The economic policies of the colonial rulers were at the centre of a controversy in the late 19th century India. Whereas the colonial administration sought to project its policies as beneficial to the country, the nationalist writers and sympathetic British commentators attacked these policies as exploitative and oppressive.
Dadabhai Naoroji, R.C. Dutt and William Digby were some of the famous critics of government policies. The economic history of India, as we know it, may be said to have begun during this period. D.R. Gadgil, Vera Anstey and D.H. Buchanan followed in their footsteps in taking up the economic history of the colonial period. Jaduanth Sarkar and W.H. Moreland wrote about the Mughal economy.
In the post-independence period, economic history became an established field of study and several studies were undertaken on various periods of Indian history covering several aspects of economy. The emergence of economics as a discipline in the eighteenth century led in due course to the development of a new branch in history called economic history.
The progenitors of economics were Adam Smith and other classical economists. India was very much in the vision of the classical economists, a group of thinkers in England during the Industrial Revolution. They advocated lays faire and minimizing of state intervention in the economy. Adam Smith, the foremost classical economist, condemned the East India Company in its new role as the ruling power in India. In his view, the Company’s trading monopoly ran counter to the principle of the freedom of the market.
Economics underwent a theoretical transformation in the early twentieth century under the influence of John Maynard Keynes, who advocated strategic economic intervention by the government for promoting welfare and employment. Keynes, too, thought deeply about India while developing his new economic theories, and his earliest major work,
Indian Currency and Finance (London 1913), illustrated his notions of good monetary management of the economy. It is also noteworthy that the early classical economists, such as Ricardo, influenced the thinking of a group of Utilitarian administrators who set about reforming the administration of India in the nineteenth century.
Above all, the influence of Adam Smith is noticeable in the end of the Company’s monopoly by the Charter Acts of 1813 and 1833. Not surprisingly, therefore, historians have paid close attention to the connection between the evolution of economic thought in England and the question of reform of the colonial administration in India.
Classical political economy in England laid the foundations for the laissez faire economics of the Raj in the nineteenth century. Keynesian economics, on the other hand, contained the germs of the development economics of the mid-twentieth century both types of economics affected the state and the economy in India, and stimulated debates in the economic history of India.
For the colonial period, R.C. Dutt’s Economic History was followed by a series of works: D.R. Gadgil, The Industrial Evolution of India in Recent Times (1924); Vera Anstey, The Economic Development of India (1929); and D.H. Buchanan, and The Development of Capitalistic Enterprise in India (New York 1934). More recently, there has been a collective two-volume survey; Tapan Raychaudhuri and Irfan Habib (eds.).
The Cambridge Economic History of India, Vol 1, C.1200 – C.1750 (Cambridge 1982); and Dharma Kumar, The Cambridge Economic History of India, vol. 2 C.1757 – C.1970 (Cambridge, 1983). Daniel Houston Buchanan, an American author, was of the opinion that other worldly values and the caste system inhibited economic development in India. D.R. Gadgil, who updated his near classic work several times, emphasized, on the contrary, more strictly economic factors: the difficulties of capital mobilization on account of the absolute smallness of capital resources in respect to the size of the population, the late development of organized banking, and the seasonal fluctuations of a monsoon economy.
A dispassionate economist, he did not blame either foreign rule or the Indian social structure for the absence of an industrial revolution in India; some of the Western contributors to the second volume of The Cambridge Economic History, on the other hand, showed a disposition to challenge R.C. Dutt’s vision of the negative impact of colonialism, and they dwelt instead on the technological backwardness of the Indian economy. This, in their view, inhibited industrial development and capitalist enterprise during the colonial period.