Even Lord Macaulay (who, as we have seen, thought very highly of the Company, and was employed by it for several years) was moved to write: ‘the misgovernment of the English was carried to such a point as seemed incompatible with the existence of society… The servants of the Company forced the natives to buy dear and sell cheap… Enormous fortunes were thus rapidly accumulated at Calcutta, while thirty millions of human beings were reduced to the extremity of wretchedness. They had never [had to live] under tyranny like this…’ Macaulay added that whereas evil regimes could be overthrown by an oppressed people, the English were not so easily dislodged. Such an indictment, coming from a liberal Englishman and an architect of the Empire, with whom we will have other bones to pick later, is impossible to contradict.
Revenue Collection and the Drain of Resources
It is instructive to see both the extent to which House of Commons debates on India were dominated by figures of the revenues from India, which seemed to many to justify every expediency the East India Company’s officers resorted to and the extent to which, at the same time, contemporary observers were horrified by the excesses occurring in their country’s name.
The prelate Bishop Heber (whose contempt for idol-worship led him to author the famous lines about a land ‘where every prospect pleases / And only Man is vile’) wrote in 1826 that ‘the peasantry in the Company’s provinces are, on the whole, worse off, poorer, and more dispirited, than the subjects of the Native princes’. In an extraordinary confession, a British administrator in Bengal, F. J. Shore, testified before the House of Commons in 1857: ‘The fundamental principle of the English has been to make the whole Indian nation subservient, in every possible way, to the interests and benefits of themselves. They have been taxed to the utmost limit; every successive province, as it has fallen into our possession, has been made a field for higher exaction; and it has always been our boast how greatly we have raised the revenue above that which the native rulers were able to extort.’
Many of those ‘native rulers’ may well have been ineligible for a modern UN good governance award, but the Company, as Shore admitted, was decidedly worse. Where the British did not choose to govern directly themselves, they installed rulers of ‘princely states’ who were circumstantially allied with their cause. These potentates were charged copious ‘fees’ in exchange for installing them on their thrones and for security from enemy states—an imperial version of the ‘protection money’ racket since practised by the Mafia. (The British called it, more prosaically, a policy of ‘subsidiary alliances’.) The princes were allied with the Company and paid generously for the British contingents in their kingdoms that were placed there for their security. If they did not, these contingents could be turned against them.
In early nineteenth-century Hyderabad, for instance, the ruling Nizam was dragooned into signing up for British protection at the inflated costs the Company chose to charge (the commander, for instance, received an exorbitant £5,000 a month). All the payments to the British were debited to his treasury, which in turn was made to borrow, at a 24 per cent interest rate, from a bank established in 1814 by an associate of the governor-general. Before he knew it, the nizam owed millions to the bank and rueful voices had coined the catchphrase, ‘Poor Nizzy pays for all’. A similar arrangement laid low the Nawab of Arcot further south, whose ‘debts’ to the Company so exceeded his capacity to pay that he had to cede the British most of his territories as a form of repayment.
Having acquired rights to collect revenue early on in the Company’s overlordship, the British proceeded to squeeze the Indian peasant dry. On the one hand they had very few officials who were deployed into the countryside to collect revenue. On the other hand, they couldn’t trust these agents entirely, and increasingly a code of written rules began to govern the collection of revenue. Where local leaders had once understood local conditions, making due allowances for droughts and crop failures or even straitened family circumstances and such exigencies as deaths and weddings, now British revenue collectors ruled with a rule book that allowed no breathing space for negotiation or understanding local problems at a given time. ‘The aim of the new system was to secure the Company’s collection of revenue without the need to negotiate with India’s local elites… The idea was to replace face-to-face conversation with written rules. The rules insisted landholders paid a fixed amount of money each month with rigorous punctuality, and did not disturb the peace… But the system undermined the negotiation and face-to-face conversation which had been so essential to the politics of eighteenth century India. As a result, it brought dispossession and the collapse of a once-rich region’s wealth.’
The British ran three major types of revenue systems: zamindari, mostly in eastern India and a third of the Madras Presidency; raiyatwari or ryotwari in much of the south and parts of the north; and mahalwari in western India. The British introduced the permanent settlement of the land revenue in 1793 as part of the zamindari system. Under this scheme, the Indian cultivators were charged not on the traditional basis of a share of crops produced but by a percentage of the rent paid on their land. This system meant that if the farmer’s crop failed, he would still not be exempt from paying taxes. On occasion, the tax demanded by the British, based on the potential rather than actual value of the land, exceeded the entire revenue from it. In the ryotwari and mahalwari areas, the revenue demand was not permanently settled, but rather periodically revised and enhanced, with even more onerous results. To compound matters, the revenue had to be paid to the colonial state everywhere in cash, rather than kind (whether directly by the peasants or through zamindari intermediaries) and there was a revenue or rent offensive everywhere until the 1880s, after which even larger amounts were extracted from the peasantry from the 1880s to 1930 by the mechanism of debt. William Digby calculated that ‘the ryots [peasant cultivators] in the Districts outside the permanent settlement get only one half as much to eat in the year as their grandfathers did, and only one-third as much as their great-grandfathers did. Yet, in spite of such facts, the land tax is exacted with the greatest stringency and must be paid to the Government in coin before the crops are garnered!’
