LANGUAGE IN INDIA

Strength for Today and Bright Hope for Tomorrow

Volume 9 : 1 January 2009
ISSN 1930-2940
Managing Editor: M. S. Thirumalai, Ph.D.
Editors: B. Mallikarjun, Ph.D.
Sam Mohanlal, Ph.D.
B. A. Sharada, Ph.D.
A. R. Fatihi, Ph.D.
Lakhan Gusain, Ph.D.
K. Karunakaran, Ph.D.
Jennifer Marie Bayer, Ph.D.

Trade in the Madras Presidency, 1941-1947

A Doctoral Dissertation

R. Jayasurya, Ph.D.

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 TRADE IN THE MADRAS PRESIDENCY
1941 – 1947

THESIS

Submitted in partial fulfillment for the Award of Degree of Doctor of Philosophy

of the Bharathiar University, Coimbatore.

By

R. JAYASURYA, M.A., M.Phil.,

Under the Guidance of

Dr. K. KAMAL MUSTAFA, M.A., Ph.D.,

JULY -2004

DEPARTMENT OF HISTORY
GOVERNMENT ARTS COLLEGE (AUTONOMOUS)
COIMBATORE – 641 018

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 DECLARATION

I Mrs. R. Jayasurya hereby declare that the thesis, entitled “TRADE IN

THE MADRAS PRESIDENCY FROM 1914-1947 AD”, submitted to the

Bharathiar University, in partial fulfillment of the requirements for the award of

the Degree of Doctor of Philosophy in History is a record of original and

independent research work done by me during August 1996 – July 2004 under the

Supervision and guidance of Dr. K. Kamal Mustafa, M.A., Ph.D., Professor

and Head (Retired), Department of History, Government Arts College

(Autonomous), Coimbatore and it has not formed the basis for the award of any

Degree/ Diploma/ Associateship / Fellowship or other similar title to any candidate

in any University.

Signature of the Candidate

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 CERTIFICATE

This is to certify that the thesis, entitled “TRADE IN THE MADRAS

PRESIDENCY FROM 1914-1947 AD”, submitted to the Bharathiar University,

in partial fulfillment of the requirements for the award of the Degree of Doctor of

Philosophy in History is a record of original research work done by Mrs. R.

Jayasurya during the period from August 1996 to July 2004 of her study in the

Department of History at Government Arts College (Autonomous), under my

supervision and guidance and the thesis has not formed the basis for the award of

any Degree / Diploma / Associateship / Fellowship or other similar title to any

candidate of any University.

Countersigned

Signature of the Guide

Principal / Head of the Department

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 ACKNOWLEDGEMENT

I wish to place on record my sincere and most grateful thanks to Dr. K.

Kamal Mustafa, M.A., Ph.D., Professor and Head of the Department of History

(Rtd), Government Arts College (Autonomous), Coimbatore - 641 018, for his

able guidance, valuable suggestions, objective criticism, fair comments and kind

help for the completion of the thesis.

I express my deep sense of gratitude to Dr. (Mrs). Chandrakanthi

Govindarajulu (Former Secretary), Smt. Nandhini Rangasamy, Secretary, Miss.

W.T. Vasanthi, M.A., M.Phil (Former Principal) and Dr. (Mrs). N.

Yesodhadevi, M.Com., Ph.D., Principal, P.S.G.R. Krishnammal College for

Women, Coimbatore for providing me with all the facilities to carry out this

research work successfully.

Equally I am grateful to Professor S. Dharmalingam, Head of the

Department of History, Principal, Professors and Other Staff members of the

Department of History, Government Arts College (Autonomous) for extending

their ready help and encouragement in the pursuit of my research.

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 I am extremely grateful to Mrs. K.O. Malathi, M.A., M.Phil (Former Head

of the Department) and Dr. (Mrs). Suseela Thayamal, M.A., M.Phil., Ph.D.,

Head of the Department of History, P.S.G.R. Krishnammal College, Coimbatore

for their constant support and help rendered during the tenure of this investigation.

I am very much thankful to the research officer, Librarians and Assistants

working in the Tamilnadu Archives, Library, Madras Secretariat Library,

Connemara Library, Madras University Library, Chennai for their help in the

consultation of Records, References, Books, Journals, Magazines, Periodicals, etc.

I am most grateful to Dr. Sundararajan, M.A., Ph.D., Librarian,

Tamilnadu Archives, Chennai – 600 008 for his timely help in the collection of

materials.

I must thank my husband Dr. D. Loganathan, M.A., M.Phil., Ph.D, Reader

in History, Dr. A. Harinarayanan, M.A., Ph.D (Rtd), Professor of History, Dr.

Ilango, M.A., Ph.D., Professor of History, Govt. Arts College (Autonomous), Dr.

Balasubramaniam, M.A., Ph.D., Professor of History, CBM College, Coimbatore

for extending all possible help, guidance and encouragement in completing the

research work.

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 I tender my heartfelt thanks to Dr. Mrs. Floris Francis, M.A., Ph.D.,

Professor of English (Rtd), P.S.G. R. Krishnammal College for her very practical

help and kindness in correction of thesis.

I thankful acknowledge and express my gratitude to

Dr. (Mrs). S.Meera Bai, M.Sc., M.Phil., B.Ed., Ph.D., Reader in Botany,

P.S.G.R. Krishnammal College for Women for helping me in drawing the map

work.

I also thank my son and family members for their exemplary patience,

sufferings and sacrifice when I was out of station.

With great pleasure I express my gratitude and indebtedness to all my

colleagues of the History Department, P.S.G.R. Krishnammal College for women

for their kind encouragement.

My special thanks are due to Mr. Ramesh, Mr. Suresh and

Mr. Kanagaraj, Kovai Data, for helping me in typing this thesis.

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 CONTENTS

CHAPTER PAGE
TITLE
NO. NO.
PREFACE

INTRODUCTION
FIRST WORLD WAR AND ITS IMPACT ON
I
TRADE
II TRADE IN INTER-WAR PERIOD (1920-1939)
SECOND WORLD WAR AND ITS IMPACT ON
III
TRADE
IV TRADE BETWEEN 1940 AND 1947
Part –I
Part –II
V GOVERNMENT POLICY TOWARDS TRADE

CONCLUSION

APPENDICES

BIBLIOGRAPHY

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 ABBREVIATIONS

IAR Indian Annual Register

CEHI The Cambridge Economic History of India

FR Fortnightly Reports on Internal Situation

PMLA Proceedings of the Madras Legislative Assembly

PMLC Proceedings of the Madras Legislative Council

TNA Tamilnadu Archives

NNR Native Newspaper Reports

USSF Under Secretary’s Secret Safe

SICC South Indian Chamber of Commerce

CWT Hundred weight, 1/20th of one ton.

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 PREFACE

The thesis entitled “ Trade in the Madras Presidency” – (1914 -1947 A.D) is

the outcome of my research work under the guidance and supervision of Dr. K.

Kamal Mustafa, M.A., Ph.D., Professor of History and Head of the Department,

Government Arts College (Autonomous), Coimbatore – 641 018. The period 1914

– 1947 marks the significant stage in the economic history of the Madras

Presidency witnessing far-reaching economic changes not only in the Presidency

but also in India and in other nations of the world. The year 1914 the outbreak of

the First World War caused tremendous impact on the trade of India and the

Madras Presidency as well. The year 1947 witnessed the end of the old colonial

economic policy in India and the beginning of free India’s new economic policy.

Thus the period undertaken for research covers a comprehensive study of the

British trade policies in its internal and external trade. An honest attempt has been

made to find out whether the British Government in India was genuinely interested

in developing the Indian trade in general and the Presidency trade in particular or

her own.

The thesis has been divided into five chapters excluding introduction and

conclusion. The introduction deals with the backdrop of the British Colonial

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Policy. The first chapter examines the causes of the first World War and its impact

on trade in India and the Madras Presidency. The second chapter explains about

the inter-war period (1920-1939) and the trade of the Presidency in details. The

third chapter gives a succinct account of World War II and its profound effect on

the inland and international trade of the Presidency. The next chapter is a

discussion on the trade of the Presidency with Sterling areas in respect of its

imports and exports. The last chapter evaluates trade policies and problems faced

by the industries in the Presidency. The Conclusion is a derivation of the preceding

chatpers.

The scholar has reviewed to a very great extent the Annual, Fort Nightly and

Weekly Reports on trade, which provided every kind of detail to write out the

thesis. Equally important and useful have been the government orders available in

the Tamilnadu Archives, Chennai. No other source reflects the mind and mood of

the Government more than the Government Orders and the notes thereon. Besides,

Despatches, Dairies, Minutes, Proceedings of the Legislative Assembly and the

Council, Letters and Acts were highly useful in writing the thesis. The information

they supply is not exhaustive and complete. A few published unpublished M.Litt

and Ph.D thesis and some important secondary and tertiary sources have been

consulted. Among them mention may be made about the following.

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 John E. “War – Time Development in Indian Currency”, M.Litt dissertation,

University of Madras, 1982, Krishnamoorthy .R “India through Slump and

Recovery” -1929 -1937; Being a study of the trade cycle in relation to India –

M.Litt, dissertation, University of Madras, 1940, malathivaratharajan; “Foreign

Trade of India since 1939”, M.Litt. diss, University of Madras, 1955, Meenakshi,

T, “The Finance of Madras Government Since, 1919”, M.Litt, dissertation,

University of Madras, 1950, Natarajan, K.V: “Economic and Financial Condition

of the Residuary Madras State”, M.Litt, dissertation, University of Madras, 1956,

Ponniah, J.S: “The Production and Marketing of Raw Cotton in the Madras

Presidency with special Reference to the Districts of Bellary, Karnool, Coimbatore,

Madura Rammnad and Tirnelvelly”, D. Litt, dissertation, University of Madras,

1944 and Shantha, M.C: “State and Industry in Madras – 1800 -1940”, Ph.D.

Thesis, University of Madras, 1966, Sivasankara Reddy, Y, War Time Public

Finance in india -1939- 1945, M.Litt, dissertation, University of Madras, 1950,

Vallisarojal, C, Labour Disputers in Tamil Nadu during the First Congress

Ministry (1937-1939)”, M.Litt, dissertation, University of Madras, 1987.

However, none of these works give an indepth study of the topic undertaken

for research. The prime object of the thesis is to find out whether the British

government willingly or grudgingly or indifferently rendered help to accelerate or

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to hamper the industrial growth and to examine how the economic or trade policy

of the British Government became the roots for the present industrial growth of the

Madras Presidency.

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Language in India www.languageinindia.com 65
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 PRE-COLONIAL PERIOD

India in the pre-colonial period had a stable economy. Self –sufficient

agriculture, flourishing trade and rich handicraft industries were some of the

features of the Indian economy. In spite of the fact that the Indian villages were

largely self-sufficient units and the means of communication were primitive, India

enjoyed extensive trade both within the country and with other countries of Asia

and Europe. A balance of the imports and exports was maintained. The items

imported into India were wool, dates, dried fruits and rose-water from the Persian

Gulf; coffee, gold, drugs and honey from Arabia; tea, sugar and silk from China;

gold muck and woolen cloth metals like copper, iron and lead and paper from

Europe. The main items exported from India were cotton textiles. Besides cotton

textiles which were famous all over the worlds, India also exported raw silk indigo

opium rice, wheat, sugar, pepper and other spices precious stones and drugs1

The major features of Indian trade in pre-colonial times where (i) a

favourable balance of trade and (ii) a foreign trade most suitable to the level of

manufacturing in India. A favourable balance of trade meant an excess of exports

over the imports i.e., India exported more than it needed to import. Since the

economy on the whole was self sufficient in handicrafts and agricultural products.
1
Gadgil, D.R. Industrial Evolution in India, Pp:57-60 (Calcutta, 1950)
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India did not need foreign imports on a large scale and continued to enjoy a healthy

trade. Secondly, India’s foreign trade suited its requirements very well. In other

words, the commodity pattern, so important to any country’s foreign trade was in

India’s favour. India exported the items it specialized in and imported ones it

needed.

One major change that occurred in India’s foreign trade from pre-colonial to

colonial times was in its commodity pattern. Although India continued to have an

export surplus, the pattern of foreign trade turned up side down and thereby ruining

India’s rich traditional handicrafts.

India was a land of extensive manufacture. Indian artisans were famous for

their skills all over the world. In fact, the reason for India’s favourable foreign

trade was its excellence in indigenous production. India involved in a large scale

manufacture of cotton and silk fabrics, sugar, jute, dyestuffs, mineral and metallic

products like arms metal wares and oil. Towns like Dacca and Murshidabad in

Bengal, Patna in Bihar, Surat and Ahmedabad in Gujarat, jaunpur Varanasi,

Lucknow and Agra in UP; Multan and Lahore of the Punjab, Masulipattnam and

Visakapatnam, of Andhra; Bangalore of Mysore and Coimbatore and Madurai of

Madras were flourishing centers of textiles industry. Kashmir specialized in

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wooden manufacture Maharashtra, Andhra and Bengal were prominent centers of

ship building industry. Many European companies brought India’s ships for their

use.

Towards the end of the 18th century India was undoubtedly one of the main

centers of world trade and industry. This status of India was completely destroyed

under colonial times. Its beginnings can be traced to the after –math of the

industrial revolution in England. The machine –made cloth of England began to

replace indigenous manufacture, Indian artisans were forced out of production. It

was this pressure from British goods, which led to the decline of India’s traditional

centers of economic activity mentioned above. The number of weavers also

declined.2

Colonialism is a system of domination, exploitation and underdevelopment

of one society by another. The stages of colonialism may be classified into three:

The first stage of the colonial rule was that no basic changes were introduced

in the colony in administration, the judicial system, transport and communication,

methods of agricultural or industrial production, forms of business management or

economic organization, education, culture and social organization.

2
Bipan Chandra, The Rise and growth of Economic Nationalisation in India. Pp. 70-77, New Delhi, 1966.
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 The second stage of colonialism was the making of the colony into a

subordinate trading partner which would export raw materials and import

manufacture. The colony’s social surplus was to be incorporated through trade on

the basic of selling cheap and buying cheap.

Politically and administratively, the third stage of colonialism meant

renewed and more intensive control over the colony.

Regarding colonialism in India, the crucial role was played by the colonial

state i.e. Britain in the subordination of India to her and in constructing,

determining and maintaining other features of the colonial structure. India’s

policies were determined in Britain in the interest of British economy and the

British capitalist class.3

It may be stated here that sharp differences have always existed and continue

to persist among scholars and historians of the west regarding their evaluation of

the impact of the British colonial rule over the economy society and policy of

India. According to many western scholars, British rule provided political unity

3
Bipan, Chandra, Essays on Colonialism. Pp: 63-65 and 69, Oriental Longman Ltd, 1999, New Delhi.
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and stability of governance to India. British scholars have maintained that the

British rescued India from chaos and provided political stability.

Indian political unity was at first myth, an abstract concept that was

characterized into reality by British rulers. In the absence of political unity,

eighteenth century India had a very low level of commerce and capital

accumulation and its implication was that British rule to India has to deal with a

very low level of economy. This argument of western writers challenges the

nationalist argument that India was economically very attractive and profitable for

British.

Western writers have suggested that the history of India revealed a very low

level of agricultural productivity because it was based on a ‘nonanimalpowered

agriculture’. According to many Western historians the absence of any worthwhile

technology kept a large proportion of India virgin land as late as 1870. The British

in India introduced Tobacco, potato and peanut cultivation.

According to them, India could not claim any great achievements in

manufacturing because it lacked technology. Although India had some excellent

craftsmen and produced textiles and few other manufactured goods, but they were

the result of hard work and not of any developed technology. The evidence for this
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viewpoint is gathered from the seventeenth century records of the English that

point out to the inelasticity of textile productivity in India. W.H. Moreland and

many other scholars have used the evidence of early European travelers to prove

that Indian technology was poor. On the basis of such evidence, Morris observes

that, “The Indian sub continent was a region in which per capacitor income was

relatively low in the country before 1800. Given the lack of political stability, low

agricultural and non agricultural productivity and insignificant commerce no other

conclusion is supportable.4

If the opinion of Morries D, W.H. Moreland, or European travelers or

British factory records are accepted that India was underdeveloped when the

British gradually conquered it, then the implication is that the British conquest of

India was beneficial for the economy, society and polity of this country. India

achieved benefits from British rule and they are enumerated by the western

scholars thus: The British provided political unity; they developed a system of

roads and rail transport which had a positive impact on the economic development

of India; they developed irrigation and other public works which facilitated the

growth of agriculture, commerce and manufacturing activities in India.

4
Basu, B.D. The ruin of Indian Trade and Industries, p. 210, Calcutta, Second Edition, 1993.
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 The western writers made two points clear regarding the impact of British

rule over India. First, on the eve of colonial expansion, the British found a highly

underdeveloped India with productivity in agriculture very low per capita income

and absence of any developed technology or tools for manufacturing. The

benevolent policies of the British helped in the establishment of political unity, a

system of governance and it laid the foundations of economic development in

India.

As against the western view-point, the Indian nationalist scholars put

forward a different hypothesis. Dababhai Naoroji, Ramesh Chandra Dutt in the

nineteenth century and Rajni Palme Dutt in the twentieth century represented the

Indian nationalist perspective. The two important aspects of British colonical rule

over India highlighted by them were the ‘drain theory’, and the theory of ‘de-

industrialization’.

