Company Rule in India - Trade

Trade

After gaining the right to collect revenue in Bengal in 1765, the Company largely ceased importing gold and silver, which it had hitherto used to pay for goods shipped back to Britain. In addition, as under Mughal rule, land revenue collected in the Bengal Presidency helped finance the Company's wars in other parts of India. Consequently, in the period 1760–1800, Bengal's money supply was greatly diminished; furthermore, the closing of some local mints and close supervision of the rest, the fixing of exchange rates, and the standardization of coinage, paradoxically, added to the economic downturn. During the period, 1780–1860, India changed from being an exporter of processed goods for which it received payment in bullion, to being an exporter of raw materials and a buyer of manufactured goods. More specifically, in the 1750s, mostly fine cotton and silk was exported from India to markets in Europe, Asia, and Africa; by the second quarter of the 19th century, raw materials, which chiefly consisted of raw cotton, opium, and indigo, accounted for most of India's exports. Also, from the late 18th century British cotton mill industry began to lobby the government to both tax Indian imports and allow them access to markets in India. Starting in the 1830s, British textiles began to appear in—and soon to inundate—the Indian markets, with the value of the textile imports growing from £5.2 million 1850 to £18.4 million in 1896. The American Civil War too would have a major impact on India's cotton economy: with the outbreak of the war, American cotton was no longer available to British manufacturers; consequently, demand for Indian cotton soared, and the prices soon quadrupled. This led many farmers in India to switch to cultivating cotton as a quick cash crop; however, with the end of the war in 1865, the demand plummeted again, creating another downturn in the agricultural economy.

At this time, the East India Company's trade with China began to grow as well. In the early 19th century demand for Chinese tea had greatly increased in Britain; since the money supply in India was restricted and the Company was indisposed to shipping bullion from Britain, it decided upon opium, which had a large underground market in China and which was grown in many parts of India, as the most profitable form of payment. However, since the Chinese authorities had banned the importation and consumption of opium, the Company engaged them in the First Opium War, and at its conclusion, under the Treaty of Nanjing, gained access to five Chinese ports, Guangzhou, Xiamen, Fuzhou, Shanghai, and Ningbo; in addition, Hong Kong was ceded to the British Crown. Towards the end of the second quarter of the 19th century, opium export constituted 40% of India's exports.

Another major, though erratic, export item was indigo dye, which was extracted from natural indigo, and which came to be grown in Bengal and northern Bihar. In late 17th and early 18th century Europe, blue clothing was favored as a fashion, and blue uniforms were common in the military; consequently, the demand for the dye was high. In 1788, the East India Company offered advances to ten British planters to grow indigo; however, since the new (landed) property rights defined in the Permanent Settlement, didn't allow them, as Europeans, to buy agricultural land, they had to in turn offer cash advances to local peasants, and sometimes coerce them, to grow the crop. The European demand for the dye, however, proved to be unstable, and both creditors and cultivators bore the risk of the market crashes in 1827 and 1847. The peasant discontent in Bengal eventually led to the Indigo rebellion in 1859-60 and to the end of indigo production there. In Bihar, however, indigo production continued well into the 20th century; the centre of indigo production there, Champaran district, became the staging ground, in 1917, for Mohandas Karamchand Gandhi's first experiment in non-violent resistance against the British Raj.