Why Modi’s economic policies are not working – Punarvasu Parekh

Indian Budget 2020

Journalist IconThe government suffers from a poverty of ideas which it seeks to hide with a plethora of words. Worse, it seems to have forgotten lessons from our socialist past. The mindset which placed government at the centre of things remains intact. There is a distrust of businessmen, foreign investors, taxpayers and those dealing in cash. Elaborate mechanisms have been set up to keep them on a tight leash. – Punarvasu Parekh

There is a glaring dichotomy in Modi government’s performance. On political front, it knows its objectives, can devise effective strategies to achieve them and implement these strategies in the teeth of severe opposition. The economy, however, stubbornly refuses to do its bidding.

To be sure, the economy has many things going for itself under NDA-II. The government is remarkably free from corruption at the top and looks quite sincere in its ambition of making India great again. A rock solid majority in Lok Sabha affords the country political stability that would be envy of most of the democracies. Prime Minister Narendra Modi enjoys unparalleled popularity and has a knack of marketing politically difficult ideas to the masses. Together, these two circumstances have created a huge political capital that could be leveraged to carry out far-going reforms.

For all that, however, the government suffers from a poverty of ideas which it seeks to hide with a plethora of words. Worse, it seems to have forgotten lessons from our socialist past. The mindset which placed government at the centre of things remains intact. There is a distrust of businessmen, foreign investors, taxpayers and those dealing in cash. Elaborate mechanisms have been set up to keep them on a tight leash.

Quite a few bad old policies are back, sometimes with the same terminology. Often the government gives the impression of being willing to strike but afraid to wound. While it talks of promoting reform, it is not prepared to go far enough. It wants to give relief and withhold or take it back at the same time. The cumulative effect of all this has been compounded by some big ticket mistakes.

In the name of curbing tax evasion and black money, Modi government has consistently prioritized formalization of the economy over growth. This has lured it into committing two big ticket blunders—demonetisation and hurried implementation of an ill-conceived GST. Together, these two measures destroyed demand, disrupted supply chains across industries and bankrupted thousands of farmers and small businesses. We are still living with the consequences. For all its talk of minimum government and ease of doing business, there is more government now in our lives and doing business is more hasslesome now than before.

In fact, the uneasiness set in quite early. Modi’s first finance minister Arun Jaitley (a misfit in the finance ministry by all accounts) had an opportunity to roll back the retrospective amendments to income tax laws which the BJP had rightly condemned while in opposition. He could have begun the promised phased reduction of corporate tax rates while removing exemptions and offered relief to the middle class in income tax. He did nothing of the sort. When oil prices plummeted, the NDA government pocketed much of the gains by hiking duties on fuels instead of passing them on to the people who had been bearing the brunt of expensive fuel when oil prices were high. All this has eroded businessmen’s and investor’s faith in the government.

Coming to the current economic crisis—arguably the most severe slowdown in three decades—it has three aspects.

First, the “twin balance sheet” problem: public sector banks, saddled with huge NPAs and short of capital, have no appetite or resources to lend big. Private sector companies, neck deep in debt and facing underutilization of existing capacity are in no mood to borrow more for creating fresh capacity. This is now compounded by the crisis in NBFCs and real estate. Second, private consumption has taken a hit, partly as a lingering effect of demonetization. Third, exports are lackluster owing to problems with international trading system and India’s protectionist policies. It does not help that sectors that generate employment on large scale—textiles, real estate, gems and jewellery, automobiles and small trade and businesses—are in deep trouble.

Finance minister Nirmala Sitharaman’s latest budget was expected, above all, to revive the economy. She could (and should) have slashed income tax rates, extended lower corporate threshold of 17 per cent to all companies and abolished surcharge, expanded MNREGA and doubled income support to farmers under PM Kisan Sahay Yojna, so as to increase aggregate demand. She could have listed out steps the government wanted to take to revive job creating sectors, restore the health of financial sector and carry out administrative reforms including judiciary and police.

What we had, alas, was a marathon speech that threw up few winners. After making the right noises on almost everything, it failed to present a credible blueprint to kick start growth by stimulating consumption and promoting investment. There is an air of half-heartedness in the reliefs given and expenditure sanctioned.

The restructuring of income tax slabs will cost the exchequer Rs 40,000 crore, we were told. However, while some tax rates were reduced, quite a few exemptions were eliminated and tax payers were given a choice of either opting for the new regime or staying with the old one. Every taxpayer now has to do his own sums to find out where he stands. Most people are likely to discover that switching to the new system does not make much difference and some may even prefer to stick to the old system.

The dividend distribution tax paid by the companies was abolished which would now have Rs. 25,000 crore more to play with. However, the dividend income will now be taxed in the hands of the recipient shareholders at applicable rates and would probably make up for the revenue forgone.

Come to the expenditure side. The Mahatma Gandhi National Rural Employment Generation Act (MNREGA), for all its flaws, has proved to be an effective means of transferring income to the people at the bottom. The revised expenditure on it for 2019-20 is Rs 71,000 crore, whereas the allocation for 2020-21 is Rs. 61,500 crore—a reduction of 13 per cent. The budget for Pradhan Mantri Awas Yojna has been trimmed by 2 per cent as also the budget for rural development by a similar proportion.

The finance minister is betting on public investment to resuscitate growth—there is a 21 per cent increase in government’s capital expenditure, mostly on infrastructure. This strategy is unexceptionable when all other drivers of growth—private consumption, private investment and exports—are down.

But the problem with infrastructure is not paucity of funds. Even if banks have no funds to lend, even if private sector companies are too debt-ridden to invest and even if government is too constrained financially to fund these projects, the world is awash with money in search of good returns. The real impediments are land acquisition and the myriad approvals needed to put up anything large. If the government were to get its act together and offer shovel-ready projects—complete with approvals and land acquisition, it will be surprised by the number of bids it receives to implement them.

