Issue NUMBER 5. OCTOBER,
THE ROLE OF THE BOURGEOISIE
IN COLONIAL TYPE COUNTRIES:WHAT IS THE CLASS CHARACTER OF THE INDIAN STATE
CHANGING LINE, REVISIONISTS
DISTORT LENIN AND STALIN
ALLIANCE, AUTUMN, OCTOBER 1993
The world is undergoing dramatic changes even as we pass
the 76th anniversary of the Great October Revolution. But at this moment
of rebuilding the movement, a Journal such as ours cannot hope to cover
all events that Marxist-Leninist have to be aware of. We can only take
on issues that illustrate general theoretical and practical problems. Though
many highly significant events have occurred since Alliance 4.
For now, we know that events in Somalia and the Middle
East are relatively easy for Marxist-Leninists to understand. In Somalia,
the hypocrisy of the UN mask "of neutrality" has been thrown off by the
USA masters. But they have difficulties in subduing the raging struggles
they themselves have previously ignited. Unfortunately we are not aware
of any representatives of the Somalia poor and middle peasantry, and the
small working class. There appears not to be a significant and strong Marxist-Leninist
party. No representatives of the workers and peasants is currently vying
with the national bourgeoisie. In that fatal vacuum, there can be no successful
end to the struggles of the Somalia peasants and minuscule working class,
and no true independence.
In the Middle East, we have previously outlined part of
the game plan of the USA in Alliance 2, which analysed the Gulf
War. We examined the rise of Middle Eastern Nationalism, centring around
Nasserism. We showed how US imperialism in its fight with a declining British
imperialism, struggled to control the Middle East producers of oil. We
depicted the state of Israel as a client state of the USA. Just so, Israel's
current rapprochement with the Palestine Liberation Organisation (PLO)
reflects a desire of the USA to obtain a degree of stability in the Middle
East. Nonetheless, we support the current initiative despite this. Because
for the first time since they were driven out, some Palestinians will have
a beginning of a homeland. We view this as a small progressive step, a
potential base; towards a future secular joint Palestinian-Israeli State.
But, again the achievement of this requires a Marxist-Leninist party.
At a future date we hope to review these topics in some
detail. However, in this issue we concentrate upon one major underlying
issue, that unifies both these topics. Of course, this is the National
Question in colonial-type countries.
The article following is one that we committed to in Alliance
4. Solving the problems raised by Somalia and Palestine, and India we suggest,
requires understanding the stages of struggle of the workers and peasants
in the colonial countries, and correspondingly their allies. This forms
part of the programmatic goals of Marxist-Leninists world wide.
For as Marxist-Leninists know, this debate was one of
those that divided Trotsky from Lenin and Stalin. The commonest Left wing
distortion is the Trotskyite one, that unless there is a socialist revolution
led by the Communist party, there can be no national progressive democratic
revolution against imperialism. Marxist-Leninists will not be troubled
by this. But less well known are the distortions introduced by the hidden
revisionists inside the Communist International. The correct policy of
United Fronts with the revolutionary type bourgeoisie in colonial countries,
during the first stage-the Democratic stage, was distorted after 1928 by
the Comintern (CI).
In relation to India, the CI foisted the Communist Party
of Great Britain, (headed by hidden revisionists) upon the Communist Party
of India (CPI). Then it destroyed the possibility of winning the best elements
away from the Indian National Congress, by a sectarian turn. In the middle
of this complicated nest of turns and distortions, and counter-claims,
the character of the Indian state has been obfuscated.
What occurred in the apparent "transfer of power" from
the British to Nehru on August 15th, 1947 ? These are not arcane academic
questions. The answers will dictate the approach to the continuing national
liberation struggles world wide.
A common Marxist-Leninist view of India, states that 1947
represented a coming to power of the comprador bourgeois capitalist class,
in a facade erected by the British. Thus because of this, the two stages
of revolution (The bourgeois democratic revolution and the socialist revolution)
both have to be carried out. The corollary is that a revolutionary
bourgeoisie still exists in India.
In this article we agree that there is an unfinished democratic
revolution (stalled by the bourgeoisie) to be carried out prior to socialist
revolution. But we pose the stages of revolution in relation to the multi-national
character of the Indian state. We identify the rulers of India at 1945
as a class coalition of the Pan-Indian national capitalist class, dominated
by the Marwari national capitalist class, and a comprador capitalist class.
We attempt to work out Marxist-Leninist attitudes for India, and distortions
of the line. This article is meant for discussion. Of course, comrades
in India are significant discussants, but the entire international movement
is of necessity joined in this debate.
This is particularly so, since our analysis of the CI
from 1928 alarms some Marxist-Leninists. We urge public airing of disagreements
with tabling of counter-documents, and a non-sectarian open discussion.
The movement can learn only from open discussion. Of course, disagreement
on the interpretation of these historical events is not the basis
of splits. However, if disagreement extends to principles, exemplified
in means of practical work nowadays, the implications are obvious.
This article is Part One of an article that will be concluded. In
part Two (Hopefully to be published over the next six months) we will analyse
events in India from 1945-1993.
TABLE OF CONTENTS BY
PAGE FOR HARD COPY.
NOTE THIS WEB EDITION IS SPLIT INTO TWO PARTS INDICATED
- PREFACE 1-4
- SOME DEFINITIONS 12-13
- ENTRY OF BRITISH IMPERIALISM, ORIENTAL DESPOTISM
AND DEVELOPMENT OF THE INDIAN MERCHANT CLASSES 14-15
- INDIAN MERCHANTS AND DEVELOPMENT OF INDIAN NATIONS
- THE DESTRUCTION OF THE HANDLOOM INDIAN INDUSTRY
- SURVIVAL OF SPECIALISED PRIMITIVE SMALL SCALE INDUSTRY
- INDIAN RAILWAY AND LAISSEZ-FAIRE 21-22
- THE COLONIAL MANAGING AGENCIES 22-23
- THE INDIAN CAPITALIST CLASS BECOMES INDUSTRIALISED
- DEVELOPMENT OF THE INDIAN PROLETARIAT 25-26
- THE POLITICAL REPRESENTATIVES OF INDIAN ASPIRATIONS
-SPLITS WITHIN CONGRESS 28-35
-OWNERSHIP OF INDIAN BUSINESS AND INDUSTRY PRE WWI:
COMPRADORS AND NATIONAL CAPITALISTS IN INDIA 36-43
-EFFECTS OF THE FIRST WORLD WAR 43-57
-CONCLUSIONS ON INDUSTRY IN INDIA BY 1947. 57-59
-COMPARISON WITH THE INDUSTRIAL SITUATION IN 1980
-ATTITUDES OF THE COMMUNIST MOVEMENT TO THE INDIAN
-MABENDRA NATH ROY (M.N.ROY) AND LENIN 65-76
-FORMATION OF THE COMMUNIST PARTY OF INDIA 76-77
-ROY IN PRACTICAL WORK 78-86
-THE ATTITUDE OF J.V. STALIN TO THE INDIAN REVOLUTION
-REVISIONISTS TURN ULTRA-LEFT: OTTO KUUSINEN, AND
WANG MING. 89-98
-TWO FLANK ATTACK ON CPI: RIGHT BRITAIN, LEFT COMINTERN
-REVISIONISM TURNS RIGHT. DUTT FOLLOWS. 112-122
-SOVIET VIEWS ON INDIA - DYAKOV 128-132
-YUGOSLAV REVISIONISM ENTERS DEBATE 133-134
-YUGOSLAVS TAKE CONTROL OF CPI-ADVENTURIST TURN 134-137
-CONCLUSIONS PERIOD UP TO 1948. 138
Amongst Indian progressive and Marxist-Leninist movements
there have been intense debates on the issue of the character of the state
in India. The participants realise that the class character of the State
decides the strategy of Marxist-Leninists towards revolution in India.
The Communist League of Britain (CL) has reported the period up
to 1928, in a two volume work (London, 1977). This document cites from
it, in order to extend the analysis to 1947 (Part One). Part Two will cover
the period 1947-1993.
The central question is whether the comprador capitalist
class or a variety of National bourgeoisie took control of the Indian State
after 1947. Perhaps three hurdles are faced in answering this question.
These are :
Firstly to characterise
the nature of the industrial base that India had at Partition (this phrase
avoids the term Independence).
Secondly to define Congress party politics.
It is a fact that the Congress party was originally formed by the British
to pre-empt a movement of independent minded Indians. But equally it was
also clear that by the time of the British Partition, the Congress was
a class coalition.
Finally the multi-national character of India
needs to be considered.
These three hurdles, or issues superimpose themselves
on one fundamental underlying question. This is :"What attitude should
communists take to the bourgeoisie in a colonial-type country ?"
On this question, first Lenin was divided from Trotsky;
and then Stalin and Trotsky were divided.
We take our stand on the importance of the bourgeois
democratic national revolution as proposed by Lenin and Stalin. How relevant
is this analysis in the 1990's?
It is significant that Stalin in his talk to the
"University of the Toilers of the East", uses the phrase that there are
2 wings of the national, or native bourgeoisie in India:
"The situation is somewhat different in countries like
India. The fundamental and new feature of the conditions of life in countries
like India is not only that the national bourgeoisie has split up into
a revolutionary part and a compromising part, but primarily that the compromising
section of the bourgeoisie has already managed, in the main, to strike
a deal with imperialism. Fearing revolution more than it fears imperialism,
and concerned with more about its money bags than about the interests of
its own country, this section of the bourgeoisie is going over entirely
to the camp of the irreconcilable enemies of the revolution, it is forming
a bloc with imperialism against the workers and peasants of its own country."
Here Stalin unequivocally states that a revolutionary part
of the bourgeoisie still existed as late as 1925, in India. By this reasoning,
to dismiss ALL the bourgeoisie struggles of this period in India
as being led by comprador factions, is a Leftist error. Marxist-Leninists
know that Trotsky argued that ALL bourgeois factions were
useless to consider as allies for the workers. But, Marxist-Leninists seem
unaware of the contradiction of the line of the Communist International
(CI) after 1928, with Stalin's view.
If, as Stalin argued, there WAS a revolutionary wing,
then WHERE was it?
To ignore that the Congress Party harboured some of the
"revolutionary part" of the bourgeoisie would be to search in the vastness
of India, for the proverbial needle in a haystack. Thus the Congress cannot
be dismissed as wholly a tool of the British imperialists.
Any Marxist-Leninist history of India must include the
struggles of M.N.Roy. True, he had a chronically Leftist interpretation
of the bourgeoisie in a colonial type country. But, in practice,
both in India and his ill-starred mission to China, he adopted Marxist-Leninist
principles aimed at a United Front with the National bourgeoisie. Roy agreed
with Stalin that there were at least 2 wings within the Congress party;
the capitulators and the more resolute. He attempted to form a principled
united front with the best elements. In so doing, he fell into dire conflict
with the Comintern.
Furthermore, both the CL and other Marxist-Leninists have
noted the positive contribution of Dyakov to the debates on India.
Dyakov, a member of the USSR Academy of Sciences, was an acknowledged expert
on Indian affairs. His observation of the multi-national character of the
Indian state is key to forming current Marxist-Leninist policy in India.
Dyakov thought that the post-Partition state represented
a coming to power of a section of the bourgeois and the middle bourgeoisie
that had turned reactionary. But, according to Dyakov, until Partition
(engineered by the Mountbatten Plan), the now reactionary bourgeoisie had
been struggling against British imperialism. In this struggle, he clearly
identified a dominant national bourgeoisie that was now oppressing other
"The expression of the centralistic tendencies of the
summit of the Indian bourgeoisie, primarily the big tendencies of the province
of Gujerat and Marwara.. this capitalist group aspires to a monopoly to
dominate the Indian market and in this sense it struggles not only against
British capital but also against the bourgeoisie of other nationalities
of India.. which strive to tear its own market away from the hands of Gujerati-Marwari
Dyakov, Cited in Selig Harrison. "India the Most Dangerous
Decades." Princeton, 1960. p. 158.
This Marwari national bourgeoisie then came to be
the Pan-Indian national bourgeoisie. Dyakov concluded this after
open debate in the Academy of Sciences, during which he sided with Balabushevich
against Zhukov :
"The differences in the more extreme views of Balabushevich
and Dyakov and the somewhat more moderate stand of Zhukov should not be
overlooked. The former considered that the Nehru Government represented
not only the big bourgeoisie but the middle bourgeoisie as well and that
the latter had turned reactionary. In place of Zhukov's four-class strategy
against imperialism, feudalism, monopoly capitalism, Balabushevich and
Dyakov proposed the three class strategy against capitalism (excluding
the entire class of the bourgeoisie and relying only on the workers, peasants
and the petty bourgeois intelligentsia). The Moscow debate signalled the
birth of a new line towards the National movement in Asia."
Shashi Bairathi."Communism and Nationalism in India."
But, if the Pan-Indian national bourgeoisie had "turned"
reactionary by 1947, what should be its historic role in fighting for a
progressive Front in 1993? It must be surely limited now ?
One other question should be asked. What did the turncoat,
erstwhile Pan-Indian revolutionary bourgeoisie now do, after 1947? Perhaps
they were content to remain under the thumb of Imperialism?
After all, a bourgeoisie that is defeated has two choices.
Either it accepts its subservience to Imperialism, remaining content with
its level of profits; or else it fights back.
We believe that this bourgeoisie continued to fight by
stealth, no longer fighting battles in the streets. But now, it was a battle
in boardrooms, assisted by the Foreign Exchange Regulations enacted
by the new state.
