Foreign Trade: Colonization Effect on Foreign Trade of India, Examples

The compilation of these Indian Economy on the Eve of Independence Notes makes students exam preparation simpler and organised.

Foreign Trade

Before the colonial period, India was a big player in foreign trade. Having established itself well on the world map, pre-colonial India was blooming with opportunities. At the beginning of the 19th century, the share of India in the world economy was around 20% which was steadily increasing. By the time the British left India the share was reduced to around 4%. Thus the colonial rule paralyzed the foreign trade also by a large proportion.

Foreign Trade in the 17th and 18th Century

Pre-colonial India enjoyed a worldwide market for its manufactured products. The excellent levels of craftsmanship were held in high regard and enjoyed a global reputation. Notable ones are handicrafts and textile industries. Shawls and carpets from Kashmir and Amritsar, silk sarees of Benaras, and silk cloth of Nagpur are some examples.

Pre-British India also excelled in the artistic handicraft industry which includes jewellery made of gold and silver, brass, copper, and bell metal wares, marble work, carving works in ivory, wood, stone, artistic glassware, etc. All of the above-mentioned items including cinnamon, pepper, opium, indigo, etc. constituted a major proportion of exports from India. Effectively, India was exporting high-quality manufactured goods to European countries and owned a respectable share in the world economy.

The Colonisation Effect on Foreign Trade

Foreign Trade

The Britishers aimed at diverting this large volume of trade for their benefit. In the light of the British era, the foreign trade of India with the rest of the world was cut off by the help of restrictive policies of commodity production, trade, and tariff. As much as half of the foreign trade was restricted to Britain.

Before the colonial period, India was exporting manufactured goods which enjoyed worldwide demand. Under colonial rule, India was reduced to a supplier of raw materials like jute, cotton, indigo, wool, sugar, etc., and importer of finished consumer goods like silk and woolen clothes and light machinery manufactured in the factories of Britain. Additionally, the opening of the Suez Canal intensified this control of Britishers over Indian foreign trade.

The remaining volume of foreign trade was allowed with a handful of countries namely China, Ceylon (Sri Lanka), and Persia (Iran). Interestingly, even this trade was heavily monitored by the colonials. As a matter of fact, there was a large generation of export surplus under the British Raj.

At the same time, this export came at the cost of low productions of essential goods like clothes, food grains, kerosene, etc. Resources were heavily being used to produce items for export, leading to an acute shortage of civil goods.

Additionally, there was no flow of gold or silver as a result of this surplus. Ironically, this export surplus never made its way to India. It was used to make payments for an office set up in Britain, war expenses of the British, and import of invisible items. Such brutalities eventually led to the dawn of a rising foreign trade aspect of India.


How was the export surplus used?
A. To make payments to a British office and war
B. Import of invisible items
C. The welfare of Indian Industry
D. Both A and B
The correct option is “D”. Britishers never meant to use the surplus for Indian interests. It was used to make payments for an office set up in Britain, to meet war expenses, and to import invisible items.