Ieph Notes

8/10/2019 Ieph Notes

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Indian Political and Economic History

Stages of British Rule1. What are the characteristics of the “First Stage “ of colonial rule in India?

2. How did East India gain by capturing political power in India?

. !escribe about early settle"ent #cts?

$. If one carefully studies the period of Indian history between 1%&% and 1'$( one finds

clearly identifiable stages of )ritish coloni*ation each with its specific and distinguishablecharacteristics. +an you identify the "ain features of each stage with corresponding

i"pacts on the Indian econo"y?

&. “,he e"ergence of Industrial )ritain resulted in !e-industriali*ation and

co""erciali*ation of Indian #griculture in the early part of ineteenth century/. !o you

agree? E0plain your conclusions.

. !iscuss the i"pact of the "ilitary and industrial reolutions upon India up to 13&3. Which

of these would you regard as "ore i"portant?

Industrial Revolution1. ,he industrial reolution in the 45 changed the nature of )ritish interest in India.

+o""ent.

2. How was the Indian econo"y affected by the change?. What role did opiu" play in that regard?

$. Would you attribute the origins of the industrial reolution to the inentie genius of the

English people? 6roide reasons for your answer.

&. #naly*e the cause and conditions of the e"ergence of the factory syste" of production in

Western Europe. What are the chief characteristics?

Indian Business1. E0plain the difference in the process of industriali*ation of 7ute and cotton te0tile industries

in India?

2. How do you e0plain the Indian )usiness +o""unity8s increasing interest in the Indiannational "oe"ent beginning with the post First World War period?

. How do you e0plain the duality in the attitude of the Indian business co""unity towards

Indian nationalis"?$. How did colonial rule affect Indian business? How did business"en respond to the new

conditions they faced?

Others1. 9ist the "ain proble"s faced by lord +ornwallis when he arried as :oernor ; :eneral in

1%3. How would you hae tac<led the situation in his place?

I-Stage in British rule:“Colonization of India by Pre-Industrial Britain”

1. EI+ gien "onopoly status by =ueen to trade with India

2. EI+ paying in gold and siler for Indian e0ports.

. :aining control oer )engal by defeating awab

$. 4nilateral flow of goods&. !estroying old traders >6un7abis "arwaris and #fghanistan@



. +reation of )engali )abus

%. 6er"anent Settle"ent- Aa0i"i*ation of profit by "a0i"i*ation of reenue

Incetion of Per!anent Settle!ent

• +o"pany reali*ed that to "a0i"i*e the profits it "ust "a0i"i*e reenue fro" land.

• EI+ auctioned Ba"indaris to those who would pay the" "a0i"u" ta0.

• Ba"indars in turn heaily ta0ed peasants who had no incentie to produce "ore.

• ,his oer-e0ploitation led to nu"ber of fa"ines greatest being 1%% in )engal. ,here was oerall

decrease in production and efficiency of agriculture.• ,o boost the production and to generate constant strea" of reenue EI+ decided to create gentry of

landlords who had a sta<e in land. #ccording to this syste" landlords would pay EI+ a fi0ed

a"ount of "oney and hence they would hae greater incentie to increase production as additional

"oney would go to landlords.

"ailure of Per!anent Settle!entProxy Zamindari:

• )engali )abus bought Ba"indaris for estee" reasons rather than co""ercial reasons.

• ,his led to creation of “pro0y Ba"indari/ of aibs who controlled the actiities for +alcutta-based

)engali babus.

• ,his led to seere corruption and large no of hierarchies between who" profits needed to be shared.

• 6easants were ta0ed as heaily as before and they had no interest in greater production.

Price fall:

• ,here was a steep fall in price in period i""ediately after per"anent settle"ent in 1%'& and prices

re"ained low.#s per bri7 narain fell by &C

• For ne0t 1& years at this ti"e "ost of Ba"indars could not fulfill their co""it"ent to EI+ and sold

their ownership.