In support of this controversial contention, data from
this period shows that although the absolute level of Direct Foreign Investment
(DFI) increased from 1947 to 1980; when expressed as a percentage of total
industrial and trade investments, it actually fell:
"For India independence from foreign financing became
a fact of life between the amendment of the Foreign Exchange Regulation
Act (FERA, 1973) and the next relaxation of government restrictions
on foreign investment (1980). To illustrate, let us consider chemicals.
Between 1974 and 1980, as we see from figure 4, (see p.48 below-Editor)
foreign financial tie-ups declined for Indian business houses from 2/3
of all collaboration agreements in 1974 to 2/5ths in 1980. Among large
houses, Only Birla actually increased its' reliance on foreign financing
always coupled with technology. Conversely houses like Tata and Sarbhai,
long known for their proclivity to seek out foreign financing by 1980 evinced
no such preference.. in 1980 Indian business houses and other local enterprises
already had established their financial independence from foreign enterprises."
THIS DECLINE IN THE FOREIGN HOLDINGS IN INDIA OVER
THE POST-"INDEPENDENCE" PERIOD MUST HAVE A CLASS BASIS.
Difficulties faced by bourgeois appraisals of the Indian
National Congress (INC) include an over-estimation of the resolve of the
INC to take on imperialism. "Left wing" opposition sees only that the INC
did not unconditionally expropriate foreign capital. These difficulties
can be resolved, seeing that the INC was a class coalition of national
capital (represented by a Pan-Indian bourgeoisie composed of Marwari-Parsi-Gujerati
capital), comprador capital, and landlord classes.
Ensuring there was not a separate party, representing
the nascent national capitalists was a master stroke of the British, who
had first floated the INC under Octavian Hume.
This INC coalition was to acquire considerable sway over
the peasant and workers masses of India. Thus the accession to power by
the INC in 1947 effectively allowed a weakened British capital to retain
some neo-colonial hold. To ensure this, British imperialists arranged the
Partition of India, by the Mountbatten Plan. This ensured that the
hostility between Hindu and Moslem would continue. Thereby crippling further
Indian development by cutting Indian industry in two, handicapping industry
in both the future infant states- Pakistan and India.
Furthermore, as stated above, we suggest that the response
of the nationalist wing of the INC was to continue to "fight Imperialism
by stealth" - Always just enough to maintain its development. This battle
by stealth (as opposed to overt "street fighting") over the subsequent
30 years, resulted in a State control of key sectors that aided the Gujerati-Marwari-Parsi
Pan-Indian capitalists to further their own industrial development. The
economic data here should be scrutinized critically, to ensure we adopt
a correct orientation.
Simultaneously, the Marwari capitalists suppressed development
of the other nations of India. In so doing the Gujerati-Marwari capitalists
suppressed the major planks of the Democratic stage of the revolution.
This includes Land Reform which was obstructed and distorted in a thousand
ways. They reneged on their own programmes, and halted the democratic revolution.
This needs to be, and will be completed.
But if economic data does demonstrate "a struggle against
imperialism by stealth", why should the Pan-Indian Marwari-Gujerati-Parsi
national bourgeoisie need (from their perspective) to be in alliance with
the workers in 1992, at a Pan-Indian level ? In this context, support of
a pan-Indian bourgeoisie would be a Rightist error.
But this does not mean to say that alliances with the
smaller struggling embryo national bourgeoisie are to be ignored; this
would be a Leftist error. Support to the "regional" ie. embryonic (or usually
embryonic) national bourgeoisie would be a correct tactic. Here the working
class party should attempt to become the leading force in a class alliance
aimed first at securing the National Democratic Revolution, and then moving
uninterruptedly to the Socialist Revolution.
PART ONE outlines Indian economic
development. In the 1900's, this formed the two new classes that would
shape India - the industrial bourgeoisie and the industrial proletariat.
We start with development of Indian capital and their political representatives,
examining British imperialism's attitude to native capital. We examine
views of Marxist-Leninists to the bourgeoisie in colonial-type countries,
and India; with the formation of the Communist Party of India (CPI). In
doing so, we cover deviations from Lenin and Stalin, promulgated by the
Comintern (CI). We end Part One just after the Mountbatten Plan of imperialism.
PART TWO, (This was to have been completed at a later
time. But this task was never compelely fulfilled, however in a later polemic
in 1998 it was at least partially completed. This will be also placed on
the web shortly -Editor Alliance; February 2000) will examine the Nehru
and Mahanobis Plan to develop India, halting of Land Reform, the national
question in India, the struggle between USA and USSR social-imperialists
for the control of the Indian state, and finally the recent victory.
SOME MARXIST-LENINIST VIEWS
"The Communist International must enter into temporary
alliance with bourgeois democracy in colonial and backward countries."
V.I.Lenin: Preliminary Draft of Theses on the national
and Colonial Countries, 2nd Congress CI, in "Selected Works", Volume 10,
London, 1946; p.237.
"The task of the communist elements in the colonial type
countries is to link up with the revolutionary elements of the bourgeoisie..
against the bloc of imperialism and the compromising elements of 'their
own' bourgeoisie, in order.. to wage a genuinely revolutionary struggle
for liberation from imperialism".
J.V.Stalin :"The Results of the Work At the 14th Congress
of the RCP(B), in "Works" Volume 7, Moscow, 1954, p.108-9.
"The second deviation lies.. in an underestimation of
the role of an alliance between the working class (of a colonial type country)
and the revolutionary bourgeoisie against imperialism.. That is a deviation
to the Left , and it is fraught with danger of the Communist Party being
divorced from the masses and converted into a sect. A determined struggle
against that deviation is an essential condition for the training of real
revolutionary cadres for colonies and dependent countries of the East."
J.V.Stalin, "The Political tasks of the University of
the Peoples of the East", In Works", Vol 7. Moscow, 1954, p.154.
A colonial type country is
one which is industrially relatively undeveloped and which is under the
economic, and possibly the political, domination of a Great Power - in
the 20th century an imperialist country.
A COLONIAL-TYPE COUNTRY MAY BE :
1. A colony ie. under the
open direct political rule of a dominating Great Power;
2. A semi-colony ie. nominally
independent but with its economic system largely dominated and controlled
for the benefit of the ruling class of a dominating great Power;
or 3. A neo-colony ie. a former colony which has
become nominally "independent" but which continues to have its economic
system largely controlled for the benefit of the ruling class of the same
dominating Great Power which formerly ruled it directly.
The nominal "ruling class" of a semi-colony or of a neo-colony
is one which is dependent on the ruling class of the dominating Great Power.
CLASSES IN THE COLONIAL-TYPE COUNTRIES.
Sooner or later the struggle for national liberation
from the domination of the Great Power concerned develops in every colonial
type country. In the 20th Century, in general:
the classes in a colonial-type
country which could be benefitted by the national liberation are :
1. The working class
2. The urban petty-bourgeoisie
3. The peasantry and
4. The national bourgeoisie, that section of the capitalist
class whose whole interests are held back the domination of the Great Power.
In general, the classes in a colonial-type
country which have interests that would be harmed by the national liberation
1. The landlord class; and
2.The comprador bourgeoisie, ie. that section of the
capitalist class the interests of which (mainly commercial and financial)
are dependent upon the domination of the Great power.
ENTRY OF BRITISH IMPERIALISM, DISINTEGRATION OF ORIENTAL
DESPOTISM AND DEVELOPMENT OF THE INDIAN MERCHANT CLASSES
By the end of the 18th Century, India was not a single
State. However significant links between parts of the sub-continent had
been established. These resulted in Indian trade nets that antedated the
British East India Company, but were then used by the colonists:
"At the beginning of the colonial era the Indian
merchant communities already had well developed financial and trade networks.
These networks were used by the Europeans, the British in particular, for
their own ends ie. colonial plunder and conquest "
Trade developed along regional lines reflecting the lack
of a single state. These regional differences became important in later
D.N."Indian big bourgeoisie and the national question."
Economic and political weekly, 4 March, 1989. 454-456.
"India rarely had a unified state structure, with centralised
extraction of the surplus. This is particularly so with regard to the Deccan,
which was only rarely directly subject to the powers that ruled the Gangetic
plain. The Gangetic plain, on the other hand was more often than not under
the rule of a single kingdom. The Gangetic plain is the Hindi-Hindu heartland
The British brutally remedied the lack of a unified
State. In doing so, they took advantage of various unscrupulous feudal
rulers like Mir Jafar, but they were also helped by the merchant-bankers:
D.N. Ibid. p.454
"When even some of the feudal rulers joined the peasants
and rebel soldiers in fighting British rule in 1857, the men of money on
the contrary, were invariably on the side of the British." The Jagat Setts,
the Nathijjiis, the Rustomjis or the Tagores clung to the foreign company.
The Mutiny of 1857 found the men of liquid money generally on the
British side. The services of Lala Jotiprasad, Nansiala Abechand or the
Muttra Sethijis who financed the authorities in those days was long remembered."
From herein on, the Indian merchants:
DN, Ibid, Citing Sinha N.C. "Studies in Indo-British
Economy Hundred Years Ago." Calcutta 1946 p.23
"Functioned as mercantile and money lending agents of
British capital.. following 3 main routes. One followed the coast from
Bombay into Central India.. across the Indian Ocean to Arabia, Africa and
China. The Parsis and the Gujerati Banias were the main communities involved,
along with them were.. the Bhatias, Cutchi Memons etc. The Second movement
was a basically external one of the Nattukotai Chettiar moneylender-merchants
from Madras to Ceylon, Burma and South-East Asia. The 3rd movement was
of Marwari capital from North West Rajputana supplemented by Khatri capital
from Punjab, along the Gangetic plain to Calcutta and the North East."
Throughout this period, the British continued to demolish
the achievements of the previous Mughal rulers of the central part of India;
and their equivalents in the South and elsewhere. Prior to the entry of
the British on to the stage of the Indian sub-continent, various dynasties
of Oriental despots had stressed the need for unity between Hindu and Moslem
(and later with Sikh). Except for short periods when communalism was fostered
for political ends, appointments to the royal courts deliberately crossed
religious barriers. For example, Mughal emperors would appoint Hindu Prime
Ministers to ensure a stable fiefdom.
Ibid citing Rajat K. Ray : The bazaar in Tripathi ed
: "Business communities of India" 1986. Delhi.
When Britain first started despoiling India, the impoverishment
of the latter for the enrichment of the former, led to the compete ruin
of the "stable" Oriental Despotic Mughal and Hindu Princely States.
The British destroyed both public irrigation works and the land system,
ruing the country's agricultural system and dispossessing the peasantry:
"Public works (ie cisterns canals and roads ED) have
been almost entirely neglected throughout India.. The motto has been :
Do nothing, have nothing done, let nobody do anything. Bear any loss, let
the people die for famine, let hundreds of lakhs be lost in revenue for
want of water or roads, rather than do anything."
INDIAN MERCHANTS AND DEVELOPMENT OF INDIAN NATIONS :
Lt.Col. Sir Arthur Cotton : "Public Works in India" Madras;
Because trade was largely controlled by certain communities,
particular regions of India became dominant in the mercantile businesses.
The less well developed regions were unable to prevent influx of aggressive
experienced traders. To follow this development, it helps to distinguish
the various sub-types of the merchants :
"There were two types of merchants, one being long distance
merchants and bankers who were of high caste status usually vaishya caste
of dwiyas (twice born) like the Marwari and Gujerati Banias and
the Agarwal and Vaish communities of United Provinces; though the
Nattukotai, not being twice born were an exception. The other were low
caste and mainly peddlers and retailers at the village level. The former
were able to accumulate enough capital to transform themselves into industrialists."
Other differences took on ethnic and linguistic forms in
Eastern India and other regions:
D.N. Ibid, p.454.
"In the homeland of the great Bania communities, the
Marwari and the Bania communities, and the Agarwal and the Vaish communities
of UP were numerous in their native places and were thus to be found at
all levels of trade and finance - from the village Bania to the all-India
hundiwal (Bill-Broker). But away from the heartland of the great Bania
communities, caste and ethnic distinctions tended to reinforce the distinctions
between the top controlling level of the indigenous trading and the peddling
and retailing levels of rural and urban trade. In Punjab, the ascending
scale of caste status distinguished the baking and merchant communities
from peddlers, carriers, cattle dealers, green grocers and liquor and meat
sellers. In Eastern India the distinction assumed an ethnic and linguistic
form. Biharis, Oriyas, Bengalis, and Assamese were overshadowed in the
higher levels of indigenous banking and trade by migrant communities from
Marwar, Cutch and Gujerat."
These differences often created tensions:
Cited by D.N. p.455 from Ray, Ibid.1984, 241-242.
"Ray points out that the Provincial Banking Enquiry Committee
Reports were full of complaints from the local traders, Bengalis, Oriyas,
Assamese, and so on about the unfair dealing and practices of the Banias
from Rajputana and Gujerat.. "
The relevance to developing a "national consciousness" is
D.N. Ibid p.455.
"The discrimination the local traders experienced
at the hands of the upper level of merchant bankers certainly played a
role in fuelling the development of a regional, sub-national or, more correctly
called a national consciousness."
As judged from constant clashes, India has enormous problems
between the Center and the States. In fact India is a multi-national state.
The Soviet ethnologist, Dyakov pointed out that the later Indian
multi-national state was dominated by a Gujerat-Marwari clique based largely
in the heartland of India. Bland has suggested, this should be amended
to a dominant clique of Gujerati-Marwari-Parsi clique (Source from Alliance).