The drain theory, as formulated by the Nationalists, referred to the process

by which, a significant part of India’s national wealth, was being exported to

England for which India got no economic returns. In other words, India was made

to pay an indirect tribute to the English nation. Needless to say, this drain of

India’s wealth to England in the form of salaries to the British officers posted in

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India, home-charge and the profits made on the British capital invested in India,

benefited England and diminished the sources for investment in India. The British

benefited immensely from the plunder and exploitation of India. Lord Curzon

wrote: “India is the pivot of Europe….. if the empire loses any other part of the

Dominion we can survive, but if we lose India the sun of our Empire will have

set”5

The company obtained Dewani or Civil administration rights over Bengal,

Bihar and Orissa in 1765 and this opened new opportunities for plunder by the

Company because of Diwani rights caused land revenue to be remitted by the

Company to England. This monopoly of plunder and exploitation by the Company

continued till the end of the eighteenth century when England moved from

mercantile capitalism to the industrial revolution and the emerging industrial

capitalists in Britain started demanding the end of Company rule in India.

Besides the external drain theory, the nationalists argue that British rule led

to the de-industrialization of India. India was an exporter of cotton manufacture

and this was how the Company started its trade but gradually India became an

exporter of cotton manufacture and thus Indian artisans, craftsmen and important

5
Gopal, S. – British Policy in India, 1858-1905, Pp: 175-77, New Delhi, 1975.
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trading centers collapsed and whatever manufacturing activity existed was

destroyed under the impact of imports of cotton manufacture almost exclusively

from Britain. Amiya Bagchi observed ---- “for more than seventy –five up to 1913,

India remained the major importer of cotton goods from Britain, often taking more

than forty percent of the British exports”6

Thus the industrialization of England was accompanied by the decline and

destruction of the Indian cotton on manufacturer. From the early 19th century

onwards India witnessed a steady decline in population dependent on indigenous

industries and consequent over burdening on agriculture as a result, Sumit Sarkar

has summed up these proved injurious to both political ramifications up.

“The sufferings of artisans have to be kept in mind as a significant factor in

the understanding of many movements of our period; both in the way in which de-

industrialization stimulated patriotic sentiments among intellectuals alike in the

Moderate Extremists and Gandhian era, as well as more directly, in occasional

urban and rural explosions of various types”7

6
Bipin, Chandra, Colonialism, Stage of Colonialism and the Colonial State
7
Chandra, Bapin, Essays on Colonialism, Pp : 62-69, Oriental Long man Ltd, New Delhi, 1999
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 The decay of Dacca, Surat, Murshidabad and many other flourishing towns

bear testimony to de-industrialization of India. Sir Charles Trevelyan observed in

1840.

“The population of the town of Decca has fallen from 1,50,000 to 30,000 or

40,000 and the jungle and malaria are fast encroaching upon the town…….. Decca

which was the Manchester of India, has fallen off from a very flourishing town to a

very poor and small one; ‘the distress there has been very great indeed”8

The twin processes of the drain and de-industrialization were carried out

extensively through the various stages of colonial rule. The process itself started

from 1757 when, with the battle of Plassey, the East India Company, representing

the British mercantile class, took over Indian control. During the same period a

fundamental change was taking place in Britain by a series of inventions leading to

the Industrial Revolution. Before the inventions, the Bank of England was

established in 1694 and the plunder of India helped capital accumulation and

inventions helped in generating the Industrial Revolution. The transformation in

England created new interests and to East India Company became the target of

8
Ibid, Pp: 70-71
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attacks in England and finally its fate was sealed by the war of Indian

Independence in 1857.

The impact of British rule in the initial stage has been summed up by R.P.

Dutt.

“While machine-made cotton goods from England ruined the weavers

machine-made twist ruined the spinners. Between 1818 and 1836, the export of

cotton twist from England in India rose 5200 times. The same process could be

traced in respect of silk goods, woolen goods, iron, pottery, glass and paper.

The effects of this wholesale destruction of the manufacturing industries of

India on the economy of the country can be imagined. In England the ruin of the

old handloom weavers was accompanied by the growth of the new machine

industry. But in India, the ruin of the millions of artisans and craftsman was not

accompanied by any alternative growth of new forms of industry……. The old

populous manufacturing towns, Dacca, Murshidabad… Surat and the like, were in

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a few years rendered desolate under ‘Pan-Britanica’ with a completeness which no

ravages of the most destructive war or foreign conquest could have accomplished”9

The merchant capital of Britain, found new opportunities in India, when the

Company started its conquests in which monopolistic buying of Indian materials

was undertaken by the revenue earned from India and they were exported to

foreign markets with maximum profits. The pre-industrial British capital, instead

of making so called ‘investments’ were buying Indian commodities for profitable

exports on the basis of money earned from revenue in India. Thus the conquest of

India by the British East India Company gave it the ‘power to levy and collect and

revenue and other taxes’ and on the basis of the gross profits the Company

exploited Indian commodities. This ‘Semi-bondage’ situation in India made by

British mercantile capitalism earns ‘tribute from conquest’. According to professor

Habib, during the later half of the eighteenth century the total British imports from

India increased from 12 percent to 24 percent and the British exports to India

increased from 6.4 percent to only 9 percent of the total British exports.10

9
Dutt, R.P. India Today, Pp. 131-132, Bombay, 1979
10
Dutt, R.C. The Economic History of India, Vol.II, Pp: 173-175 (Reprint), Delhi, 1956.
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 The phase of merchant capitalism gave way to the phase of Industrial

capitalism towards the beginning of the 19th century. Now the emphasis shifted

from revenue collection and trade to new forms of surplus appropriation. Indian

economy was now geared to serve the interests of industrial England. India was

now used to provide new material to the industries of England and a market for the

ready made British manufactured industrial goods. Indian resources continued to

be drained out in England, although in different forms. Similarly the process of de-

industrialization also got accelerated.

After 1857, when the British government took on direct control of India,

some British capital also started pouring into the Indian market, along with the

manufactured goods. This was the result of accumulation of capital at an

unprecedented level in the leading industrial countries. Now England needed India,

not only as a market for their goods but also as a favourable ground for the

investment of their capital. As a result India started getting industrialized but only

on foreign capital. All the major industries like Railways, Jute Iron and Steel (With

the exception of cotton textiles) were being run by British Capital. Its result was a

further drain of wealth, as all the profits made on British capital were going back to

England. Thus up to the end of nineteenth century India was sucked by the British

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during both phases of colonialism i.e. during mercantile capitalism and the

industrial revolution in England.

The term ‘Madras Presidency’ was applied to certain areas in South India

which passed to the British through historical causes, in course of time and its

basic formation was completed by the beginning of the 19th century. Before that

the East India Company’s possessions included the northern circars, the Jagir of

Chingleput district and a number of isolated ‘factories’ along the coast. Then the

company obtained a large number of portions of Tipu’s Kingdom including

Malabar, Salem and parts of Dindigal. There was another considerable accession of

territory, comprising Coimbatore, Canara and Wynad after the Mysore Wars. The

administration of Tanjore was taken over from the Raja. The Nizam of Hyderabad

relinguished the districts to the British. Then, the Nawab of the Karnatak was

relieved of his territories and Nellore, Nroth Arcot, South Arcot, Tiruchirappali,

Madurai and Tirunelveli were added to the company’s possessions. These areas

constituted the Madras Presidency. Except North Canara which was transferred to

the Bombay Presidency, the area continued as it, when India became independent

in 1947.11

11
Rathnasamy .N, some influences that made the British administration in Madras. 1939, Page -2.
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 The establishment of the three Presidencies of madras, Calcutta and Bombay

was the natural outcome of the efforts of a foreign naval power to secure footholds

on the Indian subcontinent for enlarging its commercial prospects. These original

factory settlements, meant purely for establishing trade contacts with the natives,

later became three vital strategic points from which the British after eliminating the

rivalry of the French advanced simultaneously in the North, South and West in

India. They formed the nuclei around which were grouped the territories that the

British came to acquire by cession or conquest. Of the three Presidencies, Madras

held a place of prime importance in the early history of British India. Fort St.

George was built before the cession of Bombay and the founding of Calcutta.

Above all, Madras was strategically the most vital place for English in the early

stages of these consolidations. The Presidency of Madras was formed by the

acquisition of territories from the native rulers through conquest and cession. Both

war and diplomacy, played their parts in its formation.12

Commerce, in the full sense of the dictionary definition, is “the interchange

of merchandise on a large scale between nations and individuals”. Commerce may

12
Sadasivam, D. The Growth of Public Opinion in the Madras Presidency 1958-1909. M. Litt. Thesis Published,
Madras, 1974, 807.
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be said to have been born in Madras only towards the end of the year 163913 Indian

trade and crafts had been an important contributory factor from time immemorial

to her immense wealth in the past. The finished products of Indian industry as well

as her natural products such as pearls perfumes, dyestuff, spices, sugar, etc, were

exported to distant countries and Indian imported gold, copper, zinc, tin, lead,

wine, horses, etc., but there was always an excess of exports over imports, which

meant necessarily the influx of a large quantity of gold. In the first country Pliny,

the Greek Geographer bitterly complained of the drain of gold from the Roman

Empire caused by the use of Indian luxuries.

During the first hundred years of this survey, the trade and general

prosperity of Madras increased with astronomic rapidity. But from the middle of

the eighteenth century a long period of trade recession set in and the forward

march was, for nearly a century, seriously checked. The main reasons for this are

not for to seek, and may be recorded under three main headings.

Firstly, War and misrule in the interior as a result of which many thousands

of the tillers of the soil left their villages and fled to the hilly tracts.

13
Hodgson G.H. Three Hundred Years of Madras Commerce in Madras, Trycentinary Commemoration Volume, P.
235, Madras.
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 Secondly, the industrial revolution in Europe resulted in the gradual

introduction of the steam – driven loom, and the growth of the factory system.

Thirdly, the result of the ‘revolution’ led to the ‘policy of protection’.14 One

might also add a fourth cause, namely the long drawn – out wars in Europe

resulting in the struggle for supremacy in India between France and England which

centered mainly round Madras.

The indigenous industries declined by the 19th century. This was partly due

to the competition of cheap goods produced by machinery and partly due to the

unwillingness of the Government or the Company to protect or encourage Indian

trade and crafts.

So, by the first half of the 19th century, India lost the proud position o

supremacy in the trade and industry of the world which she had been occupying for

well over two thousand years and, gradually transformed into a plantation for the

production of raw materials and dumping ground for cheap manufactured goods

from the West.

The position did not improve even under the rule of the Crown. The

Government did not think of protecting the rendering aid to indigenous industries

14
I bid, P. 237
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because this would have adversely affected British trade and industry which was

flourishing after the Industrial Revolution. This non-interference was defended on

the academic ground that the British Government adhered to the policy of Laissez

Faire as the best policy to be followed by the state in economic matters. This

policy suited the interests of British, traders and industrialist admirably well, who

were able to exploit the raw materials and the rich resources of undeveloped

countries like India.

The Indian spinning and weaving trades were the most badly affected by

foreign competition. Raw materials like cotton were exported to England where

they mere made into cloth. Finished cloth was imported into India and sold in

Indian markets at competitive rates. This ruined the Indian cotton industry and

rendered the weaving community unemployed. “The rapid development of

machinery and manufacturers and the cheapness with which cotton clothes were

produced in England led to India being flooded with Manchester goods to the

injury of the weaving classes”15

Another industry which had suffered foreign competition was the

manufacture of iron. In this essay of Indian economics Mr. Justice Ranade wrote

15
Srinivasa Raghvaingar S. The memorandum on the progress of the Madras Presidency during the last forty years
of British Administration PP. 117-118.
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“The iron industry not only supplied all local wants, but it also enabled India to

export its finished products to foreign countries. The quality of material tuned out

had also world – wide fame. The famous iron pillar near Delhi, which is at least

fifteen hundred years old, indicates an amount of skill in the manufacture of

wrought iron, which has been the marvel of all who have endeavored to account

for it…. The Indian Steel found once considerable demand for cutlery even in

England. The manufacture of steel and wrought iron had reached a high perfection

at least two thousand years ago.16

The Salem District Gazetteer states, “Iron – smelting in Salem District is an

art of extreme antiquity. The remains of slag mounds and furnaces in numerous

villages, not only in Attur, Salem, Omalur and Tiruchengodu but also on the border

line of Hosur and Krishnagiri taluks, and even in the heart of Anchette jungles,

testify to the wide extent and importance to the industry.”17

It is a fact that British did not develop this industry. Of course elaborate

enquiries were made in the last decade of the nineteenth century as to whether the

iron ores of Salem District could be exploited on a commercial scale. But the idea

was dropped on the pretext of the heavy expenditure to be incurred on fuel.

16
As quote in B.D. Basu – The Ruine of Indian Trade and Industries Pp. 3-4.
17
The Salem District Gazetter, P. 272.
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 The destruction of indigenous manufacturers had the effect of impoverishing

the artisan classes an driving them to agriculture which owing to the capriciousness

of the seasons was a precarious industry and the result was that the population as a

whole was growing poorer and poorer everyday and losing in stamina. The

position of the laborers had thus deteriorated under the rule of the Crown.

Not merely did industries suffer but indigenous trade also declined. Foreign

trade rapidly increased during the nineteenth century. Internal trade was

accelerated on account of marvelous improvements in communications Nicholson

in his Manual of the Coimbatore District has so well described the revolution in

trade effected by the improvement of communications in that district that his

remarks may be usefully quoted. He stated ‘from various reports it is known that in

1800 there were practically no roads, but merely tracks, there was not a cart in the

district and what the traffic existed was carried on by pack bullocks, and by ponies

and by basket boats on the Cauvery.18

Laying of roads, the gradual introduction of railways and other

communications like the post and telegraph have increased the volume of trade

during the nineteenth century but, in the absence of real industrial development in

18
The Manual of the Coimbatore District - Vol. II, P. 131
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the country, this development of trade only benefited Western industrialists,

helping the exports of raw materials from India and import of Western

manufacture.

The volume of overseas trade began to increase enormously with the

opening of the Suez Canal. In 1855-60 the average annual value of Indian trade

was about fifty –two lakhs of rupees.19

During the five years beginning with 1869 when the Suez Canal was opened.

The average annual value of exports amounted to nearly crores of rupees. The

average in 1900 exceeded two hundred crores. But, this did not satisfy the Indians

because trade was to a large extent monopolized by foreigners who had ousted the

natives of the soil from their legitimate fields of enterprises. Further these

improvements were utilized for impoverishing the people still further. They were

able to procure raw materials from remote parts of the Presidency and export them

to their country in order to import them as finished products.20

The State took no interest in industrial development till the 20th century. The

following instance shows this apathy. Alfred Chatterton, Director, Public

19
Sadasivan, D. The growth of public opinion in the Madras Presidency (1958-1909), M.Litt, Published Thesis. P.
104, Madras, 1974.
20
Venkatraman, T.K - Histroy of India, vol. II, P. 30.
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Instructions of the Madras Presidency, wanted to improve technical education in

the Madras Presidency and even set up a department of industries in 1906.

Handloom- weaving, chrome tanning and aluminum industries were encouraged

and pioneer government enterprises were even set up. This roused the alarm of

European business interests.

Lord Morley, the Secretary of State for India in London ordered the closing

of the department. The government was confined to collect industrial information

and provide some technical education.21

The efforts of Alfred Chatterton to improve indigenous industries were not

encouraged by Britain. The public resented this anti-national economic policy of

the Government, hence developed the Swadeshi Movement.22

An ardent advocate of Swadeshism in South India was V.O. Chidambaram

Pillai who with devoted patriotic followers spread the ideals of swaraj and

swadeshism all over South India. He did not content himself with merely

addressing meetings exhorting these ideals to the people. He also took concrete

21
Manual of the Coimbatore District, Vol.II, P.135.
22
Madras Year Book, 1924,P.344
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steps in that direction and started a Swadeshi Steam Navegation Company at

Tuticorin.

In 1906, the National Fund and Industrial Association was formed in Madras

“for fostering and improving indigenous industries for the promotion of scientific

and technical education and diffusion of knowledge on industrial matters among

the people by means of demonstrations, lecturers, leaflets and the like, provision of

scholarships for the study of industries in India or in any foreign country, the

helping of students trained as above in the starting of industries, the establishment

of a Bureau of Information relating to the industries, trade and commerce in India.

Chennai Jana Sangam was started on the 11th of January 1908, with an

object similar in scope and aim to the National Fund and Industrial Association and

also having its special purpose in furthering nationalism in the city by delivering

lectures on Swadheism, and boycott of foreign goods, by founding a school for

physical culture, a reading room and library and by training young men to preach

on Swadeshism. Such Sangams were established in different parts of the

Presidency.

The British Government resorted to all sorts of tactics to put down the

Industrial Association’s activities. Besides, in the absence of facilities for technical

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instructions industrial advance could not develop. Another cause was the lack of

sufficient capital. It is only gradually that Indian capitalists got over their shyness

to seek investment in industries. However, the most important reason was that not

only was the Government indifferent to industrial interests, it was generally

antagonistic to the development of industry in India.

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 CHAPTER – I

The world war stared by the news that Germany had declared war on France

and Russia. The war arose over the assassination of an Austrian Archduke in

Serbia. The Austrians wanted to punish Serbia. The Russians, who were friendly to

the Serbs, interfered. Germany supported Austria and France supported Russia.

England would not have intervened, had not Germany decided to march through

Belgium in order to attack France on her undefended flank. By doing this,

Germany violated a treaty signed by all the Great Powers, guaranteeing the

neutrality of Belgium. The Kaiser of Germany spoke of this as a ‘scrap of paper’.

Belgium appealed to England for protection and Great Britain war on Germany on

4th August 1914, the most fateful day, perhaps, in the history of the world. Almost

all the nations of the World, whether big or small, had taken part in it under one

pretext or other. The war was fought from August 1914 to November 1918 lasting

for 1565 days23.

23
Davies, H.A. – An outline History of the world, London, 1950, P. 533;
The Hindu dated 4th August 1914,
The Hindu, dated, 11th November 1918.
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 It was a total war in the sense that the warring nations were compelled to

mobilize totally their resources, their man power, manufacturing industries, their

farming, shipping, and transport and communication system24.