II-Stage in British rule:1. Industrial Deolution

2. 9aisse* faire replacing EI+8s "onopoly

. 9ancashire captures Indian "ar<ets.

$. Dee"ergence of Aarwaris traders as agents of 9ancashire goods

&. !e-industriali*ation.. Funda"ental +hange. India beco"ing “e0porter of agricultural raw "aterials fro" e0porter

of industrial finished goods/

%. 6roble"s of ,ribute Deali*ation piu" ,rade

Industrial revolution

• ,oo< place in 1%%( in )ritain and changed the way production was done in )ritain.

)uying sil< indigospices "uslin calico

fro" India

E0portingDeaching as wealth inEurope

)ullion :oldGSiler

)uying sil< indigo

spices "uslin calico

fro" India

E0porting Deaching as wealthin Europe

DeenueG,a0



• ,here was great increase in production and productiity.

• #nd it decreased the price of handloo" cloth and a great inest"ent too< place in this sector.

#aissez "aire:

• ew class of entrepreneurs >goods-producers@ e"erged in )ritain.

• ,hey could enhance profits by e0panding "ar<ets. ,hey thried on lower prices.

• ,hey were not worried of co"petition and wanted re"oal of "onopoly to gain access to new

"ar<ets. ,hey wanted “9aisse* Faire/ to replace "ercantile "onopoly. 45 was a s"all "ar<et and

9ancashire wanted to e0port its goods to India.

• ,here was conflict of interest with EI+ who thried on handloo"s produced in India.

$e industrialization:

• 9ancashire got Aonopoly charter re"oed in 131 by parlia"ent. EI+ "onopoly in India ended.

• b7ectie changed fro" “sei*ing Indian co""odities/ to “sei*ing Indian "ar<ets/.

• 9ancashire did not pay any i"port duty on goods whereas Indian cotton weaers had to pay an

e0cise duty ,hus they had a great price adantage.

• 9ancashire wiped out e0ports of Indian cotton goods. ,hey also challenged the" in their ho"e

"ar<et.

• ,his led to de-industriali*ation - "assie shutdown of Indian industries.

• ,he i"pact of this de-industriali*ation was >a@ Indian "iddle class beca"e poorer due to

une"ploy"ent >b@ decline of other industries li<e cutlery guns "achinery etc.

Proble! in Realization of tribute

• India8s de-industriali*ation seriously affected transfer-of-wealth "echanis".

• ,ill now the reali*ation of tribute had ta<en the for" of e0port fro" India.

• Dationally this could hae been co"pensated by diersion of raw cotton to English factories. )ut

this was not possible because Indian cotton was too short-stapled for English factories.

• Si"ilarly Indian raw sil< could not co"pete with +hinese and Italian sil< for English factories. Its

e0port re"ained li"ited.

• ,he proble" beca"e ery acute by 13(.

• ,he solution was found in opiu" trade.

Oiu! trade• )ritish found a "a7or "ar<et for opiu" in +hina.

• +hinese aristocracy consu"ed opiu" for centuries.

• )ritish slashed opiu" prices and s"uggled it into +hina through Shanghai and Hong 5ong ports.

• +hinese <ing tried to stop this trade and fought two “piu" Wars/ >13$(-$2 13&-&3@ with

)ritain.

• #fter losing the war opiu" trade was legali*ed in +hina.

4se of stea" incotton industry

Increase in 6roduction

productiity9arger Inest"ents in

these industries

:reater de"and for coal

and greater production

:reater de"and for

stea" engines and

handloo"s

:reater de"and for

heay e=pt

!e"and for Iron

Steel industry



• )ritish sold Indian opiu" to +hina and i"ported ,ea and Sil< to England. # large a"ount of

)o"bay and )engal capital can be traced to illegal opiu" trade.