The massive infrastructure investment is proposed to be funded partly from disinvestment proceeds of Rs 2.1 lakh crore. In the current year, as against the target of Rs 105,000 crore, it has managed to garner Rs 65,000 crore. Air India is not going to be an easy sale, and the best offer it fetches may fall short of what is politically acceptable to the government. As with infrastructure, there is no dearth of public sector companies fit for sale, but it requires tremendous inter-ministerial coordination and efficiency to realize the disinvestment target.

Probably the worst part of the budget is the continuation of tinkering with import duties on a large number of miscellaneous items, with a view to protect and promote indigenous industries. This is stupidity. If this was the road to economic greatness, India would have been a super power in the four decades of the licence-permit-quota raj. Instead it was pushed to the precipice of bankruptcy.

The key to economic power lies in productivity reflected in competitiveness of the economy. One way of making India a hub of manufacturing activity is to encourage our industries to join global supply chains. That, however, requires factor market reform, open economy, investor-friendly regime, predictable taxes and rules and high quality transportation and communications. Modi government pays lip service to all of these, but its actions do not inspire confidence.

It is not that the government does not receive right kind of advice. The Economic Survey for 2019-20 emphasized creation of wealth, private enterprise, competitive markets and invisible hand of the price mechanism. It recommended, inter alia, abolition of the Factories Act, Essential Commodities Act, Food Corporation of India Act, Sick Textile Undertakings Act, Land Acquisition Act and Recovery of Debt Tribunal Act. Nirmala Sitharaman’s budget looks like an anti-climax when compared with the survey.

In fairness to the finance minister, budget is too small an instrument to turn around an economy like ours. We need bold actions simultaneously on a large number of fronts with a focus on productivity and competitiveness. If the economy does not revive, do not blame the finance minister.

Punarvasu Parekh is an independent senior journalist in Mumbai.

Indian Budget 2020


How India was plundered by imperial Britain – Minhaz Merchant

Robert Clive & Mir Jafar

Why is compensation so important 71 years after the end of British colonial rule in India? It is important because just as Germany was forced to pay reparations to the Allies after World War I, justice must be served. – Minhaz Merchant

They came, they saw, they conquered—and they left with a fortune.

The story of how 190 years of British colonial occupation, from 1757 to 1947, impoverished India is one of the great untold stories of modern history.

Congress member of Parliament and former junior external affairs minister Shashi Tharoor tried valiantly to tell the story in his 2017 book, The Inglorious Empire: What the British Did to India, but gaps remain. What, for example, was the quantum in inflation-adjusted wealth siphoned out of India by the colonial British? What was the modus operandi colonial officials employed? Should India seek reparation—and how might these be credibly computed?

Some of these questions have now been answered by the economist Professor Utsa Patnaik. She recently published a collection of essays in Columbia University Press detailing the method of the two-century-long British theft, its computation at today’s currency value, and a possible mode of reparations.

Crucially, Professor Patnaik does what Tharoor in his otherwise fine book (Indian edition: An Era of Darkness: The British Empire in India) does not: she puts a figure on the British theft.

In an interview with the business daily Mint on November 19, 2018, Professor Patnaik said: “Between 1765 and 1938, the drain amounted to £9.2 trillion, taking India’s export surplus earnings as the measure and compounding it at a 5 per cent rate of interest. Indians were never credited with their own gold and forex earnings. Instead, the local producers here were ‘paid’ the rupee equivalent out of the budget—something you’d never find in any independent country.”

When Robert Clive defeated the Nawab of Bengal, Siraj ud-Daulah, in 1757 in the battle of Palashee (Plassey) by bribing the Nawab’s army commander, the traitorous Mir Jaffer, the real prize for the British [East India Company] was the right to collect tax from Bengali peasants, traders and farmers.

The Nawab had levied a modest tax, allowing peasants a reasonable living. By 1765, within eight years of Clive’s victory over the Nawab, all that changed. Taxes in Bengal were trebled.

Unable to eke out a living, 10 million people out of Bengali’s population of 30 million died of starvation in 1770.

Around 173 years later, in 1943, as the Second World War raged and the British Empire was on its last legs, Prime Minister Winston Churchill would withhold vital food grains from Bengal, leading to the Great Bengal Famine in which over three million people died.

But back in 1770, the British were focused on making money. Britain was still a relatively poor country. The industrial revolution was some years away.

The British were especially active in the African slave trade. Through much of the 1700s, Liverpool monopolised 55 per cent of the brutal Atlantic slave traffic. The United States was still a British colony. African slaves captured or bought by the British in Sierra Leone, Ghana and the Ivory Coast were shipped in British vessels to America, their arms and legs chained in manacles, lying one above the other. Dozens died during the horrific transatlantic journey.

Back in Colonial India

As Britain began to extort tax revenue from Indian peasants, the industrial revolution received a boost in terms of funds and raw materials from India. The British modus operandi was as simple as it was extortionate: it taxed Indian peasants 35 per cent of their income, three times what the Nawab of Bengal had taxed them. That excess tax revenue was then used by the British to buy Indian goods—spices, textiles and gold—which were in great demand in Europe and North America.

Thus British tax collectors used Indian money to buy Indian goods, exported them and pocketed the profit—with zero investment.

This system continued unimpeded virtually throughout the colonial period. In order to ensure that peasants, from whom they extorted steep taxes to buy Indian goods for export, did not realise how they were being cheated, a ruse was employed. The British tax collectors and British buyers of exportable goods were deliberately kept as completely separate entities so that no connection could be made by peasants whose taxes were being used to drain the country’s resources.

Professor Patnaik explains the scheme: “A large part of the producer’s own tax payment simply got converted into export goods, so the East India Company got these goods completely free. The later mechanism, after the British Crown took over (in 1858), used bills of exchange. The only Indian beneficiaries of this clever, unfair system of linking trade with taxes were the intermediaries or dalals. Some of modern India’s well-known business houses made their early profits doing dalali for the British.”

Were the British thus more rapacious than the Mughals? Unquestionably. They impoverished India in a way the Mughals did not. That does not absolve the Mughal Empire. It was savage, destroyed thousands of temples, and converted lakhs of Hindus through the sword or through financial inducement. The Mughals were a destructive, malignant force.

The British though exceeded them in the damage they did to India’s economy. Why then is there such little anger against the British while Muslim rule is (rightly) reviled?