The First World War led to a great dislocation in the economic life of the

world. Masses of people had been killed or made unfit for work. Many men died

through a series of epidemics of influenza. The generation was affected by a lack

of nutrition. There had been colossal destruction of property. Many areas had been

devastated25. Production had suffered by industrial organization being diverted to

the purpose of war. Merchant shipping had suffered being turned to serve War

organizations and through destruction by submarines and mines. High taxation was

necessary as the war also increased the cost of living. All this dislocation led to the

rise of prices all through the world and trade became disrupted; but this shows that

modern Wars were highly injurious to the life of the community26. England had

borrowed large sums from the United States and had lent money to her allies out of

this amount. These inter-allied debts became mixed up with the reparations which

24
Venkatraman, T.K – A Manual of British History, Vol. II, Recent Times (1789-1945), Madras, 1950, P. 247-248.
25
Ibid
26
Bhagavti, Jagadesh (ed) and Srinivasan, - Foreign Trade and Economic Development – India, Columbia
University, New York, 1976, P. 17.
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were claimed by Germany and worsened the economic situations27. In nearly the

belligerent countries, the war had led to experiments of public control. The

Government regulated trade, fixed prices, taxed profits and confiscated private

property for war purposes. Hence socialist though received further strength. One of

the results of the war was that labour hereafter became important. The example of

the Communist Revolution in Russia also stimulated labour agitation. Labour

became a political power and Socialist Governments appeared in several countries.

The First World War brought about disruption of normal international trade

channels because of the fact that the countries involved in the war directed much of

their natural and human resources for the production of goods necessary for the

prosecution of was. There was also scarcity of shipping space and there was danger

arising out of submarine warfare in the oceans28.

The outbreak of the war resulted in immediate setback to India’s

international trade. Trade with Germany ceased immediately and trade with Great

Britain became difficult because of shortage of shipping space. The immediate

impact was decline in both India’s imports and exports. But soon exports started

27
Dharma Kumar:- Cambridge Economic History of India, Vol.2, (1757-1970), page 27.
28
G.O. Ms. No.3239, Trade and Customs, dated 21st September, 1914, T.N.A.
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moving up as there was increasing demand from foreign countries for Indian’s

Cotton Textiles, iron, and steel, Mica, Saltpetre, Wolfram and Wheat. The volume

of India’s exports gradually started rising from 1915 onwards in relation to 191429;

but India’s imports continued to decline. On the whole, during the war, both

India’s exports and imports declined until the end of war in 191830.

It is difficult to summaries briefly the effect brought about by the outbreak

of hostilities on trade of India, but an attempt may be made to indicate the main

features. At first the cessation commercial relations with Central European Powers

caused considerable dislocation. Exporters of raw cotton from Bombay and of raw

jute from Calcutta lost in Germany, one of their best customers. The prices of both

these staple commodities fell and among articles of secondary importance had

created a serious situation. At the same time, the exclusion of invaded Belgium and

the military pre-occupations of Marseilles upset the oil-seed trade and the trade in

groundnuts in particular for a time. The activities of the “Emden” in the Bay of

Bengal and in the neighbourhood of the Laccadives during the first five months of

the war and the meance of the “Konigberg” in the Arabian Sea paralysed exports

generally. Further, there was a great shortage of freight due to vessels being

29
G.O. Ms No.3735, Trade and Customs, dated 28th September, 1914, T.N. A.
30
G.O. Ms. No.3742, Trade and Customs, dated 30th November, 1918, T.N. A.
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commandeered for military transport and the inability of neutral shipping visiting

Indian ports to make good all at once the elimination of the German and Austrian

Mercantile Marine. The jute mills were working short time and were faced with a

reduced demand for their manufacture31.

With the allies entering upon an in terminate period of trench warfare on the

Western Front, an enormous demand arose for sand bags. Unlimited quantities of

hides were required for the manufacture of boots for the new armies and more

extensive orders from Japan for raw cotton coincided with an unusually abundant

Indian crop. The Government of India found themselves the fortunate possessors

of large treasury balances in August 1914 which they placed freely at the disposal

of trade through the Presidency, banks and a run on deposits in the Postal Savings

Banks by small depositors though severe, was soon arrested. Emergency

legislation was passed to strengthen the gold standard reserve and sterling

exchange was supported by selling reverse Councils32.

The War affected the trade of India both directly and indirectly. The first

direct effect was naturally to stop the considerable trade with Germany and

31
G.O. Ms. No.373, Trade and Customs, dated 218th October, 1914, T.N. A.
32
Madras Administration report for the year 1914-15, pp. 64-67
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Austria. The total foreign import trade of the Madras Presidency in private

merchandise was in 1913-1914 at Rs. 1,635.46 lakhs of which Rs. 92.32 lakhs or

5.6 per cent was with Germany and Rs. 27.35 lakhs or 1.6 per cent with Austria –

Hugnary. Similarly, the total value of exports in 1913-14 was Rs. 2, 590.93 lakhs

and of this Rs. 247.19 or 9.5 per cent was with Germany and Rs. 43.64 lakhs or 1.7

per cent with Austria – Hungary33. In the Presidency as in the rest of India, closing

of the export trade to these countries was more serious than before because the

latter could be replaced from other sources, but the loss of these two customers

caused a serious drop in values as well as in quantities, quite apart from the

question of exchange34.

There was further a complete stoppage of trade with Belgium and a large

diminution of the same with France. Trade with Turkey had also ceased. In

addition to the loss of trade with enemy countries, the export trade with allied and

neutral countries had also suffered. There was a serious tonnage arising partly from

the taking up of vessels for military transport purposes and partly due to the

increased demand elsewhere; freight rates had in consequence been high and in

addition war risks had to be paid35.

33
Ibid, pp 84-85
34
Ibid
35
Ibid
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TABLE-I SHOWING THE RISE OR FALL IN EXPORT AND IMPORT
TRADE DURING THE WAR PERIOD
S.No Year Import / Export in Private Fall / Rise
merchandise
01 1913-1914 Exports 17 % Fall

02 1914-1915 Import of private Merchandise 10 % expanded

Export, 13 % increased
03 1915-1916 Import of Merchandise, 9 % decreased
Export 35 % declined
04 1916-1917 Import of Merchandise, 16 % declined
Export 35 % declined
05 1917-1918 Import 55 % declined
Export 21 % declined

(Source: - Report on the Administration of the Madras Presidency for the years
1913-14 to 1917-18).

The causes for the rise or fall may be thus given here. During 1913-14, the

German Cruiser “Emden” made several successful raids on trading vessels in the

Bay of Bengal and Arabian Sea and caused a temporary dislocation of trade. The

net result was the foreign trade declined.36

It must be borne in mind that the increase in the year 1915 was largely due

to the high prices prevailing almost every where and that the quantity of trade by

sea was in most cases materially less than the previous years. The United Kingdom

had increased her trade with Madras both in imports and exports and this was also
36
G.O. Ms. No.3773, Trade and Customs, dated 26th November, 1917, T.N.A.
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true in the case of the United States of America and Japan. Therefore foreign trade

including Government transactions improved.37 The volume of trade actually

declined during the period of the First World War to a much larger extent because

the value of most of the commodities imported and exported were considerably

higher than in the previous year.38 As the war advanced, it became necessary to

impose restrictions on the exports by food stuffs and articles capable of being

turned to warlike uses to neutral destinations owing to the risk of their being

diverted to the enemy.39 The amount of import duty was enhanced under the

revised tariff and as a result of the high prices of the articles. The restrictions

imposed on a variety of imports and exports on account of military and political

considerations and with exchange difficulties, helped to hinder trade. As regards

internal trade, there were constant complaints over the unavoidable shortage of raw

products formerly exported to Europe were seriously help up.40

Shipping and weaving concerns were fully employed in meeting the orders

of the military authorities. The tanning and leather industries, at first adversely

affected, recovered owing to the placing of large orders for coir screening for

37
Madras Administration Report for the year 1917-19, PP-64-69, T.N.A
38
Ibid
39
G.O. Ms. No. 1852, Trade and Customs, dated 25th June, PP-71-73, T.N.A.
40
G.O. Ms. No.507, Trade and Customs, dated 1st September 1917, PP 61-64, T.N.A.
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camouflage purpose in France. Rice factories, especially, in the northern districts

were hard hit by the shortage of rolling – stock and many were forced to close

down. Factory situation made a marked advance, but with factories working

intermittently. There was regular demand for factory labour and factory wages, as

compared with those outside, ruled low.41

The Government pencil factory and the soap works increased their turnout

and profits to a considerable degree. There was a tendency to multiply the

installation of small rice milling and other plants beyond the limits of economic

conditions. The Department of Industries devoted its attention to the centralization

or correlation of such plants rather than to further installation.42

The First World War revealed the industrial potentiality of India and also the

military importance of industrialization. As the Montague Chelmsford Report

observed; “Nowadays the products of an industrially developed community

coincided so nearly in kind, though not in quantity, with a catalogue of munitions

of War that the development of India’s national resources became a matter of

military necessity.” It also revealed the dangers of depending up on imports of

41
G.O. Ms. No. 4140, Revenue, dated 1st September, 1917, PP 65-66, T N A.
42
Madras Administration Report for the year 1917-18, PP 64-71 T.N.A
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essential goods such an iron, steel, machinery etc. At the dame time, fall in imports

and the consequent encouragement given to Indian Industries led to the rise and

progress of many new industries. But the fillip given to industries during the war

India had to face foreign competition. 43

The successful adoption of protective tariff in many countries particularly

Germany, Japan and the United States, revealed how indispensable the protection

was to backward countries like India. Indian leaders began to agitate for protection

of political reforms under the Act of 1919 would be inconsistent without some

fiscal freedom44.

The great awakening of interest in industrial development in Southern India

was reflected in the considerable number of new companies. With the object of

introducing improved methods and machinery among handloom weavers, he

Government sanctioned the starting off ten additional weaving parties, of which six

actually began work. A notable development of the manufacture of finished leather

goods, including footwear, was signalized by the establishment of three leather-

manufacturing firms in Madras. A company was newly formed for the manufacture

43
Gandgil, D.R. – Industrial Evolution in India, Calcutta,1950, 1950, PP 182-185
44
Anstey, Vera.- The Economic Development in India (London) 1952, PP 203-214.
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of salt on improved methods and a movement was on foot to revive the glass-

making industry, which made an unsuccessful beginning in Madras45.

The visit of the Indian Industrial Commission helped to throw light on the

happenings, but did not do much in the way of removing the difficulties of getting

expert assistance for the stoppage of imports from Europe. One important event

was the transfer of pumping and boring to the control of Agricultural Department.

A proposed demonstration of a gas suction engine had to be postponed owing to

the impossibility of shipping the plant from England.46

Arrangements had been made for systematic survey of the rice mill industry

with a view to improve the methods of manufacture. Te attempt to establish a glass

bottle industry in Madras was reluctantly abandoned, the main difficulty lying in

the fact that it was impossible to obtain the services of a glass expert and the more

or less amateur suppression must necessarily result in commercial failure.

Similarly it had been found necessary to terminate the attempts to manufacture

lime, sand and bricks on a commercial scale since it was not found feasible to

produce bricks cheaply enough to compete with the superior quality of Clay-
45
G.O. Ms. No. 1791, - Trade and Customs, dated 24th October, 1918, PP 61-63, T.N.A.
46
Report of he India Industrial Commission 1916-18, Calcutta, 1918, (reprinted, 1980),
New Delhi PP 66-72.
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bricks. Hitherto efforts to use Indian wood and Indian graphite had not been

encouraging, but the raw material for the industry had been obtained from East

Africa and Ceylon. The position of dyes was unchanged. It found it unfeasible to

replace synthetic dyes even when their price was prohibitive by use of natural and

indigenous colours47.

There were difficulties and obstacles in the way of he development of

industrial enterprise. Tonnage became scare and was strictly controlled from the

British Home Government. The shortage of costing steamers imposed a heavy

burden on the railways which were themselves handicapped by a shortage of

rolling stocking and by heavy military traffic. Most industrial concerns felt serious

anxiety in respect to coal and coke and also experienced difficulty in obtaining

wagons to move their finished products. Imports of hardware and metals from the

United Kingdom almost ceased. Local stocks became depleted and prices went up

correspondingly48.

The Government had to take control over industry and trade. Coal and coke

railway traffic, the tanning industry, tanstuff, wool, pig iron all came under some
47
G.O. Ms. No.637, - Revenue (Special) Department, dated 7th December,
1918, T.N.A.
48
. G.O. Ms. No.791, - Revenue (Special) Department, dated 28th April, 1919.
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control which was extended in further directions. Not withstanding these

difficulties, there was considerable activity particularly in Madras itself. The

weaving mills were for the Indian Munitions Board and the demand for yarn owing

to the shortage of imports from England, kept all the spinning mills fully active49.

The tanning of skins was prohibited owing to the necessity of conserving the

supplies of avaram bark, but immense quantities of hides were tanned for army

requirements. The finished leather industry also was very brisk owing to the urgent

need for accoutrements and army equipments generally. Large quantities of metal

fittings were also required for the army and most of the blacksmiths, as well as

Engineering shop of Madras were busily engaged in making buckets, shackles and

similar articles for the Madras Arsenal. A new company was established to assist

in meeting this demand and the manufacture of webbing and tape was organized in

a European firm for the purpose of supplying army demands. Tent making was

revived in a small scale at the Madras Arsenal and a private firm was also taking

up this industry as a war enterprise. Among, other new developments may be

mentioned the manufacture of lather, looms and loom parts and of pruning knives

49
Indian Annual Resister – 1914-1919, Vols. II
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and planters tools. A new large textile factory entirely financed by an Indian

Syndicate was opened on the West Coast50.

The energies of the department of industries continued to concentrate on the

supply of ammunitions up to the end of the War found it possible to devote

attention to problems of industrial development. The Madras Presidency, not being

rich in mineral wealth industries, had been for the most part depending on

agricultural product and utilization. The questions of occupying the forefront of the

department’s programme were the treatment of vegetable oils, the manufacture of

leather, mechanical engineering as applied to agriculture and hand-loom weaving51.

The Secretary of States gave his general assent to the recommendations of

the Indian Industrial Commission and accepted the two fundamental principles

underlying those recommendations viz., that in future that the Government should

play an active part in the industrial development of the country and for that

purpose, it should provide itself with adequate administrative equipment and

reliable scientific and technical advice. The publication of the Commission’s report

50
Natesan, G.A. – Indian Review, Madras, 1919 Vol. II, PP 411-13.
51
Swaminthan, Padmini, - State Intervention in Industrial Development: A case study of the Madras
Presidency, proceedings of the seminar on South Indian Ecoonomy, 1914-1945, Vol. 1.
Tiruvananthapuram, 1985, PP 85 to 87.
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and of those Despatches of the Government of India and the Secretary of States

thereon led to a great awakening of interest in such development as was

evidenced52.

The total number of factories during the war period is given below:-

S.No Year Factories Fall / Rise Reasons

01 1914 385 -- War restrictions

02 1915 417 Increase Due to the starting of new

factories
03 1916 460 Increase -do-

04 1917 492 Increase -do-

05 1918 482 Decrease Due to the removal of

factories
06 1919 483 Decrease -do-

(Source: Report on the Administration of the Madras Presidency for the years1914-
1919)

The Table above indicates that during the World War I, there was no increase in

the number of industries, factories and mills nor the expansion. This was because

of the difficulty of obtaining new machineries and securing raw materials53. In the

case of entrepreneurs who intended to start industries, the lack of provision of

52
Swaminathan, Padmini, - Cit, PP-112-151
53
G.O. Ms. No. 791, Revenue (special), dated 28th April, 1919, T.N.A
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technical assistance facilities for the supply of raw materials, assistance in

marketing etc., were also conspicuously absent in the Madras presidency during

the World War I. In the case of industries aided by the state, the Government did

not arrange for the selection and import of machineries and plant them nor helped

the firms with their engineers and technical personnel in their erection54.

It cannot be said that the Madras Presidency suffered from paucity of

business talents. Promoters of new industries, who had any reasonable prospect of

securing help from private financial agencies hardly thought of approaching the

Board of Industries. Hesitant and reluctant generally to apply for state aid, they

could not have been encouraged when application of some enterprising firms were

turned down.55

During the war, it was realized that drastic steps were necessary to increase

the revenue. Hence in 1917, the general import duty was further raised from 5% to

7 ½ % the cotton excise duties and excise remaining unaltered, at 3 ½ %. Excise

duties were imposed on both tea and jute56. In 1917, the attitude towards cotton

excise was modified. In 1917, the duty on imported cotton piece goods was raised
54
Ibid
55
G.O. Ms. No. 1166, Revenue (Special) Department, dated 12th June, 1919,, T.N.A
56
Boag, G.T.- The Madras Presidency, 1881-1931, Madras 1933, PP 81-84
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from 3 ½ % to 7 ½ % and the export duty on jute was doubled. It was at this point

the first change in policy appeared as the countervailing was left at 3-½%57.

One of the results of the war naturally had been to increase the British

Empire’s share of the aggregate trade of the Madras Presidency. This share was 63

per cent before the War, 75 per cent in 1916-1917 and 81 per cent in 1917-18. The

value of imports declined by 2 per cent and that of exports by 27 per cent giving a

total decline in trade of 18 per cent. The trade with other countries also declined by

44 per cent58. The trade with the United Kingdom represented 40 per cent of the

total trade compared with 48 per cent in 1916-1917 and declined by 37 per cent. If

the tanned hides and skins shipped under the Government control were included,

the fall in the total trade was reduced to 22 per cent. The trade with the British

Empire representing 81 per cent of the aggregate trade of the Presidency declined

by 18 per cent. The trade with the continent of Europe showed a decline of 73 per

cent and the decline occurred mainly by the trade with France and Italy. Smaller

trade with the Philippines, Java and Japan resulted in a decrease of 7 per cent in the

trade with Asiatic Ports. The trade with Africa declined by Rs. 3.05 lakhs owing to

57
Ibid
58
Baliga, B.S – Compendium on History of Handloom Industry in Madras, Madras, 1960 PP 143-145.
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cessation of exports to reunion and that with America, which was practically

confined to the United States of America declined by 45 per cent59.

