Colonial Rule and Its Effects on India's Rural Economy
Read this article, which takes a much longer-term historical view of
India's contributions to the global economy. In particular, it covers
how British colonial rule may have "broken" the economy in ways that
have yet to be repaired.
Introduction
Economic Benefits of the Empire
For hundreds of years, India contributed immensely to world GDP (between 1 A.D to 1600 A.D, 25-30 % of the World's GDP was Indian). As mentioned by Adam Smith in "The Wealth of Nations," the commodities traded from India were from the wealthiest and most fertile lands, the best cultivated, most industrious, and most populous country in the world.
The Mughal Empire (1526-1757)
comprised the most fertile lands and, for 300 years, was
one of the respected and most powerful empires in the
world. The major commodities produced and traded
were spices, silk, muslin and fine handlooms, cotton,
dyes, salt, tea and opium. After the Battle of Buxar
(1764), the British East Indian Company managed to use
the opium trade to save them from a massive trade
deficit vis-a-vis China. By the 17th century,
opium was an important source of income for the
Mughal Empire. The British then cultivated poppy in
Bengal, Bihar and Malwa and built efficient factories for
export of purified opium to China which later became an
immense economic and social burden for the Chinese
during the 18th and 19th centuries.
Soon company agents dominated internal trade in India
and, with the decline of markets in west Asia, the
popularity of Indian raw cotton and opium in
China, Japan, and Southeast Asia, encouraged English private traders to look to the east for trading
opportunities. The Parsi merchants profited immensely from this opium
trade and the Parsi commercial firms built their
fortunes in China based on the opium trade. British and
Parsi traders soon dominated internal and export trades.