The reason is complex. Many Hindus in the 1700s were fed up of the debauched Mughal Empire. They were relieved when the British defeated the Mughals. They regarded the British, who brought new technology and avoided religious conversions, as the lesser evil. There are miniscule Protestant converts in India compared to millions of Muslim converts. In a deeply religious country, that mattered.

Between two evils, there is little to choose but let Professor Patnaik have the last word: “Per capita annual foodgrains absorption in British India declined from 210 kg, during the period 1904-09, to 157 kg during 1937-41, and to only 137 kg by 1946. If even a part of its enormous foreign earnings had been credited to it and not entirely siphoned off, India could have imported modern technology to build up an industrial structure as Japan was doing. Instead the masses suffered severe nutritional decline and independent India inherited a festering problem of unemployment and poverty.”

Colonial reparations. How much? 

I wrote about new evidence that has emerged quantifying the economic value of plunder during the 190-year British occupation of India and asked how colonial reparations could be effected.

First, a brief rewind.

In 1988, I wrote a piece for The Illustrated Weekly of India called “Debt and Dishonour of the British Empire” in which I computed the colonial reparations due to India at around £3 trillion.

Nearly 30 years after that piece, Shashi Tharoor, former minister of state for external affairs, spoke on the subject at the Oxford Union in 2015 and later developed the theme into a book, excoriating the British Empire for its plunder of India. Shortly thereafter, I wrote for Daily-O: “Shashi Tharoor, the Congress MP from Thiruvananthapuram, in his book An Era of Darkness: The British Empire in India, says reparations aren’t needed; an apology and a token payment of one pound sterling a year for 200 years will suffice. He is wrong. Reparations are needed. An apology and tokenism won’t suffice.”

This is what Tharoor wrote in his 2017 book: “India should be content with a symbolic reparation of one pound a year, payable for 200 years to atone for 200 years of imperial rule. I felt that atonement was the point—a simple “sorry” would do as well—rather than cash. Indeed, the attempt by Minhaz Merchant to compute what a fair sum of reparations would amount to came up with a figure so astronomical—£3 trillion in today’s money—that no one could ever reasonably be expected to pay it. (The sum would be larger than Britain’s entire GDP in 2015).”

Tharoor is wrong on both the figure and the modus, as we shall shortly see.

Professor Utsa Patnaik has done painstaking research on the Indian economy which she began 50 years ago as a student abroad. She has arrived at an inflation-adjusted figure of £9.2 trillion for the wealth siphoned out of India by the British.

In an oped for the Hindustan Times published on October 30, 2018, Professor Patnaik elaborated on how she arrived at this figure: “How exactly did the British manage to diddle us and drain our wealth? That was the question that Basudev Chatterjee (later editor of a volume in the Towards Freedom project) had posed to me 50 years ago when we were fellow students abroad. After decades of research I find that using India’s commodity export surplus as the measure and applying an interest rate of 5 per cent, the total drain from 1765 to 1938, compounded up to 2016, comes to £9.2 trillion; since $4.86 exchanged for £1 those days, this sum equals about $45 trillion.”

Professor Patnaik goes on to explain the modus operandi: “The exact mechanism of drain, or transfers from India to Britain was quite simple. The key factor was Britain’s control over our taxation revenues combined with control over India’s financial gold and forex earnings from its booming commodity export surplus with the world. Simply put, Britain used locally raised rupee tax revenues to pay for its net imports of goods, a highly abnormal use of budgetary funds not seen in any sovereign country.”

“The East India Company from 1765 onwards allocated every year up to one-third of Indian budgetary revenues, net of collection cost, to buy a large volume of goods for direct import into Britain, far in excess of that country’s own needs. Since tropical goods were highly prized in other cold temperate countries which could never produce them, in effect these free goods represented international purchasing power for Britain which kept a part for its own use and re-exported the balance to other countries in Europe and North America against import of food grains, iron and other goods in which it was deficient.”

“The British historians Phyllis Deane and W.A. Cole presented an incorrect estimate of Britain’s 18th-19th century trade volume by leaving out re-exports completely. I found that by 1800 Britain’s total trade was 62 per cent higher than their estimate, on applying the correct definition of trade including re-exports that is used by the United Nations and by all other international organisations. When the British Crown took over from the East India Company (in 1858) a clever system was developed from 1861 under which all of India’s financial gold and forex earnings from its fast-rising commodity export surplus with the world was intercepted and appropriated by Britain.”

Professor Patnaik’s work, published recently by Columbia University Press, gained further international traction last week.

Jason Hickel, a columnist with The Guardian, wrote a piece for Al Jazeera on December 14, 2018, titled “How Britain stole $45 trillion from India: And lied about it”.

The piece laid bare the deceit with which Britain accomplished its plunder of Indian wealth over nearly two centuries and the disgraceful lack of acknowledgment in British society and among British historians of this crime.

The methodology

Let’s turn now to other methodologies to compute the imperial theft. The Gandhian economic philosopher J.C. Kumarappa in a detailed note to the Congress in 1947 estimated Britain’s colonial debt to India at Rs 5,700 crore. This was largely undisputed at the time by both the Indian and British authorities—but the matter never went into arbitration.

The exchange rate in 1947 was Rs 13.33 to one British pound. The debt of Rs 5,700 crore computed by Kumarappa in 1947 was therefore equivalent to 430 crore pounds sterling or £4.30 billion. Adjusting for inflation and 5 per cent compounded annual interest over 71 years, the total British debt to India in 2018 would be over £5 trillion.

Professor Patnaik’s figure of £9.2 trillion ($45 trillion adjusted for dollar-pound exchange rates as well as interest) is significantly higher because she correctly computes the cost of exports and re-exports by Britain using extorted tax revenue from Indian peasants, farmers and workers.

Moreover, the cost of human suffering, through famines and the loss of Indian lives in wars waged by the British to capture Indian territories, from Punjab to Assam, has not been computed.