To total value of coastal trade excluding Government transactions improved

by 13 per cent. Imports of private merchandise improved slightly by Rs. 1.24

lakhs, larger imports of tanned and rawhides, cotton twist and yarn and kerosene

oil having been counterbalanced by smaller imports of grain and pulse and

teakwood. Exports rose by 27 per cent, the result of larger shipments of raw cotton,

groundnut, coffee and spices60.

The relative importance of the trade of the out ports remained much the

same as in 1915-1916. Mangalore improved its position from sixth to fifth place at

the expense of Calicut. Dhanushkodi was the only port to show an appreciable

increase of trade but Mangalore and Cannanore both handled more merchandise

than in 1916-1917. The value of the sea-borne trade on account at the port of

Madras represented nearly 42 per cent of the trade of the whole Presidency

compared with 45 per cent in the previous year and 11 per cent in 1915-1661.

59
Ibid
60
Ibid
61
Madras Administration Reports for the year 1916-1917, PP 64-65
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 The total revenue receipts for the Presidency increased from Rs.107.86 lakhs

to Rs. 115.03 lakhs or by 7 per cent. The total disbursements on account of

customs for the whole Presidency amounted to Rs. 6.65 lakhs compared with Rs.

70.01 lakhs in 1916-1917. There were no customs cases of particular importance.

The number of offences dealt with under the Sea Customs Act during the year was

936 against 1,494 in the previous year. Penalties realized amounted to Rs. 19,175

against Rs. 27,019 in 1916-17. Five hundred and four cases occurred at Madras

and 432 at the out ports62.

The dislocation of trade during the war was enormous. The coasting trade,

whose recrudescence was the result of the war, had of course suffered severely,

freights for timber, for instance, had fallen from Rs. 120 per ton in 1918 to the low

figure of Rs. 30. Super dues on exports and imports were still necessary to

maintain the solvency of the Port of Madras in view of the depleted volume of

trade. The shortage on land naturally affected the movement of products by sea;

thus an enormous and unprecedented quantity of Burma rice was imported while

no Indian rice was exported owing to the prohibition. There was a notable decrease

in imports of sugar owing to the retrial from the market of the Bombay buyers; the

62
Ibid
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general increase of the value of sea-borne trade over the figures for 1918 was as

forty per cent. An interesting feature of the year was the persistent smuggling of

gold from the Straits of Settlements in contravention of the prohibition-a business

rendered extremely profitable by the prevailing rates of exchange63.

The rise in the price of machinery and restriction on imports with the

scarcity of liquid fuel to retard any advance in the mechanical engineering branch.

A tendency was there to multiply the installation of small rice milling and other

plants beyond the limits of economic conditions and the energies of the department

may be devoted to the centralization or combination of such plants rather than to

further installations. So far as the unsatisfactory nature of the prevailing conditions

had permitted, the activities of the department had been vigorous and

comprehensive and the financial results had been everywhere favourable, the soap

works presenting a specially promising record64.

The cotton mills in the Presidency had nearly 4,100 power looms and

1,95,000 spindles at work and gave employment to about 30,000 operatives. Two

of the concerns worked as Joint Stick companies. The number of spinning and

63
Madras Administration Reports for the year 1919-20, PP 64-65
64
G.O. Ms. No. 130, Trade and Customs, dated 19th January, 1920, T.N.A
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weaving concerns, which were not worked by mechanical power and were

therefore not closed as mills decreased by two to four. Handloom weaving was an

important cottage industry in the Presidency and the Department of Industries

endeavoured as usual to introduce improved methods and machinery amongst the

weavers. An investigation was also undertaken into the condition of industry in its

technical aspects and to the social and economic condition of the weavers. The

three jute mills in the Northern Circars continued to work during this period.

Owing to the boom in the leather trade, the number of tanneries increased from 24

to 46 of which three, together with the two leather works came under the Factories

Act65. There additional leather manufacturing firms had been established in Madras

City, and it was probable that the manufacture of finished leather goods would

develop considerably in Madras during the next few years and that an export trade

in foot-ware might be developed; especially in South Africa where there was a

large market for this class of leather goods. The prohibition on the tonnage of

sheep and goat skins by the Madras tanners, which had been in force during the

great, part of 1917-18 and 1918-19 was removed early in 1919 with the result that

certain tanners immediately stopped the input of hides and turned their attention to

skins, but owing to the exceedingly high price of raw skins, many continued

65
G.O.Ms. No.1111, Revenue (Special), dated 15th June, 1920, T.N.A
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tanning hides and skins so long as they could dispose of them to Government

under the scheme of control66. An important event of the year in connection with

the trade in hides and skins was the passing of an Act by the Government of India

imposing a tax of 15 per cent on all hides and skins exported from India but

providing for a rebate of 10 per cent on hides and skins as were exported within the

British Empire.

The coir industry was represented by 22 concerns as against 18 in the

previous year. The number of cotton, ginning and pressing factories remained

almost the same as in the previous year. For some time past attention had been

devoted to the question of controlling and licensing cotton gins and presses in

order to reduce the advantage of the lint which resulted from the bad condition of

the small ginneries and to prevent the mixture of short and long staple cotton. The

Indian Cotton committee recommended that all ginning and pressing factories

should be required to take out licenses and laid down a series of conditions to

which such factories should be required to confirm. The government of India

accepted the Committee’s recommendations67.

66
G.O. Ms. No.829, Revenue (Special), dated 29th April, 1920, T.N.A
67
Report of the Department of Industries for 1919-20; See also: G.O. No. 1206 Revenue (special) dated 2nd July
1920, T.N.A.
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 CHART - VIII
SEA - BORNE TRADE 1937 -38 TO 1944-45
160

140

Tot al Sea- bor ne Trade

120 Export s
Import s

100

80

60

40

20

0
1937- 38 1938- 39 1939- 40 1940-41 1941-42 1942-43 1943-44 1944-45

S o ur c e : M a dr a s A dm i ni st r a t i on R e p or t f o r t he y e a r 19 4 4 - 4 5

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 A. ORDNANCE FACTORIES
B. COACH BUILDING AND MOTOR REPAIRING WORKS
C. ARMY CLOTHING, HOSIERY, SILK AND OTHER TEXTILE
FACTORIES
D. TANNERIES AND LEATHER INDUSTRIES
E. TOBACCO FACTORIES
F. SUGAR FACTORIES
G. ROPE WORKS
H. CHEMICALS, OIL MILLS BONES AND MANURE WORKS ETC
I. TEA FACTORIES
J. GROUDN NUT DECORATICATING, PADDY BOILING, CHEST
NUT CURING, CONDIMENTS AND GRAM MILLS
K. COFFEE CURING WORKS
L. JUTE MILLS
M. PRINTING, BOOK BINDING ETC
N. ENGINEERING INCLUDING ELECTRICAL ENGINEERING
ELECTRICAL GENERATING STATIONS, FOUNDRIES
MINERAL AND METAL WORKS, KEROSINE TINNING AND
PACKING ETC
O. BRICKS AND TILES SAW MILLS, PENCIL AND CABINET
WORKS
P. RICE MILLS
Q. RAILWAYS AND TRAMWAY WORKSHOPS AND
DOCUKYARDS
R. COTTON GINNING AND BALING PRESSES, JUTE FIBRE AND
FORAGE PRESSES
S. COTTON SINNING, WEAGVING AND OTHER FACTORIES

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 CHART - I RELATIVE IMPORTANCE OF THE DIFFERENT CLASSES OF FABTORIES
IN MADRS DURING 1931 (VALUE IN LAKHS)

S 1058
R 1272
Q 1275
P 1890
O 1931
N 2312
M 2462
L 2785
K 2828
J 4051
I 4224
H 6211
G 6286
F 6554
E 7961
D 15796
C 16445
B 20186
A 34284

0 5000 10000 15000 20000 25000 30000 35000 40000

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 CHAPTER – II

Import and Export trade in the Madras Presidency during 1920-21 was more

abnormal than any of the war years, consequent on the dramatic collapse of the

European exchanges, the depreciation in the value of rupee as a result of the

adverse balance of trade, the accumulation of large stocks bought at high prices by

overseas customers and in the first year of 1921-22, the reduced purchasing power

of the country consequent on the unsatisfactory monsoon of the previous year

coupled with the high price of imported goods presented absorption of the heavy

stocks in the market. Owing to the increase in the general rate of import duty and

imposition of enhanced duties on luxuries, fresh imports received a check. The

export trade failed to come up to general expectations. In the next two years, the

trade of the Presidency was passing through a period of recuperation and although

under the stimulus of high prices, the value of the export trade expanded above 10

crores of rupees, the value of imports declined by over 1 ½ crores of rupees68.

The depression in Europe generally restricted the Presidency’s outlet for produce

and in turn diminished her purchasing power.

68
G.O.No. 310 Trade and Customs, dated 15.12.1921;
G.O.No. 372, Trade and Customs dated 27.12.1922. T.N.A.
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 The yea 1924-25 witnessed a further expansion in the export trade owing to

fairly good crops in that year, the large demand for them as a result of the

improved economic conditions in buying countries and the consequential rise in

the prices of most of the exported produce while a partial revival in the export

trade also was in evidence. In the next year, the import trade in most articles was

depressed despite favourable exchange and the tendency of the fall in prices

considerably restricted imports, especially cotton piece goods, the price paid by the

consumer was still above the general average before the war. In the case of

exports, however, there was satisfactory progress. The prosperity of the rubber and

tea industries and the large crops of groundnut and cotton were contributory

factors. Exports in many staple articles were adversely affected by the depreciation

of the franc. Consequent on a market improvement in the imports of cotton

manufacture, sugar, dyes and colours, machinery and work, paper and paste board,

there was an expansion in the foreign import trade of the year 1926-2769. The total

value of this trade would no doubt have been still higher, had the world prices of

staple articles such as cotton, sugar and steel remained at the previous year’s level

and had not the coal strike in Britain retarded the forward progress of the cotton

steel and other industries of that country. On the other hand, there was an

69
G.O. No. 313 Revenue (Special), dated 20.01.19256, T.B.A; The Samarasa Bhodhini (Tanjore), 7th Jan 1926,
NNR.
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appreciable decline in the foreign export trade by over 6 crores, chiefly under

cotton and groundnuts, owing to the competition resulting from a plentiful supply

of cheap American cotton in the case of former (cotton) and unsettled state of the

continental exchanges, the difficulty of securing freights owing to the coal strike in

England70.

In the next two years, the trade assumed prosperous dimensions. Exports and

imports in the year 1928 – 29 in particular attained a level (4,659 and 2,759 lakhs

respectively) never reached previously or subsequently. This was due to a general

stability in the financial condition of the world, a stable exchange and a

comparatively good supply of freight at reasonable rates. The year 1929-30,

however, showed a slight dimension in the foreign trade of the Presidency71. In the

beginning of the year 1928-29, the conditions appeared favourable for a steady

development in trade, but these hopes were not fulfilled owing to phenomenal

financial stringency in the chief money markets of the world brought about by over

speculation and the resultant failure and adverse effects on credit and purchasing

power. It was, however, only in the year 1930-31 judging from the trade figures

that the effects of the world-wide depression made themselves fully felt and

unfortunately for this country, certain additional factors such as Civil Disobedience

70
G.O.No.321, Trade and Customs dated 27.01.1928, T.N.A.
71
Census of India 1931, Vol.XIV, Madras Report, Part I, pp 216-217.
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Movement and boycott of British goods accentuated further and the general

economic distress72.

The Madras Presidency in common with the rest of the world had since been

passing through a period of unprecedented economic depression and like all

producers, of primary products had suffered severely from the fall in prices.

Following Great Britain’s departure from the gold standard in September 1931 and

the linking of the rupee with the depreciated sterling, there was an immediate rise

in price of all principal commodities and this afforded a definite stimulus to the

export trade. It was though in some quarters that he improvement was a sign of

better times but more cautious observers took the spirit of optimism but there had

been a definite retrogression in the situation. Practically all commodities had

declined in price during the last few months. Tanned hides, one of the principal

exports of the Presidency, had actually declined below the September level. The

production of agricultural products seemed to have run ahead of demand and the

real problem was the correct of oversupply extending over a wide range of

commodities. The rise in the value of gold and as a corollary, the fall in prices of

commodities was still further accentuated by the unfortunate position of the

counties engaged in primary production. The general basis of world prosperity

72
Ibid, Part II, pp 224-225.
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undoubtedly was in a satisfactory level of commodity values whereby the primary

produced could earn satisfactory profits, but this could only be affected when

excess production was overtaken by an increase in consumption and the expansion

of consumer’s demand which was so greatly desired. It would be folly to overlook

or minimize the gravity of the present situation. It would be also unwise to

exaggerate it for there was no instance in economic history of a crisis that was not

followed by a period of stability and prosperity. The long delayed improvement

came and India became one of the first countries to spare it73.

COTTON

It will be seen from the following statement which shows the area on which

cotton was grown during the last ten years, with the weight and volume of the

cotton exported, that the value of the export trade had undergone considerable

fluctuations during the period74.

In the Madras Presidency, the cultivation of cotton was largely carried on in

the districts of Tirunelveli, Ramnad, Madurai, Coimbatore, Tiruchirapalli, Salem,

Cuddapah, Anantapur, Bellary, Nellore, Kurnool, Guntur, Kirshna, Godawari and

Vizagapattnam. The trade name of the several varieties grown were ‘Cambodias’,
73
The Indian Annual Register, Calcutta, 1931, Vol.I, pp 434-435.
74
G.O.Ms. No. 805, Trade and Customs, dated 13.06.1932, T.N.A.,
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‘Tinnevellies’, ‘Salem’, ‘Northerns’ and ‘Western’ and ‘Coconadas’. ‘Cambodia’

were grown in Tiruchirapalli and portions of Coimbatore and Madura,

‘Tinnevellies’ in Tinnevelly, ‘Salems’ (Uppam) in Salem and portions of

Coimbatore, ‘Northerns’ and ‘Westerns’ in Bellary, Kurnool, Anantapur,

Cuddapah and Chittoor and ‘Cocanadas’ in Krishna and Guntur. Of the Southern

India Cotton, ‘Tinnevellies’ were well situated for the production of 40s counts and

below, while others were suitable for 24s counts and below. The ‘Northern’ stable

was 7/8s, the ‘Eastern’ 3/4s, the Cocnada 5/8s, the Karunganni 7/8s, the Tinnevelli

3/4s and 7/8s and the Salem 3/4s. There were about 2,500,000 acres of land and

normally the yield was about 5,00,000 bales of 400 Lb each75.

There were 28,905 persons engaged in cotton ginning, cleaning and pressing

in 1931 while the corresponding figures for 1921 was 20,844 representing an

increase of about 40 per cent. The number of ginning factories and presses in the

Madras Presidency coming under the Factories Acts was 424 in 1931 against 205

in 192176.

75
G.O. Ms. No.153, Trade and Customs, dated 02.02.1932, T.N.A.,
76
G.O. Ms. No.637, Trade and Customs, dated 09.05.1932, T.N.A.,
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 The industry of hand spinning was as old as the Vedas and had been in

existence from time immemorial. Hand spinning was still largely carried on in the

coir, wool and industries. As regards cotton, however, when cheap and superior

mill-made yarns were placed on the market, the handloom weavers gradually

abandoned the use of hand-spun yarn. Hand spinning of cotton then ceased to be a

remunerative occupation and consequently fell into destitute. In the last decade,

however, there had been a partial revival of cotton hand-spinning industry. It was

estimated by the ‘All India Spinners Association’ that in 1930-31, Khadi was

produced in the Madras Presidency (Andhiradesam, Tamilnad and Keraladesa) to

the value of Rs.31,08,302 out of a production for the whole of India valued at

Rs.57,81,952. Taking 6 annas per yard as the average cost price or 2½ yards per

rupee, the production of khadi in the Presidency amounted to 8,448,800 yards. The

industry of hand-spinning was carried on chiefly in the districts of Cuddapah,

Karnool, Anantapur, Ramand, Madura, Tinnevelly, South Kanara, Salem, Guntur,

Tanjore, South Arcot, Chittoor, Krishna, West Godawari, East Godawari, Nellore,

Vizagapattnam and Ganjam. Generally in the Ceded Districts and Northern

Circars, the industry was more developed than in the southern districts.

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 The average annual imports of Madras during the last few years had been 7

million pounds of yarn and 70 million yards of cotton piece goods. The following

table shows the progress made by the mill industry since 1919.

Statement showing the progress of Cotton Spinning and Weaving Mill

Industry:

Year Number of Number of Number of Number of

Mills Looms Spindles hands
employed
daily
1919 12 423,232 2,727 24,118

1929 23 775,928 5,233 32,866

1930 - - - -

1931 25 - 5,493 -

(Sources – Report on the Administration of the Madras Presidency for the year

1919 to 1931).

The textile cotton industry of the Madras Presidency afforded a means of

subsistence to a large number of people and ranked in importance and magnitude

next only to agriculture. Except the Nilgiris, all other districts of the Presidency

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were handloom-weaving areas. Fourteen districts contained more than 10,000

looms each77.

