How exactly did the British manage to diddle us and drain our wealth’ ? 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.This is begging the question.
After decades of research I find that using India’s commodity export surplus as the measure and applying an interest rate of 5%, 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.This is completely meaningless. To understand why it's meaningless consider India's annual coconut exports. These are almost certainly a surplus but the surplus in trade is countered by the other country buying the product (indeed, by definition, trade surpluses contribute to the GDP of a nation which hardly plays into intuitive conceptualisations of drain).
She [Patnaik] consistently adopts statistical assumptions (such as compound interest at a rate of 5% per annum over centuries) that exaggerate the magnitude of the drainMoving on:
The exact mechanism of drain, or transfers from India to Britain was quite simple.Convenient.
Drain theory possessed the political merit of being easily grasped by a nation of peasants. [...] No other idea could arouse people than the thought that they were being taxed so that others in far off lands might live in comfort. [...] It was, therefore, inevitable that the drain theory became the main staple of nationalist political agitation during the Gandhian era.- Chandra et al. (1989)
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 import of goods, a highly abnormal use of budgetary funds not seen in any sovereign country.The issue with figures like these is they all make certain methodological assumptions that are impossible to prove. From Roy in Frankema et al. (2019):
the "drain theory" of Indian poverty cannot be tested with evidence, for several reasons. First, it rests on the counterfactual that any money saved on account of factor payments abroad would translate into domestic investment, which can never be proved. Second, it rests on "the primitive notion that all payments to foreigners are "drain"", that is, on the assumption that these payments did not contribute to domestic national income to the equivalent extent (Kumar 1985, 384; see also Chaudhuri 1968). Again, this cannot be tested. [...] Fourth, while British officers serving India did receive salaries that were many times that of the average income in India, a paper using cross-country data shows that colonies with better paid officers were governed better (Jones 2013).Indeed, drain theory rests on some very weak foundations. This, in of itself, should be enough to dismiss any of the other figures that get thrown out. Nonetheless, I felt it would be a useful exercise to continue exploring Patnaik's take on drain theory.
The East India Company from 1765 onwards allocated every year up to one-third of Indian budgetary revenues net of collection costs, to buy a large volume of goods for direct import into Britain, far in excess of that country’s own needs.So what's going on here? Well Roy (2019) explains it better:
Colonial India ran an export surplus, which, together with foreign investment, was used to pay for services purchased from Britain. These payments included interest on public debt, salaries, and pensions paid to government offcers who had come from Britain, salaries of managers and engineers, guaranteed profts paid to railway companies, and repatriated business profts. How do we know that any of these payments involved paying too much? The answer is we do not.So what was really happening is the government was paying its workers for services (as well as guaranteeing profits - to promote investment - something the GoI does today Dalal (2019), and promoting business in India), and those workers were remitting some of that money to Britain. This is hardly a drain (unless, of course, Indian diaspora around the world today are "draining" it). In some cases, the remittances would take the form of goods (as described) see Chaudhuri (1983):
It is obvious that these debit items were financed through the export surplus on merchandise account, and later, when railway construction started on a large scale in India, through capital import. Until 1833 the East India Company followed a cumbersome method in remitting the annual home charges. This was to purchase export commodities in India out of revenue, which were then shipped to London and the proceeds from their sale handed over to the home treasury.While Roy's earlier point argues better paid officers governed better, it is honestly impossible to say what part of the repatriated export surplus was a drain, and what was not. However calling all of it a drain is definitely misguided.
she [Patnaik] consistently ignores research that would tend to cut the economic impact of the drain down to size, such as the work on the sources of investment during the industrial revolution (which shows that industrialisation was financed by the ploughed-back profits of industrialists) or the costs of empire school (which stresses the high price of imperial defence)
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.Re-exports necessarily adds value to goods when the goods are processed and when the goods are transported. The country with the largest navy at the time would presumably be in very good stead to do the latter.