Bland refers to Prakash, who cites ownership data of modern industry:
D.N. Ibid, p.455
"The classification of 75 larger industrial houses made
by the Monopolies Inquiry Commission shows that the Gujeratis and Parsis
control 37% of the total assets of these houses, the Marwaris control 25%
and foreign houses control 13.5% - making a total of 5.5% of the total
assets of these houses controlled by the Gujeratis, Parsis, Marwaris and
The question arises:
K.Prakash: " Language and nationality politics in India"
Madras, 1973; p. 137.
"Why did the merchant-bankers of the Hindi heartland
not play a similar role in the development of a regional, national consciousness
in the Hindi belt ? Why is it that what developed in this region was only
a pan-Indian consciousness ? The reason for this could lie in the fact
that this region did not have itself much of an indigenous trading community.
The merchants and traders, down to the village retailer, came from the
great Bania communities. Thus there was no local trading class that could
have an interests in carving out a regional market, through the spread
of a regional national consciousness. Further the merchant class in this
area was already operating on a Pan-Indian scale. They had spread through
the country and beyond in the Pax Britannica. Thus for them the interest
was not just some regional market but the all India market. The consciousness
they wanted to build, was that of the Pan-Indian identity. In fact they
stood opposed to the expression of the various regional national identities.
The above situation did not change much in the transition from merchant
Post-Partition, this class opposed the national aspirations
of the smaller regional nascent bourgeoisie. The big Pan-Indian bourgeoisie
were aided by the hyperbole and mysticism of Gandhi's preaching of ancient
Hindu (which was taken to be equivalent to Indian) society; and the Indian
National Congress (INC) attitude to Muslims. In fact D.N. conjectures
that the views of the big bourgeoisie formed one of the reasons why the
INC did not oppose the Partition of India in 1947. The big
bourgeoisie favoured Partition over an alternative option of a Federation
which would have yielded major power to the other competing bourgeoisie,
not just the bourgeoisie in the Muslim areas. The leading industrialist,
Birla, was particularly against a Federation.
D.N. Ibid. p.455.
THE DESTRUCTION OF THE HANDLOOM INDIAN INDUSTRY
As well as traders, Indian society had a well developed
artisan type industry. The hand loom industry with cottons was already
exporting to Europe:
"The hand loom and the spinning wheel, producing their
regular myriads of spinner and weavers, were the pivots of the structure
of that society. From immemorial times, Europe received the admirable textures
of Indian labour, sending in return for them her precious metals, and furnishing
thereby the material to the goldsmith.. It was the British intruder who
broke up the Indian hand loom and destroyed the spinning wheel.. Those
family communities were based on domestic industry, in that peculiar combination
of hand weaving, hand spinning, and hand-tilling agriculture which gave
them self supporting power. English interference.. dissolved them.. by
blowing up their economical basis.."
Among the first steps of British imperialism in their
penetration into India was the dismantling of any independent industry.
Karl Marx commented that:
Karl Marx in "The British Rule in India" In "Articles
on Britain." Moscow, 1971. p. 171.
"Till 1813 India had been chiefly an exporting country,
while it now became an importing country; and in such quick progression
that already in 1832 the rate of exchange which had been generally 2/6
per rupee sunk down to 2/ per rupee. India, the great workshop of cotton
manufacture for the world, since immemorial times, now became inundated
with English twists and cotton stuffs.. the whole character of the trade
changed.. After its' own produce had been excluded from England, or only
admitted on the most cruel terms, British manufactures were poured into
it at small and merely nominal rate, to the ruin of the native cotton fabrics."
By 1840, Sir Charles Treveleyan was able to tell the
House of Commons Select Committee on the British East India Company:
Marx "The East India Company - its history and results
" Ibid p.180-181.
"We have swept away their manufactures; they have nothing
to depend upon but the produce of their land ". Cited
p.5. Perspective on India. HK (Source from Alliance)
Inter-capitalist rivalries had however set in amongst British
rivals early in the East India trade. Initially there were battles against
the monopoly of the East India Company. These culminated in the denial
of their monopoly trade. But then came an even more complicated situation:
"Till (1813).. the interests of the moneyocracy which
had converted India into its landed estates, of the oligarchy who had conquered
it with their armies, and of the millocracy who had inundated it with their
fabrics, had gone hand in hand. But the more the industrial interest became
dependent on the Indian market, the more it felt the necessity of creating
fresh productive powers in India, after having ruined her native industry.
You cannot continue to inundate a country with your manufactures, unless
you enable it to give you some produce in return. The industrial interest
found their trade declined instead of increasing.. the power of consuming
their goods was contracted in India to the lowest possible point."
Because of this, both the native Indian industrialist, and
the British industrialist based in India, continued to have problems in
building any sort of totally independent industry. Marx commented that:
Marx, Ibid p.181
"The (British industrialists) found that in all attempts
to apply capital to India they met with impediments and chicanery on the
part of the India authorities. Thus India became the battle field in the
contest of the industrial interest on the one side and of the moneyocracy
and oligarchy on the other."
SURVIVAL OF SPECIALISED PRIMITIVE SMALL SCALE INDUSTRY
Marx, p.181 Ibid.
Though British efforts destroyed the handicrafts industries,
it did not entirely eliminate them. In fact small scale "lower forms" of
industry were preserved. Naturally these were unable to accumulate large
"The exploitation of the direct producers, particularly
peasants was intensified and the chances for saving were minimised. This
put a brake on the development of productive forces and the introduction
of modern techniques. The immutable system of reproduction and the way
of life in the countryside.. ensured the traditional demands for consumer
and producer goods. There was to put it in another way, a direct relation
between the persistence of the backward productive forces in agriculture
and the preservation of the lower forms of industry. "
But the vast oversupply of labour, gave small entrepreneurs
and owners of manual establishments the ability to cut costs:
Shirokov G.K. "Industrialisation of India",
Moscow, 1973. p.15.
"The small producer - the semi-independent craftsmen,
cottage workers, and so on - held on to their hereditary occupations even
though their incomes often fell short of the physical minimum of subsistence.
Such cases were frequently in industries traditionally reserved for definite
castes (chamars in tanning and shoe making, juhals in hand - weaving)."
A final reason for small entrepreneurial survival was the
nature of the market:
Shirokov p.16 Ibid.
"Differences in the national, caste and religious composition
as well as in climatic conditions, created specialist demands for the various
types of manufactured goods sold in the markets in different parts of India.
Mechanised enterprises with their standardised and mass production found
it unprofitable to put out goods satisfying the requirements of the different
castes or of the relatively small groups of people.. since foreign capital
had a monopoly of equipment and technical know-how, the handicraft industry
was in essence the sole sphere of production which promised the majority
of small entrepreneurs a share in industrial profits.. The entrepreneurs
had some special advantages in the sphere of industrial production.. no
big capital expenditures.. usually the workers worked in the homes, had
little contact with each other and could not organise.. Thus in competing
with small entrepreneurs, factory industry foreign and local failed to
make full use of its advantages : low production costs, cheap finished
articles, standard designs and mass production."
Inevitably, the end result of this survival of the most vigorous
of the handicraft producers was their growth into capitalist industry:
Shirokov G.K. Ibid p. 18.
"Competition coupled with the advance of capitalism transformed
some village industries and urban handicrafts into small scale commodity
production and then into the lower forms of capitalist industry - simple
co-operation and the manufacture system.. so the turn of the century was
marked by a certain reinvigoration of the small scale industries."
But accumulation was not high enough to allow an easy transition
into capitalist industry. In fact there was only one way that enough big
capital could be developed:
Shirokov G.K., Ibid, p.18-9.
"Such big capital did not develop from smaller industrial
capital but from within the comprador-moneylender network, where profits
were high and there were certain opportunities of accumulating a money
hoard in the colonial situation.. thus it was the classes most intimately
connected with the colonial and feudal exploitation of the country that
made the transition to capitalist industry."
The origin of Indian Big Capitalism was then initially under
the thumb of Comprador capital. ie. That section of the capitalist
class in a colonial type country, most dependent upon, and intimately linked
to foreign capital.
DN, Ibid. p.455.
INDIAN RAILWAY AND LAISSEZ-FAIRE
Initially, the British state refused to aid even British
owned industry in India, was justified by the ruling theory in economics
- Free Trade and with it Laissez Faire. Ironically, the days of Laissez-Faire
"The hey day of the British power in India was the high
noon of laissez faire economic doctrine. To interfere as little as possible
with economic progress was considered to be the highest wisdom.. (but)
the financial emergency of the Mutiny (1857-1859) left the Government with
a pressing problem of way and means."
But, as Lenin pointed out, imperialism was marked by the
export of capital. The mercantile period of colonial development of India
was coming to an end, and a new phase was beginning. Given the low returns,
and the uncertainty of investment in India at that point (other than investment
in trading) private enterprise was unwilling to provide financing for heavy
industry. It was the State itself that broke the expressed sanctity for
Laissez Faire. The single great State sponsored act in India was the creation
of the Railways.
The Oxford History of India " V.A.Smith, 4th Edition
edited by P.Spear, Delhi, 1988. p.703.
Lord Dalhousie had already proposed in 1853 a national
system. But the State had to underwrite the whole scheme, in order to lure
private financing. A 5 % guaranteed rate of interest was the bait, with
the 50% share with government of any profit above that initial figure.
The cost of the operation was enormous; the rail lines in operation in
1868 cost Pounds Sterling PS 18,000 per mile rather than the planned PS
8,000 (Oxford History, Ibid, p.707).
By 1910, figures from Sir George Paish showed that India
and Ceylon were the 5th largest recipient of British capital exports. Of
"Just under PS 271 million of British capital exported
to India by 1910 - 75 of the total- had been invested in India."
Marx foresaw that the inevitable effects of the railway,
(despite the intentions of the builders) would be progressive. That is
to say, the effect would be to build the basis of an industrial society:
B.R.Tomlinson. "The Political Economy of the Raj 1914-1947",
Surrey, 1979 p.4
"I know that the English millocracy intend to endow India
with railways with the exclusive view of extracting at diminished expense
the cotton and other raw materials for their manufactures. But when you
have once introduced machinery into the locomotion of a country which possesses
iron and coals, you are unable to withhold it from its fabrication. You
cannot maintain a net of railways over an immense country without introducing
all these industrial processes necessary to meet the immediate and current
wants of the railway locomotion and out of which there must grow the application
of machinery to those branches of industry not immediately connected with
railways. The railway system will therefore become in India truly the forerunner
of modern industry."
THE COLONIAL MANAGING AGENCIES
Marx "The future results of the British Rule in India",
In Ibid. p. 201.
Usually, the British industrialist was linked to the Indian
marketplace by a Managing Agency. These Agreements became a convenient
institution for both the industrialist in Britain and the local Anglo-Indian
merchants, as resident British traders were then called.
"The merchants had a unique opportunity to branch out
from export trading into production for exports only if they acquire new
funds; for their part London and Liverpool houses would only supply capital
if they could find reliable management able to cope with alien conditions
at the end of what was still.. a long and erratic line of communication."
The structure of the agency would be such that it would be
represented in the Board of Directors of Joint firms; and one of its partners
would act as Chairman of the board. They would receive a percentage of
profits, commission on sales, and an allowance for services; plus interests
on loans or fees. In practice:
M.Kidron, "Foreign Investment in India", London,
"The Managing agency.. became the decisive partner, so
much so that companies managed by foreign controlled managing agencies
are officially considered to be foreign controlled whatever the ownership."
Because they eliminated middlemen and the banks, they were
able to ease financing. So the agencies could easily become very diversified
in function. Their portfolios would run the gamut of industry. Furthermore
they tended to be quite "interlocked " in character. That is to say, there
were often joint directorships; across several firms and spanning several
sectors of industry.
M.Kidron, Ibid, p.5
THE INDIAN CAPITALIST CLASS BECOMES INDUSTRIALISED
Railways were a major factor tending towards consolidation
for the developing bourgeoisie of India. In the interim, the merchant communities
of India had primarily become linked with British capital as outlined above.
Before there could be a transition in Indian merchant capital to industrial,
certain internal and external factors were required.
Internal conditions included the accumulation of money,
the existence of a market for the commodities, and the existence of a labouring
class. These conditions were present.
The external condition was the technology and machinery,
which had to be imported from Britain since the "normal" developmental
stage in India had been bypassed.
Inducements for the British imperialist-capitalists were
necessary. These were Firstly, the tendency in capitalism for the
rate of profit to fall, prompting that phase of Imperialism identified
by Lenin as marked by the export of capital not goods; Secondly
as Marx noted (see above) the growing need of the British capitalists for
a market rich enough to absorb British goods:
"The falling rate in profit in capital invested in Britain
was forcing capitalists to seek outlets in the colonial countries for more
profitable investment. The machinery manufacturers took the lead in this
export of capital to the colonies where machinery could be sold at much
higher prices than those prevailing in the market at home in Britain."
The railways provided a major stimulus to Indian industry:
D.N. Ibid, p.455-56.
"The economic effects of railway construction were very
great. Railways.. transformed the famine problem and made the Famine Code
a working proposition.. trade was revolutionised by making possible production
for a market and the opening up of the interior to large scale operations.
Plantation and factory industries were made possible because coal could
be supplied for power at the points of production. Finally India was brought
within the orbit of world economy and the range of world prices.. the railways
did what they did elsewhere, they hastened the transition from handicraft
to mechanical industry by transforming the transport situation, They were
an essential preliminary to an industrialized India.. the new industries
were made possible.. the first was the cotton mill industry. The new industry
did not so much as replace the old handicraft weavers as grow up in the
face of a practical monopoly.. it was not until 1853 that the first successful
Indian cotton mill was started in Bombay.. Real progress began with the
opening of the Empress Mill at Nagpur by the Parsi J.N.Tata in 1887.. by
1914 India was reckoned to be fourth in the world list of cotton manufactures."
As well as cotton, other industries started up like jute:
Oxford History, Ibid, p.710.