The various classes of people engaged in the industry from time immemorial

were Devangar, Sourashtras, Kaikolas and Padmasalis and also the depressed

classes and the industry provided work for men, women and children. The

importance of the industry to the Presidency can be gathered from the fact that

although there were only 1,69,451 looms in the Madras Presidency in 1921 out of a

total of nearly two million looms in the whole of India, the consumption of yarn in

the province was only a little less than one quarter of that the whole of India in the

decade ending with the year 1920-21 and an increase of 15 per cent to 1,73,474 in

193178

There were twenty Hosiery factories in the Presidency which were generally

run by power79. The more important factories were situated in Malabar and at

Karur and Salem, the Malabar and Karur concerns manufacturing mainly net

banians while those at Salem were engaged mainly on the manufacture of knitted

77
Annual Report, Department of Industries, 1919-1931.
78
N.G. Ranga, The Cotton Mill Industry to the Madras Presidency – The Indian Journal of Economics”
Vol.XI, 1930-1931.
79
Ibid
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banians. The factories appeared to be fairly well employed as although they

experienced severe competition from the cheap and inferior Japanese goods some

benefit was derived from the preference shown for the Swadeshi article.

Competition was, however, very keen and prices were often non remunerative to

the manufacturers. Consignments of hosiery goods were frequently forwarded by

manufacturers for payment as and when they were sold and sales conducted on

these lines were expensive. The market for hosiery goods in India was a growing

one, only the fringe of the potential demand having yet been touched. India was

Japan’s principal customer for knitted goods80.

Certain places in the Presidency had attained a reputation for dyeing

different kinds of fabrics and in select colours; Kumbakonam and Conjeevaram for

dyeing silk and artificial silk, Nagapatnam for its black dye, Madura for certain fast

bright red and its Chungadi sarees and Saya Veshties and Coconada and Nellore

for certain kinds of dyed clothes. The location of the industry in particular placed

had been chiefly due to the patronage of the rich in the neighbourhood and the

facilities available, particularly, the suitability of water in the area for dyeing

purposes. The classes of people engaged in the industry were chiefly Telugu,

80
Ranga, N.G. Opct, p.50

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Balija and Kapu in the northern districts, washerman in Godawari and

Vizagapatnam District, Rangarajus or Rangaries in the central districts and several

classes, eg. Mudaliyas, Yadavars, Banias, Nattars, Woddars, Pallas etc., in northern

districts81.

The jute grown in the Madras Presidency was not the crochorus variety but

Deccan hemp. The area under this variety had averaged about 65,0000 acres of

which Vizagapattnam District contributed about 75 percent Guntur District over 15

per cent. There were two jute mills in 1921 in Chuttivasal and Ellore; the mill at

Nellimaria was not started until 1922 while at Guntur which was started in 1904,

was not working at the time of 1911. The number of looms and spindles employed

in these four mills at the close of 1930-31 was 941 and 20,394 spindles, giving

employment to nearly 6,500 hands an increase of about 4,000 over the figure for

192182.

The importance of the tanning industry to the Madras Presidency may be

gauged from the fact that there were 400 to 500 tanneries giving employment in

normal times to about 40,000 hand with an estimated wages roll of over Rs.95

81
Bhogendranath, N.C., Development of the Textile Industry in Madras (Upto 1950), Madras, 1957, pp12.
82
Annual Report, Department of Industries, 1921-1931.
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lakhs per annum. Tanned hides and skins had been one of the most important

exports of Madras ever since the figures of sea-borne trade were published. The

trade during the previous decade had been abnormal in many respects owing to the

effects of the war83.

The production of cashewnut kernels was an important industry on the west

and east coasts, particularly the former, Mangalore being the chief centre. The

production of raw nuts in South Kanara was estimated of about 70,000 to 80,000

bags of 140lbs., each, while an equal quantity was produced in the adjacent parts of

Malabar, Cochin and Travancore some of which was imported into Mangalore.

The East Coast districts accounted for 50,000 bags, while Goa and Coastal tracts of

Bombay Presidency probably accounted for 110,000 bags84. The total production

in India of Cashewnut was therefore about 300,000 bags. The requirements of the

industry in Mangalore alone were started to be about 200,000 to 300,000 bags, the

deficiency was made good by the importation of African nuts which came into the

Mangalore market from December to April., i.e,. when the Indian crop was

exhausted and thus served to keep the factories going throughout the year. There

were five or six factories in Mangalore engaged in the industry which provide

83
Census of India, 1931, Vol. XIV, Madras Report, Part II, Page 232.
84
Ibid, pp.235
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deployment for about 4,000 persons, mostly women and the annual wage

amounted to about 4½ lakhs of rupees. This industry had shown marked

development during the decade as will be seen from the table below which shows

the total exports of cashew kernels for the past ten years85.

Exports of Cashew Kernels from Mangalore Port

Year Quantity Year Quantity Year Quantity

Cwt Cwt Cwt
1922 10,637 1925 16,671 1928 26,063

1923 8,735 1926 13,533 1929 26,432

1924 9,586 1927 19,546 1930 30,733

1931 37,663

(Sources: Report on the Administration of the Madras Presidency for the

years 1922-1931).

The above figures did not, however, represent the total production of

cashewnut kernels in Mangalore, since during the south-west monsoon when the

port of Mangalore was closed; a considerable quantity of cashew kernels was

railed to Cochin an other parts for shipment86.

85
Census of India, 1931, Vol.XIV, Madras Report, Part II, pp.222-223.
86
Bhoag G.T., - The Madras Presidency, 1881-1931, Madras, 1933, pp.207-209.
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 The expression, “coconuts, the consols of the East” aptly indicates the value

placed on the products of the coconut palm and the part these play in the economic

life of the people in several parts on South India, Ceylon, etc., for there is or was

no essential requirement of the people which some part of it cannot or could not

supply. Apart from several uses of the chief products, viz., coir, copra, coconut oil

and oil cake, the hollowed trunk serves as a canoe, the nut forms a staple article of

diet and a very wholesome one, the leaves may be used for many of the purposes

of paper, are frequently employed as thatch and for the manufacture of brooms,

baskets, umbrellas, tattis and fans and utilized as crude torches in a dried form or

burnt as fuel or for manufacture. The shell is also used as fuel either as it is or in

the form of charcoal. The fresh or fermented juice of the stem is consumed as a

beverage, by evaporation it is made into jaggery and by subsequent treatment

refined sugar is obtained. When distilled, the toddy becomes spirit or arrack and

finally vinegar. The jaggery is not in frequently mixed with lime to make a strong

ferment which takes into fine polish and so on87.

The area under coconuts in the Presidency had averaged over 550,000 acres

during the last ten years vide statement of acreage given below:

87
South India Chamber of Commerce, Golden Jubilee – 1910 – 1960 (SICC, 1961) Madras, Page 223.
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 Year Acs Year Acs Year Acs

1921-22 559,404 1925-26 555,465 1929-30 576,083

1922-23 543,263 1926-27 552,815 1930-31 565,971

1923-24 520,552 1927-28 557,102

1924-25 525,445 1928-29 570,330

(Source: Report on the Administration of the Madras Presidency for the

year 1921-22 to 1930-31)

Malabar, South Kanara, East Godawari and Tanjore were in order of

importance, the chief districts growing coconut88.

During 1921, the pride of place among coconut products exported was held

by Copra, but in 1931, the first position had been taken by Coir and Coir products.

Table-shows the export of coir (unmanufactured) during the last ten years89

88
G.O. M.S.No.798, Trade and Customs, dated 11.06.1932 – T.N.A.,
89
G.O.Ms.No.1116, Trade and Customs, dated 17.07.1932, T.N.A.,
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 Coir (Unmanufactured) - Foreign Trade

Year Quantity Value Year Quantity Value

Tons (Rs) Tons (Rs)
1922-23 460 1,11,816 1926-27 245 75,290

1923-24 368 87,481 1927-28 194 57,088

1924-25 340 84,481 1928-29 3.34 1,02,327

1925-26 397 1,09,141 1929-30 229 75,147

1930-31 190 60,004

(Source: Report on the Administration of the Madras Presidency for the

year 1922-23 to 1930-31, TNA)

Table II

Foreign Coastwise
Year Quantity Value Quantity Value
1921-22 27,208 90,14,937 15,378 31,20,360
1922-23 32,575 1,07,41,614 13,478 26,16,890
1923-24 31,163 1,00,88,531 15,151 30,26,385
1924-25 36,286 1,20,25,754 13,002 25,46,793
1925-26 29,561 1,05,83,341 13,875 31,37,894
1926-27 27,655 97,99,076 13,023 28,85,819
1927-28 33,069 1,11,56,924 13,538 28,82,385
1928-29 31,767 1,03,97,287 13,533 29,32,065
1929-30 31,176 1,02,54,195 - -
1930-31 25,862 87.13 lakhs - -

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(Source: Report on the Administration of the Madras Presidency for the
year 1922-23-1930-31, T.N.A.,)

The United Kingdom and Belgium were the Chief importers of Coir

(unmanufactured) while manufacture a coir was mainly utilized by Germany, the

United Kingdom Netherlands, Belgium, France, Italy and the United States of

America. It will be seen that foreign exporters alone of manufactured coir had

exceeded Rs.1 crore in value, except in three years, while the value of coastwise

exports had always been over 25 lakhs. Cochin and Calicut were the principal ports

of shipment, the former accounting for about 80 percent and the later for almost the

entire balance. Foreign and coastwise exports of coir rope and the cordage had

averaged about 10 lakhs of rupees in value, cordage preponderating90.

The production of coffee in India was confined to Mysore, Madras, Coorg,

Cochin and Travancore in the order of importance, the Madras share being less

than one-fourth of the total. The following statement shows the production and

export of coffee in the Presidency during the decade.

90
G.O.Ms. No.1173, Trade and Customs, dated 1718/1932, T.N.A.,
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 PRODUCTION AND EXPORTS OF COFFEE

Year Acres Production Export Value of

of cured CWT exports
coffee LBS Rs.(lakhs)
1921-22 25,655 5,163,158 219,153 129.86

1922-23 27,452 7,642,406 162,045 119.63

1923-24 38,487 3,598,396 208,885 152.59

1924-25 34,235 9,669,289 235,135 202.62

1925-26 35,430 4,525,736 196,638 178.22

1926-27 37,173 6,914,970 145,244 128.48

1927-28 38,159 11,533,164 270,495 226.88

1928-29 38,104 4,827,302 193,432 165.77

1929-30 37,583 8,068,408 179,730 141.87

1930-31 38,377 - 287,414 188.35

The area had increased by about 50 per cent within the last 10 years.

Production had also increased, the output during the first five years of the decade

being slightly less than that for the next four years. The Nilgiris, Salem, Madurai,

Malabar and Coimbatore were the important coffee growing districts91. The

exports in 1930-31 were highest in quantity but the pride of place in regard to the
91
G.O. Ms. No.1392, Trade and Customs, dated 01.09.1932, T.N.A.,
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value of coffee exported belonged to 1927-28 in which year, the value was higher

by 38 lakhs although the quantity was less by 17,000 cwt. The United Kingdom

and France were the important customers, Germany, Netherlands, Norway,

Belgium, Iraq, Bahrein, Islands, etc., taking smaller quantities. Trade also had

suffered greatly during the last few years of the decade owing to the trade

depression, a heavy fall in the price having occurred owing to the inability of

Brazil to maintain its valorization scheme in the face of economic causes92.

Machinery imports and Mill work afforded a reliable index of the industrial

development of the Presidency. Of the machinery imported, textile and electrical

machinery and prime movers were the most important. The average imports of

these classes had been 42,40 and 24 lakhs during the decade. The other machinery

and mill stores imported included sewing and knitting machines, belting for

machinery, boilers, tea machinery, rice and flour machinery, typewriters and

agricultural machinery93.

The Depression affected trade and commence. Industrial production in the

world decreased almost without a break from the last quarter of 1929 to the middle

92
G.O. Ms. No.1209, Trade and Customs, dated 10.06.1932, T.N.A.,
93
Census of India, 1931, Vol. XIV, Madras Report, Part II, p.234
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of 1932. But in India, the Depression did not have the same effect on industry as in

many industrial sectors. During this period, industrial production in India did not

contract but increased in some cases. At a national level, cotton, sugar, steel and

cement industries expanded rapidly, while in Madras, cotton, sugar and banking

were the growing industries. But the same was not the case with small-scale and

cottage industries. Hosiery, tanning, matches and handlooms had to face rough

weather in this period94.

P.J. Thomas, an economist in the University of Madras at that time, noted

that the period 1928-29 to 1936-37 was one of great industrial activity, with

production of cotton piece goods increasing of 89 percent, sugar by 1,016 percent

pig iron by 213 percent and steel by 151 percent95. D.R. Gadgil also observed like

thus ‘Indian Capital has become distinctly bolder during the period (1929-39) and

with large investment facilities available, more of it being sunk in the industrial

enterprises96.

The striking industrial growth of this period can be attributed to a variety of

causes. The most important was the discriminating protection given to a select

94
Economic Depression Enquiry Report, Madras, 1930 Part I & II, pp.179-181, 185-187.
95
Thomas P.J., - Papers on Currency and Depression ,Madras, University of Madras, 1985, pp.241.
96
Gadgil, D.R., - Industrial Evolution of India in Recent Times, London, Oxford University Press, 1954, Pp
304.
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number of industries. On the basis of the recommendations of the Tariff Board set

up in 1923, the Government had granted specific protection to nine industries,

namely, steel, cotton textiles, sericulture, paper, sugar, silver, thread and wire,

magnesium chloride, heavy chemicals and matches97. The protective measures

were considered to have paved the way for a marked growth in industrial sectors,

but the available studies indicate that hardly any Indian firm gained from it.

Besides, industrial development of colonies was still anathema to the British

Government, as it was beginning to feel threatened by the reports of such,

developed in the wake of the Depression.

There was no change of policy until 1939, and imperial interests continued to

govern England's policy towards colonies. Therefore, industrial growth in the

Presidency occurred mainly because of certain special conditions created by the

Depression. First, owing to the steep fall in prices of agricultural goods, raw

materials were available at very low prices, second, faced with all round

unemployment, labour was willing to work for subsistence wages. Third, money was

available at low rates of interest, as funds lying with banks sought an outlet. The

bank rate of interest stood at 8 percent in November 1931 to 3.5 per cent98. A

97
Narayanasamy Naidu, B.V. – Edited – Indian Trade. Annamalai University Economic Series No.9, Annamalai
Nagar, Annamalai University, 1942, pp.171-173.
98
Thomas, P.J. Op. Cit, Page 240
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further condition was that the rupee's high exchange rate enabled the

manufacturers to obtain machinery and other essential imports at comparatively

cheap prices, this was especially at the time. Finally, the real income of fixed

income groups, such as rented classes, high government officials and chieftains of

the princely states had increased greatly due to the Depression and the fall in prices.

They were able to save a large amount of their income and invest it in banks and

industries99

In the Madras Presidency, under the system of diarchy industry had become a

provincial subject, which enabled the government to actively participate in industrial

enterprise. The introduction of cheap electric power through hydro electric schemes,

such as the Pykara Hydro electric scheme and Mettur Project, helped the

industrialists who already had an abundant supply of cheap labour. During the

Depression the wage rates were very low on account of falling prices, and there was

flooding of the labour market with workers repatriated from Burma, Malaya and

Ceylon100. Another factor that encouraged the growth of industry was the

agricultural depression leading to an extreme degree of indebtedness of peasants.

99
Narain, Lakshmi, Price Movements in India, 1929-1957, Meerut: Shri Prakasham Publishers, 1957, pp34-35
100
Baker, C.J. - The Politics of South India. (1920-1937) New Delhi, Vikas Publishing House, 1976, P. 184

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Many men with liquid capital to employ found lending to peasants risky and thus

transferred their attention to industry101

The census of India in 1931 noted the industrial developments that were

taking place in the Madras Province. The companies to come up first were those set

up for the transmission of electricity to the towns of the province. Then came the
petroleum distribution companies, banks, insurance companies cotton, sugar and jute

mills and cinema enterprises.102 While the depression was paralysing agriculture

and trade in the Presidency, the number of industrial undertakings registered kept

increasing every year. The aggregate joint stock capital in the province grew by 37.2
percent between 1935 and 1940, five times faster over the previous twenty years. The

newly registered joint stock companies in Madras between 1928-29 and 1936-37

are shown in table.

101
Amitya Kumar, Bagchi, - Private Investment in India (1900-1939),New Delhi, Logman, 1982, p.
210
102
The Indian Annual Register. 1933. Vol II Calcutta: p. 419

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 Year Total Banking Insur Tran Trade % of Cotton Other Sugar Others
and ance sport & total mills mills mills
credit manufa
cture
1928-29 64 9 5 9 20 31.25 4 3 - 14

1929-30 98 9 18 8 19 19.39 3 4 - 14
1930-31 109 27 7 11 40 36.70 - 5 - 19
1931-32 93 27 10 7 38 40.86 2 3 - 6
1932-33 146 38 33 6 8 32.33 5 3 - 13

1933-34 159 34 24 6 61 38.86 3 8 4 19

1934-35 189 44 12 17 86 45.50 8 9 2 11

1935-36 174 34 4 5 75 43.10 14 5 3 34
1936-37 235 39 8 10 112 47.66 4 8 2 52

Cotton and sugar industries recorded remarkable growth during the period. In

1929-30, there were only nineteen spinning and weaving mills in the Presidency,

with 697,564 spindles and 5,039 looms at work. But by 1937, there were forty-

seven mills at work with 1,134,222 spindles and 5,866 looms103

The history of the textile industries in Madras dates back to the later half of

the nineteenth century. But the greatest expansion of industry seems to have taken

place during the nineteen thirties, as the equipment of mills and the labour force

employed increased.

