When did India begin to reintegrate with the world economy? When did the Indian state begin to embrace the market again? Much confusion prevails in the academic discourse on these questions. The confusion derives from a belief that the questions are necessarily related. They are not. The reintegration did not stem from any formally announced reforms. In fact, the reintegration began informally, in the late 1970s, when two trends came together, an accumulation of capital and competitiveness in small-scale labor-intensive industry, and an unannounced easing of the value of the Indian currency. The exporting opportunities that the latter step created were utilized by the former group. An official reform that extended to all aspects of trade and investment policy did not happen before 1992. Its effects encompassed foreign investment, import of technology, and export of knowledge-based industry in the 2000s. The door that was opened slightly in the late 1970s was now fully ajar.

The precise contents of the economic liberalization process announced for 1992–95 were similar to “structural adjustments” elsewhere in a developing world burdened with bankrupt governments and unsustainable balances of payments. Exchange rates were formally devalued. Tariffs were reduced. A basketful of industrial regulations was removed. The government stepped away from business commitments, a move resisted by the organized trade unions. The broad result, nevertheless, was market integration at all levels, and a fall in the size of the government in the national economy, in short, a return to the nineteenth-century liberal ideal.

At the start of the nineteenth century, the English East India Company tried to encourage a few businesses in India to compensate for the declining role of cotton textiles in Indian exports. These were opium, indigo, and raw cotton. Opium was useful as a means of payment for Chinese tea, the company’s main import. Indigo and raw cotton contributed to Britain’s own expanding cotton-textile industry. These businesses retained some of the characteristics of the old Indo-European trade in that they were concentrated in the port towns and had been initiated by the company. But they were also exceptional in some ways. All three provided a larger scope for private enterprise and involved dealing with peasants rather than with artisans. Property rights over land were now a matter of interest to the conduct of foreign-export businesses.

A simple measure of trade volume based on incoming shipping tonnage (Figure 5.1) shows that trade to and from India grew quickly from 1850. By comparison with this explosive growth, in the first half of the century growth was more modest, but the acceleration started before 1850. The first half of the nineteenth century saw the consolidation of what I earlier called the imperial umbrella, a loose network of territories ruled by regimes that shared a commitment to market integration and a single official language and that had compatible laws. The umbrella created the opportunity for capital and labor to circulate within the network, with an additional impetus from Britain’s own industrialization and the Asian country trade. Recent research has demonstrated how the removal of barriers to private trade imposed earlier by the chartered companies and the Chinese state aided the growth of intra-Asian trade, creating new axes of commerce that were to play a large role in the business history of Asia later in the century. This chapter deals with the broad patterns of commodity trade, capital formation, and labor migration in this phase and under these stimuli.

Preface

This is a book about transactions between South Asia and the rest of the world in the very long run. I show the antiquity of long-distance intercultural economic exchanges conducted from South Asia, and also show how external factors such as new technology or new partnerships and internal factors such as geography shaped these exchanges, allowing us to mark out distinct epochs in the history of these transactions.

The idea of writing this book occurred to me some years ago while I was taking part in the proceedings of the Global Economic History Network, an international collective of economists and historians, now concluded. The conversations started during those proceedings exposed me to interesting current research on other regions, especially other Asian regions. Useful though the experience was, however, this book does not implement the intellectual program of the network with Indian material. In fact, I formed the idea of this book partly in reaction to the main item on the network’s agenda, namely, to search for the causes of international economic inequality in the modern world. It seemed to me that by placing the inequality problem at the center, we risked making the history of India’s globalization too dependent on the history of Europe’s globalization, which would be a wrong thing to do because every region did business with other regions in a somewhat autonomous and distinctive way, depending on local factors such as politics and geography. And because some of these local factors were extraordinarily durable, a longue durée India-focused narrative of transactions was possible. I did not wish to get into the sterile rhetoric about which region – Asia or Europe – was the center of the world in the seventeenth century. My point was, rather, that it should be possible to write a history of transactions that is mindful of the distinctive qualities of India. This book implements that idea.