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Economic History Association

Towards a Reinterpretation of Nineteenth-Century Indian Economic History


Author(s): Morris D. Morris
Source: The Journal of Economic History, Vol. 23, No. 4 (Dec., 1963), pp. 606-618
Published by: Cambridge University Press on behalf of the Economic History Association
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Towards a Reinterpretation of Nineteenth-
Century Indian Economic History*
I
Indian society is one of the most complex in existence, and we know
little about its structure,functioning, or-more important-its develop-
ment and dynamics. The neglect of Indian's economic history, particu-
larly the period 1800-1947,is one of the most distressing gaps. It is
dismaying to realize that even within very broad ranges of error we
do not know whether during the past century-and-a-halfthe economy's
performance improved, stagnated, or actually declined.1 Not only is
ignorance of Indian economic behavior over time disturbing in itself,
but the attempts at planning since 1947 have suffered because of this.
It is difficultto predict outcome and consequencesof any majordevelop-
ment policy in the absence of any clear clues about the long-rundynam-
ics of the Indian economy and society.
It is not necessary to defend and explain work in economic history
to this audience, but it might be useful to indicate the importance of
studying nineteenth-centuryIndian economic history, inasmuch as such
investigationsare so rare in this country and in Europe.
First, Indian economic history is important in its own right. A not
inconsiderableamount of work has been published, but it has generally
focused on only a few issues. Moreover, it has tended to be purely
descriptive, to be uncritical of its sources, and it has avoided even the
simplest tools of economic analysis.2
Second, the subject is important for its possible contributions to
comparativeeconomic history, possibly the only technique from which
can come fruitful generalizationsabout changing economic institutions
and behavior over time. So far, most of our generalizationsabout the
character of capital accumulation,the role of internationaltrade, the
significanceof entrepreneurship,the role of the state, and the problems
of shifting labor and other factors from one activity to another have
been derived from the experienceof Western economies. For significant
generalizationswe will have to go beyond the Western cases, and I am
convinced that Indian experiencecan offer some provocative challenges
to traditionalnotions.8
* I use "India" to refer to the entire subcontinent.
1 This is true whether we attempt to measure performance in terms of per capita
income or by any reasonable combination of qualitative-quantitativeelements.
2 For some critical comments about scope and method in Indian economic history,
see M. D. Morris and B. Stein, "The Economic History of India: A Bibliographic
Essay," THE JOURNAL OF ECONOMIC HISTORY, XXI, No. 2 (June 1961), 179-207.
3 There is a current tendency to use Japan as a case to compare with Western
606
19th-CenturyIndian Economic History 607
Third, examination of the Indian case is important to the elaboration
of a general theory of economic growth and stagnation. It is clear that
the pattern of economic change and growth in currently developing
regions is likely to differ significantly from Western experience.4 India,
illustrating limited growth, can throw considerable light on the entire
process of economic development.
II
The fact that we have no satisfactory basis for any judgments has
not prevented the emergence of a widely-held interpretation of the
career of the Indian economy in the nineteenth century. This conven-
tional doctrine starts with a notion of "traditional India," a subsistence
economy which was self contained and static. Into this traditional socio-
economic order came the shattering influence of market forces repre-
sented by Western commercial and industrial competition, reinforced
by the power of the modem imperial state. The consequences which
flowed from this intervention furnish the main strands of the classical
view of nineteenth-century Indian economic history-the swift destruc-
tion of handicrafts, the steady enfeeblement of agriculture, the persistent
frustration of industry.5 Indian writers typically stress the exploitative
features of British rule as the cause of nineteenth-century decay. Western
scholars, to the extent that they do not accept the "exploitation thesis,"
attribute the failure of the Indian economy to respond to the warming
influences of the Industrial Revolution to the society's "other-worldliness,"
to its lack of enterprise, and to the caste-exclusiveness of groups within
the society. But whether one stresses the imperialist or the social-struc-
tural features as decisive, the classical view sees the nineteenth century
as an era of stagnation and, possibly, even of steady deterioration." But

economies. This seems to me to miss the problem. For a host of reasons, it is not
appropriate to think of Japan as a classical "oriental society." The characteristicsof
the Tokugawa and Meiji period make the society much more like Britain in her
preindustrialstage.
