Clingingsmith on Balachandran, ed., _India and the World Economy, 1850-1950_

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Published by EH.NET (January 2007)

G. Balachandran, editor, _India and the World Economy, 1850-1950_. 
New York: Oxford University Press, 2005. xi + 319 pp. $20 
(paperback), ISBN: 0-19-567234-8.

Reviewed for EH.NET by David Clingingsmith, Department of Economics, 
Harvard University.


This volume brings together eight previously published papers and 
book chapters about India's international economy during the British 
Raj. Despite its sweeping title, the articles form three rather 
narrow thematic clusters: the transfer of wealth from India to 
Britain through the Indian fiscal system, Indian currency policy, and 
the impact of worldwide depressions on the Indian economy. Readers 
interested in these topics will find that the collection provides a 
useful overview of the existing literature. Nonspecialists may find 
it surprising that only three of the eight articles were written 
during the past twenty-five years. The cultural turn of the 1980s 
made economic topics unfashionable among historians of India. The 
subject of this volume, along with many others in Indian economic 
history, is ripe for renewal.

Observers of the Indian economy since late nineteenth century noted 
the Indian economy ran a persistent current account surplus with 
Britain. Nationalist economists, such as R.C. Dutt and Dadabhai 
Naoroji, viewed this surplus as a tribute India paid to Britain, and 
labeled it a "drain" of wealth responsible for the impoverishment of 
India. Editor G. Balachandran's introductory essay notes that 
historical writing on India's international economy continues to 
follow Dutt and Naoroji's framing of this issue along with many 
others. K.N. Chaudhuri's excellent 1968 article on the drain argues 
that the nationalist approach is more often a source of confusion 
rather than illumination. Examination of the current account is not 
the best way to assess the welfare implications of British rule, and 
a focus on this assessment obscures the role of current account 
dynamics for the Indian economy as a whole. Chaudhuri recommends an 
approach to India's current account driven by economic theory and 
data, though subsequent authors only partly follow his suggestion. 
Balachandran's introduction and the articles by Chaudhuri, John 
McLean, and Sunanada Sen do an admirable job of trying to understand 
the composition of this surplus in detail, with an eye to separating 
"legitimate" payments for services and debt from those that might 
properly be regarded as tribute. However, Sen discovers that during 
the building of India's railways the Government of India tended to 
use current revenue to retire debt that paid India's indemnity for 
the 1857 rebellion and to issue fresh debt to pay for the railways. 
The current account thus does a poor job at reflecting the purposes 
to which India's revenue was put. It would be better to analyze the 
role of the current account and the suboptimal use of India's 
revenues separately.

The articles by de Cecco, Tomlinson, and Balachandran concern Indian 
currency policy. De Cecco provides a detailed account of the efforts 
of the government of India to stabilize the falling rupee and 
establish the gold standard in India. Tomlinson and Balachandran 
examine the currency crisis of the early 1930s that led to the 
devaluation of sterling and the rupee and the pegging of the rupee to 
a sterling standard. All three articles focus particularly on the 
debates between and conflicting interests of the British and Indian 
governments. Tomlinson gives a particularly nice blow-by-blow account 
of the devaluation. Greater attention to the broader macroeconomic 
effects of currency policy would have been welcome, however, 
particularly since these impinge on the political considerations of 
both governments.

Amiya Bagchi's rambling essay concerning the impact of the depression 
of 1873-96 on India's domestic economy is perhaps the weakest 
analysis in the collection. It lacks a clear line of argument. Omkar 
Goswami's detailed analysis of the 1930-39 depression in the 
jute-growing regions of Bengal presents is admirable attempt to work 
out an income statement for a typical jute grower and understand how 
the collapse of jute prices and exports in the 1930s accelerated the 
expansion of indebtedness, land transfers, and the growth of 
sharecropping in Bengal.


David Clingingsmith is a graduate student in the Department of 
Economics at Harvard University. He specializes in development 
economics and economic history, with a special interest in South 
Asia. He has recently been working on the economics of language 
consolidation in twentieth-century India and on the impact of the 
Hajj on Pakistani pilgrims.

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