Development Experience (1947-90) and Economic Reforms since 1991
Current Challenges Facing Indian Economy
Development Experience of India
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Foreign Trade

Foreign Trade

Foreign Trade before the British rule

  • India had great repute in the international market before the dawn of British rule.
  • India was well known for its handicraft industries in the fields of cotton and silk textiles, metal and precious stone works etc.
  • These products enjoyed a worldwide market based on the reputation of the fine quality of material used and the high standards of craftsmanship seen in all imports from India.

Impact of British Rule on Foreign trade

  • The restrictive policies of commodity production, trade and tariff pursued by the colonial government adversely affected the structure, composition and volume of India’s foreign trade.
  • India became an exporter of primary products such as raw silk, cotton, wool, jute etc. and an importer of finished consumer goods like cotton, silk and woollen clothes and capital goods like light machinery produced in the factories of Britain.
  • More than half of India’s foreign trade was restricted to Britain while the rest was allowed with few countries namely China, Ceylon (Sri Lanka), Persia (Iran).
  • The opening of the Suez canal further intensified British control over India’s foreign trade (it reduced the distance between the two countries i.e. India and Britain by 7000 km).
Export-Surplus and Wealth Drain during Colonial Rule
  • The most important characteristic of India’s foreign trade throughout the colonial period was the generation of a large export surplus (Situation when country’s exports exceed import).
  • But this surplus came at a huge cost to the country’s economy. Several essential commodities—food grains, clothes, kerosene etc. — were scarcely available in the domestic market
  • Moreover, This export surplus did not result in any flow of gold or silver into India. Rather, this was used to make payments for the expenses incurred by an office set up by the colonial government in Britain, expenses on war, again fought by the British government, and the import of invisible items, all of which led to the drain of Indian wealth.

Quick Acid Test

Yes, I agree that India had great repute in the international market before the dawn of British rule.

  • India was well known for its handicraft industries in the fields of cotton and silk textiles, metal and precious stone works etc.
  • These products enjoyed a worldwide market based on the reputation of the fine quality of material used and the high standards of craftsmanship seen in all imports from India.
  • India was among the countries with highest share in the world market.
  • The restrictive policies of commodity production, trade and tariff pursued by the colonial government adversely affected the structure, composition and volume of India’s foreign trade.
  • India became an exporter of raw material such as raw silk, cotton, wool, jute etc. and an importer of finished consumer goods like cotton, silk and woollen clothes and capital goods like light machinery produced in the factories of Britain.
  • More than half of India’s foreign trade was restricted to Britain while the rest was allowed with few countries namely China, Ceylon (Sri Lanka), Persia (Iran).
  • The opening of the Suez canal further intensified British control over India’s foreign trade (it reduced the distance between the two countries i.e. India and Britain by 7000 km).
  • The most important characteristic of India’s foreign trade throughout the colonial period was the generation of a large export surplus (Situation when country’s exports exceed import).
  • But this surplus came at a huge cost to the country’s economy. Several essential commodities—food grains, clothes, kerosene etc. — were scarcely available in the domestic market

The most important characteristic of India’s foreign trade throughout the colonial period was the generation of a large export surplus (Situation when country’s exports exceed import).

  • However, this export surplus came at a huge cost to the country’s economy. Several essential commodities—food grains, clothes, kerosene etc. — were scarcely available in the domestic market
  • Moreover, This export surplus did not result in any flow of gold or silver into India. Rather, this was used to make payments for the expenses incurred by an office set up by the colonial government in Britain, expenses on war, again fought by the British government, and the import of invisible items, all of which led to the drain of Indian wealth.