Article Written By EIH Researcher And Writer
Digantika Daschowdhury
India was a partially integrated economy at the time of railroad expansion. Railways were integral to the development of Indian economy way before World War I. This paper undertakes a comprehensive analysis of British imperial railways during the second half of the nineteenth century. Such related aspects as the development of colonial economy, role of railways in mobilizing the economy, the comparative proliferate effect of railways on the Indian subject as well as post-independence railways situation is thoroughly debated. The period 1861 to 1920 witnessed sharp price convergence in British Indian grain markets. Previous research attributed this to the construction of railways. But experiments examining price differences between districts provide surprisingly weak support for that hypothesis. This article tends to draw a pattern as to how railways bridged the huge gap of prices of selling goods throughout the subcontinent. Another major issue that sprang up in writing this article is that whether Britain had devised the railways in accordance to their economical expediency. Apart from focusing on the nineteenth century railways, light has been shone on the study of post-colonial railways as well.
In 1846, the revenue commissioner of Bombay, Thomas Williamson wrote to the chairman of the Great Indian Peninsular Railway Company in London stating that:
“The great trunk-line, running by the Malseje ghat in the direction of Nagpur, would be most direct which could possibly be selected to connect Bombay to Calcutta. Commercially, it would be best for the cotton of Berat, while for the first 120 miles from Bombay we would proceed in the immediate direction of the military stations of Ahmed-naggar, Jaulna and Aurangabad.”
Nothing could be more obvious than the twin purpose of colonial railways stated so early and so clearly above, i.e., commercial and military. These two objectives set the tone for the imperial railway project until the end of British raj. Private British companies with the strong backing of the government of India not only built railways but also owned them. The foundations of this colonial economy were laid well before the introduction of railways. “If we can cheapen carriage, we may greatly increase the imports of foreign goods into the interior; and in a corresponding degree, export cotton and other agricultural produce.” This observation made by an East India Company agent in mid-1840’s aptly sums up the fundamental characteristic of the colonial economy of India in the nineteenth century.
It is not surprising that the cotton barons of Lancashire were the most vehement supporters of Indian railway project. They had a double objective: firstly, to sell their cheap machine-made cloth to the millions of Indian masses and secondly, secure a more reliable source of raw cotton than the United States. Karl Marx in 1853 prophesied, “…..the millocracy intend to endow India with railways with the exclusive view of extracting at diminished expenses the cotton and other raw materials for their manufacturers”. Indian railways did not experience any serious competition from alternative modes of transport. Neither the government of India nor private companies showed much interest in building canals, roads, river channels for steamers, boats or carts. So, the railways had a virtual monopoly on pricing and rates.
The building of railroads, in particular, has been identified as crucial to these processes of price convergence and market integration. This was certainly true for British India. During the latter half of the nineteenth century, the country built the fourth most extensive railway system in the world. By 1910, India had over thirty thousand miles of track, just behind Germany and Russia. The period 1860 to 1920 was also marked by significantly declining price dispersion across districts in grain markets. Previous research suggested that India’s railway system caused the fall in price dispersion and thereby unified the Indian economy. However, this assertion rests primarily on the fact that price convergence and railway construction occurred at the same time. There has been no attempt to rigorously test whether railroads were primarily responsible for this convergence.
The railways pushed India into an era of classical colonialism. This was characterized by Indian exports of agricultural raw materials and imports of British manufactured products. India’s economy was twisted to fit this classical colonial pattern. Throughout the nineteenth century, Britain enjoyed a trade surplus with India. But it had a growing deficit in its overall international trade with other nations, which were offset by substantial Indian export surpluses. The Indian railways and economy exclusively serviced British economic interest. Railroads stood out amongst all the other transport systems. Neither the government of India nor private companies showed much interest in building canals, roads, river channels, boats or carts. Hence, one can say that railways had virtual monopoly over rates and pricing of products.
The railway companies charged differential rates to maximize profit. Lower rates were charged for shipments from the ports to the interior than for shipments of similar distance between two inland points. Similarly, costs were reduced for the transportation of raw materials and finished products. Railways clearly encouraged classic colonialism in India. Layout of the lines favoured shipment to the ports rather than encouragement towards internal trade. Its colonial status deprived Indian economy of any protective tariffs, but gave the advantage of low transportation costs to foreign producers in addition to low sea-rates to and from India. British imperial structure tried to keep India agrarian for the most part and the manner in which the railways were constructed and operated increased India’s dependence on agriculture.
A few documentations have been mentioned to demonstrate this subject. John Hurd analyses annual retail wheat and rice data from 188 districts in British India and reports that the coefficient of variation dropped by sixty percent between 1861 and 1920, the same period that India was building its railways. Additionally, he shows that price dispersion was consistently lower for districts with railways. In a study of Bengal rice prices, Mukul Mukherjee calculates a similar decline in dispersion between 1855 and 1912, and also finds less dispersion among subdivisions that had early linkages to railways. Finally, Michelle McAlpin documents a sharp convergence in Indian cotton prices during the same period. However, she finds that there were no concomitant charges in acreage devoted to either cotton or food grains, which one would expect if railways impacted relative prices. Taken together, the literature demonstrates that there was substantial convergence in grain and other commodity prices in several economies in the 1800s and early 1900s, suggested that the introduction of railroads was the main cause behind these changes. Many of these arguments, however, rests on the simple fact that price convergence and railway construction occurred at the same time. There have been few attempts to test econometrically whether railways were the main force driving this process.
It is much of a debate whether actually railways can be considered as the root cause behind price convergence. Various theories have been put forth regarding this issue but nothing so far has been established yet. Often the enormity of railroads has been credited for convergence but appears to be a weak support for the hypothesis. Unequivocally, railways played a significant role in partial monopolization of Indian economy, but it has been observed by historians that mere twenty percent of decline in grain price can be accredited. One could extend this analysis in a number of ways. The most obvious is to obtain precise measures of institutional changes, which would allow one to test for their effects on price convergence. Also, it would be interesting to delve deeper into why the impact of railways on prices appears to be largest in 1860s and to taper off after that instead of the reverse. Another extension would be to estimate the persistent effects of price differentials in nineteenth century India on economic outcomes there today.
References
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- Bogart Dan, Chaudhary Latika; ‘Engines of Growth: The Productivity Advance of Indian Railways, 1874–1912’ The Journal of Economic History, Vol. 73, No. 2 (June 2013), pp. 339-370 (32 pages)
https://www.jstor.org/stable/24551039
- Derbyshire I. D. ‘Economic Change and the Railways in North India, 1860-1914’ Cambridge University Press, Modern Asian Studies, Vol. 21, No. 3 (1987), pp. 521-545 (25 pages)
https://www.jstor.org/stable/312641
- Kerr. J. Ian; ‘Representation and Representations of the Railways of Colonial and Post-Colonial South Asia’ Modern Asian Studies, Vol. 37, No. 2 (May, 2003), pp. 287-326 (40 pages)
https://www.jstor.org/stable/3876573
- Satya D. Laxman, ‘British Imperial Railways in Nineteenth Century South Asia’ Economic and Political Weekly, Vol. 43, No. 47 (Nov. 22 – 28, 2008), pp. 69-77 (9 pages) https://www.jstor.org/stable/40278213
- Sarath S. ‘Review: Raj and the Railways’ Reviewed Work: Railways in Modern India by Ian J. Kerr; Economic and Political Weekly, Vol. 37, No. 12 (Mar. 23-29, 2002), pp. 1123-1128 (6 pages)
