One-Way Free Trade and the Tariff Policy
Modern History › Economic Impact of British Rule · Topic 28.2
Between 1813 and the 1860s, India was integrated into British and world capitalism through free trade. Import duties were removed or reduced to nominal rates, British capitalists could freely develop plantations, trade and industry, and India absorbed 10 to 12 per cent of British exports and nearly 20 per cent of Britain's textile exports. Nationalists argued that one-way free trade ruined handicrafts and that tariffs served British capitalists.
6 min read · UPSC Prelims · History · Economic Impact of British Rule
At a Glance
- Period Second stage of colonialism, 1813 to the 1860s
- Policy Import duties removed or cut to nominal rates
- Market India took 10 to 12 per cent of British exports and about 20 per cent of its textile exports
- Critique Tariff policy guided by British capitalist interests
- Exam link UPSC Prelims, Modern History: Economic Impact of British Rule
Where Does It Fit?
This is the second topic of the category on the economic impact of British rule. The previous topic covered deindustrialisation. This topic covers one-way free trade and the tariff policy. The next topic covers ruralisation and the impoverishment of the peasantry. Previous topic: Charter Act of 1813: one-way free trade Tariffs Nearly 80 per…">Deindustrialisation: Ruin of Artisans and Handicraftsmen.
What Was Meant by One-Way Free Trade?
After the Charter Act of 1813, British citizens had free access to the Indian market for machine-made goods, while Indian goods faced heavy tariffs in Europe, nearly 80 per cent on textiles. The trade ran one way. The effects on handicrafts are described in Deindustrialisation: Ruin of Artisans and Handicraftsmen, and the Act in Pitt’s India Act: Board of Control 1793 to…">Constitutional Development 1773-1858: Regulating Act to the Act of 1858.
Why Did Britain Adopt Free Trade in India?
Soon after the Company became ruler over most of India, a debate began in Britain about whose interests the new colony should serve. The newly emerging industrial capitalists criticised the Company and its exploitation of India and demanded that colonial administration and policy now serve British capitalist interests, which were different from the Company’s. India was to be a market for the ever-increasing output of British manufactured goods, especially textiles. The new capitalists also needed raw materials from India, especially cotton, and foodgrains. India could buy more British goods only if it earned foreign exchange by exporting more. The export of raw materials was therefore increased sharply, to meet the Company’s dividends and the profits of British merchants and to pay pensions to retired British officials.
What Were the Features of the Free Trade Phase?
| Feature | Detail |
|---|---|
| Integration | India’s colonial economy was integrated with the British and world capitalist economy through free trade; all import duties were either removed or cut to nominal rates |
| Free entry | British capitalists were allowed free entry to develop tea, coffee and indigo plantations, trade, transport, mining and modern industries, with active help from the state |
| Land systems | The Permanent Settlement and Ryotwari systems were introduced to turn the old agrarian structure into a capitalist one |
| Administration | Made more comprehensive, covering villages and outlying areas, so that British goods could reach and farm products be drawn from the interior |
| Law | Personal law was largely left alone, but criminal law, the law of contract and procedure were overhauled to promote capitalist relations and keep order |
| Education | Modern education provided cheap manpower for the larger administration and aimed at creating loyalty |
| Taxation | The tax burden on the peasant rose sharply with the economic changes and the costly civil and military administration |
| Exports | India absorbed 10 to 12 per cent of British exports and nearly 20 per cent of its textile exports; after 1850 locomotives, rails and other railway stores were imported on a large scale |
| Army | The Indian army was used for British expansion in Asia and Africa |
The land revenue systems are in Ruralisation and the Impoverishment of the Peasantry, and the army’s use in The Military Under the British.
What Was the Nationalist Critique of Tariffs?
The nationalists held that one-way free trade was ruining the Indian handicraft industry by exposing it to premature, unequal and unfair competition, and that the tariff policy was guided by British capitalist interests. On finance, they said that taxes were levied to burden the poor and spare British capitalists and bureaucrats. They demanded a reduction of land revenue, abolition of the salt tax, and income tax and excise duties on the consumer goods used by the rich and the middle classes. They argued that government spending served colonial needs only, while development and welfare were ignored. The full critique is in Economic Drain and the Nationalist Critique.
