Railways and the Growth of Trade

At a Glance

• Effect on trade British goods reached remote areas; raw materials moved out
• Trade pattern India: importer of finished goods, exporter of raw materials and foodstuffs
• Nationalist critique A commercial, not industrial, revolution
• G.V. Joshi Expenditure on railways as an Indian subsidy to British industries
• Exam link UPSC Prelims, Modern History: Economic Impact of British Rule

Where Does It Fit?

This is the eighth topic of the category on the economic impact of British rule. The previous topic covered the late development of modern industry. This topic covers railways and the growth of trade. The next topic covers the economic drain and the nationalist critique. Previous topic: Late Development of Modern Industry.

How Did Railways Affect Trade?

The newly introduced rail network helped European products reach the remotest corners of the country, and from being a net exporter India became a net importer, as in Charter Act of 1813: one-way free trade Tariffs Nearly 80 per…">Deindustrialisation: Ruin of Artisans and Handicraftsmen. D.H. Buchanan wrote that the armour of the isolated, self-sufficient village was pierced by the steel rail, and its life blood ebbed away. After 1850 locomotives, rails and other railway stores were imported into India on a large scale, and large British capital was invested in railways and loans to the Government of India. The free trade phase is in One-Way Free Trade and the Tariff Policy.

What Was the British Argument and the Nationalist Reply?

The British argued that the growth of foreign trade and railways meant development for India. The nationalist analysts exposed the weakness of this claim.

G.V. Joshi remarked that expenditure on railways should be seen as an Indian subsidy to British industries.

How Were Railways Financed?

Large British capital was invested in railways and in loans to the Government of India, which is mentioned in the account of the third stage of colonialism. The interest on these loans and the profits on the foreign investment were among the components of the drain, described in Economic Drain and the Nationalist Critique. Because rails, locomotives and other stores were bought from Britain, the money paid for them went largely to British suppliers, while the Indian taxpayer carried the burden of the guaranteed returns. The nationalists therefore saw the railways as at once a modern service and a channel by which Indian resources left the country. They did not deny that the railways gave India a unified market and helped people to travel; their point was that the benefits to Indian industry and Indian wealth were small compared with those received by Britain.

Why Does This Matter?

The critique linked trade and transport to the structure of the colonial economy. The railways were a modern technology, but they were built to serve the trade in raw materials and imports, and the orders for rails, locomotives and capital goods went to British firms. Under the nationalists’ view this meant that Indian money paid for a system whose industrial benefits went elsewhere. The remark is attributed to G.V. Joshi and the argument is a nationalist one, which other historians have qualified by noting that railways also integrated the national market and aided commercial agriculture, a point covered in Commercialisation of Indian Agriculture.

As an analytical point, the debate over railways is one of the clearest examples of how the same fact, a rail network, could be read as development or as exploitation, depending on whether one looks at what it connected, markets, or at who profited, British capital and industry. The wider critique, including the drain of wealth, is in Economic Drain and the Nationalist Critique, and the foreign capital invested in Three Stages of Colonialism in India.

Why Is This Topic Important?

• Nationalist critique of railways A standard Mains argument
• Trade pattern Importer of finished goods, exporter of raw materials
• G.V. Joshi’s remark A frequently quoted line

What Came Next?

The next topic covers the economic drain and the nationalist critique. Next topic: Economic Drain and the Nationalist Critique.

Key People and Terms

• Railways The rail network introduced from the mid-nineteenth century
• Commercial revolution Growth of trade without industrial change
• Finished goods Manufactured goods imported by India
• Raw materials Cotton, jute and others exported by India
• G.V. Joshi Nationalist economist who called railways a subsidy to British industry
• Capital investment Spending on railways and similar projects

Exam Corner

Mains Angle

Questions ask whether railways meant development. These points add depth.

• British view Development through trade
• Nationalist view Colonial subsidy
• Balance Integration versus exploitation