The British historians Phyllis Deane and WA 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% 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.While interesting, and certainly expected for such an old book, re-exporting necessarily adds value to goods.
When the Crown took over from the Company, from 1861 a clever system was developed 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. As before up to a third of India’s rising budgetary revenues was not spent domestically but was set aside as ‘expenditure abroad’.So, what does this mean? Britain appropriated all of India's earnings, and then spent a third of it aboard? Not exactly. She is describing home charges see Roy (2019) again:
Some of the expenditures on defense and administration were made in sterling and went out of the country. This payment by the government was known as the Home Charges. For example, interest payment on loans raised to finance construction of railways and irrigation works, pensions paid to retired officers, and purchase of stores, were payments in sterling. [...] almost all money that the government paid abroad corresponded to the purchase of a service from abroad. [...] The balance of payments system that emerged after 1800 was based on standard business principles. India bought something and paid for it. State revenues were used to pay for wages of people hired abroad, pay for interest on loans raised abroad, and repatriation of profits on foreign investments coming into India. These were legitimate market transactions.Indeed, if paying for what you buy is drain, then several billions of us are drained every day.
The Secretary of State for India in Council, based in London, invited foreign importers to deposit with him the payment (in gold, sterling and their own currencies) for their net imports from India, and these gold and forex payments disappeared into the yawning maw of the SoS’s account in the Bank of England.It should be noted that India having two heads was beneficial, and encouraged investment per Roy (2019):
The fact that the India Office in London managed a part of the monetary system made India creditworthy, stabilized its currency, and encouraged foreign savers to put money into railways and private enterprise in India. Current research on the history of public debt shows that stable and large colonies found it easier to borrow abroad than independent economies because the investors trusted the guarantee of the colonist powers.
Against India’s net foreign earnings he issued bills, termed Council bills (CBs), to an equivalent rupee value. The rate (between gold-linked sterling and silver rupee) at which the bills were issued, was carefully adjusted to the last farthing, so that foreigners would never find it more profitable to ship financial gold as payment directly to Indians, compared to using the CB route. Foreign importers then sent the CBs by post or by telegraph to the export houses in India, that via the exchange banks were paid out of the budgeted provision of sums under ‘expenditure abroad’, and the exporters in turn paid the producers (peasants and artisans) from whom they sourced the goods.Sunderland (2013) argues CBs had two main roles (and neither were part of a grand plot to keep gold out of India):
Council bills had two roles. They firstly promoted trade by handing the IO some control of the rate of exchange and allowing the exchange banks to remit funds to India and to hedge currency transaction risks. They also enabled the Indian government to transfer cash to England for the payment of its UK commitments.
The United Nations (1962) historical data for 1900 to 1960, show that for three decades up to 1928 (and very likely earlier too) India posted the second highest merchandise export surplus in the world, with USA in the first position. Not only were Indians deprived of every bit of the enormous international purchasing power they had earned over 175 years, even its rupee equivalent was not issued to them since not even the colonial government was credited with any part of India’s net gold and forex earnings against which it could issue rupees. The sleight-of-hand employed, namely ‘paying’ producers out of their own taxes, made India’s export surplus unrequited and constituted a tax-financed drain to the metropolis, as had been correctly pointed out by those highly insightful classical writers, Dadabhai Naoroji and RCDutt.It doesn't appear that others appreciate their insight Roy (2019):
K. N. Chaudhuri rightly calls such practice ‘confused’ economics ‘coloured by political feelings’.
Surplus budgets to effect such heavy tax-financed transfers had a severe employment–reducing and income-deflating effect: mass consumption was squeezed in order to release export goods. 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.Dewey (1978) points out reliability issues with Indian agriculutural statistics, however this calorie decline persists to this day. Some of it is attributed to less food being consumed at home Smith (2015), a lower infectious disease burden Duh & Spears (2016) and diversified diets Vankatesh et al. (2016).
