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Foreign Trade

Since ancient times, India has been an important trading nation. During the colonial rule, the trade and tariff policies followed by the government and the restrictive policies of commodity production adversely affected the composition and volume of Indian foreign trade. Because India became a grower of raw materials, India became an exporter of such products like cotton, jute, raw silk etc and an importer of finished goods like cotton, silk and woolen clothes and capital goods like light machinery, all of which were produced in the factories of England. Britain maintained a complete monopoly over our trade. Hence most of our trade was with Britain and the rest with China, Ceylon(Srilanka) and Persia(Iran). After the Suez canal was opened, the British control over India's trade increased even more.

During the colonial period, the most significant characteristic of our trade was the generation of a large export surplus. This surplus costed our economy heavily. Several essential commodities like food grains, clothes, kerosene etc were not available in the domestic market. Also, the export surplus did not bring in any flow of gold or silver to India. Instead they were pocketed by the colonial government, which took it away for the expenses incurred by the office they had set up in India. They also used the export profits to pay for the wars fought by them and for the import of non-existent goods thereby draining India's wealth.

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