"The jute industries were originally a handicraft of
Bengal with small export market. Its' value was first realized in 1838
when export started to Dundee in Scotland. But Bengal jute could only be
used for the coarsest goods owing to the lack of standards in cultivation
and local manufacture was impossible owing to the lack of means of power..
Improved methods of cultivation.. and.. the development of Indian coal
by the new Indian Railway made jute manufacture in Bengal possible.. By
1908 Indian output exceeded that of Dundee. Throughout (1870-1930) India
enjoyed a virtual monopoly of jute production. Jute made Calcutta, as cotton
made Bombay, Madras, and Ahmedabad industrial cities."
But ultimately the most significant industry to become established
was the iron and steel industry - itself the basis of any large scale industrialisation.
In turn this depended upon coal. It is notable that this was entirely Indian
owned and financed:
Oxford History, Ibid p.711.
"Modern industries could not have grown without railways
and railways could not have worked without coal. Progress was steady. In
1868 1/2 million tons were produced.. in 1938 it was over 28 million tons.
India was virtually self-sufficient in one of the essentials of heavy industry.
Associated with the new coalfields came the iron and steel industry.. The
industry was finally established by the efforts of Jamshed Tata.. his sons
founded in 1907 the Tata Iron and Steel Company (TISCO) at Jamshedpur in
Bihar. By the end of the period this plant was the largest single plant
steel works in the world.. India ranked sixth in the list of steel producing
countries. The whole steel industry is a monument of Indian enterprise
and skill built up entirely on Indian capital."
As Mabendra Nath Roy (M.N.Roy) says:
Oxford History. Ibid.p.711-12.
"So till the closing decades of the last century, the
Indian capitalist remained a ridiculous adjunct to the imperial capitals.
It was not until the 1880's that he demanded a more dignified position.
This renaissance of Indian capitalism was marked by a strong tendency towards
industrialism, and brought into being a city proletariat, separated from
the ranks of the proletarian nation."
DEVELOPMENT OF THE INDIAN PROLETARIAT
M.N.Roy "India in Transition." p.371. Contained in
Documents of the History of the Communist Party of India
Ed.Adhikari Vol 1 1917-1922. Delhi, 1971.
The development of the bourgeoisie inevitably meant the
development of the proletariat. As M.N.Roy put it:
"After the real industrialisation of the country began..
in the closing decades of the 19th Century, a revolution in the movement
of the population became quite marked. Several large cities had come into
existence with their industrial centers.. where a considerable number of
workers were attracted from the villages.. the industrial centers did not
grow in the same districts of modern India where in the early days had
flourished the towns inhabited by a rich trading and prosperous artisan
class.. But the native capitalists had to go through a protracted struggle
with the foreign ruler before they could build modern industries to any
considerable extent. Therefore during the 30 years from 1880 to 1910 the
growth of modern industrial centre in India was rather slow. The number
of toilers living on wages accumulated in urban centers still remained
very small.. since the beginnings of the 20th century, and especially during
the last 6 years, there has been a steady influx of workers from the village
to the city.. the cost of living is much higher in the towns than in the
villages, the worker becomes disillusioned discontent follows.. the struggle
for life is harder and more acute.. Indian workers in modern industries
were mostly unskilled until 10 years ago (ie. 1912) and the permanent presence
of a huge army."
Exactly how fast was the pace of development? - would be
contended by various Marxist-Leninist commentators. Both Lenin and Stalin
recognised a bias in Roy, which was to overestimate the growth of the proletariat.
However, the strike waves of the Bombay mill workers in 1928 set
off India wide strikes that testified to the growth of the Indian proletariat.
It was this strike wave that prompted the British imperialists to launch
their direct attack on the Indian workers and peasants through the Meerut
Conspiracy Case. At the same time the Comintern (CI), by now
in the hands of Otto Kuusinen and others entered into an Ultra-Left phase
that attacked the workers from the left. This is discussed in greater detail
M.N.Roy Cited by Adhikari, Ibid. p.375.
THE POLITICAL REPRESENTATIVES OF INDIAN ASPIRATIONS
"From the Indian natives, reluctantly and sparingly
educated at Calcutta under English superintendence, a fresh class is springing
up with the requirements for government and imbued with European science."
Eventually it was bound to be the case that indigenous Indian
educated elements would arise and threaten British rule. As a means of
self-defence, the British helped to create the Indian Congress Party
(INC) - seeing in it a way of neutralising the political activity
of the Indian middle classes. The founder of the Indian Congress was a
very shrewd British administrator, Allan Hume.
Marx, in "The Future Result of the British Rule in India"
In Ibid. p.198.
Hume had watched the rise of famine and the reaction
of the population with mounting concerns, lest it should provoke more serious
agitation. As his biographer said of his motives:
"These ill starred measures of reaction, coupled with
Russian methods of police repression, brought India under Lord Lytton within
measurable distance of a revolutionary outbreak, and it was only just in
time that Mr.Hume and his Indian advisers were inspired to intervene."
The First Congress was in Bombay, in December 1885. Hume
himself expressed the role of INC in this way:
Sir William Wedderburn, "Alan Octavian Hume", London,
"A safety valve for the escape of great and growing forces
generated by our own action, was urgently needed and no more efficacious
safety-valve than our Congress movement could possibly be devised."
The Vice-Roy Lord Dufferin saw the wisdom in this:
Wedderburn, Ibid. p.77.
"Putting aside the demands of the extremists.. the objects
even of the more advanced party are neither very dangerous nor very extravagant..
Amongst the natives I have met there are a very considerable number who
are both able and sensible, and upon whose loyal cooperation one could
undoubtedly rely. The fact of their supporting the government would popularise
many of its acts which now have the appearance of being driven through
the legislature by force; and if they in their turn had a native party
behind them, the government of India would cease to stand up, as it does
now, an isolated rock in the middle of a tempestuous sea, around whose
base the breakers dash themselves simultaneously from all the 4 quarters
of the heavens."
Among the ruling echelons of the British, there were some
concerns however. Some anticipated that INC might be a double edged sword,
such as Sir Auckland Colvin, the Lieutenant Governor of the north-Western
Provinces. He warned in October 1888, that Hume:
Lord Dufferin, Cited by Sir Alfred Lyall. "The Life of
the Marquis of Dufferin and Ava." Vol 2. London. 1905, pp.151-2.
"Was unleashing forces he would not be able to control."
Similar considerations led to a parallel organisation
aimed at the Muslims, the Muslim League. This vehicle was a continuation
of the policy of "Divide and Rule" that the British had used from their
earliest days in India. Lord Elphinstone Governor of Bombay sent to the
Enquiry on the causes of the Indian Mutiny of May 1857 (led by Nawab
Mahmud Khan) a memorandum stating:
M.J.Akbar: "Nehru: The Making of India." London,
"Divide et impera was the old Roman motto, and
it should be ours. I might perhaps hesitate to express my conviction so
decidedly if I were not able to show that my views upon this subject are
entirely in accordance with those of the Duke of Wellington."
Many other citations bear witness to this conscious policy
of the British, which in general contrasted with the behaviour of the previous
Emperors of India, the Muslim Mughals. The Mughals sought harmony between
Hindu and Muslim, the emperors often appointing Hindu Prime Ministers.
Not that religious feuds and riots (Communalism) never occurred
before the British arrived. But the British had a conscious widespread
policy of using these divisions.
Cited by Akbar, Ibid, p.33.
The logical goal was a "Two Nation -Hindu and Muslim"
Theory in a modern "National" form. This was first enunciated by a British
stooge, Sir Sayid Ahmed in 1887. He had been knighted for his defence
of Empire against the Indian Mutiny.
The logical divisive step was for a separate party to
siphon off the energy of the Muslim agitators. Lord Minto, the Vice
Roy mediated the formation of the Muslim League party in 1906. Minto's
private secretary, Dunlop Smith wrote to Minto:
"I must send Your Excellency a line to say that a very
big thing has happened today. A work of statesmanship that will affect
India and Indian history for many a long year. It is nothing less than
the pulling back of 62 million of people from joining the rank of the seditious
SPLITS WITHIN CONGRESS
Cited, Akbar, Ibid, p.68.
So the Indian National Congress (INC) was clearly
initially a movement set off by the British as a false trail, to divert
the developing Indian nationalist movement. However, it came to be a very
broad umbrella that included diverse individuals and groups. It could not
ultimately completely suppress the tides of nationalism.
Early on Two Wings of the Congress became clearly demarcated.
They were represented by Gopal Krishina Gokhale and Bal Gangadhar
Tilak. The former represented a Moderate wing:
"Gokhale was to become the voice of moderation.. He reconciled
a real Indian patriotism with loyalty to England. The two he believed -as
did Motilal Nehru- were necessarily compatible."
Naturally, this bred a response that was more vehemently
anti-British. At first these responses were exemplified by the Arya
Samajand formed by Dayananda Saraswati; and Vivekananda. Both
sponsored Hindu Revivalist societies aiming at fostering pride in Indian
traditions, including Hinduism. But it was Tilak, that really formulated
a viable movement that stood for a more firm militant stand. This wing,
termed the so-called Extremists can be considered the germs of the
native revolutionary bourgeoisie, and called for:
"Nehru-a Political Biography", Michael Edwardes, Harmondsworth,
"Swaraj", complete independence and no compromise,
'militancy not mendicancy' was his rousing slogan.. He was extremely successful
in arousing mass support and militant action.. (which) led to his arrest
and imprisonment and a wider dissemination of his ideas.. New methods of
protest were put into practice. There was a boycott of British goods and
a general shut down of business. The moderates in Congress now found themselves
trailing behind what became a more and more popular movement. The new militant
leadership while not condemning violence did call for action and not words.
Boycott, not only of British goods but of Government-controlled educational
institutions, of courts of law and the rest of the apparatus of alien rule.
The people should support "Swadeshi", goods produced in India by
Indians.. the phrase 'passive resistance' appears."
Tilak was explicitly influenced by Lenin and the Bolsheviks
Edwardes, Ibid. p.26-27.
"Tilak also praised the Bolsheviks. Like other national
leaders her too condemned the Government's anti-Bolshevik propaganda. His
paper Kesari is its issue of January 29, 1918, published an article full
of praise for Lenin whom he described as a "advocate of peace". At the
Rajputana Conference at Ajmer in March 1920, while referring to the growing
military expenditure, Tilak said that Bolshevism had just been made an
excuse for this. He explained:' Bolshevism did not conquer and enslave
countries as the British do. They only spread their doctrine which was
the power of labour over capital."
Thus early on after its formation, the Congress became a
rather confused class coalition; between pro-British compradors
and a native bourgeoisie that was the nascent revolutionary national bourgeoisie.
This tension within the ranks of the INC led to the Allahabad Conference
of the INC in 1907. At this conference, whose President was Motilal Nehru,
the ground work was laid for a spilt. The expulsion of the Extremists followed
at the next Surat Congress, from the INC.
Cited S.Bairathi, Ibid. p. 17.
The First World War provoked much debate as to
the attitudes of the nationalists. But clearly the nationalists expected
for their "loyalty" during the war to obtain some rewards later. They therefore
halted any major struggle, as did the Muslim League.
Mohandas Gandhi, having launched
a struggle in South Africa against the treatment of Indians there, left
for Britain. There he joined the ambulance forces and was about to depart
for France's battlefields. But then returned to India at the behest of
Gokhale. After the stand of the INC in 1914 to support the war in Europe,
This made it easier for the "Extremists" to return to
the party, led by Tilak and Mrs.Annie Besant. In leadership also
was Mohammad Ali Jinnah, a conservative future leader of the Muslim
League. But at this point he fought against the disunity of Muslim and
Hindu. In the Lucknow Pact of 1916, both the Congress and the Muslim
League joined together in a demand for Dominion Status. This was a significant
step against communalism, though simultaneously a step back from full independence.
Since both the Muslim League and the Congress had halted significant attacks
on British imperialism, during the First World War, this limited anti-communalism
was not a threat to the British.
Although the general orientation of Tilak had become
more cautious, younger militants were drawn into the Congress. Mrs.Besant
was voted into Congress office as the President in 1917, but her leadership
was short lived, being rejected by the younger militants in 1918.
By now Mohandas Gandhi had returned to India from
South Africa. He turned to Champaran in Bihar, where severe repression
of bonded labour and rural workers existed. Here in 1918, he organised
the indigo dye rural workers and displayed a capacity of mass agitation.
Courting arrest made him a national figure.
By 1917, the war going badly, Lord Montagu (Secretary
of State for India) had accepted the need for sops to the Indians nationalists.
Akbar cites ihs words and comments:
"The increasing association of Indians in every branch
of administration, and the gradual development of self-governing institutions
with a view to the progressive realisation of responsible government in
India as an integral part of the British Empire."
As Gandhi put it in a letter to Lord Chelmsford on
30 April 1918:
Montagu was buying Indian support for the war.. Sir James
Meston warned that not only was nationalists feeling greater than ever,
but that Hindus and Moslems were united.. there were other worries too:
about the spreading impact of the Russian revolution."
Akbar Ibid, p. 112.
"I recognise that in the hour of its danger we must give,
as we have decided to give, ungrudging and unequivocal support to the empire
of which we aspire in the near future to be partners in the same sense
as the Dominions overseas. But it is the simple truth that our response
is due to the expectation that our goal will be reached all the more speedily."