As an analytical point, free trade was presented as a principle of economics, but it applied in one direction in India: British goods entered freely, Indian goods met duties abroad, and the Indian government could not use tariffs to protect its own producers, which is why nationalists later demanded tariff protection for Indian industry. The stage of colonialism that followed, with its emphasis on foreign investment, is in Three Stages of Colonialism in India.
Why Is This Topic Important?
- Free trade phase The features of the second stage are frequently asked
- Nationalist critique of tariffs A recurring Mains point
- Link to land systems Permanent Settlement and Ryotwari as part of the same project
What Came Next?
The next topic covers ruralisation and the impoverishment of the peasantry. Next topic: Ruralisation and the Impoverishment of the Peasantry.
Key People and Terms
- Free trade Trade without duties
- Tariff A duty on imports or exports
- Raw materials Cotton and other inputs exported from India
- Foreign exchange Foreign currency earned from exports
- Capitalist transformation Turning the agrarian structure into a capitalist one
- Colonialism of free trade The second stage, 1813 to the 1860s
Exam Corner
Points to Remember
- Second stage: 1813 to the 1860s.
- Import duties removed or nominal.
- India took 10 to 12 per cent of British exports.
- Nearly 20 per cent of Britain’s textile exports.
- Permanent Settlement and Ryotwari introduced.
Do Not Confuse With
- Free trade in Britain and in India The same policy meant different things at each end
- Raw material exports and manufactured imports India supplied the first and bought the second
- Second and third stages Free trade versus foreign investment
Memory Hook
Duties down in India, up in Europe, and India paid for British cloth with raw cotton.
Mains Angle
Questions ask about the free trade phase and its critique. These points add depth.
- Motive Market and raw materials for British industry
- Features Duties removed, land systems, administration
- Critique Handicraft ruin and taxation of the poor
A Question You May Face
An original practice question, not a past paper question.
“Discuss the free trade phase of British rule in India and the nationalist criticism of tariff policy.”
How to Answer
- Motive Industrial capitalists’ demand.
- Features Duties, plantations and land systems.
- Critique Nationalist arguments.
- Conclude One-way trade.
GS Relevance
Frequently Asked Questions
Why did Britain adopt free trade in India?
Britain's new industrial capitalists demanded that Indian policy serve their interests. India was to be a market for British manufactures, especially textiles, and a supplier of raw materials like cotton and foodgrains, paid for by increased exports of raw materials.
What were the main features of the free trade phase?
Import duties were cut or removed, British capitalists could develop plantations, trade and industry with state help, the Permanent Settlement and Ryotwari systems changed agriculture, administration reached villages, and India absorbed 10 to 12 per cent of British exports.
How much of British exports did India take?
India absorbed 10 to 12 per cent of British exports and nearly 20 per cent of Britain's textile exports in this phase, and after 1850 locomotives, rails and other railway stores were imported on a large scale.
What was the nationalist critique of tariff policy?
Nationalists said one-way free trade ruined Indian handicrafts through unequal competition, that tariff policy followed British capitalist interests, and that taxes burdened the poor while sparing British capitalists, and they asked for lower land revenue and abolition of the salt tax.
What changes in law accompanied the free trade phase?
Personal law was largely left alone, but criminal law, the law of contract and legal procedure were overhauled to promote capitalist commercial relations and also to maintain law and order for the new economic system.
PYQ Practice — Statement Analysis
1 Import duties in India were removed or reduced to nominal rates in the free trade phase.
British goods entered freely.
2 India absorbed about 20 per cent of Britain's textile exports in this phase.
It took 10 to 12 per cent of total British exports.
3 The Permanent Settlement and Ryotwari systems were introduced to preserve the old agrarian structure.
They were meant to turn it into a capitalist one.
4 Nationalists demanded abolition of the salt tax.
They also wanted income tax on the rich.
5 The free trade phase began with the Charter Act of 1853.
It began with the Charter Act of 1813.
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