The Decline of Indian Textile Exports
Historically, fine cottons produced in India were exported to Europe. But with British industrialisation, British cotton manufacturers pressurised the government to restrict imports and protect local industry, and tariffs were imposed on cloth imports into Britain. As a result, the inflow of fine Indian cotton declined.
British manufacturers also sought overseas markets, and — excluded from Britain by tariffs — Indian textiles faced stiff competition in other markets too. The figures tell a dramatic story: the share of cotton textiles in India's exports fell from about 30 per cent around 1800 to below 3 per cent by the 1870s.
From Manufactures to Raw Materials
As exports of manufactures declined, the export of raw materials increased just as fast. Between 1812 and 1871, the share of raw cotton in India's exports rose from 5 per cent to 35 per cent. Indigo (used for dyeing) was another major export, and opium shipments to China grew rapidly from the 1820s to become, for a while, India's single largest export. (Britain grew opium in India, sold it to China, and used the money to finance its tea imports from China.)
Over the century, British manufactures flooded the Indian market, while India's exports of food grains and raw materials rose.
Britain's Trade Surplus and the Global System
The value of British exports to India was much higher than the value of British imports from India. Thus Britain had a 'trade surplus' with India. Britain used this surplus to balance its trade deficits with other countries — this is how a multilateral settlement system works, allowing a country's deficit with one country to be settled by its surplus with a third.
By helping Britain balance its deficits, India played a crucial role in the late-nineteenth-century world economy. Britain's trade surplus in India also helped pay the so-called 'home charges' — private remittances by British officials, interest on India's external debt, and the pensions of British officials in India.
Questions and Answers
Q1. Why did India's cotton textile exports decline in the nineteenth century? Ans. With British industrialisation, British manufacturers pressed the government to impose tariffs on Indian cloth imports into Britain, and British goods also competed with Indian textiles in other markets. So the share of cotton textiles in India's exports fell from about 30 per cent around 1800 to below 3 per cent by the 1870s.
Q2. What did India export instead of manufactures? Ans. As manufactured exports fell, India increasingly exported raw materials — raw cotton (its share rising from 5 to 35 per cent between 1812 and 1871), indigo for dyeing, and opium (sent to China), which became for a time India's single largest export.
Questions and Answers (continued)
Q3. What is meant by Britain's 'trade surplus' with India? Ans. The value of British exports to India was much higher than the value of British imports from India, so Britain sold more to India than it bought — a trade surplus. Britain used this surplus to balance its trade deficits with other countries.
Q4. What were the 'home charges'? Ans. The home charges were payments India had to make to Britain, met from Britain's trade surplus. They included private remittances by British officials, interest on India's external debt, and the pensions of British officials in India.