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Introduction From Financing India's Imperial Railways

Introduction From Financing India's Imperial Railways

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The introduction from Financing India's Imperial Railways
The introduction from Financing India's Imperial Railways

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Published by: Pickering and Chatto on Aug 01, 2011
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INTRODUCTION
By 1908 Britain had invested £274 million o capital in Indian railways, mak-ing it the largest single investment programme ever undertaken in the BritishEmpire.
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Railways made up 80 per cent o Britain’s industrial investment inIndia, relying on Indian taxpayers to und construction and early operations.Te size and prominence o this public works project has prompted a continu-ing scholarly debate on the motivation and results o Indian railways, since LordDalhousie’s original railway minute o 1853. However, most o the analysis hasocused on the earlier period o railway construction up to 1875. Like muchhistoriography o the colonial Indian period, analysis has been characterizedby subjective responses to British Imperialism. For example, Daniel Torner’s work on government provision o early Indian railway guarantees comple-mented Indian nationalist writing on railways, as part o the ‘drain’ debate. obe air, Torner was sensitive to the di culty o pursuing development policiesin British India given the political landscape at Westminster. Aer all, the IndiaO ce was not unique in guiding colonial enterprise towards dependence onmanuacturers and nanciers at the metropole. In contrast, the ‘new Imperial-ist’ scholars, reinterpreting British railway policy as liberal, sensible and benignhave ignored the most compelling aspects o Indian nationalist critique. Dutt,Naoroji, Ranade and Wacha may have overstated their case at times, but thecomplaint that Britain pursued railways in isolation rom other legitimate devel-opment concerns has never been rebued.
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Te opportunity cost o railways, ina balanced budget environment, in terms o irrigation, sanitation and educationexpenditure oregone was considerable.Indian railways have been criticized or absorbing more than their air shareo India’s tax receipts. Tey have also been seen as stifing industrial develop-ment and wealth creation in India. It is true that nationalists underestimated thechallenges in converting India’s eighteenth-century artisan textile businesses into western-style industry. Nevertheless, India’s industrial stagnation in the nine-teenth century is an awkward act or apologists o Empire. Te British neglecto Indian industry aer the all o the Company is beyond debate, but the extentto which this was understood to place limits on India’s growth potential is still
 
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 Financing India’s Imperial Railways
discussed. Even Keynes had seen the terms o trade moving in avour o India’sagricultural base over time.
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Modern globalization theory has stressed the ben-ets o rigorous international specialization. Victorian railways in India wereconstructed to accelerate that process but, uniquely, India became a major rail- way power without beneting rom the normal accelerator and multiplier eectso capital investment. Te cataclysmic amines o the 1870s and 90s were themost dramatic evidence o the ailure o the Raj to create economic growth andcombat extreme poverty in India. Over 1875–1913, or example, China gener-ated comparable economic growth to India, without a railway network, whileboth countries underperormed the average or developing nations.
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At thesame time, the British ocus on overseas capital exports, o which Indian railwaybonds and equities made up a signicant share, created longer term problems orthe UK economy, which suered rom the opportunity cost o capital directedat ‘rentier’ empire pursuits, rather than new domestic industries like electricity,chemicals and motor cars.
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During the late nineteenth century the British were prepared to questionthe benets o rail investment at public committees and commissions. However,by 1909, in a memorandum detailing the achievements o the Raj in the hal-century since the Mutiny, sel criticism had ceased. Railways were emphasizedas one o the great achievements o the period since the abolition o the EastIndia Company (the Company). Aggregate gross earnings were £30 millionand the benets o the railways were estimated at a spectacular £100 million perannum, incorporating savings in transport ares per mile travelled but excluding additional benets o spared time. Te railway network employed some 525,000 people o whom 508,000 were Indians. Railways had produced a return that yearo 4.33 per cent. Like modern scholars o the Imperialist school, the report ailedto consider alternative uses o the enormous capital expended. Indeed, the report pointed to returns o some 8 per cent on more recent irrigation expenditureon an aggregate capital programme o only £32.5 million. Tese were returnsunheard o in the Indian railway sector, outside the Bengal regional monopoly,the East Indian Railway (EIR). Te India O ce/GOI had over previous yearschannelled ten times as much capital into the lower yielding railway businessin a policy which ignored considerations o market-based returns.
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One aim o this monograph is to explain the strength o support or this railway investment programme across large sections o British decision-makers without resorting toa partisan view o the rights or wrongs o the project.
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o do so it is necessary tolook in detail at debate surrounding the three rationales used by the British to justiy prioritization o Indian railways: trade and commerce, amine protectionand relie, and military/strategic benets or the deence o India. Te triumvi-rate o early rail enthusiasts, W. P. Andrews, Macdonald Stephenson and JohnChapman used all three aspects in promoting Indian rail projects.
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Tese three
 
 
 Introduction
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rationales provide a helpul ramework or interpreting the period aer 1875 when similar arguments persisted.Te commercial rationale or railways had been called into question by 1875.Te rst generation o government-guaranteed companies, with the exceptiono the EIR and Great Indian Peninsula Railway (GIPR), had ailed to meettheir 5 per cent guarantees and absorbed large GOI subsidies. Tis prompteda shi to direct state unding under the Liberal Viceroy Lawrence, a decisionreversed in the early 1880s in an attempt to move railways o the government’sbalance sheet. Te second generation o guaranteed companies provided ampleopportunities or City underwriters, nancial advisors, stockbrokers, rail pro-moters, managing agents/traders, shippers and insurers to generate serviceindustry revenues. Tis was achieved in parallel with large manuacturing ordersor locomotives, wagons, steel railings, steel lines, bridge contracts and gen-eral engineering products. Te extent to which Indian railways could act as acounter-cyclical source o demand during the ‘great depression’ o the later nine-teenth century was much discussed at the parliamentary commission hearingson the depression o trade. She eld, Glasgow, Manchester and London Cham-bers all had signicant representation in parallel with the Indian chambers. Tebook will attempt to disentangle these dierent interest groups, to draw con-clusions on the relative strength o service industry and manuacturing lobbies.Tis should contribute to the active debate on gentlemanly capitalism which hasdeveloped in recent years.
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 Given that India made up over 80 per cent o the population o the BritishEmpire by 1900, Cain and Hopkins made clear that ‘no plausible explanation o the purpose o empire-building can aord to stumble over the sub-continent’.
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 Tis makes the sub-continent’s largest industrial project central to any critiqueo the ‘gentlemanly capitalism’ paradigm. Indeed, Dumett criticized the lack o attention paid by the two authors to railways and shipping across the BritishEmpire. He saw their reerences as ‘brie’ and argued that the writers ailed tolink transport technology to ‘the wider industrial revolution’. Further, he ques-tioned positing a close relationship between the City and politics, apart romthe prominent Bank o England/reasury relationship (where the requirementso public unding brought them together). Tere was a lack o ‘representativeexamples’ where City people had demonstrably infuenced ‘overseas politi-cal, military and naval operations’ or ‘the building o new colonies and theextensions o empire’.
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Indian railways provide a test case or these gaps in gen-tlemanly capitalism’s historiography. Equally, scrutiny o British manuacturing lobbies, which pressed railways, should allow consideration o Clive Dewey’s view that manuacturing infuence in British India was declining by the late Vic-torian period. Dewey argued that the ‘eclipse o the Lancashire [cotton] lobby’could be traced back to 1870. Lancashire’s success in overriding ‘inant industry’

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