,he following figure showing i"ports and e0ports of )ritain to #sia shows the gain to )ritain by this

triangular relationship.

ear I"ports E0ports E0cess I"ports oer e0ports13&$ 2 12 11

13&& 2$. 1.1 11.2

13& 2'. 1&.$ 1$.$

J #ll alues in "illions pounds

III-Stage

1. Flow of capital to )ritain.

2. !eelop"ent of Dailways as an agent of deindustriali*ation.. +o""erciali*ation of #griculture.

$. Ba"indars to 9andlords.

&. E"ergence of Kute and +otton Industry.

"lo% of caital#t about 13&(8s the capital inest"ent had reached a saturation point with construction of basic networ<s of

railways the greatest absorbent of capital. ,he "a7or characteristic of this stage was e0port of capital and

intensified race for Indian "ar<ets. Fro" 13&% to 13& saw "a7or "oe"ent of )ritish capital to India.

$evelo!ent of rail%ays

Reason o body was interested in inesting in railways as no one could see econo"ic iability in it. 9ord

!alhousie wanted railways in India because of proble" in ad"inistering such a large country. ,hus

railways were deeloped "ore in need for ar"y personnel "oe"ent than "oe"ent of goods. East India

+o. beca"e the underwriter and assured &C DD in railways inest"ent in India. Aa7or inest"ent was

carried out in +alcutta region although first line was introduced in )o"bay.

Complete Colonization:

piu"

nly E0ports

45

India +hina

+otton goods

I"portsLE0ports ,eaG Sil<

E0portLI"port



Dailways sered as a catalyst of co"plete coloni*ation of India. Dailways led to "assie increase in i"ports

by the country.

• I"ports of cotton doubled between 13&' and 13%%.

• I"ports of sil< beca"e $ ti"es between 13&' and 13%%.

,he railways also led to increased e0ports fro" India. ,he entire co"position changed as bul< no longer

re"ained a barrier to transport. In 13%1 piu" was still principal ite" but ilseeds and cotton ca"e close

second. ,hus there was a real shift in Indian agriculture to production of raw "aterial for England a shift

fro" food grains to non-food crops.

Co!!ercialization of &griculture,he railways also led to change in co"position of Indian e0ports as bul< no longer re"ained a barrier to

transport. In 13%1 piu" was still principal ite" but ilseeds and cotton ca"e close second. ,hus therewas a real shift in Indian agriculture to production of raw "aterial for England a shift fro" food grains to

non-food crops. ,his ast change in Indian agriculture fro" food grains to non-food crops >7ute indigo@ is

so"eti"es <nown as “co""erciali*ation of agriculture/.

,he co""erciali*ation had a "a7or i"pact as =uantity of food aailable for ho"e "ar<et declinedand it led to great fa"ines >fa"ines of 13'-'% 13''-1'((@ were "illions perished. ,he

co""erciali*ation "ade condition of poor peasant worse and only few rich landlords were the gainers.

Zamindars to Landlords#t this period due to “Sundown 9aws/ lot of absentee landlords lost their Ba"indaris to their naMf. So there

deeloped a new class of people who are the owners of land peasants and who are also the traders.

A NW N 9

,his syste" of “pay interest and principal later/ created a debt trap for the far"ers. #nd they gradually losttheir land and beca"e bonded laborers.

3. Debt Trap

+onsider a far"er D who is able to produce 7ust enough for sustenance of his fa"ily under nor"al

circu"stances

t O +t N St N :tield O N Saings N

I tN1 O St

Inest"ent for the ne0t period O saings for this year.

tN1 O tield constant >no growth@

For a typical "ono crop cycle fro" Kune !ec the price of the crop is as follows

Aoney 9ender

>Interest@

Hoarder >,rader8s

profit@

9and wner >Dent

fro" peasant@



>Show sine cure with "in at !ec and "a0 at Kune@

• So"eti"es due to so"e unforeseen circu"stances >for eg daughters "arriage death@ the

far"er "ay hae to resort to borrowings.

