Colonialism and the Emergence of New Markets

Colonialism did not simply replace one set of economic arrangements with another. It violently reshaped the entire structure of production, trade, and consumption in India, creating entirely new kinds of markets and market relationships. The key shift was from India being a manufacturer for the world to becoming a supplier of raw materials and a consumer of foreign-made goods.

Before the British, India had a complex, monetised economy and was a major exporter of manufactured goods — especially textiles — to world markets. Colonial rule reversed this. The most dramatic example was the destruction of the handloom industry. Cheap, machine-made textiles from England flooded Indian markets, undercutting local weavers and artisans who could not compete. This was not a natural market process; it was enforced by British policy — high tariffs on Indian cloth entering Britain, and low or zero tariffs on British cloth entering India.

India was now linked to the world capitalist economy in a subordinate role. She became a source of raw materials (cotton, indigo, jute, tea) and agricultural products for industrialising England, and a consumer of British manufactured goods. The market was restructured to serve British industrial interests, not Indian ones.

At the same time, new groups entered trade and business. European firms arrived, sometimes partnering with existing Indian merchant communities, sometimes forcing them out. But the story is not simply one of displacement. The expansion of the market economy under colonialism also created new opportunities for some Indian merchant communities. Those that could re-orient themselves to the changing circumstances improved their position. In some cases, entirely new business communities emerged and consolidated economic power that lasted well beyond Independence.

The best example of this is the Marwaris. Today the most widespread and well-known business community in India, the Marwaris were not a dominant commercial group before the British. They became successful only during the colonial period. They took advantage of new opportunities in colonial cities like Calcutta, settling throughout the country to carry out trade and moneylending. Their success rested on extensive social networks that created the relations of trust necessary to operate their banking system — much like the Nakarattars (Nattukottai Chettiars) of the south. …