The East India Company had consolidated its business by the mid-eighteenth century. The earlier centres of trade; like Surat and Hooghly; declined during this period. The new centres; like Calcutta and Bombay emerged.
Once the East India Company established political power, it began to assert its monopoly right to trade.
The Company tried to eliminate the existing traders and brokers who were connected with the cloth trade. It tried to establish a more direct control on the weavers. A paid servant; called gomastha was appointed to supervise weavers, collect supplies, and examine the quality of cloth.
The Company prevented weavers from dealing with other buyers. This was done through the system of advances. Under this system, the weavers were given loans to purchase raw materials. Once a weaver took the advance, he could not sell his produce to any other trader.
The new system of advances created many problems for the weavers. Earlier, they used to grow some crops on their land which took care of their family needs. Now, they had not time for cultivation and they had to lease out their land.
Unlike the traditional merchants, the gomastha was an outsider who had no social links with the villages. He used to visit with sepoys and peons and punished weavers who could not meet the deadline. The gomastha behaved arrogantly. There were reports of clashes between weavers and gomasthas in many villages.
The system of advances resulted in many weavers falling in debt trap. In many places in Carnatic and Bengal, weavers deserted villages and migrated to other villages to set up looms. Many weavers began to refuse loans, closed down their workshops and took to farming.
By the beginning of the nineteenth century; a long decline of textiles exports from India initiated. In 1811 – 12 piece-goods accounted for 33% of India’s exports but it declined to less than 3% by 1850-51.
Because of pressure from the British manufacturers, the government imposed import duties so that the goods manufactured in Britain could sell in England. They also pressurized the East India Company to sell British manufactured goods in Indian markets. At the end of the eighteenth century, there had been negligible import of cotton piece-goods in India. But by 1850 cotton piece-goods constituted over 31% of the value of Indian imports. By 1870s, the value increased to over 70%.
The machine-made cotton was cheaper than hand-made cotton piece-goods in India. The weavers thus lost a huge market share to imports from Britain. By 1850s, most of the cotton producing centres in India faced a steep decline.
The Civil War broke out in the US in 1860s. Due to that, the cotton supply from the US to Britain was cut off. Britain turned began to source cotton from India. This led to a huge shortage of raw cotton for weavers in India.
By the end of the nineteenth century, cotton factories began to come up in India as well. This was the final blow for traditional cotton textiles industry in India.
The first cotton mill in Bombay came up in 1854 and it went into production two years later. By 1862 four mills were in operation. Jute mills also came up in Bengal around the same time. The Elgin Mill was started in Kanpur in the 1860s. In Ahmadabad, the first cotton mill was set up in the same period. By 1874, the first cotton mill of Madras began production.
The history of many business groups goes back to trade with China. From the late eighteenth century, the British in India began to export opium to China and import tea from there. Many Indians took active participation in this trade by providing finance, procuring supplies and shipping consignments. Once these businessmen earned enough, they dreamt of developing industrial enterprises in India.
Dwarknanath Tagore was among the pioneers to begin industries in the 1830s and 1840s. Tagore’s enterprise sank during the business crises of the 1840s. But in the later nineteenth century, many businessmen became successful industrialists. In Bombay, Parsis like Dinshaw Petit and Jamsetjee Nusserwanjee Tata went on to build huge industrial empires. Seth Hukumchand; a Marwari businessman; set up the first Indian jute mill in Calcutta in 1917. The Birla Group was similarly started by successful traders from China.
Capital was also accumulated through other trade networks; like Burma, the Middle East and Africa.
There was a virtual stranglehold of the British players on business in India which leaved little scope for growth of Indian merchants. Till the First World War, European Managing Agencies controlled a large sector of Indian industries.
In most of the industrial regions workers came from the surrounding districts. Most of the workers were migrants from neighbouring villages. They maintained contact with their rural homeland; by returning to their villages during harvests and festivals.
After some passage of time, workers began to migrate greater distances in search of work. For example; people from the United Provinces began to migrate to Bombay and Calcutta.
Getting a job was not easy. Industrialists usually employed a jobber to hire new people. The jobber was usually an old and trusted worker. The jobber usually preferred people from his own village. He helped them settle in the city and provided financial help during crisis. The jobber thus became an influential person. He began to demand money and gifts for his favour and began to control the lives of workers.
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