• In case of non-"onetised econo"y borrowing is <ind >seeds fro" the trader@ but in

"onetised it is the alue of seeds.

• He borrows when the price of seeds is the highest.

• Depay"ent ti"e is the harest ti"e when the price is the lowest in !ec.

• Aoreoer with the e0orbitant rate of interest charged by these "oneylenders it beco"es

irtually i"possible for the far"er to erase the debt.

• He "ight be able to pay 7ust the accrued interest and hence this process continues eery

year and gets trapped in the debt trap.

• Further the inability of the far"er to pay the debt >or the interest accrued on debt@ led to

sei*ure of the land by the "oneylender and this also gae birth to a new class of bonded

labor.

o ,hus top landowners a"ounting to 1(C of the population own %(C of the land.

%(C of the agricultural people own 1(C of the land. #nd re"aining 2(C of the people own 2(C.

o ,hus it led to collusie oligopoly. )ecause the far"ers were not in a position to ta<e

shoc<s it led the" to fall into the debt trap.

o ,he landlords started beco"ing rich.

o #s the productiity increased they hoarded the goods at lower price and sold the"

when it was dear.

Post 19!"#$C%&PL'T'(

#fter independence the trap itself perpetuates. It was identified that to sole this proble" three

ways were possible

1. Land reforms "')P*$D(

2. Co+operation in ter"s of "ar<eting to increase productiity to buy inputs +ooperatiefar"ing failed because big *a"indars refused to be part of it.

. Loanable f,nds access to ban< funds ationalisation of ban<s only helped in

strengthening the "oneylender. ,hey are the ones who get the loans based on collaterals.

#lso only those who sered the )ritish #r"y were allowed to buy the land or ery rich landowners

>eg 6un7ab@. ,his led to large clusters. Si<hs were the spearheads of the )ritish ar"y.

,he productiity 7ust shot up in these regions. Een today in the non-irrigated parts we hae

bonded labour with its socio-political after"aths.

#lso atte"pts to sei*e the land of landowners failed as they hid the lands under benaami

transactions "')P*$D(.



Howeer it did play so"e positie role also in the for" of interest-free adances especially inpiu" cultiation. So"e peasants een "anaged to eade the goern"ent and sell opiu" to the

priate traders.

'!ergence of (ute and Cotton industries

)ute Industries

Kute industry was deeloped in Scotland >around !undee@ but based on DA supplied fro" +alcutta.T-e c-aracteristics of ,te ind,stry /ere:

1. 9abor intensie. ,he 7ute industry is highly labor intensie and does not re=uire "uch s<illed labor.

2. !ependant de"and. ,he "ar<et of 7ute goods were other industries and hence de"and for 7ute

depended on de"and or well being of other industries. Aar<et was not local but world "ar<et.

T-e factors t-at led to 0ro/t- of ,te ind,stries in Calc,tta are:

1. Lo/ /a0es in +alcutta as co"pared to !undee and hence lower cost of production

2. $at,re of R&. ,he olu"eGalue ratio was high and that was not the case with cotton >7ute couldnot be bent@. ,he "arginal cost of transportation was "uch higher in 7ute than in cotton.

. Prod,ction process ,he raw 7ute had a high wastage in production process which "eant you

would be i"porting e0tra 7ute and hence would be paying e0tra for that

$. la2e trade. ,he slae trade was declining and those in slae trade were loo<ing for so"e other inest"ent. ,hey found good opportunity in 7ute "ills in India. ,hat is the reason we find all 7ute

"ills in India were owned by Europeans till 2nd WW.

#mpact of ,te ind,stry

,he 7ute "ills did not e"ploy local laborers as wage differential was the <ey to their success. So they

brought people fro" different places Sardars were appointed sent to )ihar rrisa etcP . ,hese Sardars

would pay adance to illagers and brought people to town they not <nowing where they were heading

>,he operation was ery si"ilar to slae trade@. ,hese people would be settled in co"pound of the "ills and

that is the reason 7ute "ills had huge co"pounds.