The modus

Even if a consensus is arrived at on the final reparations figure, how would post-Brexit Britain pay? Consider the discounted figure of £5 trillion. Spread over 50 years, Britain would need to repay the Indian treasury £100 billion (Rs 9 lakh crore) a year—that is an entirely affordable 3 per cent of Britain’s GDP. With every passing year, as the British GDP grows, the burden on Britain as a ratio to its GDP will shrink.

Why is compensation so important 71 years after the end of British colonial rule in India?

It is important because just as Germany was forced to pay reparations to the Allies after World War I, justice must be served.

Colonial reparations by Britain have a precedent. In 2013, the British government paid $20 million to Kenyans tortured by British colonial forces during the Mau Mau uprising in Kenya in the 1950s. The amount was small, the precedent it set large.

American historian and philosopher Will Durant toured India in 1930. This is what he wrote: “The British conquest of India was the invasion and destruction of a high civilisation, utterly without scruple or principle, careless of art and greedy of gain, overrunning with fire and sword a country temporarily disordered and helpless, bribing and murdering, annexing and stealing, and beginning that career of illegal and ‘legal’ plunder which now (1930) has gone on ruthlessly for one hundred and seventy-three years.”

Colonial reparations to India won’t fully heal the wounds of India’s “high civilisation” that Durant wrote so feelingly about. But they will be a step in the right direction to correct a historical wrong. – Daily-O, 3 December 2018

»  Minhaz Merchant is the biographer of Rajiv Gandhi and Aditya Birla. He is a media group chairman and editor, and the author of The New Clash of Civilizations.

Robert Clive and famine victims across India

Robert Clive Quote


How Britain stole $45 trillion from India and lied about it – Jason Hickel

Nizam of Hyderabad at the Delhi Durbar 1911

Jason HickelWe need to recognise that Britain retained control of India not out of benevolence but for the sake of plunder and that Britain’s industrial rise didn’t emerge sui generis from the steam engine and strong institutions, as our schoolbooks would have it, but depended on violent theft from other lands and other peoples. – Jason Hickel

There is a story that is commonly told in Britain that the colonisation of India—as horrible as it may have been—was not of any major economic benefit to Britain itself. If anything, the administration of India was a cost to Britain. So the fact that the empire was sustained for so long—the story goes—was a gesture of Britain’s benevolence.

New research by the renowned economist Utsa Patnaik—just published by Columbia University Press—deals a crushing blow to this narrative. Drawing on nearly two centuries of detailed data on tax and trade, Patnaik calculated that Britain drained a total of nearly $45 trillion from India during the period 1765 to 1938.

It’s a staggering sum. For perspective, $45 trillion is 17 times more than the total annual gross domestic product of the United Kingdom today.

How did this come about?

It happened through the trade system. Prior to the colonial period, Britain bought goods like textiles and rice from Indian producers and paid for them in the normal way—mostly with silver—as they did with any other country. But something changed in 1765, shortly after the East India Company took control of the subcontinent and established a monopoly over Indian trade.

Here’s how it worked. The East India Company began collecting taxes in India, and then cleverly used a portion of those revenues (about a third) to fund the purchase of Indian goods for British use. In other words, instead of paying for Indian goods out of their own pocket, British traders acquired them for free, “buying” from peasants and weavers using money that had just been taken from them.

It was a scam—theft on a grand scale. Yet most Indians were unaware of what was going on because the agent who collected the taxes was not the same as the one who showed up to buy their goods. Had it been the same person, they surely would have smelled a rat.

Some of the stolen goods were consumed in Britain, and the rest were re-exported elsewhere. The re-export system allowed Britain to finance a flow of imports from Europe, including strategic materials like iron, tar and timber, which were essential to Britain’s industrialisation. Indeed, the Industrial Revolution depended in large part on this systematic theft from India.

On top of this, the British were able to sell the stolen goods to other countries for much more than they “bought” them for in the first place, pocketing not only 100 percent of the original value of the goods but also the markup.

After the British Raj took over in 1847, colonisers added a special new twist to the tax-and-buy system. As the East India Company’s monopoly broke down, Indian producers were allowed to export their goods directly to other countries. But Britain made sure that the payments for those goods nonetheless ended up in London.

How did this work? Basically, anyone who wanted to buy goods from India would do so using special Council Bills—a unique paper currency issued only by the British Crown. And the only way to get those bills was to buy them from London with gold or silver. So traders would pay London in gold to get the bills, and then use the bills to pay Indian producers. When Indians cashed the bills in at the local colonial office, they were “paid” in rupees out of tax revenues—money that had just been collected from them. So, once again, they were not in fact paid at all; they were defrauded.

Meanwhile, London ended up with all of the gold and silver that should have gone directly to the Indians in exchange for their exports.

This corrupt system meant that even while India was running an impressive trade surplus with the rest of the world—a surplus that lasted for three decades in the early 20th century—it showed up as a deficit in the national accounts because the real income from India’s exports was appropriated in its entirety by Britain.

Some point to this fictional “deficit” as evidence that India was a liability to Britain. But exactly the opposite is true. Britain intercepted enormous quantities of income that rightly belonged to Indian producers. India was the goose that laid the golden egg. Meanwhile, the “deficit” meant that India had no option but to borrow from Britain to finance its imports. So the entire Indian population was forced into completely unnecessary debt to their colonial overlords, further cementing British control.

Britain used the windfall from this fraudulent system to fuel the engines of imperial violence—funding the invasion of China in the 1840s and the suppression of the Indian Rebellion in 1857. And this was on top of what the Crown took directly from Indian taxpayers to pay for its wars. As Patnaik points out, “the cost of all Britain’s wars of conquest outside Indian borders were charged always wholly or mainly to Indian revenues.”

And that’s not all. Britain used this flow of tribute from India to finance the expansion of capitalism in Europe and regions of European settlement, like Canada and Australia. So not only the industrialisation of Britain but also the industrialisation of much of the Western world was facilitated by extraction from the colonies.

Patnaik identifies four distinct economic periods in colonial India from 1765 to 1938, calculates the extraction for each, and then compounds at a modest rate of interest (about 5 percent, which is lower than the market rate) from the middle of each period to the present. Adding it all up, she finds that the total drain amounts to $44.6 trillion. This figure is conservative, she says, and does not include the debts that Britain imposed on India during the Raj.

