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Evolution of Indian Business- I - Views on News from Equitymaster
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  • Jun 22, 2013

    Evolution of Indian Business- I

    Before we start our discussion about the evolution of Indian business in the post-Independence era, we believe it is imperative to understand how the British colonial rule impacted the Indian economy. In this article, we will broadly discuss some of the major transformations that Indian businesses witnessed during the British regime.

    The impact of British Rule in India

    The victory of the British East India Company at the Battle of Plassey in 1757 marked the beginning of its political conquest of India. By 1818, the British had established its dominion over the entire subcontinent. By the time the British rule ended in 1947, India had gone through unprecedented political, economic and social changes. These changes laid the foundation for the economic developments that followed in the post-Independence period.

    Political and economic exploitation of a colony is the very basis of the colonial system. The British regime did all they could to tighten their hold on India and to extract the maximum economic benefits from it. As such, it goes without saying that India's economic interests were compromised for the benefit of Great Britain.

    Consider the fate of Indian cotton textiles. Earlier, India had been a supplier of cotton textiles and some other industrial goods to Great Britain. But within a few decades of British occupation, India turned a mere supplier of raw materials for British industries, whose products were then sold back in India.

    The Industrial Revolution that took place in Great Britain also had a major impact on India's trade. Being under British subjugation, India did not have much freedom to counter the adverse economic dynamics that emerged.

    Notwithstanding the negative effects of British imperialism, the mechanism of exploitation brought with it several unintended yet progressive outcomes that fundamentally transformed the Indian business landscape. The following are some of the key changes:

    • Development of infrastructure

      The British motive to further its own economic interests and to provide effective governance led to the development of infrastructure facilities such as roads, railways, post, telegraph and telephone network. As a result, barriers and high costs related to transport of goods and services were significantly reduced.

    • Emergence of codified law & single currency

      A body of codified law and an administration of justice were introduced. This ensured greater security of life and property. In addition, the introduction of a single currency acceptable as legal tender across India gave a further boost to business activity.

    • Rise of modern education system

      In order to generate a native workforce, the British rulers refurbished the educational system in India. This had several positive consequences. The spread of English language created a single medium of communication in a country full of diverse languages and dialects. The rise of modern education created a spirit of rational enquiry into the religious and cultural dogmas that had been carried over for centuries. As a result, several age-old superstitions and regressive practices started losing their hold. Moreover, caste-based occupational barriers began to weaken and people from various social backgrounds started entering areas of economic activity which were earlier the preserve of select castes and communities.

    • Formation of a national market

      Prior to the British occupation of India, there were frequent political fragmentations. Moreover, the means of transport and communication were inadequate. As such, India remained split into a number of small markets and consequently, businesses had limited scope to grow. But the political unification of the land that the British rule brought also resulted in economic unification. This led to the formation as well as the expansion of the national market.

    • Easy access to technology

      Prior to the British colonial rule, India severely lacked the climate for enterprise as well as the competence in manufacturing. The technology in the country had been quite stagnant with very basic and undeveloped implements used in manufacturing. The colonial rule enabled Indian businesses to easily access the most developed production technologies.
    All these factors together gave an unparalleled boost to Indian businesses. In addition, several British promoters also entered the Indian market. The rising interaction with British enterprises as well as the access to the developed West opened completely new vistas for India. While trading and money lending had earlier been the mainstay of the business class, the changing business landscape encouraged entrepreneurs to explore industrial projects.

    In the next article of the series, we will continue to discuss some other important changes in the Indian business landscape during the British colonial rule.

    Evolution of Indian Business Series - Previous article | Next article | All Articles

    Disclaimer: This series of articles is based on the book called "The Oxford History of Contemporary Indian Business" (hereinafter referred as 'the Book") co-authored by Dwijendra Tripathi and Jyoti Jumani. Views, if any mentioned above are of Equitymaster based on its interpretation of the Book. Equitymaster has not verified any data, facts, figures or content mentioned in the Book and does not claim it to be accurate nor accept any responsibility for the same. Any use of the quotes, content, information from the Book is only for the purpose of review, study and comment under the principles of 'Fair Use'. Please read the detailed Terms of Use of the web site.

      Ankit Shah (Research Analyst) is the editor for Equitymaster Insider and Vivek Kaul's Inner Circle. A journalism graduate turned Research Analyst, Ankit joined Equitymaster when he was just 23 years old, right after getting his MBA from NMIMS, Mumbai. Having been an avid reader of Equitymaster's research through his college years, Ankit knew he would fit right in!

    In his seven years with Equitymsater, Ankit rose quickly, leaving his mark on almost everything from: Travelling thousands of miles to find the next small cap stock, as part of the Hidden Treasure team... Designing Equitymaster's Secrets, an online value investing course based on the company's 20-year journey... Bringing global investing ideas to Indian readers through Vivek Kaul's Inner Circle... Right to launching his brand-new service, Equitymaster Insider.

    Ankit is a firm believer in Charlie Munger's multidisciplinary approach on juggling between various disciplines...He is not just a research analyst, but also a voracious reader and an avid traveler...Born and brought up in Mumbai, he now prefers to keep away from the noisy megapolis as much as possible. In any given month, you could find him exploring the ancient ruins of South America, the beaches of South East Asia, or the organic cafes of Pondicherry.



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