4 See, for example, M. D. Morris, "Labor Discipline, Trade-Unions, and the
State in India," Journal of Political Economy, LXIII, No. 4 (Aug. 1955), particularly
302-8.
5 The most impressive single analysis along these lines is R. C. Dutt, The
Economic History of India (2 vols., 7th ed.; London: Routledge and Kegan Paul,
1950). A very recent article is V. V. Bhatt, "A Century and a Half of Economic
Stagnation in India," The Economic Weekly, XV, combined Nos. 28, 29, and 30
(July 1963), 1229-36.
Marx, in his essays on India, has a brief and powerful description of the smashing
of the traditional social and economic society. But his perceptions did not permit
him to fall victim to a crude theory of disintegration. He argued that English
interference produced "the only social revolution ever heard of in Asia" and that
"Bourgeois industry and commerce [will] create these material conditions of a new
world." The most accessible source for the two most important of Marx's essays
on India is A Handbook of Marxism, E. Bums, ed. (New York: International
Publishers, 1935), pp. 179-194.
6 There are some recent notable exceptions to this. See particularly D. R. Gadgil,
608 Morris D. Morris
as I have already said, neither of these interpretationshas any substan-
tial support,because there has been no solid research on which to base
the conclusions. Moreover, both interpretations suffer from internal
contradictionswhich become quickly apparent when exposed to the
touchstone of the simplest economic tools.7
Let me sketch some of the main features and trends which have to
be considered in order to obtain a correct view of the economic career
of India in the nineteenth century.8 Although my approach is quite
tentative, I have become convinced that many (if not most) of the
fundamentalpropositionswhich have achieved currency are thoroughly
dubious. Because of the limitationsof space and the absence of support-
ing research, my statements must be baldly made and will be largely
undocumented.However, all my propositionsfind a reasonablebasis in
the evidence I have examined. Exploration along these lines offers
promise of major reinterpretationsof the most exciting sort. The rate
of return for scholarshipin this field promises to be exceptionallyhigh.
III
Our analysisof nineteenth-centuryperformancemust begin with some
notions about traditional Indian society which have important impli-
cations for the post-1800period. I mention only some of the more sig-
nificant features.
There was a lack of politicalunity and stability.Indian political history
can be summarizedin a brief phrase: "from chaos to chaos in three
generations."Despite a Hindu tradition of imperial expansion, at no
time in Indian history over any large region did a stable political unit
survive for more than a century or a century-and-a-half.There was
nothing that compares with the imperial chronologiesof Rome, Egypt,
or China. A crucial consequence is that no tradition of continuous
administrativeinstitutionsand no persistentbureaucracyever developed.
This political instability had many causes. Certainly geography and
climate helped prevent the elaborationof any effective system of com-
munication and control.9Whatever the causes, the political instability

The Industrial Evolution of India in Recent Times (4th ed.; Calcutta: Oxford
University Press, 1942); and N. V. Sovani's two essays on "British Impact on India"
in Cahiers d'Histoire Mondiale, I, No. 4 (Apr. 1954), 857-82, and II, No. 1 (July
1954), 77-105.
7 Some writers, stressing the total disruption associated with the establishment of
British rule, suggest that the Indian economy, racked by famine and depopulation,
lay in chaos at the beginning of the nineteenth century. They then proceed to argue
that economic conditions worsened through the century. I call this "the theory of
infinite and increasing misery."Apart from certain logical difficulties,this view cannot
embrace two fundamental pieces of evidence, the growth of population and the
apparent lengthening of life expectancy.
8 I am not pretending to offer a systematic analysis or even a full-blown taxonomy.
I shall only mention certain elements which tend to be neglected and which warrant
investigation.
9 A. L. Basham, The Indian Sub-Continent in Historical Perspective (London:
19th-CenturyIndian Economic History 609
had obvious economic effects through the eighteenth century. Com-
merce and capital accumulationcertainly were kept to very low levels.
