It is often believed that the colonial administration encouraged the commercialization of agriculture that improved the position of peasants in many areas of the Indian colony.
From the 1860s onwards, the nature of agricultural production was determined by the demands of the overseas markets for Indian primary products. The items exported in the first half of the nineteenth century included cash crops like indigo, opium, cotton and silk.
Gradually raw jute, food grains, oil seeds and tea replaced indigo and opium. Raw cotton remained the most in demand item. This expansion in cash crop production was accompanied by the building of railways, after 1850, to improve trade networks.
But commercialization seems to have been a forced artificial process that led to very limited growth in the agricultural sector. It led to differentiation within the agricultural sector, but did not create the figure of the ‘capitalist landowner’ as in Britain. The lack of any simultaneous large scale industrial development meant that accumulated agrarian capital had no viable channels of investment, for it to be converted into industrial capital.
Initiatives to expand the productive capacity and organization of agriculture was also a risky proposition, as the sector catered to a distant foreign market with wildly fluctuating prices, while the colonial state provided no protection to agriculturists. Thus, commercialization increased the level of sub-infeudation in the countryside and money was channelised into trade and usury.
The larger part of the profits generated by the export trade went to British business houses, which controlled shipping and insurance industries, besides commission agents, traders and bankers. Those who benefited in the colony were big farmers, some Indian traders and moneylenders. Commercialization further intensified the feudal structure of landlord-moneylender exploitation in rural areas.
The so called process of commercialization, which was supposed to lead to capitalist agriculture, was often carried out through very exploitative and almost unfree forms of labour. Tea was grown in plantations in Assam, owned by whites, and they used indentured labour, which was almost like slavery. White planters had to force farmers to grow indigo because it yielded low profits and upset the harvesting cycle. This involved inhuman levels of coercion, which eventually led to the indigo-rebellion in 1859-60.
Commercialization did lead to limited phases of success in the cotton producing areas of western India in 1860s and in jute production in eastern India, but they were because of increases in demand rather than capitalist innovation in production and organization.
Farmers were forced to grow cash crops also because they had to pay the high revenue, rents and debts in cash. The shift away from food crops like jowar, bajra and pulses to cash crops often created disaster in famine years. A decline in world demand for Indian cotton led to heavy indebtedness, famine and agrarian riots in the Deccan cotton belt in the 1870s.
The jute industry collapsed in the 1930s, which was followed by a devastating famine in 1943 in Bengal. Although, causes of these famines have been widely debated by historians, it is undeniable that the aggregate production of food crops remained far behind population growth, and millions of people died of starvation and epidemics.
Among the limited steps that the colonial government took towards improving agricultural productivity included the construction of some irrigation canals in northern, north-eastern and south-western parts of India. ‘Permanently Settled’ eastern India got left out this government initiative, because there was no scope of increasing the revenue any further. Thus, revenue maximization and limited famine-relief in extreme situations were the factors that motivated this public investment.
It did lead to great prosperity and commercial agriculture in limited enclaves, especially in the canal colonies of Punjab, but it was confined to a small number of already well-of farmers who could pay the high water rates. It also encouraged the cultivation of cash crops like sugar, cotton and wheat, while reducing the production of millets and pulses. In some cases, like the United Provinces, it did not suit local conditions and caused swamps and excessive salinity.
In 1853, Lord Dalhousie took the decision to construct railways in India. Very often the railways have been seen as a marker of the modernization that took place under British rule. But the construction of the railways in India only further strengthened the colonial nature of India’s economic development. The railway network made it easier to penetrate the interior markets and sources of raw material in the colony and linked them to port cities, instead of linking internal markets to each other.
The railway network was primarily geared to serve the interest of foreign trade. Railway lines built in frontier regions would facilitate army movement and some "famine lines" were built in scarcity areas. Moreover, the whole project was built with British capital, and investors in Britain were guaranteed 5% interest, which was paid out of Indian revenue. Most of the high level expertise and railway equipment like machinery, railway lines and even coal to an extent, was imported from Britain. This ensured that the ‘multiplier’ effects of constructing the railways also remained absent in India.
Amongst other factors, the penetration of the interiors of the country, made possible by the railways, had another grave fall out - the ruin of the Indian handicrafts industry, which had enjoyed patronage both from local ruling elites and markets overseas.
With the expanding control of the British, traditional native courts disappeared. The British also enforced an unequal tariff system, whereby the entry of Indian commodities in British markets was restricted by high custom duties. In turn, the Industrial Revolution in Europe enabled the mass production of cheap machine-made goods, which flooded Indian markets. Unable to compete with this, Indian commodities lost both their overseas and domestic markets. This destructive process led to deindustrialisation that increased pressure on land.