,he people in +alcutta saw 7ute "ills as a sy"bol of foreign oppression. Whereas the people of

)o"bay saw cotton "ills as sy"bol of national pride owned and wor<ed by Indians.

Cotton Industries+a"e to India for reasons different than 7ute.

• )o"bay ca"e under )ritish ( years after +alcutta. )y then the "onopoly of EI+ was withdrawn

and "ercantile attitude was replaced by 4tilitarian capitalistic attitude. ,here was an attitude

difference in )ritish )o"bay and )ritish +alcutta.

• For ( years of difference )o"bay "erchants en7oyed free trade in local "ar<et and they had a lot

of capital accu"ulation. !eccan handloo" had suried and it was a "a7or cotton belt controlled

by )o"bay 6arsis.

• 9ancashire and European te0tile producers had "oed fro" short Indian staple to long #"erican

staple causing obsolescence of preious spinning "ills. ,he capital goods sector in cotton was

loo<ing for e0ternal buyer.

• ,he )o"bay "ills were dealing with short staple and producing coarser ariety of cotton cloth.

,here was a s"all "ar<et of this cloth in #frica and Indian te0tile owners were co"peting with

+hinese and Kapanese te0tile "anufacturers. ,he de"and for yarn was increasing and hand

spinning was not sufficient to "eet the de"and. ,he 9ancashire did not enter into this "ar<et as profit "argins were lower.

• ,he 6arsi traders bought the old spinning "ills fro" the te0tile "anufacturers against wishes of

9ancashire and thus cotton-spinning "ills ca"e up in 13$(-(8s.



• ,his is the reason why )o"bay te0tile "ills were not integrated whereas #h"edabad had

integrated spinning "ills.

Other Industries in India

,0ar: Rail/ays helped deelop other industries li<e sugar. 6reiously sugar "ills couldn8t be set

up co* of transportation delays of sugarcane to the "ills location. ow railways ca"e to theirrescue.

Leat-er: &adras was the only port to e0port leather to Europe till the end of the 1'th century.

E"ergence of nation states led to building up of ar"ies OL "ore de"and for leather >boots belts@.

9eather was tanned by egetable >inefficient@. 9ater c-emical tanned leat-er >chro"e-tanned@e"erged and 4S too< adantage of this. ,his led to the deat- of &adras leat-er tanneries.

#ndi0o faced a si"ilar fate as leather. #ndi0o /as replaced by synt-etic bl,e inented by a:er"an scientist.

pices were e0ported fro" Aadras +ochin. ,his was till the end of 1'th century after whichIndonesia too< that lead fro" India.

E0cept +hina and 4S the whole world was either colonies or coloni*ers8 property. #"ong the

colonies India was the "ost industriali*ed which had indigenous industrial capitalists

I*-StageDise of Indian nationalis" ; “)ritish rule and 9aisse* faire reason for Indian poerty/

Danade ,elang !adabai aro7i branding laisse* faire as reason for poerty.

)engal partition and )oycott "oe"ent

E"ergence of :andhi as a ational leader.

I WW and its i"pact on Indian industry

eed for planned econo"y

1'2' depression

FI++I 1'$ )irla Speech

1'% 6roincial Election

II World War and 6ost war Deconstruction +o""ittee

)o"bay 6lan

Indian nationalis" deeloped in two "a7or categories

+ilitant grous, Political etre!is!:

• E"phasi*ed on glorious Hindu past.

• )elieed in self-reliance and fell bac< on traditional handicrafts as "eans of prosperity.

• pposed )ritish rule as it destroyed traditional Indian society with destruction of local

"anufacturers.

• )oycott of foreign goods and re7ection of western "ode of life.

