From New International, Vol.8 No.2, March 1942, pp.46-49. 
Transcribed by Ted Crawford.
Marked up by Einde O’Callaghan for ETOL.
The following article is the first section of a thesis by the Indian Trotskyist organization which we received prior to the outbreak of the war in that part of the world. In view of the international situation we believe it of extreme timeliness to begin publication of the whole thesis with this particular introductory section. Other sections will follow in forthcoming issues of The New International. They deal with the development of the classes in India, the movements of national independence, the rôle of the successive British governments in their treatment of the question of Indian Freedom, and the presentation of a program to realize the genuine liberation from imperialism of the Indian proletariat and peasantry and the whole of Asia. A brilliantly written document, we are certain that our readers will find it highly instructive and of the utmost social importance – Ed.
India, the largest, the longest dominated and exploited of British conquests, the richest field of investment, the source of incalculable plunder and profit, the base of Asiatic expansion, the inexhaustible reservoir of material and human resources for British wars, the focus of all British strategic aims, the pivot of the Empire, and the bulwark of British world domination, offers, after 200 years of subjection, the most complete demonstration of the workings and results of the colonial system of modern imperialism.
Every European colonizing power directed its first efforts toward India, and the bitterest struggles for the glittering prize were fought on the battlefields of Europe and India alike. The success of Britain in defeating her continental rivals, as well as the native rulers of India, and the consolidation of her domination in India paved the way for her subsequent world supremacy. The conquest and exploitation of India was one of the main bases of capitalist development in Britain, giving direct support to her whole social and political structure. The plunder of India was a main source of the primitive accumulation of capital which made possible the English industrial revolution. The exploitation of the Indian market and of Indian raw materials provided the basis of British industrial expansion in the 19th century. Today India provides a field of investment for a quarter of British overseas capital holdings, and sends to Britain roughly 150 million pounds sterling annually, as tribute, in various forms.
After 200 years of imperialist rule, India presents a picture of poverty and misery of the masses, which is without equal in the world – the more striking because up to the 18th century the economic condition of India was relatively advanced and Indian methods of production and of industrial and commercial organization could compare with those of any part of the world; and because of the vast natural wealth and resources of the country, which cannot be utilized and developed under the imperialist system.
European capitalist penetration of India began with the Portuguese establishment of their factory in Calicut. The British (1600), Dutch (1602) and the French (1664) formed their trading companies in the course of the 17th century. British direct rule dates from the middle of the 1801 century.
The British conquest of India, carried out piecemeal, and in the most ruthless, vindictive and deceitful manner, differed from every previous conquest of India in that, while earlier foreign conquerors left untouched the traditional economy, British imperialism “broke down the whole framework of Indian society.”
The first steps of this destruction were carried out by (a) the East India Company’s colossal direct plunder, (b) by the British neglect of irrigation and public works, (c) by the wrecking of the Indian land system and its replacement by a system of landlordism and individual land holding, (d) by the direct prohibition and heavy duties on the export of Indian manufactures to Europe, and to England.
But it was the operations of 19th century British industrial capitalism and the governmental policies initiated by it in India that decisively broke up the Indian economic structure. The industrial capitalists of Britain had a clear cut aim in India – to reduce it to an agricultural colony of British capitalism, supplying ran materials and absorbing its manufactured goods.
Britain captured and developed the Indian market for her industrial goods on the basis of the technical superiority of English machine industry (for which the Indian plunder had provided the accumulated capital), while utilizing at the same time the state power to block the export of Indian goods to Europe and permit the free entry of British goods to India. The destruction and collapse of Indian manufactures in the unequal struggle against British competition was the inevitable result. The ruin of millions of artisans and craftsmen was not accompanied by any growth of newer forms of industry, and the old urban centers of Indian manufactures (Dacca, Murshidabad, Surat) were depopulated and laid waste.
The work of destruction was not confined to the towns. “The handloom and the spinning wheel were the pivots of the structure of Indian society” which was based on the “domestic union of agricultural and manufacturing pursuits.”
“British steam and science uprooted over the whole surface of Hindustan the union between agricultural and manufacturing industry.” “The British intruder, who broke up the Indian handloom and destroyed the spinning wheel” struck at the roots of the Indian society, in destroying the balance of the village economy. Thereby Britain produced “the greatest, and to speak the truth, the only social revolution ever heard of in Asia,” “actuated in this matter only by the vilest interests, and stupid in her manner of enforcing them.”