Indian agriculturehad a very low level of productivity.Indian society
has been based historicallyon a non-animal-poweredagriculture.Once
having established a settled irrigationagriculture (c. 1000 B.C.?), the
populationapparentlyquickly expandedto the limits of vegetal produc-
tion, which made a later shift to animal-basedagriculturemuch more
difficult. Unlike western Europe, there have been fundamental limits
to the mobilization of animal power and resources in agriculture,with
consequent effects on agriculturalproductivity.
Moreover, agriculture in India seems always to have been charac-
terized by very low yields. It is not that agriculturaltechniques were
undeveloped: rotation,fallowing, green manuring,and double cropping
were known. Nor was Indian agricultureinsensitive to innovation: we
know that many of the western hemisphereplants-for example,tobacco,
potato, and peanut-were quicklyintroducedinto India and some rapidly
spread.'0But extremes of temperature,very short growing seasons, and
the restricted supply of soil moisture made it impossible to achieve
high yields."
One additionalfeature must be mentioned. While there was always a
waxing and waning of cultivated area, much of the Indian subcontinent
seems to have been virgin land as late as 1800. The survivalof extensive
tracts of this sort seems to have been partly a function of political in-
stability and partly a result of the limitations of pre-1800 technology.'2
The region's mineral resource base was very frail. TraditionalIndia
seems to have used very little metal. This does not mean that the region
lacks these resources but only that dense population developed where
mineralresourceswere not at hand. Much of the region's great mineral
deposits are found in areas which were very isolated before the later
nineteenth rentiirv.13

School of Oriental and African Studies, University of London, 1958), agrees with
my major proposition about political instability but not with the causes I have
suggested.
10 I ignore the appearance of modem plantation crops such as tea, rubber, and
coffee, which were modem innovations.
11 For some very provocative insights into basic geographical and climatic
limitations on raising agricultural productivity in India, see Louise E. Howard,
Sir Albert Howard in India (London: Faber and Faber, 1953). I ignore the
implications of these factors for current efforts to achieve temperate-zone levels of
agricultural output. On the quality of Indian peasant agriculture, see Sir Albert
Howard and J. A. Voelcker, Report on the Improvement of Indian Agriculture
(London, 1893).
12 Most writers leave the impression that the vast bulk of land now used was
also tilled in traditional India and that the extensive uncultivated regions found at
the beginning of the nineteenth century were areas which had fallen out of
cultivation due to the disorders attendant on British conquest. A reading of the
writings of sixteenth- and seventeenth-century travelers suggests that this is in-
correct.
13 The high probability of this notion is reinforced by an examination of Indian
610 Morris D. Morris
There is a widespread notion that India was a great preindustrial
manufacturingnation. It is much more likely that in the eighteenth
century India had achieved a technology that was at about the produc-
tive levels of late medieval Europe. If one looks at European technical
developments between 1400 and 1700 and compares these with what
India possessed in the eighteenth century, one can see the truth of this.
While India produced fine textiles and a few examples of remarkable
craftsmanship,we must not mistake manual dexterity for productivity
nor assume that dexterity implied the presence of sophisticated tools
and manufacturingtechniques. In fact, the reverse is true.14
Finally, geography and climate made for an inefficient system of
waterways and roads, useful only during very limited periods of each
year. Political instabilityaffected transportat all times. Regional special-
ization seems to have been very restricted, and commercial activity,
international and domestic, must have constituted an infinitesimal
proportionof total economic activity on the subcontinentYl
From all of this we can conclude that the Indian subcontinentwas a
region in which per capita income was relatively low in the centuries
before 1800. Given the lack of political stability, low agriculturaland
nonagriculturalproductivity,and insignificantcommerce,no other con-
clusion is supportable.16These factors are responsible for the society's
geographicaland social mobility and for the complementaryideologies.17
imports and exports from 1500 to 1800. Apart from cotton textiles, virtually all
exports were primary agricultural products, while imports included a substantial
proportion of metals in various stages of fabrication.