Bishop Heber acknowledged in 1826, ‘No native prince demands the rent which we do’. The English-educated Romesh Chunder Dutt, an early Indian voice of economic nationalism, acknowledging that some earlier Muslim rulers had also levied swingeing taxes, pointed out that ‘the difference was this, that what the Mahomedan rulers claimed they could never fully realize; what the British rulers claimed they realized with vigour’. The land tax imposed in India averaged between 80–90 per cent of the rental. Within thirty years, land revenue collected just in Bengal went up from £817,553 to £2,680,000. The extortion might have been partly excused if the taxes were being returned to the cultivators in the form of public goods or services, but the taxes were sent off to the British government in London. The ‘permanent settlement’ proved repressive for the Indian economy and all but destroyed Indian agriculture. Taxation and the general conditions of life under the East India Company were so unpleasant and onerous that, as mentioned above, as many as could fled their traditional homes for refuge in domains beyond the Company’s remit, whereas the migration of Indian peasants from the ‘native states’ to British India was unheard of through most of the nineteenth century.
The Company did not care about the superstitions, the social systems or the indignities that Indians practised upon each other so long as they paid their taxes to the Company. Taxes were officially levied for the express purposes of improving the towns, building bridges and canals, reservoirs and fortifications, but (as Burke pointed out in Parliament) the work was soon forgotten and the taxes continued to be levied. A committee of the House of Commons declared ‘that the whole revenue system resolved itself, on the part of the public officers, into habitual extortion and injustice’, whilst ‘what was left to the ryot [peasant] was little more than what he was enabled to procure by evasi
on and concealment’.
The ryotwari and mahalwari systems of taxation had the additional feature of abolishing all private property which had belonged both to the affluent as well as the inferior cultivating classes, thereby abolishing century-old traditions and ties that linked people to the land. As we have seen, Pitt’s India Act was passed in 1784 and formalized British authority to collect revenue from India. In Bengal, the British ignored the hereditary rights of the zamindars and sold their estates by auction to enhance the Company’s revenues.
As long as the East India Company was in charge, its profits skyrocketed to the point that its dividend payouts were legendary, making its soaring stock the most sought-after by British investors. When its mismanagement and oppression culminated in the Revolt of 1857, called by many Indian historians the First War of Independence but trivialized by the British themselves as the ‘Sepoy Mutiny’, the Crown took over the administration of this ‘Jewel in the Crown’ of Her Britannic Majesty’s vast empire. But it paid the Company for the privilege, adding the handsome purchase price to the public debt of India, to be redeemed (both principal and generous rates of interest) by taxing the victims, the Indian people.
And the objective remained the same—the greater good of Britain. The drain of resources from India remained explicitly part of British policy. The Marquess of Salisbury, using a colourful metaphor as Secretary of State for India in the 1860s and 1870s, said: ‘As India is to be bled, the lancet should be directed to those parts where the blood is congested… [rather than] to those which are already feeble for the want of it.’ The ‘blood’, of course, was money, and its ‘congestion’ offered greater sources of revenue than the ‘feeble areas’. (Salisbury went on to become prime minister.)
Cecil Rhodes openly avowed that imperialism was an essential solution to the cries for bread among the unemployed working-class of England, since it was the responsibility of colonial statesmen to acquire lands to settle the surplus population and create markets for goods from British factories. Swami Vivekananda, the Indian sage, reformer and thinker, saw the British as a caste akin to the Vaisyas, governed by the logic of commerce and purely pecuniary considerations, who understood the price of everything they found in India but the value of nothing. The Bengali novelist Bankim Chandra Chatterjee wrote of the English ‘who could not control their greed’ and from whose vocabulary ‘the word morality had disappeared’.
By the end of the nineteenth century, India was Britain’s biggest source of revenue, the world’s biggest purchaser of British exports and the source of highly paid employment for British civil servants and soldiers all at India’s own expense. Indians literally paid for their own oppression.
Taxation remained onerous. Agricultural taxes amounted at a minimum to half the gross produce and often more, leaving the cultivator less food than he needed to support himself and his family; British estimates conceded that taxation was two or three times higher than it had ever been under non-British rule, and unarguably higher than in any other country in the world. Each of the British ‘presidencies’ remitted vast sums of ‘savings’ to England, as of course did English civil servants, merchants and soldiers employed in India. (After a mere twenty-four years of service, punctuated by and including four years of ‘home leave’ furloughs, the British civil servant was entitled to retire at home on a generous pension paid for by Indian taxpayers: Ramsay MacDonald estimated in the late 1920s that some 7,500 Englishmen were receiving some twenty million pounds annually from India as pension.)