+oderates:1. 9oo<ed forward to industrial deeloped India

2. ,elang aoro7i Danade Koshi D+ !utt belong to this school of thought.



. 6rotectionis" was <ey for re"edy of econo"ic distress of country.

$. For both the reason for poerty was poor policies of )ritish which led to econo"ic ruin of the

country >“ 4nbritish rule of India/@

&. Identified lac< of large-scale industriali*ation was identified as "a7or reason for poerty and

"eans to eli"inate poerty. It was a shift in thin<ing fro" past swadeshi "oe"ent which

considered deelop"ent of traditional handicrafts as panacea for econo"ic ills

Pre/ar

Role of state

Early criticis" of )ritish laisse* faire deeloped into an idea of positie state participation in

econo"ic actiities.

Dole of state was defined as not only protecting nascent Indian industry against foreign co"petition

but also to carry out social and agricultural refor"s.

1st orld ar

9aisse* faire policy bro<e down and got of India placing orders with Indian fir"s.

6ositie change in attitude of got as regard to e0cise duty on cotton.

#ccu"ulation of large capital but e0pansion constrained by capital goods

+o"plete brea<down of trade with )ritain and first e0perience with protectionis".

P%T+1st *R

Industries again facing foreign co"petition and de"and for protection rising

#fter 1st WW we see e"ergence of new generation of econo"ists 5, Shah Sar<ar :adgil all were

staunch supporter of protection and encourage"ent to industriali*ation.

Qisesaraiya “Deconstructing Indian Econo"y/ identified following proble" of Indian poerty

• 9ow standard of liing of people

•9ow leel of education

• !ependence on agriculture

• 9ac< of industriali*ation and destruction of indigenous industries due to )ritish tariff and

fiscal policies.

For"ation of FI++I in 1'2% by :! )irla and 6urshota"das ,ha<urdas

1949 Depression

!eathblow to laisse* faire and planning ta<ing up fir" roots in India.Sir :eorge Schuster >finance "inister@ tried to setup Econo"ic #disory council in India.

5#CC# in 193 6irla and ar7ar spo7e on necessity of planned economy in #ndia.

1. +apitali*ation of west was based on e0ploitation of colonies this was large capital accu"ulated that

was loo<ing for inest"ent but in India there is no surplus and hence capitali*ation can deeloponly through protection and e0pansion of "ar<et.

2. Increasing the purchasing power of people is essential for growth of capitalis". Since %(C of

people are in agriculture hence there is need to deelop agriculture to raise 666. ,his deelop"ent

re=uires new inest"ents in power irrigation. ,hese inest"ents cannot be "ade by priate sector

so state "ust deelop the".

. !ependence on i"ports of "achine "ust be stopped. ,his "eans deelop"ent of <ey industriesG

+apital goods industries. ,hese <ey industries re=uire large inest"ent and has larger gestation

period slower rate of profitability and hence "ust be deeloped by state

6oerty Industriali*ation #nti 9F 6rotection State Initiatie



+onference of "inisters of industries for arious proinces in 1'3. For"ation of ational planning

co""ittee.

Identified types of industries

econd orld ar

6ost War Deconstruction co""ittee was setup in 1'$1 to prepare “deelop"ent plan for India/.

)o"bay plan released in Kanuary 1'$$Industrial policy of :I in 1'$&.

)oth the plans supported license ra7 to ensure spread of industries in all parts of country to get true

industriali*ation.

#!efense and 6ublic

4tilities. Aust bedeeloped by state

)5ey Industries there

was difference of

opinion

++onsu"er Industries

"ust be left for priate sector.



#nd,strial de2elopment of 6ombay and Calc,tta

,here were distinct differences between the nature of growth of )o"bay and +alcutta as centers of

"a7or "odern industrial cities in India during nineteenth century.

Timin0 of arri2al of 6ritis-: )ritish first ca"e to +alcutta so the effect of I"perialis" was seen

ery early there as co"pared to )o"bay and other places in the country.