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.This is, unfortunately, impossible to prove. Had the British not arrived in India, there is no clear indication that India would've united (this is arguably more plausible than the given counterfactual1). Had the British not arrived in India, there is no clear indication India would not have been nuked in WW2, much like Japan. Had the British not arrived in India, there is no clear indication India would not have been invaded by lizard people,
This article starts from the premise that while economic categories - the extent of commodity production, wage labour, monetarisation of the economy, etc - should be the basis for any analysis of the production relations of pre-British India, it is the nature of class struggles arising out of particular class alignments that finally gives the decisive twist to social change. Arguing on this premise, and analysing the available evidence, this article concludes that there was little potential for industrial revolution before the British arrived in India because, whatever might have been the character of economic categories of that period, the class relations had not sufficiently matured to develop productive forces and the required class struggle for a 'revolution' to take place.A view echoed in Raychaudhuri (1983):
Yet all of this did not amount to an economic situation comparable to that of western Europe on the eve of the industrial revolution. Her technology - in agriculture as well as manufacturers - had by and large been stagnant for centuries. [...] The weakness of the Indian economy in the mid-eighteenth century, as compared to pre-industrial Europe was not simply a matter of technology and commercial and industrial organization. No scientific or geographical revolution formed part of the eighteenth-century Indian's historical experience. [...] Spontaneous movement towards industrialisation is unlikely in such a situation.So now we've established India did not have industrial potential, was India similar to Japan just before the Meiji era? The answer, yet again, unsurprisingly, is no. Japan's economic situation was not comparable to India's, which allowed for Japan to finance its revolution. From Yasuba (1986):
All in all, the Japanese standard of living may not have been much below the English standard of living before industrialization, and both of them may have been considerably higher than the Indian standard of living. We can no longer say that Japan started from a pathetically low economic level and achieved a rapid or even "miraculous" economic growth. Japan's per capita income was almost as high as in Western Europe before industrialization, and it was possible for Japan to produce surplus in the Meiji Period to finance private and public capital formation.The circumstances that led to Meiji Japan were extremely unique. See Tomlinson (1985):
Most modern comparisons between India and Japan, written by either Indianists or Japanese specialists, stress instead that industrial growth in Meiji Japan was the product of unique features that were not reproducible elsewhere. [...] it is undoubtably true that Japan's progress to industrialization has been unique and unrepeatableSo there you have it. Unsubstantiated statistical assumptions, calling any number you can a drain & assuming a counterfactual for no good reason gets you this $45 trillion number. Hopefully that's enough to bury it in the ground.
Perhaps the single greatest and most enduring impact of British rule over India is that it created an Indian nation, in the modern political sense. After centuries of rule by different dynasties overparts of the Indian sub-continent, and after about 100 years of British rule, Indians ceased to be merely Bengalis, Maharashtrians,or Tamils, linguistically and culturally.or see Bryant 2000:
But then, it would be anachronistic to condemn eighteenth-century Indians, who served the British, as collaborators, when the notion of 'democratic' nationalism or of an Indian 'nation' did not then exist. [...] Indians who fought for them, differed from the Europeans in having a primary attachment to a non-belligerent religion, family and local chief, which was stronger than any identity they might have with a more remote prince or 'nation'.
"Da f*ck, I want to know how much I pay for ETH in my home country, not in CFT !"Exactly, no one cares of CFT, and that's why you shouldn't even see it. Every user in the world will choose (or will have it auto assigned) his currency: someone living in Europe will have EUR displayed and someone in the USA will have USD displayed, but also someone living in India will have Indian Rupee displayed.
"1 CFT = 1 EUR = 1 USD ???"No, the CFT will only be a stable coin, its rate will depend on your home currency based on Forex prices. For example we could have 10 CFT = 10 USD = 8.82 EUR etc.