14 Early European travelers often noted the primitive character of Indian
technology when compared with their own. See, for example, Relations of Golconda,
W. H. Moreland, ed. (London: Hakluyt Society, 1931), pp. 31-32. The English
factory records of the seventeenth century constantly stress the inelasticity of textile
supplies and low per-loom productivity.
15 One should not make the mistake of assuming that the importance of the
international trade in textiles in the seventeenth and eighteenth centuries is a
measure of its significance to the Indian economy. I would argue that the great
impact of this trade was felt primarily in the European economies.
16 My own general impression is that the traditional Indian society was supported
at a lower level of real income per capita than was the case in early modem Europe
or even in Tokugawa Japan. As Thomas Kerridge wrote in 1619, "though this
countrie be esteemed rich, we finde the common inhabitants to be verie needie...."
W. Foster, The English Factories in India, 1618-1621 (Oxford: Clarendon Press,
1906), p. 138.
The characteristics I have described are not all typical of every "traditional"
society. If I am right, this raises important doubts about the usefulness of Rostow's
"stage" theory. His tendency to generalize about the characteristics of traditional
societies ignores the enormous diversifies which exist among them and leads to
erroneousconclusions about the nature of subsequent developments.
17 It will be noted that I have not included caste as one of the distinctive and
significant features of traditional Indian society. For reasons too complex to enter
into here, I am assuming that caste has been a consequence rather than a cause
and is largely irrelevant to fundamental economic change and growth. Caste and
ideology may define the groups which first respond to a new situation and therefore
first benefit from a change; but this is a distributive rather than a growth
phenomenon.
19th-CenturyIndian Economic History 611
IV
The Britishdid not take over a society that was "ripe"for an industrial
revolution and then frustrate that development. They imposed them-
selves on a society for which every index of performancesuggests the
level of technical, economic, and administrativeperformanceof Europe
five hundred years earlier.18What happened to the Indian economy in
the nineteenth century?Although the evidence is largely unstudied and
much of it is ambiguous, my tentative conclusion is that during this
period per capita output grew, and the growth may have been rather
substantial. Let me briefly note some factors which have to be
considered."'
In the period from 1872 to 1921,populationgrew at an average annual
rate of no more than 0.4 per cent, and that growth was very irregular
because of famine and epidemic.20We do not know what the pattern
was in the previousthree quartersof a century,but populationprobably
grew no more rapidly before 1872 than it did afterwards.This means
that during the whole nineteenthcenturythe economywas not burdened
by a high rate of population expansion.21
The British ranintroducedthe political frameworkof the nineteenth-
century liberal nation state with its virtues and its limitations. Public
orderwas establishedon a scale never before achieved in India. Taxation
and commercialregulationswere rationalized,and the arbitraryfeatures
of traditional government were largely eliminated. A high degree of
stability, standardization,and efficiencywas achieved in administration.
The security needs of the imperial governmentled to the development
of a fairly substantialsystem of road and rail transport.In themselves,
all these features probably stimulatedeconomic activity in a way which
had never been possible before.22
18 It is frequently implied that the British conquest of India represented the
triumph of the Industrial Revolution. It must be noted, however, that British rule
was firmly established by 1820, before the Industrial Revolution could have played
any major role. While the superiority of Western technology was already substantial
in the eighteenth century, I suggest that the main sources of European power in
India stemmed from the superiority of administrative skills of various sorts. While
this can be interpreted in economic terms, my point is that the origin of this
advantage can not be found in the steam engine but more likely flows initially from
the organizationalinnovations of the Roman Catholic church, of the nation state, and
of early modern military administration.
19 Again let me make it clear that I am only attempting to identify a limited
number of important factors. I am not attempting a systematic analysis of the total
economic process.
20 Not until the decade 1921-1931 did the average rate of population growth
rise above 1 per cent per year.
21 Despite K. Davis' study, The Population of India and Pakistan (Princeton:
Princeton University Press, 1951), there is still need for basic analysis of nineteenth-
and twentieth-century population trends. For example, I am still not at all satisfied by
the typical explanations of the sudden acceleration of population growth after 1921.
