally considered to be a myth, originating from William Bolts’ 1772 account where he alleges that several weavers had cut off their own thumbs in protest at poor working conditions. Several historians have suggested that that the lack of industrialization was because India was still a largely agricultural nation with low wages levels, arguing that wages were high in Britain so cotton producers had the incentive to invent and purchase expensive new labour-saving technologies, and that wages levels were low in India so producers preferred to increase output by hiring more workers rather than investing in technology. Several economic historians have criticized this argument, such as Prasannan Parthasarathi who pointed to earnings data that show real wages in 18th-century Bengal and Mysore were higher than in Britain. Workers in the textile industry, for example, earned more in Bengal and Mysore than they did in Britain, while agricultural labour in Britain had to work longer hours to earn the same amount as in Mysore. According to evidence cited by the economic historians Immanuel Wallerstein, Irfan Habib, Percival Spear, and Ashok Desai, per-capita agricultural output and standards of consumption in 17th-century Mughal India was higher than in 17th-century Europe and early 20th-century British India.
British control of trade, and exports of cheap Manchester cotton are cited as significant factors, though Indian textiles had still maintained a competitive price advantage compared to British textiles up until the 19th century. Several historians point to the colonization of India as a major factor in both India’s deindustrialization and Britain’s Industrial Revolution. British colonization forced open the large Indian market to British goods, which could be sold in India without any tariffs or duties, compared to local Indian producers who were heavily taxed, while in Britain protectionist policies such as bans and high tariffs were implemented to restrict Indian textiles from being sold there, whereas raw cotton was imported from India without tariffs to British factories which manufactured textiles from Indian cotton. British economic policies gave them a monopoly over India’s large market and raw material such as cotton. India served as both a significant supplier of raw goods to British manufacturers and a large captive market for British manufactured goods.
Decrease in the share of world GDP
India’s share of the world economy went from 24.4% in 1700 to 4.2% in 1950. India’s GDP (PPP) per capita was stagnant during the Mughal Empire and began to decline prior to the onset of British rule.India’s share of global industrial output also declined from 25% in 1750 down to 2% in 1900. At the same time, the United Kingdom’s share of the world economy rose from 2.9% in 1700 up to 9% in 1870,and Britain replaced India as the world’s largest textile manufacturer in the 19th century. Mughal India also had a higher per-capita income in the late 16th century than British India had in the early 20th century, and the secondary sector contributed a higher percentage to the Mughal economy (18.2%) than it did to the economy of early 20th-century British India (11.2%). In terms of urbanization, Mughal India also had a higher percentage of its population (15%) living in urban centers in 1600 than British India did in the 19th century.