103
Annual Report. Department of Industries. 1929 to 1937.P - 1 7
The Swadesamitran (Madras), 2nd September 1936, NNR
The Andhra Patrika (Madras), 7th September 1936, NNR

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 Progress of textile industry in Madras Presidency

Year No of mills Capital (in Looms Spindles Labourers

Rs.
Million)
697,564 34,513
1929-30 20 (100) 24.62 (100) 4,039 (100)
(100) (100)
753,520 34,670
1930-31 22 (HO) 29.61 (120) 5,033 (100)
(108) (107)
714,404 37,872
1031-32 24 (120) 27.65 (112) 5,143 (102)
(102) (116)
794,564 38,769
1032-33 23 (115) 28.33 (115) 5,13 (102)
(114) (119)
846,230 41,208
1933-34 29 (145) 30.30 (123) 4,083 (81)
(121) (127

(Source: Report on the Administration of the Madras Presidency for the

years 1929-30, 1933-34)

Twenty nine mills and ginning factories were floated in Coimbatore area

during 1929-37. Coimbatore began to function as the chief centre of the Cotton

Textile Industry in Madras. As the number of cotton mills in Coimbatore

increased, several adjoining towns also registered growth. Tirupur, for

instance, emerged as the major cotton mart in Coimbatore district104. Two

104
Baker, C.J. - Op. Cit, p. 190

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cotton mills, namely, Sri Ramalinga Choodambigai Mills and Dhanalakshmi

Mills Limited, had come into being in Tirupur during the Depression.

In 1932, the Tariff Board recommended a protective tariff which the

Government adopted for the sugar industry. Within the next five years, the industry

grew at a very rapid rate. The number of sugar factories in the Presidency rose

from two or eleven between 1934-35 and 1936. In Tamilnadu, the Coimbatore

Lakshmi Sugar Mill, an old sugar refinery at Podanur was reconstructed during

1933-34 re-equipped with a cane-crushing plant. During 1936-37, the Southern

India sugar Company Ltd, in the Karur area and the Srimathi Sugar Mills Ltd., in

the Lalgudi area of Tiruchirapalli district were started.105

A cement factory started at Madukkarai in Coimbatore district in 1932 gave

fillip to the industry in the state.106 The Mettur Chemicals and Industrial Corporation

Ltd, established in 1937, undertook production of caustic soda.107 The Indian

Steel Rolling Mills was started at Nagapattinam for the manufacture of Steel in

1933-34.

105
Annual Report, Department of Industries, 1933-34, Ibid -193 6 -37, P - 3 4 The Hindu (Madras), 20th Century,
1936, NNR
106
Natarajan, K.V - Economic and Financial condition of the Presidency, Madras State. (M.Litt, Dis. University of
Madras, 1956). P. 76
107
Ibid
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 The number of oil presses in the Presidency increased from 34 to 238

between 1931 and 1938108 A survey undertaken inl939 found 153 full time

groundnut dealers in the groundnut cultivating areas. These dealers who survived

the crash invested in groundnut decorticating plants. In Salem there was an

enormous increase in the construction of groundnut decorticating mills.109 The oil

mill industry was hit in view of the low prices prevailing for all varieties of

vegetable oils. Several mills either stopped working or reduced their output

considerably. The price of coconut oil declined from Rs. 387 to Rs. 287.

The aggregate value of the sea borne trade, foreign trade in private

merchandise and treasure imports, exports and the coasting trade declined and

contracted considerably in the Madras Presidency during 1930 and 1931 due to

smaller arrivals of principal articles of merchandise, though these were counter

balanced by increased arrivals of mineral oils, instruments, apparatus, appliances

and parts of those artificial silk, grain, pulse and flour. The decline was due to world

trade Depression, fall in prices, the Non-Cooperation and Civil Disobedience

Movements in India throughout the period and the inability of certain foreign

exchanges and the suspension of the gold standard by Great Britain. But during the

108
Baker, C.J. - An Indian Rural Economy (1880-1955). Tamilnadu Countrywide Oxford University, 1984, p. 373.
109
Baker, C.J. - Politics of South India. (1920-1937), New Delhi 1976,P. 186.

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year 1932, there was an increase. The increase was noticed in every variety and

was chiefly due to the suspension of the Non-Co-operation and Civil Disobedience

Movements.110

During 1933 and 1934, there was an increase of sea-borne trade, Government

transactions, foreign trade in private merchandise and treasure, import, export and

coasting trade due to large receipts of grain, pulse and flour, metals and ores, cotton

twist and yarn, manures, vehicles, instruments, apparatus and appliances, dyeing

and tanning substances, spices and artificial silk, partly set off by large

decreases in silk, raw and manufactured sugar.111

The United Kingdom was the principal supplier in iron and steel and other

suppliers were, as usual, Belgium, Sweden and Germany. The United States of

America and Canada also increased their supplies of cars.

The aggregate value of the sea-borne trade, government transactions, foreign trade

in private merchandise and treasures (excepting coasting trade) during 1935 and

1937 shows a decreased as a result of the fall in receipts of grain, chiefly rice and

paddy and consequent on the imposition of duty on broken rice. The United

110
Report on the Administration of the Madras Presidency for the years, 1931,1932 and 1933. P. X; P XII, P.
X
111
Proceedings of the Madras Chamber of Commerce 1933 and 1934 (Madras) PP 27-29; 33-35;
The Swadesamitran, (Madras), 5th May 1934, NNR;
The Swathanthrasaneu (Madras), 8th May, 1934, NNR.

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Kingdom continued to be the principal supplier in iron and steel and the other

suppliers were Belgium, Germany, Sweden, Japan and France. The Swadeshi

spirit in India encouraged and helped the expansion of trade. But the tide

turned the Presidency along with other countries experienced a reversal of

conditions in the course of the year 1937-1938. During this period in the

Presidency in respect of sea-borne trade, import and export and coasting trade fell.112

The administrative report for the year 1929-30 stated that the seaborne trade

of the Presidency had decreased by almost two million rupees during the first eleven

months of the year. Surveying the conditions of trade and industries for the year

1929, the President of the South Indian Chamber of Commerce in his annual report

observed thus:

“I feel that the conditions of the past year (1929) present a picture of

unredeemed gloom in almost all sections of trade, commerce and industry. “…..”

A most disappointing circumstance during the past year was the continuous fall

in prices all around much more in the case of our export goods than in imported

articles”.

112
Report on the administration of the Madras Presidency for the years, 1935, 1936, 1937 and 1938, Pp. 137-138,
145-147, 150-151, 155-157;
The Dhinamani (Madras) 22nd April, 1935, NNR
The Hindu, (Madras), 16th July, 1935, NNR.
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 The administrative report of the Madras Presidency for 1930-31 provides

a vivid account of Depression.

“Importers generally suffered a heavy fall in their turn over while European

business houses, especially those dealing in piece goods, either suffered heavy

losses or fared more than inl929-30. Exporters of tanned skins and hides were

hard hit by the imposition of an import duty of 10 percent by the United States of

America without corresponding duty on hides....”

“There was little export trade in rice to Ceylon, owing to the continuous

fall in the price of paddy and the competition of Burma and Saigon dealers.

Several rice mills remained closed for considerable periods on this account.”

The history of foreign trade of the Presidency from 1929 to 1937 provides

sufficient testimony to the fact that it was foreign trade, which acted as the most

effective and disastrous channel through which the world slump transmitted its

effect to the Madras economy.

Business in cotton, yarn and piece goods suffered severally on account of the

big fall in prices and some of the ginning factories also had to be closed. Business in

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groundnuts was also not generally profitable. Weaving and other allied industries

were severely affected by the economic Depression.

The conditions created by the Depression in the Madras Presidency such as

availability of raw materials at low prices, cheap labour and low rates of interest

for the money lent by banks, all proved to be conducive to the growth of certain

industries. Cotton, sugar and banking industries registered commendable advances

during the inter war period.

Though the Presidency witnessed industrial development, handloom, cottage

and small-scale sectors had a trying time. The government's taxation policy turned

out to be disastrous to those sectors. When the tanners were demanding high export

duty on raw skins and hides, the government abolished the duty much against

Indian interest. An excise duty levied on matches crippled the industry and the

Government's protective tariffs extended to Indian textile mills affected the

handloom sector. A large number of weavers in handloom centres and labourers in

small industrial establishments lost their jobs. In large factories, the workers had to

suffer wage cuts. Instead of taking offence the working class, in face of the acute

crisis, remained passive. Even the strikes and struggles launched by the organized

labour unions were of short duration, fizzling out in the end.

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 TRADE STATISTICS (1930-39)

(Rs. In crors)

S.No Year Sea- Govt. Foreign Trade Import Export Coasting

Borne Transactions in private (Crores) (Crores) Trade
Trade Merchandise (Crores)
(Crores) (value in Rs.)
(Crores)
1 1930-31 87.83 10.79 crores 19.56 24.80 32.85 4.45
2 1931-32 71.49 50.19 crores 13.34 43.81 26.83 3.10
3 1932-33 72.00 23.73 crores 0.73 16.10 28.15 27.15
4 1933-34 70.04 22.55 lakhs 14.71 15.31 27.3 1.07
.5 1934-35 76.98 19.86 lakhs 44.46 17.75 26.71 32.29
6 1935-36 76.10 21.21 lakhs 43.37 16.08 27.29 32.48
7 1936-37 82.80 22.97 lakhs 52.15 15.64 36.51 30.42
8 1937-38 88.49 44.99 lakhs 54.53 15.61 36.24 14.59
9 1938-39 79.04 45.63 lakhs 61.10 24.87 36.24 17.48
(Source: Report on the Administration of the Presidency for the years 1930-
39)

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 CHART - IX
TRADE OF THE PROVINCE BY COUNTRIES IMPORTS (1938-39) (VALUE IN LAKHS)

OTHERS 215

SOUTHAFRICA 23

NETHERLANDS 24

CEYLON 31

BELGIUM 46

STRAITS SETTLEMENTS 54

IRAN 62

U.S.A 101

JAPAN 124

GERMANY 184

UNITED KINGDOM 656

BURMA 924

0 100 200 300 400 500 600 700 800 900 1000
Source: Madras Administration Report for the year, 1938-39, p.144.

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 CHART - VI
VALUE OF CHIEF EXPORTS (FOREIGN AND COASTWISE) 1938-39
(VALUE IN MILLIONS)

OTHERS 111.8

MANGANESE 6.2

COFFEE 7.8

RUBBER, RAW 9.3

PADDY AND RICE 12.3

COTTON RAW 14

SPICES 14.1

TOBACCO, UNMANUFACTURED 17.6

COTTON TWIST YARN 19.2

HIDES (TANNED OR DRESED) 25.1

SKINS (TANNED OR DRESSED) 23.9

COTTON PIECE GOODS 25.1

TEA 49

GROUNDNUT SEEDS 89.8

0 20 40 60 80 100 120
Source: Madras Administration Report for the year, 1938-39, p.144.

CHART - VII
TRADE OF THE PROVINCE BY COUNTRIES EXPORTS (1938-39)
(VALUE IN LAKHS)

OTHER COUNTRIES 353

EGYPT 59

JAPAN 71

STRAITS SETTLEMENTS 73

BELGIUM 169

USA 171

GERMANY 183

NETHERLANDS 201

FRANCE 227

BURMA 253

CEYLON 368

UNITED KINGDOM 1440

0 200 400 600 800 1000 1200 1400 1600

Source: Madras Administration Report for the year, 1938-39, p.144.

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 CHAPTER – III

The First World War had left bitter memories in the minds of Germany and

her allies, particularly, Germans had a feeling that their army had not been defeated

in the First World War, but had been betrayed into a surrender. The military

classes resented the “War Guilt” clause of the treaty and other humiliating

provisions. Hence, they supported Hitler when he proceeded gradually on the path

of aggression. Hitler claimed that Germany was being encircled by Russia,

England and France and that her natural aspirations and their development were

hindered. Nations like Italy and Japan also felt that they had not got a proper share

in the territories of the world to help their economic advancement and that the

division of the earth’s surface was unequal, Italy was resentful of the attitude of the

Western powers on the Abyssinian questions.113

Japan was casting her eyes on the Pacific area which had unlimited supplies

of rubber, oil and tin.

113
Venkatraman, T.K. – A Manual of British History, Part II (Recent Times – 1789 – 1945). Second edition, 1950,
Madras – pp.27-71;
The Hindu, dated 8th Sept, 1939
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 “The primary cause was the failure of the League of Nations to restrain

aggressors. The League of Nations had failed to ring about disarmament. It’s

weakness against aggression encouraged other aggressors. The failure of the league

could be explained by the fact that no state was willing to give up its sovereignty

and submit all matters to the decisions of a world organization. So long as this

mentality continued, suspicion and insecurity amongst the countries were also

bound to continue.114

Mussolini of Italy and Hitler of Germany had practically same objects in

view and both formed a close alliance known as the Rome – Berlin Axis. While

Germany and Italy were extending their territories, the Allies – England and

France made protests, but they did not declare war, probably, they dreaded war and

were not prepared for it. But the patience of the Allies was exhausted when, in

August 1939, Hitler demanded the restoration of the Corridor (which had been

ceded to Poland by the Treaty of Versailles) and Danzig without waiting for a

reply invaded Poland on September1, 1939. War began between Poland and

Germany.

114
Ibid,p.272;
The Mail (Madras), dated 5th September 1939, NNR.
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 Both England and France had given their word to Poland that in case she

was invaded, they could come to her help. So they declared war on Germany on

September 3, 1939. Thus Poland, England and France were on one side and

Germany on the other. A few days before the beginning of the war, Russia also had

entered into an agreement with Germany. In the beginning, Italy kept aloof but she

declared war on the Allies in June 1940.115

World War II was also a global war in which almost all the great countries

of the world became involved. When it began, England and France were fighting

on behalf of Poland with Germany, Italy and Japan which were on the side of

Entente before were now Axis powers, though they did not enter the war at once.

But, Italy joined the war as Germany’s ally. In the second half of 1940, Germany

forced Hungary, Rumania and Bulgaria to join her. In 1941, Germany turned

against Russia which hitherto was neutral, as Hitler had concluded a nonaggression

pact with her in 1939. in December 1941, Japan joined the war against Britain and

the United States. Thus the war took place over the vast areas of the world and

over all the oceans. Later China, several Latin American states and Turkey joined

against Germany. The whole world felt the effect of the war.116

115
Ibid, p.273; The Swadesamitran (Madras), dated 19 September 1939, NNR.
116
Ibid, p.274; The Indian Express (Madras), dated 20 September 1939, NNR.
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 War is a mighty upheaval, which violently disturbs the social and economic

equilibrium. World War II was bound to have far-reaching consequences, the

magnitude of which cannot be foreseen. The war of 1914-18 reduced the

conditions and created problems which baffled statesmen. The economic

adjustment from which the World War I differed before the World War II was the

legacy of the war of 1914-1918.

Close upon the heels of that war came World War II. The latter had been

characterized by the colossal destruction of material and human power. Practically

the whole of the continent of Europe lay-estate before Hitler, Poland, Belgium,

Holland, Norway, Sweden, France and Bal khan countries were all groaning under

the unbearable tyranny of Hitlerism. Russia had put up a brave defence. Britain and

America remained the only countries to fight with the Axis powers117.

Mighty empires had fallen before Hitler and there had been colossal

destruction of material and prosperity. The currencies of various countries had

been reduced to a chaotic state. Standing crops had been destroyed and industrial

towns had been bombed. There was the problem of feeding the people of the

117
The Review, 1936, Vol. XXXX, p.157;
The Andhra Patrika (Madras), dated 14 October 1939, NNR.
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conquered countries. Inspite of her economic and military cooperation and

collaboration with Germany, France had been compelled to pay an indemnity of

400 million francs every day-a payment which was far in excess of what Germany

was even called upon to pay under the Peace Treaty of 1919118.

The problem to be solved in the post war period was of far-reaching

importance. The huge loss had to be repaired, currency and banking required to be

reorganized and the flow of international trade had to be revived. After the war of

1914-18, currency adjustment was brought about with great difficulty in various

countries. The problems of industrial reconstruction, war beds and reparation

payments proved to be very tough and complicated119.

The question of giving employment to the disbanded armies in various

countries would prove a very tough one. A number of Industries grew up during

the war, e.g. the automobile industry, the aero plane manufacturing industry and

the like. They were war-time industries and the conversion of war economy into

118
Ibid, pp. 158-160;
The Mathrubhumi, (Calicut), dated 17 October, 1939, NNR.
119
Ibid, p. 79;
The Tamilmani (Madras), dated 19 October, 1939, NNR.
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peace economy was indeed difficult. It required the shifting of labour and capital

from war industries into peace industries120.

All this required international cooperation i.e., cooperation between the

leading statesmen and central banks of the various countries of the world.

Unfortunately, this could not be secured after the war of 1914-18 to an adequate

extent and it was still more difficult to secure after the war was over.

Every war leaves behind a series of taxes and loans. The taxes and loans

imply transferences of wealth between different classes of people. The problem of

repaying these loans would have to be solved and it would, indeed, be very

difficult to secure social justice.

The war had brought an end to the economic depression through which the

World War passing before 1939. Its end created conditions that might usher in a

more formidable economic chaos. There was the trade cycle theory and it was not

without historical justification. The problem of the post-war economic depression

required international cooperation121.

120
Ibid, p. 799;
The Ananda Vikatan (Madras), dated 3 November 1939, NNR.
121
Sivasankara Reddy, Y. – War Time – Public Finance in India – 1939-45,
M.Litt. Thesis (Unpulished) University of Madras, 1950, pp. 175-77.
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 There were world - wide or international problems and consequently they

required international cooperation. Hence the establishment of a body styled as

International Economic Rehabilitation Commission became necessary. The League

of Nations and the International Labour Organization were already in existence.

They had now become more or less defunct. Their revival to suit the changed

circumstances became necessary122.

