Exploration and Exploitation in India – Advent of Europeans -3



In India, colonial exploitation is a long history spread over nearly 200 years.  It would be better to look at the forms of colonial exploitation in I India and its consequences.

Exploitation of India which was started initially in the form of trade, later on other forms of exploitation were made through investment income in the form of dividends  and profits and though payment of costs of British administration in the form of home charges.  These included salaries British army and civil officers, Payment of interest on sterling debt.

Thus the main forms of colonial exploitation in India were:

  • Trade policies with the objective of developing colonial pattern of trade in which India became an exporter of primary products like raw materials and food stuffs and an importer of manufactures.
  • Encouragement of finance capital in the country through Managing Agency System for appropriating a major portion of the profits through various malpractices.
  • Encouragement of British Capital to participate in direct investment in Indian consumer goods industries.
  • Forcing India for paying the costs of British administration and also to finance the wars and expeditions conducted by the British Government.

Exploitation through Trade Policies:

Various trade policies enforced in India by the East India Company and then by the British government resulted huge drain of wealth from India so as to facilitate the growing British industry with supply of raw materials from India and also encouraging commercialization of Indian agriculture in order to transform Indian economy into a British colony.

Thus the major trade policies which resulted huge exploitation of India were as follows:

  1. Colonial exploitation of Indian cultivators by the East India Company through its indigo planters to boost indigo exports by compelling the zamindar and cultivators to go for indigo cultivation.
  2. Colonial exploitation of artisans through the agents of east India company for delivering cotton and silk fabrics at a price much below the market price.


Exploitation through export of British capital to India:

The second form of colonial exploitation of India by the British was through investment by exporting British Capital to India.

Thus main field of foreign direct investment into India include:

  1. Development of infrastructural projects such as railways, roads, communications, port, shipping, water works, generation of electricity.
  2. Promoting mining of coal, petroleum, gold and development of metallurgical industries.
  3. Promoting commercialization of agriculture and undertaking investments in tea, coffee and rubber plantations.
  4. Investment in machine building, engineering industries and chemicals.
  5. Investments in banking, insurance and trade.


Thus the two major forms of British investment in India were:

  1. Private foreign direct investment in mining, mills and plantations.
  2. Sterling loans given to British Government in India and public and semi public organizations for undertaking infrastructural and public utility projects.

Exploitation in the form finance capital via the managing agency system:

At the end of nineteenth century  British investors started to invest a huge amount of their capital in India, a major portion of which was actually looted earlier from India by the East India Company.  British rulers invited British capital for the growth of railways in India and gradually repaid these loans by imposing taxes on the Indian people.

Exploitation through payments for the cost of administration:

British employed a large number of British officers both for maintaining its military and civil administration of the country.  These British officers were paid higher salaries and allowances as compared to their Indian counterpart.

The British officers were given immense administrative powers for awarding contracts for supplies and stores and in return they collected commissions form the contractors.  These officer were given pensions after a specified period of service.  All these resulted a huge remittance in the form of savings, pensions and other benefits known as family remittances causing huge drain on India resources.

Consequences of Colonial Exploitation:


Various forms of colonial exploitation ultimately resulted the following consequences on Indian Economy:


  1. The first important consequence of colonial exploitation was that India remained primarily an agricultural country with a scope for commercialisation of agriculture so as to serve the interests of Great Britain.
  2. Although India was an industrially advanced country during the 16th and 17th century but the British policy never permitted those industries to modernise its structure during the 18th and 19th century. This led to destruction of Indian handicrafts and transformed the country into an importer of manufactured goods from Britain.
  3. The British developed some forms of economic infrastructure such as electricity work, railways and irrigation with the objective of promoting foreign trade and also for exploiting natural resources of India to their own advantage. No direct British investment was made for the development of heavy and basic industries rather all investments were made in plantation and consumer goods industries.
  4. The British followed the policy of discriminating protection and imperial preference so as to maintain complete control over the Indian market and also to provide secure avenues for British investors in India.
  5. The British developed Managing Agency System for promoting consumer goods industries which had its exploitative nature in appropriating 50 per cent of the gross profits as managerial remuneration.
  6. The industrial Revolution in England created a serious impact on Indian economy as it reversed the character and composition of India’s foreign trade. This led to destruction of Indian handicrafts, increasing competition of British machine made goods and increasing demand for Western commodities as a result of foreign influence.
  7. The new land system in the form of Zamindari and Ryotwari system introduced by the British created a class of absentee landlords making way for exploitation of the peasants and concentration of economic power in the hands of the few. This had resulted total depression in agriculture and industry.
  8. The colonial exploitation through the entry of British capital and finance capital and through the payment for the costs of administration via Home charges and for meeting the costs of War led to a huge economic drain of India weakening the base of Indian economy.

Thus the British rule in India was a long history of systematic exploitation of Indian people by the imperialistic Government which led to stagnation and poverty of Indian economy.