Between 1885 and 1905, Indian industrialists, drawing upon emerging…

Concept: Protecting a home industry works through three price levers. A border tax (import duty) raises the domestic price of foreign manufactures so that home-made goods can compete. The exchange rate does the same across the whole trade account: a weaker home currency raises the price of every import and lowers the foreign-currency price of every export. And the terms on which an established foreign supplier is admitted matter as much as the rates themselves: if its goods enter without a protective duty while the home producer is separately taxed, that supplier is privileged over the home industry, so withdrawing the privilege restores even terms. Economic nationalism is the argument that a colonial government sets all three levers against the colony’s own producers.

Applying the concept to India, 1885–1905

1. The border tax. Import duties on cotton goods were abolished in 1882 in the name of free trade. When duties were restored in 1894, a countervailing excise duty was placed on Indian mill cloth in 1896, which cancelled the protection the duty would otherwise have given. Indian mill-owners therefore asked for genuinely protective, that is high, import duties.

2. The exchange rate. The mints were closed to the free coinage of silver in 1893 and the rupee was pegged at 1s 4d by the Indian Coinage and Paper Currency Act of 1899. Bombay and Ahmedabad millowners held this ratio to be pitched too high: it made British imports cheap in India and Indian exports dear in the China and Japan markets. Their remedy was a lower rupee — devaluation.

3. The terms of admission. British manufactures held a privileged position in the Indian market. Cotton import duties were kept low or were offset, an excise fell on Indian mill cloth alone, and tariff and railway-freight policy was shaped around the Lancashire export trade, so the advantage lay with the British supplier rather than with the Indian producer. Ending that privileged treatment of British trade was the third plank of the industrialists’ demand.

Contrasting the other packages by value

• Nationalisation of industry, import bans and restrictions on foreign capital: state ownership and outright prohibition entered Indian economic argument with the planning debates of the 1930s and 1940s (the Bombay Plan of 1944, then the Industrial Policy Resolutions of 1948 and 1956). The mill-owners of 1885–1905 were private entrepreneurs asking for price protection, not for a state takeover of their own mills.

• Export subsidies, low tariffs and continued trade preference for Britain: low tariffs and the privileged treatment of British goods were precisely the two features of colonial policy that the nationalist economic critique attacked, so they cannot also be its demand.

• Free trade policies, gold standard currency and British trade dominance: this is a description of the regime already in force, which Dadabhai Naoroji, M. G. Ranade, R. C. Dutt and the industrialists were arguing against.

Result: the package Indian industrialists pressed between 1885 and 1905 was devaluation of the rupee, high import duties, and an end to the privileged position British trade held in the Indian market.