22 The administrative cadre developed to administer India was surprisingly small,
and the tasks required of the bureaucracy were limited by the "night watchman"
612 Morris D. Morris
I think that there is good reason to suspect that average agricultural
output per acre and per man rose during the nineteenth century. First,
the establishmentof public order reduced the wide fluctuationsof land
under cultivation, a phenomenon previously caused by warfare and
political instability. This spread of political stability implies a higher
averageoutputper acre in the long run. Second,much of the traditionally
cultivated land that had been marginal under the old technology was
made more productive by the application of great and small irrigation
schemes. Third-a fact little noted-there seems to have been a rather,
substantialexpansion of land under cultivation. While it is possible to
argue that such expansion would have yielded a declining marginal
product, I think the reverse is probably true. Many of the new tracts
needed political stability and superiortechnology to warrantthe initial
risk of large-scale investments of capital and labor. Once opened up,
much of this land proved to be extremely productive. Fourth, the
improvementsof internal transportand public order and the growth of
foreign as well as domestic markets encouraged regional specialization
of productionwhich shouldhave yielded higher average output per acre.
And, finally, there was the shift from lower- to higher-value crops in
many areas of the country. The combinationof expanded acreage and
higher output per acre when linked with the fact of relatively slow
population growth suggests that there was also a rising output of
agriculturalproductsper capita.23
If there is any notion that has entered into the canonical tradition, it
is the proposition that Manchester'smachine-madetextiles wiped out
the Indian handicraft industry by the mid-nineteenth century.24My
own investigations suggest that this is probably completely wrong.25
Space permits me merely to sketch out the basis of my analysis. Man-
chester exported both yarn and cloth. While British cloth was competi-
tive with Indian handloom production, machine-made yarn seems to
have strengthenedthe competitive position of the indigenous handloom
sector despite the fall in cloth prices. The demand for cloth in India
seems to have been fairly elastic. The fall in price led to a movement
down the demand curve. In addition, there seems to have been a shift
to the right of the demand curve for cotton cloth. Not only was there
population growth; there were also changes in custom which increased

objectives of the government. In terms of the requirements of the modern planning


state, India at the time of Independence was under-administered. Many of the
country's current difficulties stem from this fact.
23 For some confirmationof these suggestions, see W. C. Neale, Economic Change
in Rural India: Land Tenure and Reformnin Uttar Pradesh, 1800-1955 (New Haven:
Yale University Press, 1962), particularly pp. 141-48.
24 There is Marx's famous quotation from the Governor-General'sreport of 1834-
35: "The bones of the cotton-weavers are bleaching the plains of India." Capital, I
(Chicago: Charles H. Kerr & Co., 1906), p. 471.
25 I am working on a detailed analysis of this problem which I hope to publish
in the near future.
19th-CenturyIndian Economic History 613
the amountof cloth consumedper capita.26Finally, there seems to have
been a shift away from inferiorfabrics to cotton.27
I am suggesting that there is evidence of a rising demand for cotton
cloth during the nineteenth century. My tentative conclusion is that, at
worst, the vast expansion of British cloth exports to India skimmed off
the expanding demand. The handloom weavers were at least no fewer
in number and no worse off economicallyat the end of the period than
at the beginning. The net effect for the economy was a positive one in
terms of per capita real income.
This type of argument,advanced for the handloom industry, can be
applied to many other traditionalactivities. I suspect, for example, that
the enormous annual imports of raw and semifabricated metals and
the consequent reduction of metal prices increased the demand for
metal products, a large proportionof which were produced by handi-
craft workers. Typically, stress has been placed on the fact that the
shift to metal products displaced potters, and the railroads displaced
the traditional carters. However, my own hunch is that income and
employment generated by the new activities greatly offset declines in
other types of enterprise.On the whole, then, I would argue that there
is a strong likelihood that the traditionalsector, generally speaking, did
not decline absolutely in economic significance and therefore did not
constitute a depressing element in the performanceof the nineteenth-
century economy. It is even possible that absolute growth occurred,
thereby bolsteringthe expansionistforces in the economy.28
The later nineteenth century also saw the rapid growth of modem
factories for the productionof cotton and jute fabrics, the development
of a great railway network, and the expansion of the coal mining in-
dustry to support these. The development of the cotton textile industry
occurredalmost entirelyunder the auspices of Indian entrepreneurs,and
by 1900 it was one of the largest textile industries in the world. The
rapidity of growth in this sector suggests at least two importantpoints.