These are eye-watering sums. But the true costs of this drain cannot be calculated. If India had been able to invest its own tax revenues and foreign exchange earnings in development—as Japan did—there’s no telling how history might have turned out differently. India could very well have become an economic powerhouse. Centuries of poverty and suffering could have been prevented.

All of this is a sobering antidote to the rosy narrative promoted by certain powerful voices in Britain. The conservative historian Niall Ferguson has claimed that British rule helped “develop” India. While he was prime minister, David Cameron asserted that British rule was a net help to India.

This narrative has found considerable traction in the popular imagination: according to a 2014 YouGov poll, 50 percent of people in Britain believe that colonialism was beneficial to the colonies.

Yet during the entire 200-year history of British rule in India, there was almost no increase in per capita income. In fact, during the last half of the 19th century—the heyday of British intervention—income in India collapsed by half. The average life expectancy of Indians dropped by a fifth from 1870 to 1920. Tens of millions died needlessly of policy-induced famine.

Britain didn’t develop India. Quite the contrary—as Patnaik’s work makes clear—India developed Britain.

What does this require of Britain today? An apology? Absolutely. Reparations? Perhaps—although there is not enough money in all of Britain to cover the sums that Patnaik identifies. In the meantime, we can start by setting the story straight. We need to recognise that Britain retained control of India not out of benevolence but for the sake of plunder and that Britain’s industrial rise didn’t emerge sui generis from the steam engine and strong institutions, as our schoolbooks would have it, but depended on violent theft from other lands and other peoples. – Daily Times, 15 December 2018

» Dr. Jason Hickel is an anthropologist, author, and a Fellow of the Royal Society of Arts in London.

British Railway India


Colonialism was a disaster and the facts prove it – Joseph McQuade

Robert Clive & Shah Alam

Joseph McQuadeEmpirical research clearly provides the facts to prove colonialism inflicted grave political, psychological and economic harms on the colonized. – Dr Joseph McQuade

Recently an academic article, asserting the historical benefits of colonialism, created an outcry and a petition with over 10,000 signatures calling for its removal.

The Case for Colonialism, published in Third World Quarterly by Bruce Gilley, argues Western colonialism was both “objectively beneficial and subjectively legitimate” in most places where it existed.

Gilley, an associate professor of political science at Portland State University, claims the solution to poverty and economic underdevelopment in parts of the Global South is to reclaim “colonial modes of governance; by recolonising some areas; and by creating new Western colonies from scratch.”

Understandably, the article faces widespread criticism for whitewashing a horrific history of human rights abuses. Current Affairs compared Gilley’s distortion of history to Holocaust denial.

Last week, after many on the journal’s editorial board resigned, the author issued a public apology for the “pain and anger” his article may have caused.

Whether the article is ultimately retracted or not, its wide circulation necessitates that its claims be held up to careful historical scrutiny. As well, in light of current public debates on censorship and free speech versus hate speech, this is a discussion well worth having. Although this debate may seem as though it is merely academic, nothing could be further from the truth.

Although it may seem colonialist views are far behind us, a 2014 YouGov poll revealed 59 per cent of British people view the British Empire as “something to be proud of.” Those proud of their colonial history outnumber critics of the Empire three to one. Similarly, 49 per cent believe the Empire benefited its former colonies.

Such views, often tied to nostalgia for old imperial glory, can help shape the foreign and domestic policies of Western countries. Gilley has helped to justify these views by getting his opinions published in a peer review journal. In his article, Gilley attempts to provide evidence which proves colonialism was objectively beneficial to the colonized. He says historians are simply too politically correct to admit colonialism’s benefits.

In fact, the opposite is true. In the overwhelming majority of cases, empirical research clearly provides the facts to prove colonialism inflicted grave political, psychological and economic harms on the colonized.

It takes a highly selective misreading of the evidence to claim that colonialism was anything other than a humanitarian disaster for most of the colonized. The publication of Gilley’s article—despite the evidence of facts—calls into question the peer review process and academic standards of The Third World Quarterly.

Trains in India

Colonialism in India

As the largest colony of the world’s largest imperial power, India is often cited by apologists for the British Empire as an example of “successful” colonialism. Actually, India provides a much more convincing case study for rebutting Gilley’s argument.

With a population of over 1.3 billion and an economy predicted to become the world’s third-largest by 2030, India is a modern day powerhouse. While many attribute this to British colonial rule, a look at the facts says otherwise.

From 1757 to 1947, the entire period of British rule, there was no increase in per capita income within the Indian subcontinent. This is a striking fact, given that, historically speaking, the Indian subcontinent was traditionally one of the wealthiest parts of the world.

As proven by the macroeconomic studies of experts such as K.N. Chaudhuri, India and China were central to an expansive world economy long before the first European traders managed to circumnavigate the African cape.

During the heyday of British rule, or the British Raj, from 1872 to 1921, Indian life expectancy dropped by a stunning 20 per cent. By contrast, during the 70 years since independence, Indian life expectancy has increased by approximately 66 per cent, or 27 years. A comparable increase of 65 per cent can also be observed in Pakistan, which was once part of British India. Although many cite India’s extensive rail network as a positive legacy of British colonialism, it is important to note the railroad was built with the express purpose of transporting colonial troops inland to quell revolt. And to transport food out of productive regions for export, even in times of famine.

This explains the fact that during the devastating famines of 1876-1879 and 1896-1902 in which 12 to 30 million Indians starved to death, mortality rates were highest in areas serviced by British rail lines.

Colonialism did not benefit the colonised

India’s experience is highly relevant for assessing the impact of colonialism, but it does not stand alone as the only example to refute Gilley’s assertions. Gilley argues current poverty and instability within the Democratic Republic of the Congo proves the Congolese were better off under Belgian rule. The evidence says otherwise.

Since independence in 1960, life expectancy in the Congo has climbed steadily, from around 41 years on the eve of independence to 59 in 2015. This figure remains low compared to most other countries in the world. Nonetheless, it is high compared to what it was under Belgian rule.

