Second Stage

Owing to its mode of exploitation being trade, this stage is also termed as Colonialism of Free Trade. It started with the Charter Act of 1813 and continued till 1860s. Soon after the East India Company became the ruler over most parts of India, there was a debate in Britain as to whose interests the newly acquired colony would serve. The newly emerging industrial capitalists began to criticise the East India Company and its exploitation of India. They demanded that colonial administration and policy in India should now serve British capitalist interests which were very different from those of the East India Company. Now India was to serve as a market for the ever increasing output of British manufactured goods especially textiles. At the same time, the new capitalists in England, needed from India exports of raw materials, especially cotton, and foodgrains. Moreover, India could buy more British goods only if it earned foreign exchange by enhancing its exports.

The export of raw materials was increased sharply to meet the dividends of the Company and profits of British merchants. Besides, there was a need of money to pay for pensions of British officials who would go to Britain after retirement.

In this phase the following dominant features were visible:

(i) India’s colonial economy was integrated with the British and world capitalist economy. This was made possible with the introduction of free trade. All import duties in India were either totally removed or drastically reduced to nominal rates.

(ii) Free entry was also granted to the British capitalists

to develop tea, coffee and indigo plantations, trade, transport, mining and modern industries in India. The British Indian Government gave active State help to such capitalists.

(iii) The Permanent Settlement and the Ryotwari system in agriculture were introduced to transform traditional agrarian structure into a capitalist one.

(iv) Administration was made more comprehensive and included villages and outlying areas of the country. These changes were brought about to make British goods reach, and

agricultural products drawn from, interior villages and remotest parts.

(v) Personal law was largely left untouched since it did not affect colonial transformation of the economy. However, the changes related to criminal law, law of contract and legal procedures were overhauled to promote capitalist commercial relations and maintain law and order.

(vi) Modern education was introduced to provide cheap manpower to the vastly expanded administration. However, it was also aimed at transforming India’s society and culture for two reasons: (a) create an overall atmosphere of change and development and, (b) give birth to a culture of loyalty to the rulers.

(vii) The taxation and the burden on peasant rose sharply due to economic transformation and costly administration (civil as well as military).

(viii) India absorbed 10 to 12 per cent of British exports and nearly 20 per cent of Britain’s textile exports. After 1850, engine coaches, rail lines and other railway stores were imported into India at large scale.

(ix) Indian army was used for British expansion of colonialism in Asia and Africa.