First, it would seem to invalidate the notion that Indians lack a spirit
of entrepreneurship.If the Indian economy failed to grow more rapidly
than it did, the causes did not stem from specific defects in the character
of Indian businessmenbut arose out of more objective causes.29Second,
26 For example, there was an increasing tendency for women to wear bodices in
addition to the traditional saris.
27 Many tribal groups seem to have shifted from jute cloth. This might have
worsened the economic status of jute producers except for the growing foreign
demand for jute for commercial purposes.
28 The classical argument is based on census data which purported to show that
between 1872 and 1931 a growing proportion of the population became dependent
on agriculture. This evidence has recently been effectively demolished. See D. and
A. Thorner, Land and Labour in India (London: Asia Publishing House, 1962),
pp. 70-81.
29 For a sophisticated analysis which elaborates on this point, see H. G. Aubrey,
"Industrial Investment Decisions: A Comparative Analysis," JOURNAL OF ECONOMIC
HISTORY, XV, No. 4 (Dec. 1955), pp. 335-51.
614 Morris D. Morris
it throws serious doubt on the notion that British policy deliberately
and effectively inhibited economic expansion in India. While British
policy did not actively encourage new industrial expansion, the career
of the cotton textile industry suggests that other factors were probably
much more importantin explaining the limited industrializationin nine-
teenth-centuryIndia.
There is also no question that there was a remarkableexpansion of
commercial activity, both domestic and foreign. The growth of cities
as centers of demand, on a scale not achieved previously, stimulated
domestic commerce. In addition, there was a growing international
marketfor traditionalprimaryproducts as well as the creation of trade
in new products such as tea.30
Given the generalized effects of political stability, the evidence of
expanding agricultural output, my reinterpretationof the career of
handicrafts, the growth of modem industries, and the expansion of
foreign and domestic commerce,we have evidence of rather substantial
increases in total real output in the Indian economy in the nineteenth
century. Add to this the probability that population grew very slowly,
and we have a fairly solid basis for arguing that per capita real product
rose significantlyduring this period.3'
V
We know very little more about trends in the economy during the
twentieth century than we do about those of the nineteenth century.
However,there is somewhatstrongerreason to suspect that, between the
First World War and Indian Independence, total output grew at a
slower rate than in the previous century. At the same time, the rate of
population expansion rose sharply, so that per capita incomes did not
rise and may even have diminished.32Moreover,it is clear from what
we know about contemporaryIndia that the economy is even now very
far from being industrialized.
This may seem rather bewildering, given my description of the nine-
teenth-centuryperformance.After all, the Indian economyhad developed
before World War I one of the world's five largest cotton textile indus-
30 Some traditionally exported products like textiles diminished in importance, but
the growth in size and number of ships involved in India's international trade makes
it clear that the total trade grew, not only absolutely, but on a per capita basis,
during the century.
31 Moreover, there is no evidence to suggest that the distribution of income
became more unequal over time. If anything, the trend probably ran the other way.
32 See, for example, K. Mukerji, "A Note on the Long Term Growth of National
Income in India, 1900-01 to 1952-53," in Indian Conference on Research in National
Income: Papers on National Income and Allied Topics, Vol. II, V. K. R. V. Rao et al.,
eds. (London: Asia Publishing House, 1962), pp. 15-24. For another similar analysis
containing a discussion of some of the problems of estimation and a bibliography, see
S. J. Patel, "Long-Term Changes in Output and Income in India: 1896-1960,"
Indian Economic Journal, V, No. 3 (Jan. 1958), pp. 233-46.
19th-CenturyIndian Economic History 615
tries, one of the two largest jute industries, the third largest railway
network, and a substantial coal mining industry.33Yet these develop-
ments did not serve as "leadingsectors,"pulling the economy into the
sustained upward sweep of an industrialrevolution.Why did the sub-
continent not match the experience of Western economies or of Japan?