To consolidate the conquest of India, and to develop the Indian market and Indian resources for exploitation by the British capitalist class as a whole, the East India Company was replaced in 1858 by direct governmental administration. After a century of neglect of the most elementary functions of government, the British inaugurated a process of the active development of the country by (a) building a network of railroads, (b) by the development of roads, (c) the introduction of the electric telegraph and of a uniform postal system, (d) by giving the benefits of Western education to a limited class of Indians, and (e) by the introduction of the European banking system into India. While opening up India for commercial penetration, and supplying a market for British iron, steel and engineering industries, this process of development – especially the construction of railways – laid the foundations of a new stage – the development of British capital investments in India.
The last decades of the 19th century and the first of the 20th were marked by the imperialist export of finance capital from the countries of Western Europe and North America to every corner of the globe and by the conquest and exploitation of all the backward countries through the colonial system. Between 1880 and 1914 the major European powers and the USA had carved up the whole world into colonies and spheres of exploitation.
This period of modern imperialist expansion was marked in India by an intensification of British exploitation, and a corresponding change in its character, wherein the finance-capitalist exploitation of India came to dominate all other methods. Nevertheless the new basis of exploitation did not replace the already established forms of plunder and industrial and trading exploitation, but was auxiliary and parallel to these processes.
British capitalist investment in India developed at a rapid pace in the second half of the 19th century, with expansion of railway construction, and also with the establishment of tea, coffee and rubber plantations and other minor enterprises.
The holdings of British capital in India developed not on the basis of the export of British capital, but rather through the plunder of the Indian people, which was reinvested in India, as a rich source of interest. The sterling debt of the Indian government, which includes more than one-third of the total holdings of British capital, has been manipulated to include the cost of every imperial undertaking (including wars for the subjugation of India, and other colonial wars) which could conceivably be charged to India. The colossal amount of this debt bears no relation to the costs of the public works schemes carried out, and of railway construction (themselves multiplied by wasteful spending). At the same time, the almost continuous excess of the value of Indian exports to Britain over that of imports, has left no room for a real export of capital to India. Nevertheless, the volume of British holdings in India today exceeds one billion pounds sterling.
With the post-war weakening of Britain’s share of the Indian market (Britain’s share of Indian imports dropped from 63 per cent to 29 per cent between 1913 and 1937), in the face of foreign competition and the rise of Indian – especially cotton – industry, British imperialism has consolidated its financial stranglehold on the Indian economy as its chief source of profit in India. The proportion of Britain’s total overseas investment which has been placed in India has risen from 11 per cent in 1911 to 25 per cent in 1937. Despite this, there has been since 1927 (with the collapse of the post-war boom and the general crisis) a sharp drop in the actual volume of British capital newly invested in India, which reflects the general stagnation of the economic development of India.
The capital investments of Britain in India have never led to the industrialization of India on a scale proportionate to their volume. The colossal waste involved in the railway construction of the last century, and the unproductive expenditure which swelled India’s public debt, first created the glaring disproportion between the size of British investments and the slow economic development of the country. Up to 1914 97 per cent of British capital invested in India was devoted to purposes of government (i.e., wars, the heavy costs of bureaucratic administration, levies for costly durbars, etc.), transport plantations, and finance. These investments served as auxiliaries to the commercial penetration of India and its exploitation as a source of raw materials and a market for British goods, and did not lead to the development of modern industry in India on any commensurable scale.
The industrial development of India which has taken place in recent times bears no relation to Indian needs. The vast resources of India have never been tapped. The rate of industrial advance, far lower than that of other large non-European countries, has not, even in modern times, kept pace with the decline of Indian handicrafts – with the result that from 1911 to 1931 there has been a reduction in the proportion of the population dependent on industry (including domestic industry).
The growth of Indian industry has been greatly impeded by British imperialism, for fear of competition with home industries, by administrative neglect, by a hostile tariff policy and by unfavorable currency manipulations. Until 1914 this policy of opposition to industrial development in Indian was openly followed, particularly by the removal of import duties on competing British goods. The brief and half-hearted reversal of policy after 1914 and during the period when British capital flowed in to share in the profits of the post-war boom, was nullified by the later raising of the exchange rates, which disastrously hit Indian exports.
Under these conditions, the development of modern industry in India has taken place at a very slow rate, and in lop-sided fashion, chiefly in light industry. The basis necessary for real industrial development – heavy industry – has never been laid. Until 1914, large organized production in India was represented chiefly by the cotton, jute and coal mining industries, and by the tea, rubber and coffee plantations. The post-war period, when foreign competition was reduced, was marked by a short and feverish boom, which led to the development of other industries, including steel and iron, cement, manganese and other minor types. This period was utilized by British capital, which during the years 1921 to 1923 flowed in at an average annual rate of over thirty million pounds sterling. But the brief post-war boom was followed by a period of stagnation and decline, prolonged by the currency policy of the government, and finally intensified by the world crisis of 1929-1931 which signified the entry of world capitalism itself into a period of decline.