However the quid pro quo, after the end of the war as found
to be "entirely unacceptable " as Tilak said. The 1918 Montagu-Chelmsford
Reforms had rejected the Congress demand for Dominion status. Coupled
with this were draconian anti-revolutionary and nationalists Bills which
abolished democratic rights, called the Rowlatt Act, after Justice
Rowlatt of the Kings bench High Court.
Cited Akbar Ibid, p.113.
It was only now that Gandhi launched a Satyragraha
campaign aimed at non-cooperation with the British administration. This
movement became rapidly very widespread.
On 11 April 1918, General Dyer inflamed the Indian
masses even more by his brutal slaughter of over 500 dead in Jalianwalla
Bagh, in Amritsar. Gandhi halted the movement (p.118, Akbar Ibid).
He would continue to retard the movement at key times. Despite Gandhi's
temporary alliance with the progressive Muslim Khilafat movement
he clearly was a Hindu obscurantist of the worst reactionary stripes. Tilak
died in 1920, leaving Gandhi clear passage. Gandhi's staunch conservative
allies in the Congress were Villabhai Patel, Rajendra Prasad, and C.Rajagopalachari.
Gandhi rapidly took control of the Congress. He imposed strict non-violence.
When despite this, on 4th February 1922, at
Chauri Chaura the masses erupted into violence Gandhi performed a trick
that was to be repeated at key times in the future - he called off Civil
Disobedience campaigns. Akbar notes that Gandhi said:
"This Swaraj stinks in my nostrils."..
As Edwardes comments:
On 11 February the Congress Working Committee quietly
substituted the revolutionary call for mass civil disobedience with a 'constructive
programme' of spinning, temperance, education and reform.. To do anything
else Gandhi said, would be to succumb to the voice of Satan."
Cited Akbar, Ibid. p.151.
"The British had in fact learned something about Gandhi.
They now believed - and retained their belief that they had nothing really
to fear from him. While Gandhi was in control of Congress they had an unofficial
ally. As long as civil disobedience remained non-violent the Government
had little to worry about. Who was hurt by Non-Cooperation anyway ? Henceforth
the Government would leave Gandhi free as long as possible, arresting him
only when it seemed that he was losing his influence which could only be
refreshed by a small martyrdom. Meanwhile the Government would take more
positive action against the terrorists and the Western-style revolutionaries
whom they really feared."
Jawaharlal Nehru, the son of
Motilal Nehru, was a more complicated character. Though certainly an acolyte
of Gandhi, he cultivated a more radical position. Nehru was clearly influenced
by the Bolsheviks just as Tilak had been:
Edwardes, Ibid, p.47-8.
"Nehru in "Soviet Russia" in 1928, wrote about :"that
strange Eurasian country, Russia where workers and peasants sit on the
throne of the mighty.".. and spoke "And Russia what of her? An outcaste
like us from many nations and much slandered and often erring. But in spite
of her many mistakes she stands today as the greatest opponent of imperialism
and her record with the nations of the East has been just and generous.""
Often Jawaharlal Nehru was able to unite factional splits.
He and Maulana Azad, were able to form a Center party in 1923, within
the INC. This defused and prevented an open split between those who wished
to contest elections and change tactics away from Gandhi's abstentionism,
the Pro-Changers (led by Motilal Nehru and C.R.Das) and their opponents
the No-Changers (led by Rajendra Prasad).
Cited Bairathi, S: Ibid. p.17-8.
However Nehru was also beholden to Gandhi, and was not
able to break with Gandhi. But he rejected non-violence, and he attacked
obscurantism at various moments. He tried to abolish the name Mahatma,(p.165
Akbar) and said of the religious elements in the INC:
"At the growth of this religious element in our
politics, both on the Hindus and the Muslim side, I did not like it all.."
After Chauri Chaura and Gandhi's back down at a critical
Cited, Akbar, Ibid, p.141.
"Jawaharlal could conceal neither his amazement nor his
anger. He unlike Gandhi, did not find a rational answer from Gandhi to
his bitter questions. If one Chauri Chaura was sufficient to stop this
massive nation wide struggle for freedom, then the British could always
employ agents-provocateurs to sabotage the freedom movement.. "
Other sections of Gandhi's allies were also furious:
"The Muslims (the Khilafat movement) also had
no argument with violence in the use for justice. Gandhi' decision to call
off the movement after Chauri Chaura was.. bitterly inexplicable to the
Muslims.. Gandhi's lieutenants were confident that dominion status for
India was within reach of the mass campaign pushed the British hard enough.
Britain was exhausted after the First World War. The British themselves
acknowledge how close Gandhi came to success. The Governor of Bombay, Lord
Lloyd put it:
As it was, Gandhi now catered to the Ultra-Right Hindu fanatics
in side the Congress, called the Hindu Mahasabha organised in December
1913. They had adopted a Plan called Shuddhi. This meant "purification",
and was aimed at the proselytisation of the "impure", which naturally included
the Muslims (Akbar, Ibid, p.176-77). By 1924 they were in an ascendancy
and sabotaged an all-party conference on the issue of communalism. Gandhi
kow-towed to Hindu extremism, and fostered the growth of the Hindu-Moslem
rupture. A key member of his entourage, Rajendra Prasad was a member
of the committee of the Hindu Mahasabha that adopted the programme in 1924
to "popularize" the Hindi language.
"He gave us a scare. Gandhi colossal experiment came
within an inch of succeeding."
At this point, the Non-Cooperation movement was only
objectively helping the British. Though the mass nature of the movement
had been aborted, the policy of Non-Cooperation at electoral level was
still in force.
This Abstentionism deprived the Congress of another voice.
To address this, a section of Congress Opposition led by C.R.Das
formed the Swaraj Party in 1922.
By 1927 Jawaharlal Nehru was contending for the Presidency
of the Congress. He accused Gandhi in a private letter of:
"Drifting to middle class politics or babu politics".
As the Indian Statutory Commission headed by Sir
John Simon arrived in India in February 1928, the objectives of the
INC had been under discussion for some time.In May the INC had set up a
Drafting Sub Committee headed by Motilal Nehru, and this submitted its
report in August termed the "Nehru Report". This recommended that
the Constitution be based not upon independence, but on dominion status
within the British Empire. Jawaharlal disagreed. Though he still did not
breach with Gandhi and Motilal Nehru (his father) fully, he provoked turmoil
over his controversial resolution for discussion at the Madras Congress
in December 1928. This read:
(Cited Akbar, Ibid, p.204).
"This Congress declares the goal of the Indian people
to be independence with full economic control over the defence forces of
the country, the financial and economic policy and the relations with foreign
countries.,. The country demands that this right of the people of India
should be forthwith recognised and given effect to, in particular by the
complete withdrawal of the alien army of occupation."
In these demands, Jawaharlal Nehru was repudiated by the
Mahasabha and pro-Gandhi forces like Rajendra Prasad. Motilal Nehru's Report
was accepted. But Jawaharlal did manage to secure a proviso; that if dominion
status had not been obtained within twelve months, Congress would revert
to its demand for complete independence and would organise a country wide
civil disobedience campaign. Gandhi himself broadcast the news of this
Cited Akbar, Ibid, p. 202.
Jawaharlal Nehru and Subhas Chandra Bose and Zakir
Husain, now formed the Independence For India League within
the INC with the declared aim of:
"The achievement of complete independence for India and
the reconstruction of Indian society on a basis of social and economic
The League decided to affiliate to the League against
Imperialism. In 1931, the League Against Imperialism (under the Ultra-Left
turn of the revisionist Comintern) expelled the Independence for India
Overstreet and Windmiller, ibid, p.126.
Another manifestation of the more determined wing of the
INC was the formation of the Congress Socialist Party (CSP).
In 1934, in protest against the Congress resolutions on private property
and the conditions of the working class, Rafi Ahmed Kidwai and Subhas
Chandra Bose formed the Congress Socialist Party as a pressure group.
Other leaders were Jayaprakash Narayan, Acharya Narendra Dave and Achut
Patwardhan. They appealed to Jawaharlal to join, and to target the
Gandhi threatened to leave Congress if the CSP became
too powerful. During this period, Jawaharlal was confronted by the right
wing of the Congress (including Birla). Gandhi effectively prevented an
overt expression of the Congress Socialist Party's views in the form of
a binding resolution , ever taking place.
1. There were clear differences
in the degree of militancy of members in the INC.
2. Gandhi objectively represented the most servile
and ultimately compliant wing of the Indian native bourgeoisie that came
to represent the comprador faction.
3. Jawaharlal Nehru came to represent a more determined
nationalist wing. Together with other possible progressive nationalist
forces within the INC (eg. The faction around C.R.Das), this wing was opposed
to the more moderate wing of Gandhi. But this wing was itself "vacillating",
and also anti-Communist. It would back down in future whenever there was
a possibility of a socialist up-turn of the masses. But it was more militant
than was Gandhi; and did not wish to settle for less than full independence.
4. This meant that there were
two wings in the Indian Congress party. This allowed a certain flexibility
for work within the INC by representatives of the Indian working class
and peasantry. As we will see, this line in colonial-type countries was
explicitly endorsed by Stalin.
5. In summary, the INC was
a class coalition between representatives of the comprador capitalist class
and a developing national capitalist class. This latter was mainly if not
entirely, composed of the Marwari nation.
The confusing nature of the class coalition ensured that
the real objectives of the INC were obscure to most observers. Stalin,
had however pointed out by 1925, that the INC was in effect a class coalition;
and that both sections were timid; and that the worker and peasants should
take over the leadership (See p.80). Unfortunately this thrust did not
achieve fruition, sabotaged as it was at a critical juncture, by a revisionist
OWNERSHIP OF INDIAN BUSINESS AND INDUSTRY PRE WWI.
COMPRADORS AND NATIONAL CAPITALISTS IN INDIA
The ownership, management and financial capital
underlying the large scale industries was dominated by the British. Nonetheless
it is significant that this does not mean that there was no ownership by
the native bourgeoisie. The process of development of the Indian industrial
bourgeoisie was progressing :
"Speaking generally it may be said that the capital of
the cotton industry was mainly Indian, that of the iron and steel industries
was entirely so, that of the jute half and half, while the coal and plantation
industries were mainly British together with that used for the building
of railways and irrigation and public works.. Management in the cotton
and steel industry was mainly Indian though European technicians were freely
employed, that of the jute, coal, and the plantation industries being European..
Their capital apart of course from government enterprises operated through
joint stock companies and managing agencies, the latter arose through the
convenience found by bodies of capitalist seeking to develop some new activity
and lacking any Indian experience, of operating through local agents..
the managing agency was the hyphen : connecting capital with experience
and local knowledge."
As outlined above, the representatives of Indian capitalist
to first become industrialists were the old traders that had made links
with British colonists:
Oxford History, p.713.
"The first to make the transition from trade to
industry were the merchants of Bombay, like the Jeejeebhoys and Tatas.
They imported British manufactures and exported Indian raw cotton. They
also had interests in shipping and the China trade. The Banias of Gujerat
had the same background, though with a lesser foreign trade connection.
In the interior of the country were the Marwaris, acted as merchants,
moneylender and bankers rather than carrying out proper middlemen activities.
They were important both in the internal trade of the country and in procuring
raw materials for export, though not in the actual export. This was the
second of the sections of the Indian bourgeoisie to make the transition
to industry, it included the Birlas, Singhanias and Thapars. The
third group came from among the moneylending landowners like Goenka
But simply because the merchants had been connected with
British capital did not necessarily make them indefinitely tolerable to
British capital, or compradors. Moreover, the process of coming into being
of a bourgeoisie wholly interested in its own capital, and not satisfied
with being an imperialist chained beast, is not a mechanical and rigid
one. For example, the great Birla family.
DN, Ibid. p.455
Gyanshamdas D. Birla (in the second wave of industrialists
identified by D.N. in the above quote) was originally a trader whose family
had its' first successes in the opium and cotton markets. Thereafter, as
his biographer explains, Birla was blocked repeatedly by British interests.
His further rise was helped ultimately by an Indian feudal prince. This
little story of coming into being, goes against expectations in two ways,
firstly that a feudal prince should aid the capitalists; and secondly that
a "true" comprador could change his stripes :
"Marwaris.. successfully speculated in the
opium and cotton markets. The alliance between the warrior Rajputs and
the merchant Marwaris worked to their mutual advantage. Eventually as a
consequence of the Opium War in China and trade restrictions imposed by
the British the Marwaris found themselves obliged to move out to Rajasthan
and develop new outlets.. in seed and bullion.. G.D. decided to start his
own broking business.. the British saw no reason to accommodate an inexperienced
Marwari.. at the time G.D. left for Calcutta to start a mill.. Andrew Yule
the largest managing agency in Calcutta.. did its best to hinder Birla
Brothers by gratuitously buying up land adjacent to plots already bought
for the factory, forcing the Birlas to go further South where.. the first
Birla jute mill came into operation.. G.D. having successfully floated
shares for an entirely Indian owned jute and cotton business found the
Imperial Bank initially refusing to provide capital. When they were eventually
prevailed upon to do so it was a provocatively high rate of interest compared
to that charged for British firms. Transport charges.. were raised steeply
in an attempt to dissuade Indian intrusion into what had been a British
preserve. G.D.. made friends.. with the Maharajah of Gwalior.. who proposed
that it might be in their mutual advantage if Birla Brothers could set
up a textile mill in Gwalior.. the Maharajah offered to put up part of
the money at normal rates."
Alan Ross. "The Emissary. G.D.Birla, Gandhi, and Independence."