Under colonial rule, the Congolese population declined by estimates ranging from three million to 13 million between 1885 and 1908 due to widespread disease, a coercive labour regime and endemic brutality.

Gilley argues the benefits of colonialism can be observed by comparing former colonies to countries with no significant colonial history. Yet his examples of the latter erroneously include Haiti (a French colony from 1697 to 1804), Libya (a direct colony of the Ottoman Empire from 1835 and of Italy from 1911), and Guatemala (occupied by Spain from 1524 to 1821).

By contrast, he neglects to mention Japan, a country that legitimately was never colonized and now boasts the third largest GDP on the planet, as well as Turkey, which up until recently was widely viewed as the most successful secular country in the Muslim world.

These counter-examples disprove Gilley’s central thesis that non-Western countries are by definition incapable of reaching modernity without Western “guidance.”

In short, the facts are in, but they do not paint the picture that Gilley and other imperial apologists would like to claim. Colonialism left deep scars on the Global South and for those genuinely interested in the welfare of non-Western countries, the first step is acknowledging this. – Daily-O & The Conversation, 28 September 2017

» Dr Joseph McQuade is a SSHRC postdoctoral fellow, Centre for South Asian Studies, Munk School of Global Affairs, University of Toronto, Canada.

Bengal famine of 1770


India forgets its darkest hour – Mohan Guruswamy

Winston Churchill

Mohan GuruswamyWill we continue to celebrate Churchill? Today our theatres are showing Darkest Hour. This is Joe Wright’s movie about Winston Churchill….  He is depicted as a dark and brooding drunken hero, instead of the monster that he was. Churchill once said: “History will be kind to us. We will write it.” He was right. Some victims just don’t get it. – Dr Mohan Guruswamy

The movie Darkest Hour is playing in many of our better cinema halls in all major cities. The Anglicised Indian elite, who still largely lionise Winston Churchill, are beating the pathways to the movie halls. Nearly every review in our major newspapers is quite breathless. The Hindu writes: “Wright’s focused single-minded direction takes the audience on a journey, plummeting with Churchill’s low spirits and soaring with his triumphs. It makes history fade into the background. What remains instead is only that one figure, who is supported by brilliant performances from Mendelsohn and Dillane. Special credit also goes to Kazuhiro Tsuji, the make-up designer genius who brings historical figures to life on the big screen. There are plenty of close-ups of Churchill’s face but never once does his leathery wrinkled skin, thinning hair or liver patches appear artificial”.

The Times of India reviewer writes: “While Christopher Nolan’s Dunkirk largely focused on the evacuation of those soldiers from the beaches, Darkest Hour documents the days leading up to those events, particularly around Churchill’s thought process before choosing the fate of his country. It’s no easy call to make and this weighs heavily on Churchill’s mind and stooped shoulders embodied brilliantly by Gary Oldman who gives the performance of a lifetime. Disappearing under all the prosthetics and makeup, Oldman plays Churchill as temperamental and riddled with doubt. He infuses the otherwise grandiose wartime leader with a human sense of vulnerability that indicates the pressure the man was under at that time. An Oscar nomination for Oldman would be well-earned, and a win not too farfetched.”

We, however, might be more usefully educated by seeing Ashani Sanket (Distant Thunder), which is set in rural Bengal at the time of the British-induced famine of 1943-44 and examines the effect of the famine on the villages of Bengal through the eyes of a young doctor, Gangacharan, and his wife, Anaga. Director Satyajit Ray shows the human scale of a cataclysmic event that killed more than three million people. The film unfolds at a leisurely pace that reflects the rhythms of village life, but gradually shows the breakdown of traditional village norms under the pressure of hunger and starvation. It does not even mention Churchill. Yet it is mostly about what he wrought on Bengal. The New York Times considers it among the thousand great films ever made. The only reference to a distant war are the planes flying overhead to and from Burma (now Myanmar) as village children happily cheer them on. The idyll ends when a wizened old man comes from a neighbouring village looking for rice. Soon the famine is all enveloping. See this movie instead and realise how Churchill had devastated Bengal.

Winston Churchill is still a very outsized figure in India. Many Indians see him as a resolute and heroic leader who led his country from the deepest despair to a final victory. Nearly every morning I walk past a neat stone bungalow in the Bolarum cantonment called “The Retreat”, on which a large sign proudly declares that Winston Churchill lived here. Our Army is still very proud of its colonial origins, but I often think its pride in its antecedents is a bit misplaced.

The Bangalore Club has encased very proudly in a glass-topped box at its main entrance a letter to Churchill suspending his membership for not paying his dues. Those who celebrate Winston Churchill should read Madhusree Mukerjee’s book Churchill’s Secret War: The British Empire and the Ravaging of India during World War II. It’s a chilling account of how Churchill was no different from Hitler, Stalin or Mao Zedong when it came to sanctioning the death of millions.

The Bengal Famine of 1943-44 must rank as the greatest single man-made disaster in India. Nearly four million Indians died because of an artificial famine created by the British government, and yet it gets little more than a passing mention in Indian history books and seldom in our conversation.

Bengal had a bountiful harvest in 1942, but the British started diverting vast quantities of food grain from India to Britain, contributing to a massive food shortage in the areas comprising present-day West Bengal, Odisha, Bihar and Bangladesh. Consequently, by 1943, hordes of starving people were flooding into Calcutta, most dying on the streets. The sight of well-fed white British soldiers amid this apocalyptic landscape was “the final judgment on British rule in India,” said Jawaharlal Nehru.

Churchill could easily have prevented the famine. Even a few shipments of food grain would have helped, but the British Prime Minister adamantly turned down appeals from two successive viceroys, his own secretary of state for India and even the American president. When urgently beseeched by Leo Amery and then Viceroy Archibald Wavell to release food stocks for India, Churchill had responded with a telegram asking why Mahatma Gandhi hadn’t died yet?

