Is New India Heading Back to Colonial Subjugation?
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AUGUST 2024
While Indians celebrate their hard-won independence on the 78th Independence Day, its citizens must reflect on the lessons of history.
The strategic errors made by Indians some 250 years ago led to the loss of their freedom and sovereignty, and now they must ensure
they do not repeat these errors in an era marked by globalization and economic liberalization.
ExpertX will conduct a comprehensive analysis of how India, in the first place, became a colony of Britain, the Dutch, the French, and the
Portuguese, focusing on the economic imperatives and trade dynamics that facilitated this colonial dominance.
Indians must understand the past to safeguard their future, drawing parallels between the mercantilist policies that paved the way for
colonial rule and the risks embedded in some of today's economic strategies, particularly those that prioritize short-term capital inflows over long-term economic resilience.
Henceforth, let us turn to India of the 1600s.
The East India Company's journey to economic hegemony can be broadly divided into three phases.
The first phase, from the early 1600s until 1757, marked by the Battle of Plassey, saw the company gradually amassing economic power,
leveraging its monopolistic control over trade to build a formidable military-industrial complex.
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The strategic errors made by Indians some 250 years ago led to the loss of their freedom and sovereignty
The second phase is marked by the exploitation of India's economic resources, where the East India Company systematically dismantled
indigenous industries and impoverished local craftsmen, leading to a profound de-industrialization.
The third phase began after the 1857 mutiny leading to the British Raj, where economic exploitation intensified despite the rising voices of
Indian independence, as the colonial administration imposed extractive institutions that drained India's wealth.
This article will focus on the period from the 1600s to 1757, particularly the economic policies and trade practices that
enabled the East India Company to establish its dominance through monopolistic competition and coercive trade agreements.
What was the underlying economic philosophy behind these policies?
One crucial mistake at the time was granting trading privileges to the East India Company by the Mughal Emperor Jahangir.
These privileges, including exemptions from tariffs and duties, enabled the company to accumulate enormous wealth and resources,
which it later used to exert political and military authority, effectively becoming a proto-sovereign entity within India.
Over time, many rulers became economically dependent on European trade goods and military supplies, creating a debt trap that made
them vulnerable to British pressure, akin to modern-day issues of debt diplomacy.
From its very existence, Europe has been embroiled in wars driven by its high sense of insecurity and mercantilist competition, leading to constant innovation in arms, military strategies, and goods.
When these military supplies entered India, our rulers and kings were captivated by their innovation, quality, and efficiency, often overlooking the strategic dependence that came with it.
The East India Company skillfully exploited this dependency, translating economic leverage into territorial control by demanding
land concessions and political authority in exchange for continued economic benefits, a precursor to the concept of economic imperialism.
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One crucial mistake at the time was granting trading privileges to the East India Company by the Mughal Emperor Jahangir
Fast forward to today, new India sees parallels in its approach to foreign trade and investment, especially in the context of globalization and trade liberalization.
India has opened its doors to foreign capital through agreements like the WTO, TRIPS, and MFN treaties with various countries.
While these agreements initially create a positive economic outlook through an influx of foreign direct investment (FDI) and technology transfer, they often erode Indigenous talent, craftsmanship, and innovation.
Just as India once lost its industries to foreign dominance, today, traditional agricultural practices, specialized metal works, alloys, and
textiles are at risk of being eclipsed by foreign goods and technologies in an era of hyper-competitive global markets.
Silk and cotton, once cornerstones of India's trade, now struggle to compete in the global market, nearing extinction regarding trade volumes.
Consider the case of genetically modified (GM) crops being approved after the 2024 budget.
These so-called innovations, introduced under the guise of climate resilience, threaten to displace traditional crops, raising concerns over the erosion of biodiversity and agricultural sovereignty.
It is noteworthy that GM crops remain banned in Europe, raising the question of why they are allowed in India—highlighting the risk of regulatory arbitrage.
Henceforth, for contemporary India, these policies echo the historical displacements caused by the East India Company, posing similar risks to our economic sovereignty.
The Gujarat potato farmers' legal battle against PepsiCo over patented seeds serves as a stark reminder of how multinational corporations
can leverage intellectual property rights (IPR) and trade-related aspects of intellectual property rights (TRIPS) to enforce their terms and policies, undermining local economies and food security.
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Consider the case of genetically modified (GM) crops being approved after the 2024 budget
It took a lengthy legal battle and a semi-revolution to protect the farmers' rights, underscoring the power imbalance between local stakeholders and global corporations.
Imagine the impact of the 109 foreign GM crops now allowed to enter India under the banner of innovation, potentially dominating our
agricultural sector for decades and further entrenching dependency on foreign biotechnology.
Much like the colonial era's exploitation of raw materials, today's exploitation of Indian human capital—highly educated and skilled
youth, engineers, scientists, and IT professionals—mirrors the economic exploitation of the past.