London, 1986. p.21-31.
Naturally the discrimination that Birla experienced did
not endear the British regime to him. He later became a major industrialists
and a key business supporter of the Indian National Congress. This firm
also became one of the top 5 major monopoly business houses in India, and
the Birlas are further discussed below.
Marxist-Leninists use the term Comprador capitalist
to refer to a group of capitalists whose profit comes wholly from the role
they perform for foreign colonial capital. The term originally comes from
China, where these individuals were primarily traders and merchants. In
India traders as outlined above were clearly linked to imperialism. Marxist-Leninists
use the term National capitalists to describe the capitalists whose
business interests are primarily in industry, and who are not dependent
upon foreign capital for their surplus profit.
Some bourgeois scholars eg Claude Markovits
argue that the Marxist-Leninist distinction between these two groups of
capitalists is a fantasy. This is the view also, of those Left Revisionists
such as Trotsky who 'dispense" with the need for class alliances in the
colonial type countries. But this view is easily parried. Though it may
be that the process of separation, of native from imperialist sponsored
capitals; may be less clear in some countries than others. This does not
invalidate the view, that generally national capitalists have different
economic interests than do comprador capitalists. Markovits himself almost
admits as much.
Markovits argues that in India, the distinction between
"comprador" and "national capital" was not easy to make as there was a
great interpenetration between the commercial businesses (ie. more or less
equivalent to comprador capital) and the industrial businesses (ie more
or less equivalent to national capital) :
"It is easy to show that in India it is not possible
to differentiate between a commercial class basically linked to imperialism
and an industrial class opposed to it. In fact it is not even possible
to make a clear distinction between traders, financiers and industrialists,
most big capitalists being all there at the same time."
But Markovits can only argue that in India, a classical comprador
bourgeoisie such as in China (one purely dealing in trade) did not exist.
For he himself draws back from his previous statement to admit one special
case of "classical compradors":
Claude Markovits, Ibid." Indian Business and Nationalist
Politics 1931-1939 " p.24. Cambridge 1985.
"Actually there was in India a category of business men
who almost perfectly fitted the description of the classical compradors;
they were the great Calcutta Banians, such as Raj Badridas Goenka
or Sir Onkermull Jatia who acted as agents and intermediaries for
big European business houses. But although an identifiable group, they
were not clearly separated from the rest of the Indian business community
And Markovits even agrees that there were opposing views
within Indian capital on the entry of foreign capital, but with a large
group in the middle camp:
Markovits, Ibid. p.24.
"There was no consensus about the question of foreign
capital. Some businessmen like Walchand Hirachand opposed the entry
of foreign capital into India; others like Pheroze Sethna welcomed
it openly; most capitalists adopting a middle of the road position. "
So Markovits' conclusions are incorrect, in that he himself
discerns different groups. He does offer interesting data by which we can
see the lineage of the compradors.
Though often thought of as a uniformly comprador faction,
the Marwari community was split into two when the Birlas set up an opposition
group in business:
"In Calcutta the factional alignment in big business
was connected to the split which had taken place in the Marwari Association
(set up in 1898 in Calcutta -Markovits,p.23) in the mid-1920's when a reformist
and pro-nationalist party led by G.D.Birla broke away from the venerable
association led by Rai Badridas Goenka. The opposition between the
2 parties was 3 pronged. It was an opposition between the banias, still
very dependent upon their British connections, and men like Birla who had
become business magnates in their own rights; between followers of the
Sanatan dharma who opposed social reform in particular widow remarriage
and female education and reformist elements; and lastly between staunch
Crown loyalists and more pro-nationalist businessmen. The opposition between
these 2 factions split the Marwari business community in Calcutta throughout
the 1920's and the 1930's.."
However, even the truly identifiable comprador capital did
not simply remain a true comprador class (ie purely a middle man and trader
and transportation merchant) for ever. Often they were drawn by the forced
pace of change by the nationalists to redirect their finance towards an
"In the 1930's they (Rai Badridas Goenka) started
to diversify their interests. Thus Groenka entered industry and became
less dependent upon his British connection.."
Even in the Post-War period where Indian capital was often
simply financing British industry, there was a tendency (relative though
it was) for the Indian financier to stretch their wings:
"The link between Indian finance and British industrial
enterprise was particularly clear in the case of Cawnpore. However in the
1920's the financial house of Juggilal Kamlapat (Singhania
family) launched its own industrial enterprises, a sign that Indian capitalists
tended to emancipate themselves from too exclusive a dependence upon a
Markovits summarises the difficulty in separation between
Indian comprador and national capital, pointing out that there were regional
differences in the degree to which the regional bourgeoisie were able to
Claude Markovits, Ibid. p. 25.
"Practically all big Indian businessmen had some sort
of British connection but none were totally dependent upon it. Ahmedabhad
was the major exception for British businessmen had never settled in significant
numbers in the greater commercial city of Gujerat. But in the other important
centers of trade and industry there was a British business community alongside
the Indian business community."
The regional factor left certain clearly defined areas where
the balance between pro-imperialist business and pro-nationalist business
was slightly different. The different factions devolved into Family groupings.
Markovits. p. 24
Thus Bombay (mainly Parsi, Khoja, Vania, Bhatia
and Marwari business communities) contained shipping (dominated by
Walchands) and cotton textiles (dominated by Sir Purshotamdas
Thakurdas); cotton mills (Currimbhoys, Wadias, Thackerays and Tatas)
but it was also the head quarters of the Tatas, who were of the
Parsi community. Being close to the Tata Iron & Steel Company
(TISCO) at Jamshed, and the electrical factories of Tata, Bombay was
the key Tata stronghold. Though the Tata grouping was initially formed
in 1907 in the face of government "indifference if not outright hostility"
(Markovits, p.10), it did come to almost a monopoly position in the Indian
sub-continent which forced the Government to appreciate it:
"In the steel industry there was outright monopoly -
till 1939 the TISCO remained the only producer of that commodity..
The War had shown the dangerous consequences of India's industrial weakness
for British imperial interests. However the victory in Mesopotamia had
been possible only thanks to the rails supplied by Tatas, a lesson which
had not been lost on English Officialdom.."
Despite the initial hostility they received from British
imperialism, the Tata group represented a group of capital most enamoured
of British capital. They influenced other sections of Bombay capital in
this direction also:
Cited Markovits, Ibid, p. 11, 15.
"The division in Indian big business also manifested
itself in the field of Labour policy.. attempts to create an Employers
Federation had been made since 1929, initially at the prompting of
Sir Dorab Tata. They came to fruition in 1933 with the creation
of the Employers Federation of India jointly sponsored by Mody
and Sir Edward Benthall. However most Indian industrialists outside
Bombay did not join the new Federation which they feared would be dominated
by British interests. Only the Bombay millowners and the Tatas joined it.
The obvious political conclusions are drawn by Markovits:
Markovits, Ibid. p. 94
"This confirmed the split in big business between Bombay
and the rest of the country. It was obvious that the Tatas and other big
Bombay capitalist placed the class solidarity of all capitalists, British
or Indian above any consideration of race or nationality, while other Indian
industrialists showed that by refusing to join hands with British businessmen
that they gave greater importance to national considerations."
Thus Markovits has identified, despite his opening
comments, at least one group who were pro-British compradors, centered
Markovits, Ibid. p. 94
Calcutta was dominated by
the Marwaris and the largest magnates were the Birlas and the Jalan and
Bajoria families, both in jute industry after years in the jute trade.
Here the British dominated Bengal Chamber of Commerce was practically closed
to Indians. In response to this bar therefore, the Federation of Indian
Chambers of Commerce and Industry (FICCI) was founded in 1925 by G.D.Birla:
"However Indian businessmen formed the Federation of
Indian Chambers of Commerce and Industry (FICCI) in 1927, following the
formation of the British business mens association in 1920.. but this remained
largely a loose confederation of local chambers.. Some regional organisations
like the Indian Chamber of Commerce in Calcutta, the Indian Merchants Chamber
in Bombay, the Ahmedabhad and Bombay Millowners Association.. played a
greater part in articulating grievances of the businessmen and in pressurising
This faction at times took a policy that favoured Nationalism.
However it frequently was frightened off by militant workers campaigns
and as a consequence frequently ended up in dialogues with British capital.
This then can be called one of the vacillating wings of national capitalists.
Markovits, Ibid. p.21.
The third main area was Ahmedabad, which was uniquely
a purely indigenous capital. The mainstay here was cotton textiles, entirely
owned by local businessmen (Jains: Sarkalal Bhalbhai, Kasturbhai Lalabhai
and Ambalal Sarabhai; a Patel ; Mafatlal Gagalbhai; and one Vaisnava ;
Chamanlal Parekh), excepting one Tata owned mill. Here the industry
was much undercapitalised as compared to Bombay. As a whole this center
was more homogenously in favour of Nationalism. This can be called the
more resolute and militant wing.
The remaining centers were much smaller, although Cawnpore
(North India), Coimbatore (In Madras Presidency), and Karachi (outlet port
of Punjab) also deserve mention.
The fragmentation of Indian industrial interests was shown
by the development of these regional blocks (See Markovits, p.19). This
prevented a unified business class, despite the Railways, arising whose
interests were truly Pan Indian. This obviously allowed the domination
of certain specific nations such as the Marwari. Because of the fragmentation
of the Indian industrialists, the British were able to play each off against
each other. But the objective power of the British was also waning.
The extent to which the Indian financier, or the comprador
trader could develop into a "fully fledged" industrial capitalist was dependent
upon the room left them by British imperialism. British Imperialism underwent
a severe crisis immediately during and after the First World War. This
tended to let the Indian national bourgeoisie some space to develop. Indeed
with the Depression Years, even further room to develop was left.
Under this process, even the more Pro-British, or comprador
sections were inclined to taking an anti-British stance at least for limited
objectives and time periods. Another point of interest is that the group
of pro-British Indian capitalists should include even a large industrial
firm like Tata. Again, these were not merchants as the classical comprador
capitalists were in China.
In general the net effect was that the Indian bourgeoisie
developed 'airs and graces' beyond their original station in life. They
aspired to become the primary capitalists; yet they wished to do so without
losing the advantages offered by Imperialism, or arousing the masses to
unpleasant visions of revolution.
EFFECTS OF THE FIRST WORLD WAR
1.Lord Hardinge, Vice-Roy of India. Despatch
to the Secretary of State for India, November 1915:
"It is becoming increasingly clear that a definite and
self conscious policy of improving the industrial capabilities of India
will have to be pursued after the war unless she is to become the dumping
ground for the manufacture of foreign nations who will be competing the
more vigorously for markets, the more it becomes apparent that the political
future of the large nations depends on their economic position.. after
the war, India will consider herself entitled to demand the utmost help
which her Government can afford, to enable her to take her place so far
as circumstances permit, as a manufacturing country."
Cited by Kidron, p.13, from A.R.Desai Social Background
of Indian Nationalism. p.98.
2.Sir James Grigg, Finance Member for the Government
of India in 1939 :
Following the First World War, there were two 2 main changes
that resulted in an increase in the industrialisation of India. Both were
at least partly impelled upon Britain by the stringency of the war and
the strains on the lines of communication.
"The attitude of expatriate businessmen.. is now frankly
that of making friends with the Mammon of unrighteousness eg Birla and
Benthall hunt together for quick profits and the latter does not see that
he is thereby weakening his own ultimate safeguard (viz British power)
and that he, or rather his competitors and successors
will be swallowed up completely. But perhaps he does
see this and doesn't care so long as he himself has got out with his swag.
Personally I wouldn't mind if every British businessman in India disappeared
Cited by B.R.Tomlinson, "The Political Economy of the
Raj, 1914-1947", Surrey, 1979.p.52.
3. The Vice-Roy Lord Chelmsford to King George V:
"We are of course handicapped by our inability to procure
machinery and by the necessity we are under of establishing industries
which should have been set up in pre-War days. For this we have to thank
the ill-judged parsimony and the now discarded laissez-faire policy of
Cited Tomlinson, Ibid. p. 58
The first was that there was a much greater tendency now
to use Indigenous financing, ie. Indian owned capital. Even the
purely physical transfer of funds was a major problem in war time. This
had an effect beyond the war years:
"Although the flow resumed after the war it was
much reduced, averaging about half the reverse flow of interest and dividends
throughout the twenties. It dried up completely the following decade when
a substantial volume of repatriated capitals Rs 2 crore a year perhaps,
between 1931-2 and 1936-6."
This allowed a partial infiltration of Indian ownership into
previously wholly British firms:
M.Kidron, Ibid, p.10.
"A gradual acquisition of British shareholdings began
before 1947 and accelerated during and after other world wars. With their
London and Liverpool H.Q. unable to invest overseas, British agencies needed
to mobilize local capital as an alternative means of financing war expansion
in India and of continuing repatriations to Britain. Here Indian business
houses exploited their opportunities. So massive was the influx of local
capital by mid-1948, in fact that Indian houses held on average, more than
85% of the equity in colonial managing agencies with the remainder held
by foreigners. Thus only one year after political independence the financial
dependence of colonial British enterprises on Indian shareholders had become
Even more important for the Indian colony was a new awareness
of the need to industrialise the country. As the acute comments above show,
from the Vice Roys Lord Hardinge, and Lord Chelmsford, there was a need
both to protect the market of India from other predator Imperialist nations;
and to keep India self-sufficient in times of war.
D.J.Encarnation, "Dislodging the multi-nationals. India's
comparative strategy in comparative perspective." Ithaca, 1989. p.57-8.