While British revenues soared, the national debt of India multiplied exponentially. Half of India’s revenues went out of India, mainly to England. Indian taxes paid not only for the British Indian Army in India, which was ostensibly maintaining India’s security, but also for a wide variety of foreign colonial expeditions in furtherance of the greater glory of the British empire, from Burma to Mesopotamia. In 1922, for instance, 64 per cent of the total revenue of the Government of India was devoted to paying for British Indian troops despatched abroad. No other army in the world, as Durant observed at the time, consumed so large a proportion of public revenues.2
[2 This dubious distinction has now been inherited by the Pakistan Army, which today consumes a greater proportion of national resources than any army in the world.]
It is striking how brazenly funds were siphoned off from India. Even accounting tables were subject to completely euphemistic entries to mask extraction: thus while trade figures showed a significant surplus, the subtraction of vast amounts under the headings ‘Home Charges’ and ‘Other Invisibles’ [sic] gave India a huge net deficit. Paul Baran calculated that 8 per cent of India’s GNP was transferred to Britain each year. No wonder the nineteenth-century Indian nationalist Dadabhai Naoroji found evidence even in the published accounts of the British empire to evolve his ‘drain theory’ of extraction and indict the colonialists for creating poverty in India through what he diplomatically termed their ‘un-British’ practices. Naoroji argued that India had exported an average of £13,000,000 worth of goods to Britain each year from 1835 to 1872 with no corresponding return of money; in fact, payments to people residing in Britain, whether profits to Company shareholders, dividends to railway investors or pensions to retired officials, made up a loss of £30 million a year. What little investment came from Britain served only imperial interests. India was ‘depleted’, ‘exhausted’ and ‘bled’ by this drain of resources, which made it vulnerable to famine, poverty and suffering. The extensive and detailed calculations of William Digby, the British writer, pointed to the diminishing prosperity of the Indian people and the systematic expropriation of India’s wealth by Britain—including the telling fact that the salary of the Secretary of State for India in 1901, paid for by Indian taxes, was equivalent to the average annual income of 90,000 Indians.
Angus Maddison concluded clearly: ‘There can be no denial that there was a substantial outflow which lasted for 190 years. If these funds had been invested in India they could have made a significant contribution to raising income levels.’ Official transfers and private remittances to the UK from Indian earnings were compounded by excessively high salaries for British officials. It did not help, of course, that the British Raj was a regime of expatriates, whose financial interests lay in England. In the past, and had an Indian administration been in power, income from government service would have been saved and spent locally; instead it all went to foreigners, who in turn sent it abroad, where their real interests lay. In most societies, the income of the overlords is an important source of economic development since it puts purchasing power into the hands of people who can spend it for the local good and indirectly promote local industry. But the lavish salaries and allowances of the Government of India were being paid to people with commitments in England and a taste for foreign goods in India. This increased imports of British consumer items and deeply damaged the local industries that had previously catered to the Indian aristocracy—luxury goods makers, handicraftsmen, fine silk and muslin weavers, who found limited or no taste for their offerings among the burra sahibs (and especially their prissy English memsahibs).
In 1901, William Digby calculated the net amount extracted by the economic drain in the nineteenth century, with remarkable (and inevitably, bitterly contested) precision, at £4,187,922,732. While that would amount, in today’s money, to about a ninth of Minhaz Merchant’s calculations, it only accounted for the nineteenth century. Worse was to follow in the twentieth.
***
A small digression is in place here. That India contributed such a significant amount to Britain’s imperial expansion can be seen from the frequency with which troops were dispatched overseas for wars which had nothing to do with India and everything to do with protecting or expanding British interests. And all this was accomplished by Indian funds, especially land revenue wrested from the labour of the wretched peasantry or collected from various princely states through ‘subsidiary alliances
’.
A list of Indian Army deployments overseas by the British in the nineteenth century and the first decade of the twentieth is instructive: China (1860, 1900–01), Ethiopia (1867–68), Malaya (1875), Malta (1878), Egypt (1882), Sudan (1885–86, 1896), Burma (1885), East Africa (1896, 1897, 1898), Somaliland (1890, 1903–04), South Africa (1899, but white troops only) and Tibet (1903). Some significant numbers worth mentioning include: 5,787 Indian troops contributed to the Chinese War of 1856–57 that ended in the Treaty of Tientsin (1857) and control of Canton; 11,000 troops sent in 1860 to China, whose campaign ended in the capture and control of Peking; 12,000 troops to release British captives from Abyssinia (Ethiopia); 9,444 troops and over 1,479,000 rupees contributed in the suppression of rebellion in Egypt in 1882 and 1896; and 1,219 soldiers dispatched to quell mutiny in East Africa. Britain used the British Indian Army to complete its conquest of the Indian subcontinent in the Kandyan War of 1818 in Ceylon (Sri Lanka); and the Burmese War of 1824–26, in which six of every seven soldiers of the British Indian Army fell as casualties to sickness or war. As late as World War II, among the ‘few of the few’ who bravely defended England against German invasion in the Battle of Britain were Indian fighter pilots, including a doughty Sikh who named his Hurricane fighter ‘Amritsar’.
Inglorious Empire Page 5