President Roosevelt and Mr. Winston Churchill had already announced their

plan of a future world peace. The terms of their plan applied to all countries,

irrespective of their political status and the degree of their economic

development123.

The damage and dislocation due to the World War II left most countries very

short of real capital. They needed imports equipment, raw materials and food stuffs

well in excess of their normal peace – time requirements, in order to rehabilitate

their industries. The chief source of such imports was the United States, which had

emerged from the war with an output much greater than before. But the chief way

in which they could earn dollars was by exporting goods to the dollar area. Their
122
Ibid, p. 280;
The Malayal Monorama(Kottaya), dated 26 January, 1940, NNR.
123
Ibid, p. 283;
The Tamilnadu(Madras), dated 28 January 1940, NNR.
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export industries had suffered from the war and most countries could not export

anything like as large as volume of goods as they did before the war. They suffered

therefore, from an acute shortage of dollars.124

The United States of America came to their assistance. Under the Marshall

Plan she agreed to provide European countries $4,875 million (which the U.K.

Share was $1,263 million)125. Over four years, mostly by grants and partly by

loans. The purpose of the Plan was to hasten the economic recovery of European

countries; to enable them to increase their output and exports and eventually to

stand on their own feet. The Marshall Plan came to an end about 1951, but it was

in effect replaced by “defence aid”, grants given by the United States towards the

cost of buildings up armaments by European countries for the defence of the free

world126.

The United States had given large grants to other areas also, notably the Far

East, during the post-war period and had also made long-term loans and

investments in Canada, Latin America and elsewhere. The total amount of dollars

she had made available to the rest of the world in these ways had exceeded her

124
Frederic Benham, - Economics – A general Introduction, Fifth Edition,
London, 1955, Chapter XXXVI, p. 504.
125
Ibid
126
Ibid, p. 504;
The Hindu (Madras) dated 9 February, 1943 NNR.
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export surpluses and she had to part with some gold, from her gold reserve, to

make up the difference.127

The problem of disarmament received due attention. It was embodied also in

the Peace Treaty of 1919 but it was no worked in a right spirit, hence the present

war. For securing disarmament, a permanent international commission backed up

by some sanction or authority was established. In these conditions, the post –war

economic reconstruction was established along sound lines.128

A few words must now be said about India. Our country had also been

affected by war. Exports to the enemy countries had been stopped and our imports

had also been reduced on account of the lack of adequate shipping accommodation

and the lack of the power of foreign countries to supply goods to us. Insurance

premium had also gone up. Our industries had not expanded as much as they

could. The currency circulation in the country now stood at about Rs. 280 crores129,

and the metallic content of the rupee had been reduced and the one rupee

inconvertible note had been issued. Control had been exercised over exchange and

the imports and exports of foreign currency into and out of India had been brought

127
Ibid, p.505.
The Mail (Madras) dated 10 February, 1942, NNR.
128
Ibid, p. 507
The Indian Express (Madras) dated 8 March 1942, NNR
129
G.O. Ms. No. 2361, Development. Dated 28 September, 1940, TNA
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under control. The level of the taxation had increased and the excess profits tax had

been imposed. A system of price – control had been instituted and certain

commodities have been rationed. Thus Indian economy was turned into war

economy.130

The war opened scope for the development of some of our industries, e.g.,

the automobile industry, the aeroplane manufacturing industry and the like. But

adequate steps had not been taken to bring these industries into existence. Out

shipping industry was in a very backward condition. But whatever industries had

received the stimulus, they continued after the war.131

In the post-war period, the war economy had to be converted into a peace

economy. The readjustment caused as little inconvenience as possible. The

industries, which grew up during the war were allowed to continue in the post-war

period with as little disturbance as possible. Then there were problems of tariff and

transport and of international trade agreements. All these became a part and parcel

of a plan of post-war economic development or economic reconstruction.132

130
G.O. Ms. No. 1242, Development, dated 10 May, 1940, TNA.
131
Ibid
132
G.O.M.S. No. 2949, Development dated 15 may 1940, TNA.
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 The government prepared a plan of post-war economic reconstruction in

which due importance was given to problems of labour, industries, agriculture,

trade, tariffs, finance, transport and the like. Further India was allowed to occupy her

due place in the comity of nations by being declared a self- governing Dominion

immediately after the war.133

The economic activity was completely subservient to political and military

demands. The deterioration in international relations and the decline in activity in the

United States had a depressing effect on the trade of the primary producing

countries including India. In the next six months there was a sharp recovery in the

United States and an uncertain movement on a slightly rising trend in the rest of the

work. Towards the end for the year the political situations caused a fresh set back

and the commodity markets weakened appreciably.134

In Madres the Bank rate remained unchanged at 3 percent. The deterioration

in the economic position was reflected in the value of Cheques passing through the

Madras Clearing House which declined from Rs. 109.90 crores to Rs. 98.91 crores.

The gross earnings of the Madras and Southern Mahratta Railway increased from Rs.

749.33 lakhs to Rs. 754.44 lakhs while those of the South Indian Railway fell from
133
G.O.Ms.No:1730, Development dated 10 July, 1939, TNA;
Anstey Vera – The Economic Development of India (London, 1952) pp. 551-553.
134
G.O. Ms. No. 2968, Development dated 10 July, 1939, TNA.
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Rs. 559.85 lakhs to Rs. 546.74 lakhs. The total value of the sea-borne trade of the

Presidency both foreign and coastwise decreased by Rs. 945.25 lakhs or 10.68

percent to Rs. 903.81 lakhs. Imports from foreign countries (excluding Burma)

declined by 14.55 percent and exports by 7.26 percent.135

An aspect of finance was that attracts much attention and the effort on the

part of the government was inflation. In simple terms inflation is a state of affairs

where there is an expansion of money income without a corresponding increase

in production. In India due to some peculiar circumstances obtaining from

during the period of war, the volume of currency went on increasing without

any corresponding increase in production. All the war purchases made by the

British Government in India were agreed to be financed by India and this was

effected to a large extent by the printing of currency notes. Thus the total

number of notes in circulation which was Rs. 174.39 crores in 1938-39 rose to

Rs. 1138.70 crores in August 1945 while the total deposits, the amount of which

stood at Rs. 227 crores in 1938-39 rose to Rs. 384 crores in August 1945136. This

obviously resulted in an enormous surpluses purchasing power while there was an

acute scarcity of goods due to the diversion of all estimated supplies to the

135
G.O. Ms. No. 922, Development dated 5 April, 1939, TNA.
136
Reserve Bank of ndia Bulletin by Reserve Bank of India – Basic statistics Indian Economy, 1938 and 1939m pp.
147-51.
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demands of war. Consequent inflation set in and prices scored up to abnormal

level. Taking the lease year 1939 at 100, the index number of wholesale prices

gradually went up to 244.9 in 1945-46. As regards the cost of living as reflected in

the Bombay Presidency the index number was reckoned at 100 in 1939 rose up to

238 in 1945-46.137

In contrast with the high prices obtaining in India, we find in U.K and

U.S.A prices always were kept under control in the war period. In these two

countries inflation was cautiously avoided in spite of large expenditure.138

Taxation was pitched at a high level from the beginning. All avenues were

explored to encourage and increase savings and to direct them to

government in the form of war loans. Rationing and price control were

strictly enforced. Thus it was by diverting and increasing part of the national

annual income that was financed without inflation.139

The war had an appreciable effect on the foreign trade of the

Presidency which we can distinctly notice in all directions. On account of

war, the balance of trade of the Presidency soon moved in its favour. As

137
Ibid
138
Ibid
139
Malathi Vartharajan, - Foreign Trade of India Since 1939, M.Litt, Thesis, University of Madras, 1955,
Pp.217-19.
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regards the quantum of trade there was an increase in exports of materials

needed by the Allies for the war. Both imports and exports fell during the

war period but the exports increased more than the fall in imports. 140

As a result of the war, the European markets were lost to Presidency. The oil

seeds market was very much affected and we could not find out an alternative

market in the United States of America since it was also a large producer of

peanuts. The Presidency market for seed oil was strongly completed by Argentina

and substitutes were used in U.S.A for jute. In regard to the Presidency trade with

the British Nation, there was not much of a definite increase or decrease in imports

while there had been a steady increase in the export. Trade with the Middle East

Countries, Australia and Canada also increased.141

War and Agriculture: The cultivator had been benefited by the new situation

since the real burden of his debt had been reduced and he was able to pay his money

obligations by the money released by the rise in prices. But this advantage could

not be availed of by many people, since a majority of the cultivators in the

Presidency did not have any surplus at all to reap the advantages of higher prices

but they were only subsistence farmers and even those benefited by the higher

140
Varshney\R.L. - India's foreign trade During and After the war, Delhi, 1949,pp. 304-305.
141
Sir Rowland over senior U.K - Trade Commission in 1947 “India” an overseas economic survey. Pp. 35-36.
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prices had to buy other manufactured goods at increased prices. But, on the

whole, it must be said, that the lot of the farmers of the Presidency had to some

extent improved during the war due to the appreciated land values and the increase in

prices for their products.142

The food situation in the Presidency during the war gave some anxious

moments to the people and the authorities concerned. There were serious shortages

of food grains due to some exports purchases made by the defence services and due

to the lower production.143

Consequent upon the failure of monsoons, cyclones and other factors, this

had necessitated apart from the "grow more food" campaign introducing, many

measures such as stopping of exports, increased imports of food materials, the

setting up of the procurement machinery, a wide rationing system, statutory price

control and various other measures. Besides, price control there were innumerable

economic controls instituted during the war which were comprehensive of almost

all economic activities of the Presidency. These were meant to divert resources to

142
Fort Nightly Reports (Confdl) II Half of Dec. 1941
143
Ibid
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the war purposes and to distribute the scare supplies equitably among the larger

number of purchases.144

War and Presidency: The industry of the Presidency during the war stood on

a different footing from that of agriculture. The Presidency trade had to face many

problems in stepping up production to meet the various increased demands. The

Presidency did not possess the chemical or the engineering industry workers

employed in factories were only a few thousands.145

Presidency war economy: Thus the Presidency had to depend upon foreign

imports of manufactured goods, machinery, spare parts and machine tools for

manufacturing production. During the war, due to the shortage of shipping space,

the imports of machinery were not possible and due to the export locomotives to the

Middle East and the shortage of coal, the inland transport system was also put to

severe strain.

Trade unions: Trade union, according to Webbes, "is a continuous association

of wage earners for the purpose of improving conditions of employment". This

narrow conception of the trade union has often been critisised. The predominant

144
Sivasankara Reddy, Y., - War Time, Public Finance in India -1939-45, M.Litt. Thesis University of Madras,
1950, Pp. 135-137
145
Fort Nightly reports fConfdl). II Half of Dec 1942
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view, however, is that the concerns of trade unions extend beyond 'bread and butter'

issues. Trade unions are considered not merely as economic organisation, but also

as political institutions directed towards wresting control over managerial authority.

The political character of the unions has been exemplified by Karl Marx and his

followers who visualized trade unions as harbingers of social revolution to change

the whole structure of class domination. Thus the political roles of the union range

from job regulation at workplace to bringing about a social revolution.146

Until the middle of the nineteenth century, except coal mining, there was no

industrial activity in the country in the modern sense. The setting up of textiles and

jute mills and laying of railways since 1850 paved the way for the emergence of

labour movement in India.147

The origin of the movement can be traced to the sporadic labour unrest

dating back to 1877 when the workers of the Empress Mills at Nagpur struck work

following wage cut. In 1884, Bombay textile workers demanded improvement in

wages and working conditions. It was estimated that there were 25 strikes between

1882 and 1890.148

146
Crouch, H., Trade Unions and Politics in India, Bombay, 1996, pp. 112-114.
147
Gosh, G. Indian Trade Union Movement, Calcutta, 1976, P.57.
148
Dalai and Company, Textile Industry in South India, Madras, 1955, P.63
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 The earliest organizations to be formed on the lines of modern trade unions

were: (i). The Textile Labour Association at Ahmedabad (movement started in

1917 with a strike for wage rise, but the association was formed in 1920) led by

Anasuyaben Sarabhai and (ii). The Madras Labour Union (1918) led by B.P.

Wadia.149

The Nationalist Home Rule Movement and the difficult conditions after

World War I led to the growth of union movement in early 1920's. The political

leaders of that time, philanthropists and social workers took the initiative in

organising industrial workers at major centers either for political reasons or because

they were moved by the wretched conditions of the workers.150

In 1920, The All India Trade Union Congress (AITUC) was formed because

of the need to have a national center of labour to depute delegates to the

International Labour Organisations (ILO) formed in 1919. By 1924, there were

167 trade unions with a quarter million members.151

The conditions after the war, the growing unrest in unionism and the spate of

strikes led the government to consider legal initiatives in 1920s. The Indian factories

149
Wadia, B.P. Labour in Madras, Madras. 1991, Pp. 210-15.
150
N.N. Mitra (ed), The Indian quarterly Register, Vol.1, January - June 1926, Pp. 164-174.
151
Murphy, E., Unions in conflict: A comparative study of four south Indian Textile Centres, 1918-1939, New
Delhi, 1981, pp. 64-65.

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Act, 1922, enforced a 10-hour day. The Indian Trade union Act of 1926 made it

legal for workers to organize and to protest and exempted actions following

out of legitimate trade union activity from the purview of civil and criminal

proceedings. This Act still continues to the basic law governing trade unions in the

country.152

Ideological differences within AITUC led to a three-way split between

communists led by M.N. Roy and Dange, nationalists led by Mahatma Gandhi

and Nehru and the moderates led by N.M. Joshi and V.V. Giri. While party ideology

was supreme for the communists, the main preoccupation of the nationalists was

independence. The moderates however wanted to pursue trade unionism in its own

right and not subjugate it completely to broader political aims or interests. The

moderates and the communists broke away from the AITUC in 1920 and 1930s but

rejoined AITUC by 1940.153

The industrial workers of the Presidency confronted an extremely difficult

situation after 1930. The mill owners tried to pass the burden of trade crisis on the

152
Venkatramayya, - Report on an enquiry into conditions of Labour in Cotton Mill Industries, in India, Simla, 1946,
p. 57.
153
Ramasamy, E.A - The worker and his union: A study in South India, New Delhi, 1977, P. 16; Giri, V. V. - My life and
Times, Vol.1 1976, P. 109.

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shoulders of the workers by way of wage cuts and retrenchments. During the

period, the workers did not achieve any new concession; rather they had to engage

into resolute struggle to retain not only whatever they had already gained but their

very jobs. Yet, there was a rival in the trade union movement after 1933. It was

mainly due to the rivalry of leftist forces, the constitutional reforms introduced by

the Government and the recovery of economy after the Great Depression (1929-

33).154

The trade union spirit in the year 1929 and the British government's

offensive against labour unions which culminated in the Meerat Conspiracy case had

put the working class on the defensive position. The Indian National Congress

which was developing into a mass organisation under the leadership of M.K.Gandhi

capitalized the situation to win over the working class. 155 The workers also began

to realize that the remedy lay in the liberation of the country from the foreign

yoke. Therefore there was a meeting point for the congress and the labour. The

congress evolved a labour programme which included recognition to union and

the right to strike for the workers. When the Congress decided to lift its ban on

entry into legislature and contest elections in the year 1937, it used an election

154
Singh, V.B (ed). - Industrial Labour in India; Chapter XX VII; Punekar, S.D. - Trade Union Movement in India,
Asia Publishing House, New Delhi, 1960, Ppp.442-453.
155
Lokanathan, P.S. - Industrial Welfare in India, Madras, 1929,pp. 107-109.
Language in India www.languageinindia.com 168
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manifesto which contained an elaborate labour programme, Madras Labour

Union which commanded the support of the majority of workers in the

Madras Province totally identified with the Indian National Congress. In the

election, Congress was voted to power and formed the ministry in July 14th 1937

with C. Rajagopalachari as Prime Minister156.

When the Congress was installed in office, there was a lot of expectations

on the part of the workers, when the Labour Union Leader, V.V.Giri was

appointed as labour minister the workers rejoiced at his appointment. In the

context of the World Wide Economic Depression which hit the Madras

Presidency also, the wages of the workers in factories had been cut down157.

The Economic Depression led to large scale unemployment and the fear of

unemployment prevented the workers from launching a stiff resistance to

restore the wages. By 1937 the Depression had ended and there was recovery. But

the managements were not prepared to lift the wage-cut inflicted in the outbreak of

strikes in a number of factories. It was also a coincidence that the congress had

come to power at that time. The labourers in view of the Congress policy looked

156
G.O.No.810, Public (Elections), dated26 th April, 1937 TNA; Government of Madras, Madras Labour, July
1937 to October, 1938, p. 15 4;
Lakhman, P. - Congress and Labour Movement in India, Allahabad, 1947, Pp.215-217.
157
Ibid

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to the Congress Government for support. The congress refused to intervene

directly to deal with the situation arising out of strikes. The Congress Government

led by Rajaji treated the question of strike as dispute between two parties and hence

favoured only internal settlement. Whenever there was no scope for internal

settlement the government only preferred to institute Courts of Enquiry to give

settlement awards. The government appointed arbitrators to implement the awards

of the Courts of Enquiry. In some cases the Court of Enquiry gave findings which

were unfortunate to the workers. In a few cases the factory management

refused to comply with the recommendations of the court. The Government in

such cases did not act decisively and forced the management to enforce the

settlement awards. In consequence, strikes prolonged in a number of factories and

the workers had to exhaust all forms of struggles before compelling the Government

to intervene158.

