Main FI Index | Main Newspaper Index

Encyclopedia of Trotskyism | Marxists’ Internet Archive

Fourth International, April 1942


Britain’s Reactionary Role in India

A Thesis of the Bolshevik-Leninist Party of India – Fourth International


From Fourth International, vol.3 No.4, April 1942, pp.122-125.
Transcribed, Edited & Formatted by Ted Crawford & David Walters in 2008 for the ETOL.


India, the largest, the longest dominated and exploited of British conquests, Britain’s richest field of investment, its source of incalculable plunder and profit, its 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, after 200 years of subjection offers the most complete demonstration of the workings and results of the colonial system of modern imperialism.

Every European colonising power directed its first efforts towards 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 both her continental rivals and the native rulers of India paved the way for her subsequent world supermacy. 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 holding, and sends to Britain roughly £150 millions 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.

Capitalist Destruction of Indian Economy

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) the British neglect of irrigation and public works, (c) the wrecking of the Indian land system and its replacement by a system of landlordism and individual landholding, (d) direct prohibition and heavy duties on the export of Indian manufactures to Europe and to England.

But it was the operations of the 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 clearcut aim in India – to reduce it to an agricultural colony of British capitalism, supplying raw 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 deliberately utilizing 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 manufacturers in this unequal struggle 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 centres of Indian manufactures (Dacca, Murchibad, 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 the union between agriculture and manufacturing industry. The British intruder thus broke up the Indian handloom and destroyed the spinning wheel, struck at the roots of the Indian society, and destroyed the balance of the village economy.

To consolidate the conquest of India and to develop the 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) the development of roads, (c) the introduction of the electric telegraph and of a uniform postal system, (d) giving the benefits of Western education to a limited class of Indians, and (e) 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 conquest and exploitation of all the backward countries through the colonial system. Between 1880 and 1914 the major European powers and the United States had carved up the whole world into colonies and spheres of exploitation.

The Rule of Finance-Capital

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 the 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 included more than one-third of the total holdings of British capital, has been manipulated to include the cost of every British imperialist undertaking (including wars for the subjection 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. 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 £1,000 millions.

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 in 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 in the last century, and the unproductive expenditure which swelled India’s public debt, created a 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.), to 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 India 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.

British Fetters on Production

Under these conditions, the development of modern industry in India has taken place at a very slow rate, and in lopsided 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 £23 millions. 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 into a period of decline. Indian industry shows even today no indication of recovery. The scope of the industrialization undertaken for war 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 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.

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 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 agentry 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 earlier 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 towards revolution.

The Permanent Agrarian Crisis

Britain relegated to India the role of an agricultural appendage to imperialism. The ravages of Indian industries carried out in the 19th Century drove the population of the ruined industrial centers back to the land and at the same time ruined the livelihood of millions of artisans in the villages. The overcrowding of agriculture which has reached a stage today where three-fourths of the entire Indian population are solely dependent on the land, and where the proportion of land available for cultivation has fallen to less than 1¼ acre per head of the agrarian population. The effect of this exaggerated disequilibrium in the economy is further aggravated by the stagnation and deterioration of agriculture itself, for which the British are also directly responsible through their disruption of the village economy, their iniquitous exactions of land revenue, their expropriation of the peasantry, their creation of parasitic 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 (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 of the rural population to a level of unspeakable poverty and chronic semi-starvation, and have 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 ownership of 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 private property in land. 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 North West they did their utmost to transform 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 £4 millions in 1800 to £15 millions in 1857 to £23 millions in 1936-1937); and in the second place to create Indian landed interests deeply interested in the continuance of British domination. 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 zamindari (landlords) – Bengal, United Province, Bihar, Punjab, but also in the Ryotwari areas in which the processes of mortgaging and subletting 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, they have been dispossessed to a great extent by moneylenders and others.

From the beginning, landlordism under British rule has been parasitic in character, since landlords neither supply agricultural capital nor 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 has 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 millions. The moneylender’s exactions and confiscations, together with the payments demanded by the government and the landlord’s extortions, forms 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 parasitic rent-receivers on one hand and of propertyless elements on the other.

The particularly rapid growth of parasitic landlordism in recent times, as well as the sharp rise in rural debt (from £400 millions in 1921 to £1,350 in 1937) is really the reflection of the invasion of moneyed interests, big and small, in the agrarian field, having failed to find effective outlets 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 by 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 are interested in its perpetuation.

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, in turn buttressing all other forms of reaction. Its failure to develop the industrial forces in India through industrialization, and the chronic stagnation and decay of agriculture under its rule, make its continued existence incompatiible 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.

Adopted 1941

Top of page

Main FI Index | Main Newspaper Index

Encyclopedia of Trotskyism | Marxists’ Internet Archive

This work is in the Public Domain under the Creative Commons Common Deed. You can freely copy, distribute and display this work; as well as make derivative and commercial works. Please credit the Encyclopedia of Trotskism On-Line as your source, include the url to this work, and note any of the transcribers, editors & proofreaders above.

Last updated on 13.9.2008