The colonial legacy of India’s subordination has been characterised as development of underdevelopment. The liberals see it as a result of the British policies alone. However, it was not policy alone but a structural underdevelopment which the British rule brought.
Colonialism should be seen as a distinct historical stage or a period in the modern historical development of India which intervenes between the traditional pre-British society and economy and the modern capitalist society and economy.
It is not a mere adaptation or distortion of the old. It is neither a partially modernised society nor a transitional state of society. Colonialism is also just not an amalgam of positive and negative features.
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It is a well structured whole, a distinct social formation or sub-formation in which the basic control of the society is in the hands of a foreign capitalist class which functioned in the colony through dependent and subservient economic, political, social and intellectual structures.
The forms of these structures variety with the changing conditions of the historical development of capitalism as a worldwide system.
It precisely implied that with colonialism India was not merely linking up with the capitalist system but was becoming a subservient and subordinate factor in it. Moreover, it also suggested that India became a producer of raw materials and a market for finished goods of the metropolitan (i.e. the British) economy. An unequal relationship developed at the basis of which there was a particular international division of labour.
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This meant that the British and other metropolitan countries now became producers of high technology, high productivity, high wage and capital inclusive goods while India produced low technology, low productivity, low wage and labour intensive goods. International trade then became an instrument for exploitation and underdevelopment.
The pattern of foreign trade in this period indicates the bias of exports towards foodstuffs and raw materials and imports towards manufacturers. Thirdly, it was increasingly evident that whatever industrialisation took place in this period was stunted. In agriculture too the impact of colonialism was glaringly obvious.
It was marked by low and backward technology and low productivity. There was very little impetus for modernisation. High revenue demand in which the main tax burden fell on the poor would catch the peasantry in the vicious circle of debt trap. This also meant that very little would be available for modernisation of techniques and technology of agriculture.
Fourthly, of the colonial economy was marked by a drain of wealth from India to Britain. This was realised by a unilateral transfer of social surplus or potentially investible capital to Britain by the colonial state, its officials, foreign merchants and other capitalists through exports for which there was no equivalent return. This drain constituted 2-3% of India’s national income from 1757-1939.
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Aiding the drain was a high level of military expenditure which was met from the Indian revenue. This enabled Britain to expand and then maintain its imperialist position in Africa and Asia. Similarly, India provided highly paid employment to a significant number of upper class Britons. Along with British capitalists and managers in India they appropriated nearly 595 of India’s national income.
As a result very little of the social surplus generated by India was going into investment in industry or agriculture. The figures of public expenditure in this period indicate that the major portion of revenues collected from high revenues in land and other taxes would go to non-productive areas of civil and military administration. On the other hand, expenditure on education, health and sanitation was constantly going down and formed a minuscule pan of the total public expenditure.
In the 19th century, the colonial state also refused to take any steps to check or slow down the decline of handicraft industries and process of deindustrialisation. Colonialism refused to give any financial or other help to the newly founded Indian industries as was done in Britain, Europe or Japan in the early stages of industrialisation. In the name of free trade, no-tariff protection was given to its infant industries.
The end result of the colonial legacy by the 1940s was:
i. Stagnant per capita national income.
ii. Abysmal standard of living.
iii. Stunted industrial development, and
iv. Dependence of the bulk of population on stagnant, low productivity agriculture.