Indian industry today shows no indication of recovery. The scope of the industrialization undertaken for defense purposes during the present imperialist war is not meant to include an all-sided development of Indian industry, but will be restricted to the strategic needs of British imperialism. Such an all-sided development of industry is excluded by the conditions of imperialist exploitation itself, by the direct hostility of the government to Indian industrial development, by the determination of Britain to maintain its share of the Indian market and, above all, by the insoluble problems of the home market caused by the extreme impoverishment of the agricultural population under imperialism. The industrialization of India, on which her future depends, cannot be carried out without the overthrow of imperialism and a sweeping transformation of agrarian relations.
Despite the hostility of imperialism to the industrialization of India, it is British and not Indian capital that has always held the dominant place in Indian industry, not only through the decisively greater volume of its investments in industry, but also through its financial stranglehold on the whole Indian economy. The Indian capitalist class, whose growth was mainly connected with the development of the cotton industry, has never been able to shake off the controlling power of British finance capital. The paid-up capital of joint stock companies registered in India was in 1914 only Rs 80 crores, which is a measure of the belatedness and weakness of Indian capital. Today the figure has risen to over Rs 300 crores. The permeation of British capital into companies registered in India reduces the importance of this figure, which in any case cannot compare with the total paid-up capital of foreign (mainly British) companies operating in India, which exceeds 700 million pounds sterling.
Despite the advance of Indian capital, British capital remains in effectively monopolist domination in banking, commerce, exchange and insurance, in shipping, in the tea, coffee, and rubber plantations and in the jute industry. In iron and steel, Indian capital has been forced to come to terms with British capital, and even in the cotton industry, the home of Indian capital, the control of British capital, through the managing agency system, is very great. Already in 1928 (before the economic crisis), English managing agents controlled the actual majority of the capital of cotton companies (50.3 per cent). The economic depression which affected Indian industry after 1924 and especially after 1929), and the bankruptcy liquidations and difficulties of many Indian firms which had arisen in the post-war period, were utilized by British capital to strengthen its hold on Indian industry.
Most decisive for the controlling power of British finance capital is the role of the foreign banking system, working in conjunction with the government’s financial and exchange policies. Financial power remains monopolized in British hands, through the Reserve Bank of India, the Imperial Bank and the big exchange banks. The Indian joint-stock banks hold less than one-third of the bank deposits in India and are themselves being invaded by British capital.
The Indian capitalist class, therefore, despite its growth in recent times, remains essentially dependent upon and an agency of British finance capital, performing a subsidiary role in the exploitation of India. Despite its dreams of industrialization and of a broadened base of exploitation for itself, the Indian bourgeoisie, shackled as it is to imperialism, cannot play the historic role of the West European bourgeoisie in liberating and developing the productive forces. The industrial advance of India demands absolutely the overthrow of imperialism, with which Indian bourgeois interests are indissolubly bound, and the overthrow of which they will be bound to resist.
Nevertheless, the rising productive forces in India are straining against the fetters of imperialism and of the obsolete economic structure which it maintains and protects. This conflict finds its expression, not only in the industrial stagnation, but in a much sharper way in the agrarian crisis, which is the index of the bankruptcy of imperialist economy, and the main driving force toward revolution.
Britain relegated to India the role of an agricultural appendage to imperialism. The ravages of Indian industries carried out in the 19th century at once drove the population of the ruined industrial centers back to the land, and ruined the livelihood of millions of artisans in the villages. The overcrowding of agriculture which resulted has reached a stage today when three-fourths of the entire Indian population is solely dependent on the land, and where the proportion of land available for cultivation has fallen to less than 1¼ acres per head of the agrarian population. The effect of this exaggerated disequilibrium in the company is further aggravated by the stagnation and deterioration of agriculture itself, for which as well the British are directly responsible through their disruption of the village economy, their iniquitous exactions of land revenue, their expropriation of the peasantry, their creation of parasitic forces in semi-feudal landlordism, and their notorious neglect of public works on the land, which have been from time immemorial the function of the government and without which, in India, the cultivation of the soil cannot be carried on. The criminal indifference of the government and the suffocating parasitism of the landlords are responsible for the incredibly low productivity and exhaustion of the soil, for the primitive agricultural technique, for the waste of labor in fragmented holdings, for the neglect of cultivable soil (of which 35 per cent is left waste in India and Burma), and the recent actual shrinkage in the area under cultivation, while the population is on the increase. These conditions, which have depressed the vast majority or the rural population to a level of unspeakable poverty, and chronic semi-starvation, and led to a state of permanent agricultural crisis, are inevitably paving the way for a sweeping revolution, as their only outcome and solution.