This is a critical problem for which we do not as yet have anything
resembling an answer. The causes are certainly complex, and this is
not the place to examinethe intricateinterplayof relationshipsinvolved.
But let me mention a few factors inherent in the nineteenth-century
situation which probably played an important part in the twentieth-
century "stagnation."
Governmentpolicy during the nineteenth century, despite its authori-
tariancharacteristics,was in its economicaspects essentiallylaissez fare.
The Britishral saw itself in the passive role of night watchman,provid-
ing security, rational administration,and a modicum of social overhead
on the basis of which economic progress was expected to occur. The
Indian government obviously had no self-consciousprogram of active
economic development.84While its policies had the positive effects in
the nineteenth century that I have already described, its influence was
very limited.
One of the distinguishingfeaturesof officialpolicy was the preoccupa-
tion with a balanced annual budget. This philosophy directly limited
the size and effectiveness of government expendituresallocated to the
construction of social overhead facilities. The bulk of government
receipts was dependent on the prosperityof Indian agriculture.As has

33 While a great deal of this expansion was financed by British capital, there is a
problem here which relates to the rate of real saving in the Indian economy. For
economists, the implication of foreign investment is that during the period
of net foreign investment the lending society is transferring real resources
to the borrowing society, which is then able to expand its capital at a
rate greater than its propensity to save. However, fragmentary evidence I have
examined for the nineteenth century suggests that the overwhelming bulk of British
capital invested in India came from Englishmen resident in India and out of earnings
made there. In a large number of instances the initial British accumulations flowed
from monopoly privileges obtained through the East India Company or from
connections with the imperial government.
It might be useful to reexamine the entire question of nineteenth-century foreign
investment along these lines, stressing the transfer of real resources rather than the
reinvestment of earnings. There would be serious problems of conceptualization, but
I suspect that a study in these terms might well challenge the notion that large-scale
transfers of real resources from Britain to India were important in the nineteenth
century. If correct, such a study would also suggest there has been a higher rate
of real saving in India than is typically assumed.
34 This statement is not intended as any criticism of English rule in India. One
does not need to argue in terms of the evilness of imperial policy. Certainly, the
general object of the raf was the welfare of the society. The difficulty is that British
economic policy in India could not rise above the ideological and policy level at work
at home. And a general economic policy appropriate for Britain at the peak of her
economic power was not adequate to provide for long-run growth in India.
616 Morris D. Morris
often been said, the budget was always a gamble on the monsoon. The
result was that official investment on social overhead-roads, canals,
irrigation,railroads,education-tended to be modest and proceeded by
fits and starts. This policy had certain immediate inhibiting economic
consequences.It also seems to have had adverse effects on the general
responsivenessof indigenous entrepreneurship,reducing confidence and
keeping the flow of capital into commerce and industry below what
it otherwise might have been.
Governmentinvestment in social overhead was largely influenced by
the doctrine that such investmentsshould typically pay their own way-
and very quickly-at going rates of interest. As a consequence, the
development of canals and irrigation facilities was limited. Railways
tapped only restrictedportions of the country, and their impact on the
economy was limited by the unwillingness to develop feeder lines.
Despite the relative smallness of its total expenditures,the state was
certainly the most important purchaser of the products of modern
industry.In the absence of industrialfacilities in India and the lack of
any direct governmentaction to stimulate their development, the state
and its instrumentalitieshad no alternative but to purchase abroad.35
In this sense, the multiplier effects of government expenditures were
sharplyreduced. The linkage effects, the stimulusto complementaryand
supplementaryeconomic activity, were much inhibited.36
The general propositionI am trying to suggest is a rather simple one.