The world is the most unpredictable place. Especially with a continuous change in motion, the position of any country can’t be counted as the stable position. Talking about the development process of any of any country is totally dependent on the development of the currency of its country, how the country is actually growing in different aspects with different growth factors taking place.submitted by bookmyforexgurgaon to u/bookmyforexgurgaon [link] [comments]
For instance, the growth of health conditions in the country how poor or good they are, the quality of education in the country, the rate of employment or moreover the poverty line of the country. All this depends on the value of the currency the country has, the better the currency, the better the country is.
Talking about Rupee, the situation since 1945 till now is never a stabilised one. The rupee has only tangoed all this while, deliberations on the amount of debts have just grown intensely. However, when it comes to the growth of Rupee, you’ll find nothing. Although, the past few months have been ever growing for the Rupee, one can’t ignore the fact that the fluctuations were terribly high and still are.
Thus, when the condition of the rupee is itself in a concoction, how can one expect to have a constant growth in another domain or field. Another reason one can find is the constant fluctuations in the Euro Exchange rate for the global markets that have their business standards quite trembling too. The impact of this tremble is quite visibly witnessed by many.
As known the Indian Rupee depends on the USD for its trade growth and economy development, not to forget the constant fluctuations in the Crude Prices and the Hiking highest of the Brent shows a constant change and no possible stability due to the Waiver take off by the US due to Trump’s decision can largely impact the world.
Imagine if Indian Rupee has touched an all-time low, one’s immediate reaction is to worry about the inflation and the negative impact on the finances. Stock markets have reacted negatively as foreign investors are pulling money out of emerging markets including India.
The investments will be depleted on the condition that all this will be gorged in a different shape. No high value of Rupee will result in no returns for your investments because the value of the rupee has changed totally.
As an investor, an important skill is to have an ability to connect the dots. This applies to your personal finances too. Being aware of the implication of economic developments on investments can not only help save money but also seize opportunities.
The investment of an investor depends a lot more on the fundamentals of a country and the movement of the country’s currency based on its fundamentals. While looking at our fundamentals we stand tall over them as one can see that there is no rise in the overall debt (excluding the corporate debt & NPAs.)
For instance, the daily forecast that is published on BookMyForex for every currency can help you in taking your decision in a better way. Here’s today forecast for your reference:
22 April 2019: The rupee had opened with a positive gap at 69.46 regaining through the day touching a high of 69.6175 in the afternoon. However, the strong dollar sales in the last 30 minutes allowed the rupee to later close at 69.34. The rising crude prices confuse the rupee’s recovery. Brent broke above $74.00 mark today amidst the speculations coming from the US that Trump is to discontinue the waivers on buying Iranian Oil. Situations are tough for any forecast on Rupee as there will be no political and economic decisions taken to combat the crude price hike until the election results are out by May 23rd.
Both fast paced global events and elections round the corner, have accelerated the journey of rupee on a rollercoaster already. Whether this ride is going to make rupee touch the mark of 75 this year or not, is the crucial question being addressed ahead.submitted by bookmyforexgurgaon to u/bookmyforexgurgaon [link] [comments]
US President Donald Trump is consistently bringing protectionist policies for US, creating a stir in the emerging markets already. Trade tensions continue to escalate and hurt rupee. What further troubles is the Brexit uncertainty, making dollar exchange a magnet to money from all around the world. This is making the dollar stronger and thus it is no good news to the Indian currency.
It is generally witnessed that private companies tone down their investments in the election year and thus the balance of payments do not recover. Further, if the current account deficit is further widened, the downfall of rupee is certain towards the end of the year.
The world's largest democracy and a fast paced emerging economy is heading towards election and this is when the currency is bound to get affected. India has been witnessing a stable economy under the current government who had a sweeping majority. The idea of a coalition holding chances to gain power brings the concept of uncertainty. Markets do not prefer the uncertainty that couples well with coalition.
Election months also bring popular campaign methods as the forerunner, paving the way for inflation ahead, the factor which works well against rupee and will definitely escalate the dollar exchange to the feared 75 by the end of 2019.