Churchill’s attitude toward Indians can be summed up in his words to Amery: “I hate Indians. They are a beastly people with a beastly religion.” According to Mukerjee, “Churchill’s attitude toward India was quite extreme, and he hated Indians, mainly because he knew India couldn’t be held for very long.” She further writes: “Churchill regarded wheat as too precious a food to expend on non-whites, let alone on recalcitrant subjects who were demanding independence from the British empire. He preferred to stockpile the grain to feed Europeans after the war was over.”

British attitudes towards Indians should be seen in the backdrop of India’s contribution to the Allied war campaign. The resources that Britain obtained from a poor India were comparable or exceeded that provided by an increasingly prosperous United States. While American materials were provided only after Britain signed an agreement on Washington’s terms, the Indian story was rather different. In lieu of payments for goods and services drawn out of India, Britain held out promissory notes that were to be redeemed in the future.

The goods nevertheless had to be purchased in India against a cash payment to individual sellers. The Reserve Bank of India rose to the occasion and its printed presses went into overdrive. Thus, in just two years, the amount of money in circulation in India more than doubled. The result was inflation of 350 per cent. Such inflation impoverishes the poor even more by taking out their purchasing power. Couple this with a reduction of goods in the market, and you can well understand the devastation. The millions of deaths in the 1943 Bengal famine was one consequence of such British policies.

Britain’s debt to India is too great to be ignored by either nation. Instead of repaying India in cash as it did to America, Britain allowed India notes to be expended in war-ravaged Britain, which had little industrial capacity left. India was fended off with war surpluses, which is how we ended up with Vampire fighters, Wellington bombers, warships and even an aircraft-carrier. Forget the money, do the British at least have the grace to offer an apology? The Queen and even the Prime Minister, despite visiting Jallianwala Bagh, never apologised. It seems unlikely that they will apologise for something which even our elites won’t demand. Like Churchill, they continue to delude themselves that English rule was India’s “Golden Age”.

Will we continue to celebrate Churchill? Today our theatres are showing Darkest Hour. This is Joe Wright’s movie about Winston Churchill resolutely resisting defeat. He is depicted as a dark and brooding drunken hero, instead of the monster that he was. Churchill once said: “History will be kind to us. We will write it.” He was right. Some victims just don’t get it.

The Karni Sena wouldn’t know all this. Just like they won’t know that the poem Padmavat, written by Jayasi five centuries ago, was not history but fiction. Napoleon exhorted his son to “read history, as it’s the only truth”. Good advice to all Indians. – Deccan Chronicle, 26 January 2018

» Mohan Guruswamy a policy analyst studying economic and security issues. He has held senior positions in government and industry, and he also specialises in the Chinese economy.

Mother and child in Calcutta (1943)

Bengal famine orphans (1943)
Bendal Famine 1943: Boys try to access rail-cars loaded with grain for export to UK.
Churchill Quote Indians
Churchill's Bengal famine of 1943

India is reinventing itself – Amar Bhushan

Republic Day India

Amar BhushanCynicism does not make a nation achieve greatness. India has always had caste, religious and social conflicts but survived well. … India is well on course to play out transformational politics. – Amar Bhushan

If you are an avid watcher of Indian news soap opera, a keen follower of elitist columnists, politicians in the Opposition or a BJP leader starved of Modi’s favours, you may wonder if it is worth waiting for so long for apocalypse to come. At the centre of their frustration is a man called Narendra Damodardas Modi who evokes either intense hatred or blind adoration. Trust them to inform you that with GDP dropping, unemployment rising, manufacturing sector limping, exports flattening out, black money returning with vengeance and demonetisation and GST dealing a body blow to the business, economy has been shattered beyond recovery.

Social justice and cinematic freedom have also become scarce. No wonder, Jignesh Mevani, the Vadgam mascot of angry Dalits, is left with no choice but to incite violence to seek better opportunities for his community. Similarly, Patidars, Marathas, Jats and similar caste groups have no future unless they snatch reservation from the jaws of ‘insensitive’ Justices. Poor Sanjay Leela Bhansali cannot screen Padmaavat without theatres being bombed by Karni Sena.

Secularism, the lifeline of apologists, is also in tatters. Muslims cannot illegally trade in cow or eat beef. Their boys cannot love, marry and convert Hindu girls. Madrasas in Kerala cannot recruit young boys to fight for ISIS with hawala funds. Muslim males have to live constantly under fear of prosecution should they divorce their wives at will. If Telangana chief minister earmarks reservation for Muslims and Karnataka chief minister celebrates ‘heroism’ of Tipu Sultan, they are vilified.

Such has been the atmospherics that Mamata Banerjee, a favourite of illegal Bangladeshi immigrants and Muslim warlords, has to hold Brahmin ‘sabhas’ and Rahul Gandhi, a hereditary secularist, has to proclaim himself a Shiv Bhakta and get aarti organised in Ram temples of Gujarat. In fact, India has now become a hub of saffron terrorists. The Karnataka chief minister has confirmed what his senior colleagues, Sushilkumar Shinde and P Chidambaram had long suspected; RSS, Bajrang Dal and Vishwa Hindu Parishad are terrorist organisations and BJP has numerous terrorists in its cadre.

Even the foreign policy is in a mess. Nepal, Maldives, Sri Lanka and Myanmar have lately far bigger Chinese footprints. Beijing has fully ‘adopted’ Pakistan and been keeping Indian security forces occupied along Sikkim and Arunachal Pradesh border so that Pak Army can exfiltrate terrorists in the Valley. In the absence of a coherent Pakistan policy, the Valley is burning in high-rising flames and cease-fire violations by Pak Army, and casualties of our security personnel and civilians have recorded an all- time high. For Chidambaram, Kashmir is now a lost cause and the only way to retain some ownership of J&K is to rewrite the instrument of accession and concede what terrorists and separatists want.

The sum total is that living in Modi’s India at one’s own terms is extremely difficult, with CBI, NIA, ED, UIDAI and Income Tax Department working overtime. But cynicism does not make a nation achieve greatness. India has always had caste, religious and social conflicts but survived well. Hindus are also deeply hurt and annoyed but have patience and wisdom to outlive the historical prejudices and contemporary scorn. Kashmir, Pakistan and China are no major worry. A new-look defence and security forces can take care of these geographical vagaries.