'xistin0 local b,siness comm,nity: Aarwaris were the "a7or business co""unity in +alcutta.

EI+ established its "onopoly by force so Aarwaris were forced to abandon their business or 7ust

beco"e EI+ agents. ,hese things were not seen in )o"bay where the )ritish reached around $(yrs later.

#nd,strial Prod,cts: #t this ti"e +alcutta beca"e the center of tea 7ute-production whereas)o"bay beca"e center of cotton-production. )engal was the only 7ute-producing area and +otton

was found in the )o"bay region Aaharashtra agpur etc.

%/ners-ip: In +alcutta )ritish-owned industries ca"e up. )o"bay "ost of the industries were

started and owned by Indians the"seles. So due to i"perial do"ination the traders in +alcutta did

not flourish whereas the traders in )o"bay flourished since they had their own industries.

Labo,r demo0rap-y: In +alcutta region all bonded-labour was brought fro" A6 )ihar and

rissa. In )o"bay the labor was fro" the region itself. ,hey wor<ed during he day and went bac<

to their ho"es in the eening.

pecial problems for Calc,tta: !ue to linguistic differences in +alcutta this labor could not "i0

and contribute to society. Effect of this was that the responsibility of labor in +alcutta was that ofthe owners. ,his also proed to an e0tra e0penditure in +al crucial to the industry8s surial later.

It was not so in )o"bay.

'xim str,ct,re: )eing short staple )o"bay cotton generated indigenous de"and and supply

whereas as the industry in +alcutta was predo"inantly "eant for e0port purposes.



L*#'Z 5*#R'

,he Indian business co""unity played a crucial role in deeloping the concept of planned

econo"ic growth through state interention.

6ritis- preference: ,he preferred econo"ic policy in )ritain and other western countries was

9aisse* faire - free trade between countries.

Problem /it- L5: ,he policy see"s to be perfect on paper - both the inoled countries should

benefit fro" this. Howeer this policy results in discri"ination against the wea<er or late-co"ing

partner and always benefits the "ore industriali*ed country.

L5 in #ndia:

In the na"e of laisse* faire the Indian indigenous "anufacturing was destroyed >particularly theIndian handloo" industry@.

In order to pro"ote the )ritish te0tile industry India was reduced to only a raw "aterial supplier by the )ritish goern"ent.It led to the large disproportion between the production of raw agricultural products and the

production G distribution of industrial produce.

T-in7in0 in #ndia:

Aoderates and the Swadeshi schools identified )ritish-goern"ent policies causing the econo"ic

drain hence abys"al poerty in India.

9arge-scale organi*ation of industry was recogni*ed as being itally necessary.,his thin<ing was also different fro" the other trends of the swadeshi "oe"ent that recogni*ed

indigenous traditional handicrafts through indiidual and co""unity efforts as the panacea of the

econo"ic ills.

Propositions:

6rotection ne of the chief proponents of industriali*ation Danade also obsered that there was a

decided reaction against 9aisse* Faire in western countries also where State was recogni*ed as thenational organ for ta<ing care of national needs in all "atters. Een in England ,he Factory

9egislation and Irish 9and Settle"ent indicated this change of "ind.

6lanning nce industriali*ation on a large scale was identified as the "eans to deelop Indianecono"y the role of state also beca"e ital in such a progra". ,he country was already bereft of

capital and there was a seere lac< of capital for"ation in the econo"y. Aoreoer the priate

capitalists also could not afford to set up large industries the"seles in the face of stiff co"petition

fro" )ritish industries. It beca"e essential for the State to contribute to the growth of large-scaleindustries.

,he role of the state to these thin<ers was also not confined to industrial growth but also includedthe responsibility of bringing about the agricultural and social refor"s. ,he early criticis" of

9aisse* faire policy in India thus gradually deeloped into the idea of positie state participation

in the econo"ic actiities of the nation.