The characteristic process of imperialism, the expropriation of the colonial population from the land, was carried out by the British under cover of legal forms, which in effect transformed the “eternal” land system of the Indian village commune into an inextricable amalgam of feudal and semi-feudal rights and tenures. The British introduced into India “the great desideratum of Asiatic society – private property in the land,” making in this connection a series of “unsuccessful and really absurd (and in effect really infamous) experiments in economics.” In Bengal they created a caricature of English landed property on a large scale; in South-eastern India a caricature of small allotment property; in the Northwest they transformed to the utmost of their ability the Indian commune with common ownership of the land, into a caricature of itself.”
The aims which guided the British transformation of the Indian land system were twofold – firstly, to guarantee the effective collection of their extortionate land revenues, which rose steeply from the time of the conquest (from four million pounds sterling in 1800 to fifteen million in 1857, to twenty-three million in 1936-37); and in the second place to create a social basis within India for imperialism, by the creation of Indian landed interests “deeply interested in the continuance of British dominion.” It is above all the still unbroken alliance between British imperialism and Indian landlordism that links up the overthrow of imperialism with the agrarian revolution in India.
Landlordism was created and fostered by the British, not only in the provinces of temporary and permanent Zemindari, Bengal, UP, Bihar, Punjaub), but also in the Ryotwari areas (including Bombay, Madras, etc.), where the processes of mortgage and subletting have caused analogous developments. In many parts of India, sub-infeudation and sub-letting have been carried to fantastic lengths, so that the cultivator of the soil is despoiled by an increasing army of functionless intermediaries, in addition to the big parasites and the government itself. A great proportion of the real cultivators of the soil are without rights of any kind and remain unaffected even by the temporary legislation by which the government has sought to stave off the impending crisis. Even in the Ryotwari areas, where settlement was originally made with the cultivators themselves, the latter have been dispossessed to a great extent by money-lenders and others.
From the beginning, landlordism under British rule has been parasitic in character, since landlords neither supply agricultural capital, not control farming operations. Today landlordism, taken in conjunction with its superstructure of sub-infeudation and sub-letting, is the most effective barrier to the development of modern large-scale agriculture.
The penetration of finance capital in the agrarian field. which characterizes the recent period, far from freeing the productive forces from the incubus of feudalism, or introducing modern productive technique, has taken place for the most part within the framework of feudal and semi-feudal relations, and become enmeshed with feudal forms of exploitation. The net result has been to add to the burdens of the peasantry by decisively accelerating their expropriation from the land, and by crushing them under a load of debt which amounted in 1937 to 1,350,000,000 pounds. The money-lenders’ exactions and confiscations, together with the payments demanded by the government and the landlords’ extortions, form for the peasantry a triple scourge which has reduced the greater proportion of cultivators in India to the status of unprotected tenants, sharecroppers and landless wage laborers. Capitalist inroads have sharply accelerated the differentiation of classes within rural society, increasing the numbers of parasite rent-receivers on the one hand and of propertyless elements on the other, as a comparison of the 1921 with the 1931 census figures illustrates:
The particularly rapid growth of parasitic landlordism in recent times, as well as the sharp rise in rural debt (from 400,000,000 pounds in 1921 to 1,350,000,000 in 1937), is really the reflection of the invasion of moneyed interests, big and small, in the agrarian field, having failed to find effective out-lets for investment in productive industry. Thus the direct plunder of the peasantry of the early British period has given place to a network of forms of exploitation of modern finance capital, with its host of subsidiary parasites in the Indian economy. The Indian capitalist class, no less than the British government and the semi-feudal landlords, are tied to the existing order of rural society, and interested in its perpetuation.
Nevertheless the abolition of landlordism in all its forms, in defiance of all these vested interests, the abolition of rural debt, and the unencumbered transfer of the land to the cultivators themselves, is the basic social task of the Indian revolution, and the absolute prerequisite of agricultural advance in India.
British imperialism, in the epoch of declining world capitalism, has become the most powerful reactionary force in India, buttressing in turn all other forms of reaction. Its failure to develop the productive forces in India through industrialization, and the chronic stagnation and decay of agriculture under its rule, make its continued existence incompatible with the advancement of India, and render its overthrow an historical inevitability. To maintain its rule in India, in the face of the rising tide of mass revolt, British imperialism uses all the weapons of bureaucratic and military repression with increasing viciousness. Nevertheless the day of reckoning cannot be long postponed. The solution of the terrible problems of the toiling millions of India demand the overthrow and elimination of British imperialism, which is the foremost task of the coming Indian revolution.
1. It has been pointed out by one of our history advisers that there are some inaccuracies in the version of this document printed in New International and other publications in Britain and America. We will shortly be adding an introductory essay correcting these errors and explaining the remarkable story of how this document was formulated. We are including this version in the New International Archive because we feel that despite its alleged deviations from the original it is nevertheless a historical document in its own right. – ETOL
Last updated on 14.8.2005