Raj review: Did British rule really impoverish India?

Last week, I showed from the work of historian Angus Maddison that the Hindu-ruled period (1-1,000 AD) wasn’t as golden as is usually painted, with GDP stuck at $33.7bn for 1,000 years. In the Muslim period (1000-1700 AD), GDP almost tripled to $90bn, but that was offset by population growth. Now, for the British period. In his bestseller ‘An Era of Darkness: The British Empire in India’, which is a devastating demolition of the British Raj, Shashi Tharoor also cites Maddison extensively.

His long thesis cannot be discussed fully in a short column, but we can discuss his citations of Maddison. Maddison’s magnum opus Contours of the World Economy, 1-2030 AD has figures slightly different from Tharoor’s. Maddison says India’s share of world GDP was 24.4% in 1700 before British rule but fell to 4.2% by 1950. Tharoor says, “The reason was simple. India was governed for the benefit of Britain. Britain’s rise for 200 years was financed by its depredations in India.”
Do Maddison’s actual figures support this? Between 1700 and 1950, Indian GDP went up from $90bn to $222bn, the fastest growth ever. India’s share of world GDP fell not because it was impoverished but because the Industrial Revolution helped other countries grow much faster. Improvements in health, and a British-enforced peace between princely states that had historically constantly warred, helped population soar from 165mn to 359mn. By contrast, the population grew not at all in the Hindu period, a grim reminder of how difficult things were in pre-British days.
Was colonial rule the reason for India’s relatively low income and Britain’s high one? Maddison’s data does not support this claim. Even in the pre-colonial period 1000-1500 AD, Britain’s annual per capita income growth was thrice India’s 0.04%. In 1500-1820, which was mostly pre-British, India’s per capita growth was minus 0.01% against Britain’s 0.27%. In 1820-70, the heyday of East India Company loot, India’s growth was 0% against Britain’s 1.26%. In 1870-1913 under British rule, India had its fastest growth ever of 0.54% per year. But that fell to minus 0.24% in the final British phase 1913-50, when India was hit by the Great Depression and sharp decline in per capita food availability.
Britain’s own annual per capita income growth declined below 1% in 1870-50, not a sign of huge colonial benefit. When it lost its colonies in 1950-73, Britain’s per capita income growth rose to a record 2.4%. This contradicts the thesis that Britain grew fast because of colonial exploitation. Its growth was due mainly to higher productivity. Colonialism helped but was not key.
On financial flows from India to Britain, Tharoor cites Maddison. “There can be no doubt there was a substantial outflow for 190 years. If these funds had been invested in India, they could have made a significant difference.” This is surely true. Yet Indian history shows that tax revenues were typically not invested but wasted in luxurious aristocratic living and non-stop wars that left many rulers unable to pay their soldiers on time, encouraging loot. Hence, GDP grew slowly.
The East India Company looted the Indian aristocracy. But this hardly affected the Indian masses, who paid much the same taxes. The princely states, ruling 40% of British India, did not hand over their revenue to the Raj, yet their economic growth was very weak overall (with exceptions like Travancore). This suggests, alas, that keeping tax revenue in India did not benefit the masses or economic growth. The Nizam of Hyderabad was reputed to be the richest man in the world, but the areas he ruled remained among the poorest in India. Nationalist historians think India would have had a faster industrial revolution without the British Raj. The performance of the princely states — notably the biggest, Hyderabad — suggests otherwise.
Tharoor says British taxation was very onerous. Maddison, however, says that taxation of peasants was around 15% of GDP in Mughal times but plummeted to 3% by the end of British rule. The East India Company expropriated the Mughal aristocracy. But after direct rule from London, taxes were fixed in nominal terms which were eroded away by inflation. This not only slashed real taxation of the peasantry but greatly reduced their real debts too. British colonialism ceased to be profitable, one reason why it ended so smoothly.
This column does not assess the totality of British rule or Tharoor’s book, which has brilliant passages. But it shows that Tharoor has cherry-picked citations from Maddison to bolster his thesis. Maddison’s full picture is less critical of the Raj, highlighting its eight-fold increase in irrigation. The debate goes on.