In 1800, India was a society which had none of the basic preconditions
of an industrial revolution. During the subsequent century substantial
growthwas achieved.The mere introductionof a stable, modernpolitical
environmentmade possible a large rise in the level and scope of eco-
nomic activity. However, the "nightwatchman"policies of the state were
not sufficientto permit the development during the century of all the
fundamentalunderpinningsof an industrialrevolution. It can, perhaps,
be suggested that the basic nineteenth-centurypolicies of the govern-
ment had produced by World War I about all the benefits that they
could automaticallyyield. Nor was the raj willing to undertake many
new responsibilitiesafter World War I. What steps it was willing to take
were inhibited by postwar internationaleconomic difficultieswhich had
adverse effects on the Indian budget.
But the exhaustionof the growth benefits of nineteenth-centurypoli-
cies did not leave the society where it had been. Just at the time that
liberal economic policy had ceased being capable of generating rising
rates of growth,a portentouslyadverseelement began to threaten.Popu-

35 Some notion of the problems of getting a major new enterprise started when
the task involved relations with the government is hinted at in L. Fraser, Iron and
Steel in India (Bombay: The Times Press, 1919).
36 For example, the railways in India bought all their equipment and stores in
Britain except for coal.
19th-CenturyIndian Economic History 617
lation growth began to move above the 1 per cent per year rate. The
continuing structural changes needed in the economy now had to proceed
with a greater burden than ever before.
I should like to conclude with some notes of warning about this
analysis. First, we must remember that this discussion is based on an
assumption of stagnation during the interwar period. It is entirely pos-
sible that the crude estimates of output trends which are currently
available have led us astray. Certainly the statistical basis of these studies
is most unsure, and there is room for radical revisions. It is quite pos-
sible-in fact, I think probable-that more intensive work will show
that per capita income did not fall during these decades.37
But beyond the limitations of the statistical data lurk much more
serious problems of interpretation. Moved by the examples of North
Atlantic experience in the nineteenth century, even economic historians
tend to lose sight of the long gestation needed before the preconditions
of an industrial revolution have matured sufficiently to permit a society
to move into a phase of high and sustained economic growth. Moreover,
we tend to ignore the geography of the problem, the size and resources
of the region within which the process has to occur.
Both these strictures are relevant to our understanding of Indian experi-
ence. When one considers the level of economically relevant attainments
of the Indian society at the beginning of the nineteenth century, it is
clear that vastly more had to be done by way of establishing the pre-
conditions for growth than was the case in any of the regions that can
today be called industrialized. Moreover, we must not forget that these
problems had to be faced in a subcontinent embracing an area equiv-
alent to all of Europe exclusive of Russia.
If we keep these features in mind, we may see the nineteenth century
as a period too brief to achieve all the structural changes needed to
provide the preconditions for an industrial revolution. Viewed in this
fashion, it can be argued that the interwar period was an historically
minute interval during which there was a momentary lull in the growth
of per capita output, but during which rather substantial structural
modifications occurred and the base was laid for a renewed upward

37Given falling per capita income after 1920, one would have expected fairly
widespread Malthusianconsequences. It is hard to conceive of the rate of population
continuing to rise under these circumstances. More important, one would have
expected a changed price relationship between food crops and commercial crops,
which would have prevented the systematic shift of land into the production of
commercial agriculturalproducts that was occurring during this whole period.
If, however, further research should conclusively show a falling per capita income
after 1920, this would lend support to my conclusion that per capita income had
risen in the previous century. Had the decline in per capita incomes occurred from
the level of economic activity current in the eighteenth century, nothing could have
prevented the operation of Malthusian checks. There would have been no margin to
prevent this. However, the rise in per capita output during the nineteenth century
provided a surplus above subsistence, which made it possible for the society to
tolerate a decline in real incomes without causing utter social disaster.
618 Morris D. Morris
surge after Independence. I must confess to some sympathy for this
interpretation.38
MoRms D. MoRRIs,University of Washington

38 In recent years, economists have been so preoccupied with output as a measure


of the tempo of economic development that they have neglected the structural
changes through which an economy must go-changes which may initially appear
to be accompanied by stagnating output. For example, the first forty years of the
eighteenth century in Britain "show few signs of growth in the economy as a whole."
P. Deane and W. A. Cole, British Economic Growth, 1688-1959: Trends and
Structure (Cambridge: [Engl.] The University Press, 1962), p. 79.