Moving ahead, it is important to understand the effect of the expected depreciation of rupee against dollar. Depreciation of the rupee will change the dynamics of the crude oil import bill. This will further trigger many other problems. The game play of rupee depreciation and inflation is yet another consequence of foreseen steep increase in dollar exchange.
In the scenario of steep depreciation of the rupee, the RBI may hike the regulatory interest rates and that will in turn impact the investment and expenditure consumption negatively. Thus it is a clear no win situation for rupee if predictions and estimates about dollar exchange at 75 hold true.
To book forex, this rollercoaster ride of rupee against dollar can be a tedious task. It will be difficult to decide which day will be the best one and which price is the lowest. At BookMyForex, we get you sorted here.
CARACAS - Venezuelan President Nicolas Maduro said on Thursday his cash-strapped country would seek to "Free" itself from the U.S. dollar next week, using the weakest of two official foreign exchange regimes and a basket of currencies.
Maduro was refering to Venezuela's "DICOM" official exchange rate in which the dollar buys 3,345 bolivars, according to the central bank.
At the strongest official rate, one dollar buys just 10 bolivars, but on the black market the dollar fetches 20,193 bolivars, a spread versus the official rate that economists say has fostered corruption.
A thousand dollars of local currency bought when Maduro came to power in 2013 would now be worth $1.20.
"Venezuela is going to implement a new system of international payments and will create a basket of currencies to free us from the dollar," Maduro said in an hours-long address to a new legislative superbody, without providing details of the new mechanism.
"If they pursue us with the dollar, we'll use the Russian ruble, the yuan, yen, the Indian rupee, the euro," Maduro said.
INR to PKR Rate = 2.22 PAKISTANI RUPEE. INR to PKR exchange rate is RS 2.22 in the currency market today. There is a trading difference from the previous day in Indian Rupee to Pakistan Rupee has decrease PKR 0.00 or 0% on 08 Nov 2020 trading in currency conversion or open market rate. INR exchange rate - Foreign exchange rate today for Indian Rupee. Use our Rupee converter to see the price of INR in other currencies. Exchange rates; Currency converter; Charts; Forex Quotes; Currency Trading News; Forex Historical Data; Forex Trading; Education; Sending INR abroad? INR Exchange Rate . Indian Rupee Latest Exchange Rate : Convert from: Convert to: Exchange rate: Last update ... In finance, an INR exchange rate is the Indian Rupee rate at which Indian Rupee will be exchanged for another. It is also regarded as the value of INR in relation to another currency. For example, an interbank exchange rate of 114 Japanese yen to the United States dollar means that ¥114 will be exchanged for each US$1 or that US$1 will be exchanged for each ¥114. Banks trade at the real rate. When exchanging Indian rupee between themselves, banks and transfer services use the mid-market rate (also known as the interbank rate). It’s the fairest possible rate. The real exchange rate. 2. They add a hidden markup for customers. This is why you’ll see different exchange rates across providers. You’re ... Welcome to the Indian Rupee exchange rate & live currency converter page. The Indian Rupee (INR) exchange rates represented on this page are live, updated every minute within the forex market's ... Don’t forget to get your FOREX card here before you step into Great Britain. Best exchange rates for Indian rupees to pound. Since the British are known to explore and try to conquer the world, they are quite familiar all over and that’s one of the main reason for GBP to be famous. People won’t hesitate to take your pound, and its value ... This currency rates table lets you compare an amount in Indian Rupee to all other currencies. Skip to Main Content. Home; Currency Calculator; Graphs; Rates Table; Monthly Average; Historic Lookup; Home > Indian Rupee Exchange Rates Table Indian Rupee Exchange Rates Table Converter Top 10 Nov 12 , 2020 17:20 UTC. Indian Rupee 1.00 INR inv. 1.00 INR ...
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