The effects of the other competitor Imperialisms, "dumping"
on hitherto British protected grounds can be seen in TABLE 1 drawn from
Tomlinson, Ibid, p. 47. (See below, p.43). Of course, both the Government
of India and Britain were essentially the same. Nonetheless a certain contradiction
had evolved from the perspective of the issue of whether or not to industrialise
India. The contradiction was especially acute from the point of view of
British industry that had no branches, nor direct hold in India. This section
of British industry, simply wanted to have the opportunity to "dump" its'
goods. If Indian business locally (whether indigenous or wholly, or partly
British was irrelevant), had the industry locally then this Dumping perforce
was limited buy competition.
The net effects of the industrialisation can be gauged
from the following data. Over the next few years a swing in the relative
balances of Indian trade and British trade took place. In effect the swing
was due to the increase in Indian import substitution. This significant
step had its corresponding effects on British revenue statistics :
"Before 1914 India had played an important role in the
international pattern of settlements providing a market for commodity exports
and a source of invisible earnings that enabled Britain to meet a large
proportion of her balance of payments deficit with the rest of the world,
while herself enjoying a considerable visible surplus and non significant
invisible deficit with other areas. Overall between 1900 and 1913 at least,
India ran a small current balance of payments deficit (visible minus invisible)
which was made good by the export of capital from Britain. The broad outline
of India's pattern of settlements remained much the same in the 1920's
but changed radically in the 1930's. Between 1921-2 and 1929-30 India had
an overall current balance of payments deficit of Rs 224.35 crores, but
from 1930-1 to 1938-9 she had a current surplus of Rs 7.32 crores. Her
balance of commodity transactions surplus rose slightly during the later
period, while her balance of service transactions deficit fell.. the value
of India's commodity surplus in the 1930's was based on a fall in the value
of her imports more than on a rise in the value of her exports (including
treasure), while the amount of her invisible imports of freight and insurance
charges and interest payments all declined significantly."
B.R.Tomlinson, Political Economy of the Raj. Ibid p.45.
The net effect was a reversal of the balance of trade towards India's favour,
and against Britain's :
"The decline in the value of India's imports especially
affected goods sent from Britain; which was the main market for gold bullion,
India's major export of the 1930's; although much of this was then re-exported
either through private trade or official channels. In each year from 1919
to 1930 Britain had a visible surplus with India totalling PS 219.4 for
the 12 years. In 1931 for the first time Britain imported more from India
than she exported from her and between 931 to 1938 ran up a total commodity
trade deficit of PS 79.5 million. This new development was the result of
both of the decreasing importance of Britain as a market for Indian exports
and the increasing importance of Britain as a market for Indian exports
despite the British Government attempts, at the 1922 Imperial Economic
Conference to increase the share of British goods in the imports of
other imperial countries.."
Tomlinson, B.R. Ibid, p. 45
TABLE 1 :
PERCENT SHARE OF BRITISH
GOODS IN INDIA'S IMPORTS (1913-1938)
Cotton Piece Goods
Iron and Steel
Other metal manufacturers
Hardware and Cutlery
Rail locomotives& Carriages
Source : Statistical Abstract for British India.
Cited By Tomlinson, Ibid, p. 42.
INDIA'S INDUSTRIAL PROGRESS
IN IMPORT-SUBSTITUTION (1919-1936)
% INDIAN PRODUCED IN :
Source : N.S.R.Sastry "A Statistical survey of India's
Industrial development" Bombay 1947; Sir Harry Townsend "A History of Shaw
Wallace &Co" Calcutta 1965; and W.A.Johnson The Steel Industry of India
Cambridge, Mass 1966. Cited Tomlinson, Ibid, p. 32. ______________________________________________________________
TABLE 3. INDICES OF INDIAN
INDUSTRIAL PRODUCTION 1925-1937.
Iron and Steel
Cited by Tomlinson, Ibid, p.33.
Source V.Anstey The Economic Development of India, London.
TABLE 4 INDICES OF INDUSTRIAL
PRODUCTION INDIA AND THE WORLD
Source: League of Nations, Industrialisation and Foreign
Cited Tomlinson, Ibid, p.132.
Table 1 shows this same trend in Britain's declining
share of imports into India. These figures are complemented by the accompanying
Tables 2, 3, and 4. Figure 2 details India's progress through these
years in terms of Import substitution; table 3 details India's Indices
of Industrial production as compared to total world industrial production;
and finally table 4 details as a table showing just the change in India's
production over the years 1931 to 1937.
These dramatic increases, are relevant to the Comintern
debate on "Decolonisation" discussed below, in the second part. Much
of this industrialisation was achieved by the mechanism of erecting of
Tariffs, behind which industry could be developed. This is further discussed
In the years before World War I, the tendency of British
Imperialism had been to see India only as a source of revenue by export
access, and military support. In other words as purely a giant milk cow:
"In the years before 1914 India's Imperial commitment
meant 3 things in practice: that India should be retained as a market for
British exports, which meant that the Government of India should not impose
insurmountable barriers, especially tariffs to the flow of British merchandise
to India; that the Indian army be kept available for the Imperial cause;
and that the Indian administration should ensure that repayment of interest
on guaranteed debt bonds was made smoothly and that adequate revenue and
remittance was available for the Home Charges. Each prong of its triple
commitment cost the Government of India money. The requirements of British
exporters obstructed attempts to impose revenue tariffs, the Home charges
and debt repayments were always a strain on revenues..when the rupee exchange
was low; the army.. was another drain."
But as Imperialism came into its Finance Imperialism phase,
it required new and different conditions. These included the entry of money
capital exports in preference to exclusively goods into India. But this
then required an expenditure locally of the imported capital. Hence the
construction of industries. As outlined above, a contradiction with British
based "Home Industry" was highly likely. This strategy of providing industry
to India would be resisted strongly by the British home-based industrialists.
But in this battle the tendency was that Finance capital would predominate
in discussions about India:
p. 27, Tomlinson, Ibid.
"The success enjoyed by the Government of India in resisting
attempts by London to restrict its fiscal autonomy can probably be explained
by a shift which was taking place in the nature of British interest in
India. R.K.Ray sees a transition from 'commercial' to 'financial'
imperialism.. though British policy makers had not abandoned all hopes
of restoring British commercial interests to their former position of dominance
on the Indian market they were well aware that it was not an easy task.
If British pressure groups interested in Indian trade, especially the Lancashire
lobby (ie the Cotton interest-Ed) had by no means become negligible, they
were not as crucial in an overall view of the British stakes in India as
the financial interests of the City of London. Finance was closely linked
to imperial strategic interests. Only a financially sound India enjoying
the full confidence of British investors could fulfil the wider Imperial
role which the British rulers still expected to play. By contrast, sectional
commercial interest however powerful politically were (within certain limits
of course) expendable."
There may also have been further sectional differences:
Markovits, Ibid. 49.
"The interests of Lancashire were hardly synonymous with
those of British capitalism as a whole; they contradicted for example,
the interests of British manufacturers of textile machinery who relied
on the Indian market as well as the interests of the British expatriates
who had invested in the Bombay industry."
Also the very fact that there was general resentment in Indian
business circles (in both the British expatriate and the indigenous Indian
business circles) about the lack of tariffs, worked in the favour of the
financiers. The British industrialists in India, would obviously be on
their side. They then became an objective ally of Finance Capital in its
battle with the older traditional Industrial Capital. This helped the promulgation
of an Indian Tariff policy, which of itself defused this native Indian
industrialist driven resentment:
Tomlinson, Ibid. p. 15.
"Giving the Government of India (GOI) independence
in tariff policy would remove this grievance and at the same time, prepare
the way for a new system of Indian and Imperial tariffs that would strengthen
the links between the imperial and the colonial economy. These plans attained
formal expression in the 'Fiscal Autonomy Convention' of 1919."
This ensured that the GOI with the Legislative Assembly of
India, could set fiscal policy independently of the Secretary of State
for India, except in 'Paramount considerations of Imperial policy':
Tomlinson, Ibid.p. 60
"During the war the GOI was more in favour of fiscal
autonomy and of protective tariffs than of imperial preference, the Indian
Fiscal Commission reported in 1922.. mapping out a policy of 'discriminating
protection' for import substituting industries."
The GOI even took some drastic purchasing decisions for its
own stores that favoured Indian industry. This became vital for even such
heavy sector industries such as the Iron and Steel industry of Tata:
Tomlinson. Ibid. p. 60-61.
"The policy of discriminating protection provided some
impetus towards import-substitution industrialisation and
Central GOI's increasing reliance on customs revenue had a similar effect
through raising the prices of imported goods.. By the early 1930's some
protective tariffs had reached remarkable levels.. it is hardly surprising
that imports of sugar mill machinery increased its real terms by 3000 per
cent between 1928 and 1933. Other industries which .. became established
in India as a direct result of changes in revenue and protective duties
include paper, matches and rubber manufactures.. Government store purchases
policy also stimulated import substitution in the 1920's-1930's. In 1924
the Secretary of State had surrendered control over this policy to the
GOI; by the 1930's the bulk of stores were obtained by rupee tender in
India rather than by sterling tender in London. This change was a blow
to British exporters, and their position was not improved but a series
of GOI decisions in the early 1930's to give encouragement to Indian manufacturers-
stores purchases officers were instructed.. to give preference to the products
of Indian manufacturers from Indian raw materials.. such purchases were
vitally important for suppliers of railway equipment contracts for guaranteed
purchases of steel rails and fishplates keeping the Tata Iron and Steel
Co. going in the late 1920's and throughout the Depression. In 1931-2 8%
of all railway stores and 12.5 % of such stores for state railways were
brought in India, by 1938-9 these proportions had reached 28 and 46 % respectively."
Thus if the temporary divergence between the interest of
The British Home based Finance and Industrial capital, had altered the
attitude to financing Indian industry, it had also allowed a set of Tariffs
to be brought in behind which Indian industry could shelter:
Tomlinson, Ibid. p. 62-3.
"This explains that in the last months of 1931 the Government
of India was able to wage a partly victorious war with Lancashire and London
over its fiscal autonomy. The pretext of the war was Imperial Preference.
It was an old slogan of ultra-imperialist circles but in the 1920's had
met with little success. In India it had been specifically rejected.. and
been introduced in 1927, so to speak through the back door, when the new
Steel Protection Bill included for the first time a scheme of differential
duties for British and non-British steels.. In 1931, the Government of
India.. incensed Manchester.. by raising the Indian Tariff without increasing
the preference for British textiles." Markovits, Ibid,
As anticipated, Manchester was not happy about the new Tariffs:
"Manchester agitated so much that the Secretary of State
for India Sir Samuel Hoare, openly threatened in a letter to the ViceRoy
Lord Willingdon to throw India's cherished Fiscal Autonomy Convention to
the winds, a move so rash that it would have jeopardised any chance of
coming to an agreement with the Indian nationalists at time when negotiations
were being held in London." Markovits, Ibid. p. 50
Willingdon protested and:
"In the face of such stiff resistance and also prompted
by a general view of British interest in India by the end of 1931 the National
government was eventually forced to accept 'that it could not interfere
directly in the general tariff policy of the Government of India and that
this method of maintaining a British commercial advantage was closed to
it. Other methods, more indirect had to be tried. The Imperial Economic
Conference.. at Ottawa in July 1932 had.. the avowed objective of building
an Imperial free trade zone."
The Ottawa Agreement was critical for the British
Imperialists at this time as they hoped to weld the trade of the parts
of the empire together in the face of increasing competition for the trade
of their colonies from places such as Japan, Germany and the US:
Markovits. Ibid. p. 50-1.
"Ottawa is without doubt a watershed in the history of
Indo-British trade for it inaugurated a period of 15 years during which
the trade between the 2 countries was subject to specific rules.. As far
as protected industries were concerned the Tariff Board alone remained
empowered to make recommendations to the government. There was no generalised
scheme of Imperial preference but only specific preferences given to specific
After the First World War, despite the inducements to investment,
British interests in India did not display many new dynamic approaches,
especially when compared to the Indian rival entrepreneurs and industrialists:
Markovits, Ibid. p.51-2.
"In Ottawa British statesmen pursued 2 objectives, At
the most general they sought to stimulate Empire trade and more specifically
to encourage a surplus of imports from the Empire into Britain. As B.Chatterji
'Such imports would adversely affect the balance of British's
commodity trade, yet they would strengthen the sterling balance held in
Britain by the Empire countries and make it easier
for their governments to meet their sterling obligations without recourse
to new loans.. the second objective was to placate the Lancashire
lobby-and prevent it from helping Churchill and the die hard Conservatives
in their attempt to wreck any constitutional settlement of the India crisis,
by bringing India more definitely into the orbit of imperial trade as Hoare
wrote to Willingdon."
"Yet what is more striking is the conservatism of expatriate
houses. Very few established agency houses made any
attempt to expand their operations into the 'new' industries being developed
in the 1930's, and those that did acted only in collaboration with British
based corporations. In the main it was the Indian entrepreneur who moved
into those fields - particularly cement, sugar, and paper but also into
chemicals paints and electrical goods."
Unsurprisingly, these Indian firms had themselves been closely
modelled on the British:
B.R.Tomlinson, Ibid. p.52.
"Thanks to the increased integration of financial
institutions that took place after the Great Depression,
the large Indian corporations that developed in the 1930's were very similar
in structure to the expatriate enterprises they were rivalling and supplanting.
Many Indian business and industrial houses now had wide interested and
owned banks and insurance and investment companies to help with finance,
trading and industrial activities."