They are drawn to work for global giants, but the economic benefits do not sufficiently contribute to India's broader economic development.
Instead, we witness a phenomenon akin to brain drain, where the gains are concentrated in a few urban centres like Mumbai, Delhi, Bangalore, and Gurgaon, leading to regional economic disparities.
While the wages offered by foreign corporations may appear lucrative, they are only a fraction of what these corporations would pay for
equivalent work in their home countries, illustrating a form of wage arbitrage that undermines the actual value of Indian labour.
Hence, like the rulers of old India, the contemporary Indian government often prioritizes short-term economic gains or an
increase in GDP figures over long-term economic sovereignty, allowing foreign corporations to reap disproportionate benefits from our
educated labour pool, with minimal knowledge transfer to bolster domestic capabilities.
For instance, Lockheed Martin, the manufacturer of F-16 fighter jets, which once threatened India's sovereignty through our western
neighbour Pakistan, now seeks to manufacture parts of these jets in India without offering complete technology transfer.
They also aim to sell upgraded fighters (F-21) to India but at prices that do not reflect the cost savings of local manufacturing, revealing the asymmetric benefits in such defence deals.
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...wage arbitrage that undermines the actual value of Indian labour
This trade deal evokes the past when Indian rulers welcomed foreign trade without a comprehensive analysis of the long-term economic implications, resulting in a loss of economic sovereignty.
While appealing to consumers, the influx of Chinese goods into India has undercut Indian innovation and economic autonomy.
For instance, the country's telecom sector continues to use specific network devices that pose national security risks, even though these
devices have been banned in Europe and the United States due to concerns over data security and espionage, reflecting the strategic vulnerability of relying on foreign technology.
Conversely, when foreign governments adopt protectionist policies, they face little resistance from the developing world.
For example, the United States has implemented protectionist measures against Mexican exports and imposed tariffs on Chinese goods over the past eight years.
Europe has also imposed almost 50% tariff on Chinese electric vehicles to protect its domestic auto industry, notably Tesla.
At the same time, India struggles to protect even the prices of life-saving medicines, highlighting the challenges of maintaining economic sovereignty in a globalized economy.
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While appealing to consumers, the influx of Chinese goods into India has undercut Indian innovation and economic autonomy
Therefore, India's economic sovereignty is a fragile construct, and it would not be an exaggeration to say that India's current economic landscape bears troubling similarities to the 1600s.
If our trade policies and economic sovereignty were robust, Indian farmers could command premium prices for their tea, coffee, and spices in global markets.
Indian vehicles would dominate roads worldwide, commanding the same prestige and demand as Saudi oil.
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Being protectionist about one's economy and population is not a dirty word...
Furthermore, Indian traditional medicines should be staples in hospitals across developed nations rather than being relegated to the status of taboo or an 'alternative medicine.'
One strategic misstep by a divided India in the 1600s led to losing freedom and sovereignty. It was a gradual erosion of autonomy through economic dependency and exploitation.
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...India's economic sovereignty is a fragile construct...
Therefore, India must ensure that a united India in the 21st century does not repeat past mistakes by compromising economic sovereignty in the pursuit of foreign trade and investment.
To conclude, here are a few more examples.
In 1997, Titan Watches was denied entry to Switzerland's Basel Watch and Jewellery fair because Indian watches,
benefiting from economies of scale and low production costs, were seen as competitive threats to established brands.
Similarly, Indian farmers narrowly avoided losing Basmati rice to US companies' patent claims, highlighting the ongoing risks of biopiracy and the challenges of protecting traditional knowledge in a globalized IP regime.
India has also faced challenges with patents on the healing properties of turmeric, further emphasizing the need to safeguard our intellectual, economic and cultural heritage.
Currently, India is negotiating a trade deal with Britain that could potentially flood our markets with cheap apples, threatening the livelihoods of farmers in Himachal Pradesh and Kashmir.
These negotiations underscore the importance of protecting domestic industries from the adverse effects of free trade agreements.
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There are valuable lessons to learn from our northern neighbour, China...
There are valuable lessons to learn from our northern neighbour, China, which has not allowed its economic sovereignty to be compromised.
China's ability to produce and induct 240 super fighter jets annually, capable of challenging the world's best, underscores the strategic
advantage of maintaining control over critical industries. India cannot even induct 20 aircrafts, annually.
Even the most vigorous critics recognize the value of collaboration and joint ventures.
However, any attempt to override the interests of Indian craftsmen, engineers, scientists, and farmers or erode our traditional knowledge base must be a red line.
Being protectionist about one's economy and population is not a dirty word, despite what modern economists might suggest.
India is a land rich in natural and human resources, and leaving our doors wide open to foreign exploitation could take us back to the era of colonial subjugation.
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