C-an0e in t-in7in0 on L5: 9ater on another reason for this de"and was the success of the first plan in Dussia in sharp contrast to the preailing crisis of the :reat !epression. ,his also fueled

the de"and in India to inole state participation.

CHAPTER 7

Development of firms in modern economic activities finds its roots in the firms of pre modern times.Thesepre modern firms also help in understanding the aspects of present day Indian economy.

The Family Firms1. They take deposits, make loans, transfer govt funds, engage in wholesale and retail trade.2. They took up the role of a managing agency for newly founded industries.3. So they could e ankers or consultants, selling!purchasing agents.

Three types of marwari firms : 1" The great firms , 2" The anians and the rokers,

3" The speculators.

GREAT FIRMS1. #ossesed large resources disposed off through large numer of ranches scattered throughout India.2. Involved in various lines of trade $commission agents, ankers, employers".3. They were a conglomerate of interacting firms elonging to closely related memers of one family. %g. Daddas created a merchants city state in #halodi.&. They otained autoomy over harassment of employees and control over firms' personnel.(. )ellow community memers were employed in these firms to ensure loyalty.*. +ll ranches of the firms were separate units.

RELEVACE !F GREAT FIRMSThese firms eemplified the steps y which marwari usinessmen progressed.They had estalished thenetwork on which the marwari emigrants spread themselves throughout the country.They provided initialemployment to marwari emigrants.

"AIAS A# "R!$ERS1. -ulk of marwaris were initially intermediaries etween domestic producers and consumers and freigneporters and importers.2. ocal retailers purchased in ulk from wholesalers on * month credit of limited amount.3. /arket town stores purchased!sold through their commission agents in port cities.&. These commission agents had to deal with %uropean importers.So, they appointed a guaranteed rokercalled 'anian'.(. These anians received around 10 of commission.*. Their o was to guarantee the trustworthiness of Inidan usinessmen who dealt with these %uropeanfirms.. Their approval was necessary for any transaction.. They were responsile for 4uality!4uantity of goods,merchandi5e, shipments etc.6. They had to good any deficiencies in weight or 4uality.

17. They had to dispose off the goods at highest possile rates.11. They were employed mainly in cloth, opium and raw cotton trade.12. 8ute firms did not use them mainly ecause it did not need their connections.13. %uropena firms in omay employed anians$mostly parsees and hatias".

E%amples& Saraf and /usuddi , 9oenka , 8hunhunwala , 8atia.

The anian relationship with %uropean firms and their large network formed the foundation for speculativemarkets



SPEC'LAT!RS A# I#'STRIALISTS1. The futures markets of :alcutta in opium,raw ute were started y marwaris as early as 161.2. ;apid oscillations in opium prices, compounded y the unstale conditions of echange etwee Indiaand :hina rendered opium market unstale and hence gave speculators a chance of makingprofits.3. 8 < -irla along with =irmal ohia and others was known as the king of speculative markets.&. Share market was a second maor speculative market.(. :alcutta Stock %change was formed in 1(7.

*. 8ute %change dominated y Indians was formed in 167*.. -omay Stock %change was founded in 1(.. + common speculative transactio was ;ain -argain, wagers on when would the first rain would arrive.6. :alcutta speculative markets were closed during >> I.17. Slowly, with increase in ute shares, these markets gained momentum.

Fr(its of Spe)(latio*It was the speculative gains made y marwari usinessmen that enaled some of them to start usinessright after >> I.9D -irla started ute mills in 161?16.@ther commercial innovations were enaled y the speculative gains.In 161, -irla -ros. ecame the first Indian owned :alcutta firm with its own eport office for ute in ondon.

Speculative firms were successful as entreprenuers in the modern period.

9reat firms, ecept 8atias and Singhanias, have receded relatively.-anian firms, again ecept 8atias and 9oenkas, have receded asolutely.

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