Consistent with their more "adventurist" approach they were
B.R.Tomlinson, Ibid. p.52
"Indian groups were expanding faster than their expatriate
rivals. In 1931, five of the top 20 industrial groups at work were Indian,
in 1939 the figure had increased to 6 while Tata's remained far and away
the largest concern through the decade. In 1930-1, 46% of the paid up capital
of rupee companies was in Indian controlled concerns (those run by Indian
managing agent or by groups with a majority of Indian directors); by 1938-9
this figure had reached 55%."
Indians were penetrating into finance, but also into the
B.R.Tomlinson, Ibid, p.52.
"Even outside Bombay expatriate firms came to rely increasingly
on Indian investors for share capital in this period. From the First World
War onwards British controlled forms starved of capital from London, were
forming alliances with Indian businessmen. During the war, Sir Rajendra
Mookerjee of Calcutta bought his way into Martin Burn, one of the 3 largest
expatriate managing agency houses in India. By 1922 majority ownership
(although not control) of the Bengal jute industry had passed into Indian
hands. In the 1930's it had become common for expatriate firms to have
at last a minority of Indian directors on their company boards.. the traditional
boundaries between Indian and expatriate capital were becoming blurred.
As the Associated Chamber of Commerce reported to the Indian Statutory
Commission in 1927:
Indian firms and British firms even developed common interests
against the Colonial Government:
"It is almost impossible to draw any line of demarcation
between Indian and British interests in regard to invested capital, for
companies floated and managed by British managing agents were frequently
owned to a very large extent by Indians. Similarly, in many companies regarded
as Indian, a considerable number of shareholder may be British."
Cited Tomlinson, Ibid p.53-4.
"Changes in the working relationship between Indian and
British capitalists were complex. Outside Calcutta and especially in Bombay,
there had always been a measure of co-operation between expatriate and
indigenous entrepreneurs. By the 1920's many sectors of the expatriate
business community were beginning to realise that under certain conditions
they could have more in common with their Indian counterparts than they
had with the British bureaucracy in the Government of India. Thus the British
millowners in Bombay joined with their Indian colleagues in pressing for
a lower ratio for the rupee in the mid-1920's, while most expatriate businessmen
including the Managing Governors of the Imperial Bank advocated devaluation
in the early 1930's." B.R.Tomlinson, Ibid. p. 53.
But, finally, and crucially, British control was not relinquished
"While expatriate businessmen were prepared to co-operate
with Indians to their mutual advantage, they were much less willing to
share the sort of control secured by the managing agency system. Several
of the old established agency houses acquired an Indian partner or associate
in the 1920's or 1930's, but none has an equality or majority of Indian
participation (except, perhaps, Martin Burn). The only example of a new
major industrial corporation based on a significant measure of joint control
was the Associated Cement Company, founded in 1936.. Indian firms owned
70% of the total shares; the board of directors was made up of nominees
of the shareholders in proportion to their holdings.. the British companies
investing in subsidiary manufacturing firms in India also seem to have
had little interest in attracting Indian capital or initiating joint control.
The only major subsidiary in which there was a significant Indian participation
was the Asbestos Cement Company, which was 87% owned by Turner Newall and
13% by Associated Cement."
In fact control sometimes only followed ownership, later
in the post-Partition era:
B.R.Tomlinson Ibid, p.55
"Yet the conversion of equity ownership into managerial
control was not immediate, as British managers used several complex methods
to ensure continued operational control. Early on the intermingling of
Indian and British capital often resembled a simple form of partnership.
In such an arrangement, Tata became associated with Macneil and Barry;
Bangur with Bird and Gillanders Arbuthonot; Mookerjee and Bannerjee with
Martin Burn. But eventually the potent insistence of Indian shareholders
that ownership in British agencies be converted into control could not
be denied. During the 1950's Indian managed business houses began to replace
British firms as the dominant enterprises in the economy. And by 1957,
the process of takeover through encroachment had run its course. Already,
some of these takeover campaigns had proved both enormous in scope and
disastrous for British agencies. Dalma-Jain shortly after Independence
became one of the top 4 Indian owned Business houses by means of such whole
sale take over. And Bangur ranked among the ten largest houses throughout
the 1960's and 1970's emerged from relative obscurity a the end of WWII
simply by gobbling up several small British agencies. Overall this growth
through mergers and acquisitions established the early preeminence of Indian
industrial conglomerates." D.J.Encarnation.p.58 Dislodging
Multi Nationals - India's strategy in comparative perspective. Ithaca,
New York, 1989.
But those firms that had industrialised found themselves
in a very select group controlled by mostly British firms and a few Indian
"In 1931.. the joint stock companies.. with paid up share
capital of Rs 3 million and more, shows that 81 groups, of which 51 were
British.. and 30 were Indian controlled 950 companies (13% of the total
number of registered joint stock companies in British controlled Indian
and in the major Indian States) with a total of over Rs 166 crores (almost
60% of the total paid up capital of the registered joint-stock companies).
Out of these 166 crores, 113 were invested in companies controlled mainly
by British groups (although many of their shareholders were Indian) and
53 in companies controlled by Indian groups (of which 26 crores in companies
controlled by Tata group the biggest capitalist in India)."
Further more there was a high degree of concentration of
Markovits, Ibid p.14-15
"In cotton textiles 10 groups (of which 6 were Indian,one
Jewish and 3 British) controlled 31.6% of the paid up capital in the industry,
29.1% of spindles and 29.5% of looms, accounted for 30.7% of raw cotton
consumption and employed 30.1% of labour. Other branches had a more clearly
oligopolistic structure. In jute 4 or 5 groups all British had a dominant
position, the upper industry was dominated by 2 British firms, in cement
5 groups (3 Indian and 2 British) controlled the entire output. In the
steel industry there was outright monopoly - of TISCO.. therefore it appears
that the corporate sector.. and the large scale industrial sector.. was
largely dominated by a few big firms still mainly British but also increasingly
By 1939 there was a considerable interpenetration of capitals,
and a decline in the objective "value" of the colony in its' current form
for the British:
Markovits, Ibid, p.15.
"The years from 1919 to 1939 saw rather the slow decline
of expatriate enterprise, a failing by and large to adapt.. to new opportunities,
or to meet the challenge of the rising Indian groups on the one hand and
of the new subsidiary manufacturing companies on the other hand.. By 1939,
the tie between British entrepreneurial and administrative interests had
weakened considerably, at least for the expanding sectors of British enterprise
in India which required Government to develop the Indian economy in ways
that no colonial administration dare risk.. By 1939, the Indian economy
was a good deal less complementary to the British one than.. in 1913, for
the destructive impact of the decline of world demand for Indian produce."
The author B.R. Tomlinson, as will have been noted uses the
term "Decolonisation" in the title of his work. This will be discussed
below in connection with the debate that took place in the 6th Congress
of the Comintern; whose intent it was to remove Stalin and M.N.Roy from
positions of influence in the Comintern.
B.R.Tomlinson, Ibid, p.55-6.
But first we should summarise the preceding analysis
of the changes in Indian industry after the First World War.
CONCLUSIONS ON INDUSTRY IN
INDIA BY 1947.
I. There was an overwhelming
dominance of industry by British imperialism. This remained in place until
2. But, there had been a relative decline in the strength
of British imperialism, as judged by its' ability to restrict the entry
of other imperialists into the market of India. And related to this the
costs of maintaining India, as a colony, were mounting to the British.
3. Indian capital had moved from its' mercantile phase
to an industrial phase.
4. This shift had first been made by that section
of capital that had been closest to British interests, characterised by
the Marwari-Gujerati clique.
5. Consistent with this, for the most part the strongest
sections of Indian capitalists still had major links with British capital.
6. Nonetheless, this section itself had been growing
in strength and adventurousness. They were developing themselves into new
areas not previously undertaken by British capital. They were beginning
to chafe at the restrictions. Moreover another sector had long been separate
from British capital and was even more restless. It was becoming possible
for it to see its' "own way". Some of this section overtly challenged British
imperialism, such as the Birlas.
7. The British state was facing political problems
in direct and overt control of India. A more palatable control was offered
by a "Pseudo-Independence".
8. Despite the chafing of the Indian bourgeoisie at
British control, they were fearful of the Indian proletariat and the mass
movements that had been put into play. Their fears could be played on by
9. Because the battle between the Financiers and the
older branches of Industrialists in the Home Country was intensifying,
an objective reason to industrialise India had arisen. Thus in a hesitant,
self-doubting manner the British had begun the increasingly rapid process
of industrialising India.
In conclusion, by 1947 this
whole process had resulted in a change in ownership, but not necessarily
of control of the bulk of industry and trading :
"By the 1920's majority ownership, as distinct from control
of the largest organised industry, in jute had passed into Indian hands..
by 1950 it was 3/4 Indian (although still foreign controlled). Indian ownership
in the coal industry was unofficially estimated at 78% in 1949 and officially
at 85% six years later.. Tea was an exception until the Second World War
when a large switch.. reduced the foreign share to 3/5 of the total investment..
The results are clear. By mid-1948, foreign managing agencies held on average
under 15% of the paid up capital of their managed companies. A fraction
of the rest was held directly abroad. But the bulk - 85% was owned by Indians.
The methods of control were naturally complex, involving holding companies,
interlocking ownership and direction.. They were largely effective until
well into the period of Independence."
A COMPARISON WITH THE INDUSTRIAL SITUATION IN 1980's
Michael Kidron Ibid. p. 10-11.
By comparing the situation graphically depicted by Kidron
and Tomlinson, ("Pre-Independence") to a later time period (Well past "Independence"),
we can ask if the objective reality of the Indian industrialist has changed?
Of course, the recent switch towards a pro-USA position of the current
Rao Government mandates that this analysis be before Rao's administration
Has there in fact been a change in the Independence
of the Indian industrialist ?
1. Over the years 1965 to
1985, the amount of monies entering India from Direct Foreign Investment
(DFI) were considerably less than in previous years. In fact there was
a net efflux of monies. This is a highly significant change in the direction
of cash flow. (From D.J.Encarnation. "Dislodging the Multi-nationals. India's
Strategy in comparative perspective." Ithaca, New
York, 1989. p.11.)
2. Some authorities would point out that there
has been an increase in the amount gross of monies owing by the Indian
state to Western Aid agencies and multi-nationals. But it is also the case
that as a percentage of the overall assets owned by State and private enterprises,
there has been a diminution over the years 1962-1982. See Below, figure
1. (Encarnation Ibid.p.35).
3. In keeping with this are
figures that show a growth of Indian state owned investments over the years
1951-80. These show an increase in State holdings of major proportions
as compared to all private sectors; including private corporation and private
non-corporation. See figure 2 below (Encarnation, Ibid, p.38) and figure
3, below (Encarnation, Ibid, p.92).
4. The means of achieving
this was a very conscious policy of Governmental restrictions on the inflow
of foreign funds and investment. Those foreign funds actually allowed in
were specifically earmarked for the definite purpose of acquisition of
"For India independence from foreign financing became
a fact of life between the amendment of FERA (1973) and the next relaxation
of government restrictions on foreign investment (1980). To illustrate,
let us consider chemicals. Between 1974 and 1980, as we see from figure
4,(fig 2-11 in Encarnation) foreign financial tie-ups declined for Indian
business houses from 2/3 of all collaboration agreements in 1974 to 2/5ths
in 1980. Among large houses, Only Birla actually increased its' reliance
on foreign financing always coupled with technology. Conversely houses
like Tata and Sarbhai, long known for their proclivity to seek out foreign
financing; by 1980 evinced no such preference.. in 1980 Indian business
houses and other local enterprises already had established their financial
independence from foreign enterprises." D.J.Encarnation. Ibid. p.63-4.
note all figures are only in hard copy and not in this web version)
FIGURE 1. From p. 35, Encarnation. SHOWS THE DECREASING
LEVEL OF FOREIGN OWNED CAPITAL; COMMENSURATE WITH INCREASED STATE OWNED.
FIGURE 2. from p.38, Encarnation. SHOWS GROSS DOMESTIC
CAPITAL OWNED AS EITHER STATE OR PRIVATE HOLDINGS.
FIGURE 3. SHOWS NUMBER OF GOVERNMENT LICENSES WITH
AND WITHOUT FOREIGN COLLABORATION.(P.92. ENCARNATION).
FIGURE 4. DECLINE FOREIGN TIE-UPS IN CHEMICALS
(fig 2-11, Encarnation).
THIS ALL SUGGESTS THAT THERE
WERE GENUINE ATTEMPTS BEING MADE TO RESTRICT THE PLAY OF FOREIGN CAPITALS
IN INDIA BY THE INDIAN NATIONAL CONGRESS, AFTER "INDEPENDENCE".
IN THE BOMBAY PLAN, the leading
sections of business and their political representatives would try to "Plan"
out the future of India, after the British had "transferred" power. In
this prototype for a capitalist India, both the 2 leading industrialists
of India - G.D.Birla and J.R.D.Tata - argued for a restriction of foreign
"By ultimately reducing our dependency on foreign countries
for the plant and equipment required by us.. the country would require
little foreign debt and even less foreign equity " - all the better since:
As Encarnation points out:
"political.. interference from foreign vested interests"
inevitably accompanied industrial investments by multinationals.
According to these industrialists, domestic production after independence
should be geared to meet:
"the internal demand which we advocate in this Plan..
Thus exports were likely to diminish in the future."
Cited Encarnation, Ibid, p. 28-9.
"Already a powerful coalition had formed, as prominent
industrialists joined political leaders in openly advocating a reduced
reliance on foreign finance , technology, and markets."
Cited by Encarnation Ibid, p.28-9.
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