Colonialism, Indian Economy & the Inter-war Period

India and the Contemporary World-II | Chapter III: The Making of a Global World

Late Nineteenth-Century Colonialism — How Did India's Economy Change Under British Rule?

While trade flourished and markets expanded in the late nineteenth century, this era had a darker side. In many parts of the world, closer integration with the global economy meant a loss of freedoms and livelihoods. European conquests produced painful economic, social, and ecological changes in the colonised societies.

In 1885, the major European powers met in Berlin to divide Africa among themselves. If you look at a map of Africa from this period, you will notice that many national borders run in straight lines — drawn almost literally with a ruler by European diplomats who had little knowledge of or concern for African communities on the ground. Britain and France made vast additions to their overseas territories, while Belgium and Germany became new colonial powers. The United States, too, became a colonial force in the late 1890s, acquiring some of Spain's former colonies.

2.4 Rinderpest, or the Cattle Plague

The story of Rinderpest^? — a devastating cattle disease — in 1890s Africa demonstrates the far-reaching impact of European imperialism on colonised societies.

Historically, Africa had abundant land and a relatively small population. For centuries, land and livestock sustained African livelihoods, and people rarely worked for wages. Europeans were attracted to Africa's vast resources of land and minerals, hoping to establish plantations and mines for export crops. However, they faced an unexpected challenge: a shortage of labour willing to work for wages.

Colonial employers used multiple strategies to force Africans into wage labour: heavy taxes (payable only through wages), changes to inheritance laws (allowing only one family member to inherit land, pushing others into the labour market), and confining mine workers in compounds.

Then Rinderpest struck. Arriving in Africa in the late 1880s via infected cattle imported from British Asia to feed Italian soldiers in Eritrea, the disease swept westward across the continent, reaching the Atlantic coast by 1892 and the Cape by 1897. Along its path, Rinderpest killed approximately 90 per cent of cattle.

2.5 Indentured Labour Migration from India

The system of indentured labour^? migration from India illustrates both sides of the nineteenth-century world — faster economic growth alongside great misery, higher incomes for some and deep poverty for others.

Hundreds of thousands of Indian and Chinese labourers went to work on plantations, in mines, and on road and railway construction projects worldwide. Indian indentured workers were hired on contracts promising return travel after five years of service. Most came from eastern Uttar Pradesh, Bihar, central India, and the dry districts of Tamil Nadu — regions facing the decline of cottage industries, rising land rents, and displacement by mines and plantations.

Major destinations included the Caribbean islands (Trinidad, Guyana, Surinam), Mauritius, and Fiji. Closer to home, Tamil migrants went to Ceylon and Malaya, and others were recruited for Assam's tea plantations.

Conditions on the plantations were harsh, with few legal rights. But workers found their own ways of surviving. Some escaped into the wilderness, risking severe punishment if caught. Others created new forms of cultural expression by blending old and new traditions. In Trinidad, the annual Muharram procession became a riotous carnival called "Hosay," where workers of all races joined. Rastafarianism in Jamaica and "Chutney music" in Trinidad and Guyana also reflect the cultural legacy of Indian indentured workers.

Most indentured workers stayed on after their contracts ended. Today, large communities of Indian descent live in these countries. From 1900, India's nationalist leaders opposed the abusive system, and indentured labour migration was abolished in 1921.

2.6 Indian Entrepreneurs Abroad

Growing crops for the world market required capital. While large plantations could borrow from banks, smaller peasants relied on Indian bankers. Groups like the Shikaripuri Shroffs and Nattukottai Chettiars^? financed export agriculture across Central and Southeast Asia, using either their own funds or loans from European banks. They maintained sophisticated systems for transferring money over long distances and developed indigenous forms of corporate organisation.

Indian traders and moneylenders followed European colonisers into Africa. Hyderabadi Sindhi traders ventured even beyond European colonies, establishing flourishing shops at busy ports worldwide from the 1860s, selling local and imported curios to the growing number of tourists.

2.7 Indian Trade, Colonialism and the Global System

India's position in the global economy underwent a dramatic reversal during the colonial period. Historically, fine Indian cottons were exported to Europe. But with British industrialisation, tariffs were imposed on cloth imports into Britain, and the inflow of Indian cotton declined sharply. The share of cotton textiles in Indian exports fell from around 30 per cent in 1800 to below 3 per cent by the 1870s.

Meanwhile, India's raw material exports surged. Between 1812 and 1871, raw cotton exports rose from 5 per cent to 35 per cent of total exports. Indigo (used for dyeing cloth) and opium (grown in India, exported to China, financing British tea purchases) were other major exports.

British manufactures flooded the Indian market while food grains and raw materials flowed from India to Britain. The value of British exports to India far exceeded British imports from India, giving Britain a trade surplus^?. Britain used this surplus to balance its trade deficits with other countries — a multilateral settlement system in which India played a crucial supporting role in the late-nineteenth-century world economy. Britain's trade surplus also helped pay "home charges" — private remittances, interest on India's debt, and pensions for British officials.

The Inter-war Economy — Great Depression, Bretton Woods and the Post-War Order

3.1 Wartime Transformations

The First World War (1914–18), though fought mainly in Europe, had a global impact that plunged the first half of the twentieth century into a prolonged crisis. The war was fought between the Allies (Britain, France, Russia, later the US) and the Central Powers (Germany, Austria-Hungary, Ottoman Turkey).

This was the first modern industrial war, deploying machine guns, tanks, aircraft, and chemical weapons on a massive scale. Millions of soldiers were recruited worldwide. The devastation was unprecedented: 9 million dead, 20 million injured. Most casualties were men of working age, reducing the able-bodied workforce and lowering household incomes across Europe.

During the war, industries were restructured to produce war-related goods. As men went to battle, women stepped into jobs that had earlier been reserved exclusively for men. To finance the war, Britain borrowed heavily from the US, transforming America from an international debtor to the world's leading international creditor.

3.2 Post-war Recovery

Economic recovery after the war proved extremely difficult. While Britain was preoccupied with the war, industries had developed in India and Japan, making it hard for Britain to recapture its earlier dominance. Burdened with huge external debts to the US, Britain faced a prolonged economic crisis.

The post-war boom quickly collapsed, leading to falling production and rising unemployment. By 1921, one in every five British workers was jobless. Agricultural economies also suffered: wartime expansion of wheat production in Canada, America, and Australia continued even as eastern European production revived, creating a global wheat glut that depressed farm incomes.

3.3 Rise of Mass Production and Consumption

The US recovered more quickly. A defining feature of the 1920s American economy was mass production^?. Henry Ford pioneered this approach at his Detroit car plant, adapting the assembly line^? concept from a Chicago slaughterhouse. Workers repeated a single task at a pace set by the conveyor belt — no delays, no breaks. Cars rolled off the line at three-minute intervals. The T-Model Ford became the world's first mass-produced car.

Workers initially struggled with the relentless pace and quit in large numbers. Ford responded by doubling the daily wage to $5 in January 1914 while simultaneously banning trade unions. He later described this as his "best cost-cutting decision" after repeatedly speeding up the production line.

By 1923, the US resumed exporting capital globally and became the largest overseas lender. US imports and capital exports boosted European recovery and spurred world trade growth for the next six years. But this prosperity proved too good to last — by 1929 the world would face an unprecedented depression.