We need to take note of the buzz around building a New India. The Swachh Bharat Abhiyan has become infectious. Thousands of skilled youths have taken to entrepreneurship. Number of those wanting to do something for the country is swelling. You sense an urgency to break free of lethargy and stereotypes and an impatience to imbibe tomorrow’s technologies to benefit the common man. Millions who did not have access to bank have now their account and can use it to receive loans for starting small businesses.

Digitisation of money transaction has taken off to dizzy heights and tax payers’ base has expanded dramatically. The thrust on economic and educational empowerment of women across all religions is phenomenal. To those in BPL category, giving free LPG connections and money to build houses are breakthrough initiatives.

My labourer summed it up when I went to have a meal at his new house. With lump in his throat, he said that he had never dreamt of having gas and a pucca roof over his head in his lifetime. The northeast states, another area of years of neglect, are witnessing massive infrastructure build-up. Elsewhere, roads, rail, air and telecommunication connectivity are expanding at a rapid pace. There is really no need for us to fear the doomsday prophecies. India is well on course to play out transformational politics. – The New Indian Express, 20 January 2018

» Amar Bhushan is a former Special Secretary at RAW, New Delhi.

Indian Air Force

India is still on the same old policy path – Atanu Dey

Rupee Drive

Dr. Atanu DeyThere have been no administrative reforms. The British Raj-inherited bloated bureaucracy continues to thrive. It is an unaccountable mass of people absolutely resistant to change and whose main output is red tape. – Dr Atanu Dey

The second anniversary of the NDA government of Prime Minister Narendra Modi is an appropriate milestone to reflect on its performance.

In May 2014, the possibility that India would embark on a path to prosperity was real. The BJP led by Modi was given an unprecedented mandate by the people and expectations were high that the new government would break from the dismal past. A move from what I call the PPP (perpetually planned poverty) policies of the past to policy reforms necessary for wealth creation was expected.

The sad truth is that instead of change, India, in essence, is still on the same old path India has been on since 1947. Heavy-handed and inept government interference into the economy had prevented India from reaching anywhere close to its full economic potential. Though the realisation that the needed structural reforms are unlikely to happen has dawned on most serious observers, it is politically incorrect to voice that concern for fear of antagonising the powers that be.

Governments, central and state, have immense power and control over all aspects of the economy, as is the norm for socialist countries. That leaves very little room for the expression of dissatisfaction by the people and the private sector. Industry leaders, for instance, may (and they do) privately bemoan the lack of reforms but they know that it would be foolish to say so publicly since the fate of their commercial enterprises are in government hands. They wisely choose to rate every budget a solid 11 on a 1 to 10 scale. They just grin and bear it because they have to, and if possible they vote with their feet.

A powerful government is a two-edged sword. It can implement growth-inducing policies that are the engines of prosperity. But if instead the government chooses growth-retarding policies, because of its power it can also prevent any challenge to its bad policies and therefore be immune to any possibilities of reform.

India’s government is unfortunately too powerful for India’s welfare. The reason is that the structure and nature of government is a continuation of the British colonial government. Although Indians democratically choose their government now, that fact is consistent with an all-powerful, anti-freedom, exploitative and extractive government like before.

Economic prosperity is built on a few basic building blocks such as good rules, urbanisation of the economy, free markets, property rights, and individual freedom. Instead, the government has focused on their anti-thesis, and perpetuated poverty rather than prosperity.

RupeeLike the previous governments, Modi’s government continues to focus on villages, which necessarily implies rural poverty and therefore the continuance of fruitless rural poverty alleviation programmes like MNREGA and Jan Dhan. Those don’t create wealth but merely redistribute what little there is. The stress is always on subsidies and dole, instead of freeing people to create wealth. The poor need freedom and opportunities to use their labour to create wealth, not Rs 2 per kilo rice as handouts.

Lack of property rights, unclear land titles and regressive labour laws limit employment in urban India. Add to that the lack of investible funds. The financial institutions are in dire distress with massive non-performing assets (NPA). Estimates of stressed assets in the banking sector top 15 per cent. Almost every public sector bank is broke multiple times over. The only avenue appears to be the injection of even more money into them. That is not the solution. In short, the government has demonstrated neither the vision nor commitment to structural changes. What kind of changes? For instance, it could have liberalised the education sector, instead of introducing even more onerous requirements.

Lack of availability of land has hamstrung industrial growth, and thus the growth of manufacturing jobs. Public sector undertakings and defense occupy prime real estate in urban areas. These could have been made available to industry for growth. Furthermore, land that the government holds is urgently needed for affordable housing. The housing sector can be another powerful engine of growth.

The government must vacate the spaces in which the private sector can and does do a much better job than the public sector can. Why must the government run Air India, BSNL and the like when the losses made by these entities have to be suffered by taxpayers who have no control over them?

There have been no administrative reforms. The British Raj-inherited bloated bureaucracy continues to thrive. It is an unaccountable mass of people absolutely resistant to change and whose main output is red tape. Another neglected area is judicial reforms. Certainly, the Modi government did not create the system but it has done nothing to address the problem of over three crore pending court cases.

Has Modi’s NDA government done anything at all? Of course it has. Any government in power, especially an all-powerful government, always does things. But did it make the right choices in doing what it did? Did the promised ‘acche din’ materialise? I think the answer is no, and I believe most observers think so too but are unwilling to come out and say so.

Narendra ModiWith three years still to go, there is time for the Modi government to change tack. That will only happen if it understands why India has not prospered so far. No country has become rich without the right rules, without urbanising, without economic freedom. No country has become rich without letting markets function or by pandering to special interest groups. The numbers speak for themselves that India is mired in poverty. Only when the realisation dawns on the Indian people and their leaders that it is possible to create wealth with the right rules and policies will India’s trajectory really change. Until then, it is futile to expect any real change. – The New Indian Express, 14 June 2016

» Atanu Dey is an economist living in San Jose, California. He is the author of Transforming India and describes himself as a classical liberal fighting against socialism and serfdom. Tweet him at @atanudey.