VENU MADHAV GOVINDU - To Understand the Nature of Britain’s Debt to India, We Need to Follow the Money
In a recent debate at Oxford, the Congress politician
Shashi Tharoor delivered a bravura performance, arguing that Britain owed
reparations to its erstwhile colonies. Speaking in front of a small audience,
his good-natured verbal joust took wings thanks to the enormous reach of the
internet. Indian accolades for Tharoor seem to have little to do with the
implications of the argument he made. Rather his speech has been cheered
for the vicarious pleasure it afforded.
While the sun set firmly on the British Empire many decades
ago, we have never lacked in apologists for the Raj who deployed
time-honoured tactics in rebutting the argument that British rule was an
unwelcome experience for many. Thus, unmindful of the inherent irony, some have
mocked Tharoor for delivering his indictment of colonialism in a ‘plummy’
English accent. Others used a play that is straight from the Perry Anderson
school of history. They acknowledged the iniquity of Empire, but rapidly moved
on to the horrors inflicted on independent India by the Congress that Tharoor
represents in Parliament. It were as if history was a somewhat macabre,
additive game where the sins of some cancelled out those of others in the past.
The passage of time since 1947 has induced a temporal and
psychological distance between contemporary India and its colonised past. As a
result, many are able to deploy arguments that either extol British rule or
diminish its depredations by trading on our ignorance. This problem can be most
easily showcased by looking at the story of India’s economic exploitation
during the Second World War. A number of recent books have shed light on India’s
experience of the two global wars of the twentieth century, but a clear
understanding of their economic impact is confined to a few scholars and not
yet part of our public understanding. Nevertheless, while the blood and gore of
war or the horrors of famine are easier to recognise, the devastation wrought
by large-scale financial manipulation is no less significant.
Gifting Indian money to Britain
By the dawn of the 20th century, the drain of India’s
economic wealth took on many complex forms. However, the veneer of financial
sophistication was dropped in times of an emergency. For instance, when Britain
incurred heavy expenditure during the First World War (1914-18), the colonial
Government of India was most sympathetic to the Crown’s economic predicament.
In a fit of generosity, it presented an outright ‘gift’ of Rs. 190 crore of
Indian taxpayer money to the British exchequer! An additional expenditure of
Rs. 170 crore was borne by India towards the deployment of its army in various
theatres of war outside the country.
In 1931, the debt owed to Britain by India was said to be
about Rs. 1000 crore. At that time, the Indian National Congress argued that
much of this amount was incurred by Britain in furthering its own interests.
Based largely on the work of the Gandhian economic philosopher and constructive
worker, J. C. Kumarappa, the Congress argued that the principle of natural
justice would wipe out all of this debt and more. Therefore, it held that the
future debt to be borne by a free India had to be subjected to the scrutiny of
an impartial tribunal. The British political leadership and press roundly
denounced this rather moderate position and treated it as a treacherous
‘repudiation’ of India’s obligations. By 1945, the equation was reversed as was
the British view on the sanctity and honour involved in paying one’s debts to
the last penny.
It is often remarked that the Second World War converted
India from a debtor to a creditor nation. Strangely enough, sometimes this view
is proffered as a matter of pride for India. But such a bland characterisation
of India’s economic history during the War period masks the devastation wrought
on the country and its people that was a result of the transformation of
India into a creditor of Britain.
Getting Indian resources for free
Wars have a ravenous appetite and a global war
simultaneously fought on multiple fronts could not be an exception. Therefore,
Britain decided to help itself to Indian resources with no consideration of its
effects on India itself. These resources included vast amounts of food, timber
and other raw materials and, most important of all, some 2 million Indians as
soldiers. 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 after Britain signed an agreement on
Washington’s terms, the Indian story was rather different. Britain coveted
India’s resources but did not want to pay for them.
As a result, in lieu of
payments for goods and services drawn out of India, Britain held promissory
notes that were to be redeemed in the future. This is akin to a customer
walking into a grocery store and clearing out the shelves. But instead of
paying cash, he writes out a note promising to pay up later. Moreover, he
decides to keep this note with himself for safe custody! This is the rather
simplified but accurate story of India’s Sterling Balances.
But if Britain deferred payments, the goods had to
nevertheless be purchased in India against a cash payment to individual
sellers. It is here that the Reserve Bank of India stepped in to the aid of
London and printed a large amount of currency. Thus, between 1940 and 1942, the
amount of money in circulation in India more than doubled. The result was an
average rate of inflation of a whopping 350%. Rapid and sustained economic
inflation is a most regressive form of hidden taxation as it severely and
disproportionately penalises the poor. Such inflation coupled with all-round
scarcity of goods had a devastating effect on life in India. While the millions
of deaths in the Bengal Famine of 1943 was a grim consequence of British policy
in India, it was only the grisly tip of a vast iceberg of countrywide sorrow
and hardship.
By the end of the war in 1945, Britain had to finally reckon
with the problem of its debt to India and other countries. Thus, while in 1931
it had insisted on the importance of servicing one’s debt, by now British
opinion had turned ‘repudiationist’ and advanced a variety of arguments against
full payment. This, as a British campaigner for India’s freedom, Reginald
Reynolds, argued, was much like the Great Indian Rope Trick – the debt kept
growing upwards till it disappeared!
Britain agreed to pay a debt of Rs. 1600 crore but other
calculations showed a rather different figure. In 1947, Kumarappa estimated
that the Indian share of the costs of deployment of its soldiers was Rs. 1300
crore. A similar amount of Rs. 1200 crore was spent in expenses pertaining to
the war. He argued that these and other costs ought to be borne by Britain,
which led to a figure of Rs. 5700 crore which was many times larger than the
British figure of Rs. 1600 crore. Britain, Kumarappa asserted, should not be
allowed to be the debtor as well as the judge and the jury and he lobbied for
India and Pakistan to demand an impartial international tribunal on the matter.
In the event, India failed to push for such an international settlement and the
British view prevailed much to the detriment of independent India.
Moral burden of colonisation
It is well recognised that the 18th century saw the
growth of British power on Indian soil and the concomitant loot of India’s
wealth. But the story of India’s economic exploitation did not stop till the
very end of colonial rule in 1947. Those wishing to argue against even the
moral burden of Britain’s colonisation of vast tracts of the world may wish to
reckon with the facts of India’s devastation in the 1940’s.
In any event, regardless of whether Britain believes it
owes reparations, there is a salutary lesson here for India. As has been argued
elsewhere, if we believe that India is owed something for its exploitation by
people from distant lands, so do some Indians to others. We may begin with
recognising that the Government of India’s policy of reservations was
originally a small gesture of reparations towards Indians who have been at the
receiving end of social and ritual oppression for centuries. Indeed, most
Indians who participated in the freedom struggle believed that British rule of
India was as immoral as was the institution of caste.
The writer is a Bengaluru-based academic and a co-author
of a forthcoming biography of J. C. Kumarappa.