There were instances wherein the government had treated a simple labour dispute

as a problem of law and order. Invariably we see Government involving Criminal

Procedure Code to handle the situation in a number of labour disputes. Even the

Congress labour union leaders like Muthu Ramalinga Thevar was put behind bars

by the Government. The statement of labour minister and the opinion expressed by

158
G.O. No. 448, Development, dated21 February, 1938, T.N.A ; Ramasamy,E.A., - op.cit.,pp. 313-14.
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 the Prime Minister of the Madras Presidency in certain instances of labour disputes

clearly indicates that the policy of the Congress Government towards labour was

not helpful. The workers were thoroughly disillusioned with the performance of

the Congress Ministry and this was probably the starting point for alienation

between the Indian National Congress and the All Indian Trade Union

Congress that eventually paved the way for the congress starting the separate All

Indian Federation of Workers called INTUC in the year 1947159.

While the British blamed the Congress for the explosive labour situation as

the Congress had given a number of pledges on the eve of election, Congress on

the other hand blamed the communists who according to them were creating trouble

to the government. As the British government used to attribute motives to a strike,

the Congress government also placed on a record that, most of the strikes broke out

during the period were engineered by socialists or communists. But the hard reality

was that the workers had legitimate grievances when the Congress Government

made it a policy to appoint them only on the basis of conciliation.

159
G.ONo. 297 - Development, dated 8th February, 1940, TNA ;
Shanta, M.C. - State and Industry in Madras 1800-1940. PhD Thesis, University of Madras, 1966, pp 146-
148.
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The Board of Arbitrators, to bring out a settlement, the Workers who were not

favourable to the policy of the Congress Government. But even for the appointment

of conciliation or arbitrators, the workers had to precipitate matters. The Congress

Government could not have made use of the situation to extract legislation to the

interests of workers. But this was sadly absent during the Congress regime. Thus

the Congress government's two generation of office in Madras achieved

nothing for the protection of workers' rights. This was probably because of the

continuous approach of the congress not antagonizing the employers or factory's

owners while intervening in a labour dispute160.

160
Report on the Administration of the Madras Presidenary for the year 1941-42. pp. 307-309.
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 CHART - XIII
SEA - BORNE TRADE 1927 -28 TO 1937-38
140

120 Total Sea-borne Trade

Exports
Imports

100

80

60

40

20

0
1927-28 1928-29 1929-30 1930-31 1931-32 1932-33 1933-34 1934-35 1935-36 1936-37 1937-38
Source : Madras Administration Report for the year 1944-45

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Language in India www.languageinindia.com 174
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 CHAPTER – IV

PART – I

The aggregate value of the sea-borne trade of the province of Madras was

Rs. 79.04 crores showing a decrease of Rs. 9.45 crores as compared with the

previous year161. Government transactions increased slightly from Rs. 44.99 Lakhs

in 1973 38 to Rs. 45.63 Lakhs. The total value of foreign trade in private

merchandise and treasure (including the value of the trade with Burma to the extent

of Rs. 11.79 crores to Rs. 61.10 crores of which imports accounted for Rs. 24.87

crores (Rs.9.26 crores) from Burma and Rs. 15.61 crores from other foreign

countries) and exports Rs. 36.24 crores (Rs. 2.53 crores to Burma and Rs. 33.71

crores to other foreign countries). The coasting trade excluding trade with Burma

decreased by Rs. 2.89 crores to Rs. 17.48 crores.162

FOREIGN TRADE IMPORTS

The total value of foreign imports of private merchandise (excluding

treasure) dropped by Rs. 2.62 crores to Rs. 15.37 crores.163 This was due to a

decrease in the imports of oils, melts and ores, vehicles, cotton twist and yarn,

161
Report of the Administration of the Madras Presidency for the year 1938 – 39, P128; The Indian Annual
Register, 1939, P.239.
162
Ibid.
163
Ibid.
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cotton manufactures, paper and pasteboard, dyeing and tanning substances,

hardware, artificial silk, rubber and silk, raw and manufactured. It was, however,

set off to some extent by increases in machinery and millwork, grain, pulse and

flour, tobacco, manures and sugar as shown below.

DECREASE
1937-38 (Rs in lakhs) 1938 – 39 (Rs. In lakhs)
Oils 163.92 130.58
Metals and ores 144.65 123.79
Vehicles 107.20 72.36
Cotton, twist and yarn 72.31 56.00
Other manufactures of 92.90 72.12
cotton
Paper and pasteboard 70.97 50.62
Dyeing and tanning 64.77 51.75
substances
Hardware 47.31 35.48
Artificial silk 48.05 12.09
Rubber 38.21 25.09
Silk, raw and 36.66 18.02
manufactured
INCREASE
Machinery and mill 240.86 269.36
work
Grain, pulse and flour 2.84 14.96
Tobacco 16.07 27.68
Manures 44.29 51.65
Sugar 0.25 5.70
(Source: Report on the Administration of the Madras Presidency for the year 1938 – 39)

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Oils

Imports of diesel and other fuel oils rose from 21.17 million gallons

valued at Rs. 33.35 lakhs to 23.43 million gallons of the value of Rs. 46.07

lakhs. Supplies of kerosene oil declined from 11.74 million gallons valued at

Rs. 56.42 lakhs to 11.10 million gallon valued at Rs. 40.27 lakhs. Imports of

petrol dropped from 5.70 million gallons valued at Rs. 50.93 lakh to 5.30

million gallons valued at Rs. 25.70 lakhs, reduced prices being primarily

responsible for the steep fall in value, Sumatra, which supplied 4.66 million

gallons worth Rs. 45.30 lakhs in 1937-38, was practically out of the market in

1938-39164.

METALS AND ORES

Imports of iron and steel dropped from Rs. 95.28 lakhs to Rs. 78.95

lakhs. Supplies from the United Kingdom and Belgium fell by nearly Rs. 3

lakhs each, those from Germany by Rs. 5 lakhs and from Japan by about Rs.

3 Vi lakhs. Receipts of brass from the United Kingdom and Germany rose from

Rs. 9.11 lakhs to Rs. 7.60 lakhs to Rs. 11.4 lakhs and 11.66 lakhs respectively.

Supplies of copper from the United Kingdom and Germany increased from Rs.

164
Op cit., P.129
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4.51 lakhs to Rs. 1.85 lakhs, to Rs. 5.07 lakhs and Rs. 3.02 lakhs respectively,

while imports of tin from the Straits Settlements fell from Rs. 8.21 lakhs to Rs. 3.38

lakhs. Imports of quicksilver diminished from Rs. 3.34 lakhs to Rs. 1.48 lakhs.165

VEHICLES

Imports of motor cars fell to 1,352 valued at Rs. 26.13 lakhs as compared

with 2,312 valued at Rs. 42.22 lakhs in the previous year. The United Kingdom and

the United States of America mainly imported to the decrease, their supplies falling

from 1:04 lakhs, 455 cars to 677 and 227 respectively. The number of motor

omnibuses and lorries imported was 639 against 1,302 in the previous year, the value

declining from Rs. 19.64 lakhs to Rs. 11.48 lakhs. Shipments from Canada and

the United States of America decreased by Rs. 2.49 lakhs and Rs. 6.13 lakhs

respectively. The United Kingdom sent 26,916 cycles worth Rs. 9.58 lakhs as

against 33.076 valued atRs. 1091 lakhs in 1937-38.166

COTTON, TWIST AND YARN

Imports of cotton, twist and yarn declined from Rs. 72.31 lakhs to Rs. 56.00

lakhs. The heavy fall may be attributed to the increased production of twist and yarn

in the Indian cotton mills. Supplies from the United Kingdom contracted from Rs.

165
G.OMSNo, 146Development, dated 19 January 1939, TNA
166
G.OMSNo, 2515 Development, dated 14 October 1939, TNA
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36.94 lakhs to Rs. 20.02 lakhs and those from Japan from Rs. 35.13 lakhs to Rs.

30.90 lakhs.167

OTHER MANUFACTURES OF COTTON

Imports of cotton pieces goods dropped from Rs. 83.92 lakhs to Rs.

64.07 lakhs. White and coloured piece goods from the United Kingdom recorded on

steep fall from Rs. 63.58 lakhs to 40.19 lakhs. Coloured piece goods from Japan

declined from Rs. 7.56 lakhs to Rs. 5.99 lakhs, while there was a noticeable increase

in Japanese plain gray piece goods from Rs. 3.95 lakhs to Rs. 9.28 lakhs.168

PAPER AND PASTEBOARD

There was a marked decline in the imports of all the categories of paper

except straw board and manufactures of pasteboard, millboard and cardboard.

Imports of packing paper fell from Rs. 11.19 lakhs to Rs. 5.87 lakhs, Germany,

Sweden and Czechoslovakia mainly accounting for the decrease. Printing paper

decreased in value from Rs. 29.30 lakhs to Rs. 17.95 lakhs, Germany and

Austria contributing to the fall. Writing paper increased in quantity from 29,808 cwts

to 31,351 cwts. But declined in value from 7.26 lakhs to Rs. 6.72 lakhs. Imports

from the United Kingdom fell from Rs. 2.98 lakhs to Rs. 2.52 lakhs, while imports
167
G.O. MS. No. 1845, Development, dated 21 July, 1939, TNA
168
GO. MS. No. 1926, Development, dated 18November, 1939, TNA
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from Austria advanced from Rs. 0.71 lakhs to Rs. 1.49 lakhs. Old newspapers

registered an increase in quantity, from 243,741 cwts to 279,931 cwts. But declined

in value from Rs. 12.77 lakhs to Rs. 11.57 lakhs, the share of the United Kingdom

being 271.299 cwts, worth Rs. 11.20 lakhs.169

DYEING AND TANNING SUBSTANCES

Imports of dyeing and tanning substances decreased from Rs.

64.77 lakhs to Rs. 51.75 lakhs. The union of South Africa supplied

323,180 cwts of wattle bark valued at Rs. 22,06 lakhs as compared with 342,968

cwts worth Rs. 20.75 lakhs in 1937-38. Despite the fall in quantity, the value rose

as a result of higher prices. Shipments of aniline dyes from Germany declined

from 1.68 million lbs. Valued at Rs. 34.03 lakhs to 0.81 million lbs, worth Rs. 22.37

lakhs and of alizarin dyes from 0.23 million lbs, worth Rs. 1.57 lakhs to 0.16

million lbs, of the value of Rs. 1.17 lakhs. Shipments of aniline dyes from the United

Kingdom increased in value from Rs. 1.69 lakhs to Rs. 1.80 lakhs in spite of a

decrease in quantity from 0.17 million lbs to 0.11 million lbs.170

HARDWARE

169
Commissioner of Labour and Chief Inspector of Factories — Report of the working of Indian factories in the
Madras Presidency, 1939, PP-102-104.
170
Ibid,PP105-107.
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 Imports of hardware dropped from Rs. 47.31 lakhs to Rs. 35.48 lakhs. They

were mainly drawn from the United Kingdom and Germany, which accounted for

Rs. 13.52 lakhs and Rs. 10.73 lakhs as against Rs. 15.51 lakhs and Rs. 17.18

lakhs. The other sources of supply were Japan (Rs. 2.75 lakhs), Sweden (Rs. 2.26

lakhs) and the United States of America (Rs. 3.41 lakhs).171

ARTIFICIAL SILK

The total value of imports of artificial silk yarn and piece goods fell from Rs.

47.92 lakhs to Rs. 12.83 lakhs. The supply of artificial silk yarn from Japan

decreased from Rs. 35.58 lakhs to Rs 7.18 lakhs and of artificial silk piece goods

from Rs. 10.00 lakhs to Rs. 3.67 lakhs. Imports of artificial silk yarn from the United

Kingdom perceptibly declined from Rs. 1.21 lakhs to Rs. 632 lakhs.172

RUBBER

The chief supplies of rubber manufactures in order of importance were the

United Kingdom Rs. 16.06 lakhs (Rs. 23.17 lakhs), Germany Rs. 6.78 lakhs (Rs.

6.16 lakhs), the United States of America Rs. 1.39 lakhs (Rs. 3.32 lakhs) and Japan

Rs. 10.01 lakhs (Rs. 2.16 lakhs). Imports of pneumatic tyre covers and tubes from

the United Kingdom were worth Rs. 14.49 lakhs (Rs. 20.18 lakhs), from Germany

171
Ibid, PP-110-112.
172
Ibid, PP-114-115.
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Rs. 4.83 lakhs (Rs. 5.07 lakhs), from Japan Rs. 0.84 lakhs (Rs. 1.60 lakhs) and

from the United States of America Rs. 1.16 lakhs (Rs. 3.97 lakhs).173

SILK, RAW AND MANUFACTURED

Imports of raw silk fell from Rs. 26.67 lakhs to Rs. 14.78 lakhs, silk yarn

from Rs. 2.37 lakhs to Rs. 0.95 lakhs and silk piece goods from Rs. 6.90 lakhs

to Rs. 2.62 lakhs. Supplies of raw silk from Japan, the principal suppliers, feel

heavily from Rs. 19.55 lakhs to Rs. 5.45 lakhs, while imports from China

advanced from Rs. 5.455 lakhs to Rs. 9.34 lakhs Japan sent silk piece goods to the

value of Rs. 2.51 lakhs as against Rs. 6.61 lakhs in 1937-38.174

MACHINERY AND MILLWORK

Imports of machinery have been steadily on the increase during the past five

years and rose from Rs. 240.36 lakhs in 1937-38 to Rs. 269.18 lakhs. As usual,

the United Kingdom supplied the bulk of the imports and accounted for Rs. 164.64

lakhs or 61 percent as against Rs. 169.91 lakhs or 71 percent in 1937-38. Next

came Germany (Rs. 47.95 lakhs) followed by the United States of America

(Rs. 17.92 lakhs) and Denmark (Rs.11.24 lakhs). Belgium increased her
173
Ibid, PP-117-119.
174
Report of the Department of Industries and Commerce for the year ending 31st March. 1939,
PP-177-119.
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share from Rs. 6.83 lakhs to 8.59 lakhs and Switzerland from Rs. 1.92 lakhs to Rs.

8.17 lakhs.175

GRAIN, PULSE AND FLOUR

The total imports of grain, pulse and flour advanced from Rs. 2.84 lakhs to

Rs. 14.96 lakhs in 1938 - 39. Indo-China increased her supply of paddy from

2,824 tons valued at Rs. 1.77 lakhs to 16,134 tons worth Rs. 8.97 lakhs. Siam

was out of the market in 1937-38 but contributed 7,142 tons valued at R. 3.97 lakhs

in 1938-39.176

TOBACCO

Imports of unmanufactured tobacco from the United States of America

increased from 0.82 million lbs worth Rs. 13.71 lakhs to 1 million lbs valued at Rs.

17.25 lakhs. In 1938-39 the United Kingdom contributed 0.74 million lbs of

cigarettes valued Rs. 1.84 lakhs as against 0.04 million lbs worth Rs. 1.28 lakhs.177

MANURES

The United Kingdom was the main suppliers of sulphate of ammonia with

28,862 tons worth Rs. 31.99 lakhs. Imports from other countries totalled Rs.

175
Ibid, PP-121-123.
176
Ibid, PP-125-127
177
Ibid, PP-130-131
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 39.15 lakhs. Imports of super phosphates from Japan fell by 2,880 tons to 875

tons worth Rs. 1.03 lakhs while supplied from the Netherlands and Belgium rose

by 1,769 tons and 1,546 tons to 2,675 tons worth Rs. 1.42 lakhs and 1,722 tons

worth Rs. 1.61 lakhs.178

178
Ibid, PP-132-133
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 SUGAR

There was a noticeable expansion in the imports of sugar, from Rs. 0.25

lakhs to Rs. 5.70 lakhs, mainly due to the failure of the Indian sugarcane crop and the

consequent rise in the prices of Indian sugar.179

FOREIGN TRADE - EXPORTS

Total exports (including re-exports) fell from Rs. 3579.90 lakhs to Rs.

3,315.50 lakhs. The decrease was mainly due to reduced shipment of leather, cotton,

raw and manufactured, metals and ores, rubbers, spices and hides and skins. There

was, however a marked increase in the despatches of tobacco, raw and

manufactured, seeds, coffee and tea

179
Baliga, B.S Compendium on History ofHandloom Industry in Madras, 1960, PP-117-119
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 (Rs. In lakhs)
DECREASE
1937-38 1938-39
Leather 665.80 479.73
Cotton raw 207.37 107.58
Cotton manufactures 221.30 142.22
Metals and ores 138.00 69.05
Rubber 83.85 71.65
Spices 47.27 37.55
Hides and skins (raw) 41.70 22.52
Tobacco raw and 91.25 174.93
manufactured
Seeds 841.22 902.58
Coffee 51.90 72.02
Tea 453.26 491.59
(Source: Report of the Administration of the Madras Presidency for the year,
1938-39).

LEATHER

Exports of hides tanned or dressed to the United Kingdom declined from

Rs. 302.91 lakhs to Rs. 213.33 lakhs and of skins tanned or dressed from Rs.

277.63 lakhs to Rs. 219.26 lakhs.

COTTON, RAW

The total exports of raw cotton contracted by nearly 50 per cent from Rs.

207.37 lakhs to Rs. 107.58 lakhs. Japan diminished her demand from Rs. 110.79

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lakhs to Rs. 40.45 lakhs in consequence of her policy of restriction in the import

of raw materials.180

COTTON MANUFACTURES

Shipments of cotton handkerchiefs and shawls to the United Kingdom fell

steeply from Rs. 17.86 lakhs to Rs. 1.53 lakhs and those to Nigeria from Rs. 30.34

lakhs to Rs. 13.57 lakhs. Ceylon reduced her purchase of coloured cotton piece

goods from Rs. 71.33 lakhs to Rs. 54.40 lakhs and the Straits Settlements from Rs.

40.68 lakhs to Rs. 28.16 lakhs.

METALS AND ORES

Japan, the chief buyer of "iron ore, for remanufactured" diminished

her takings from Rs. 4.72 lakhs to Rs. 1.17 lakhs. Exports of manganese ore dropped

steeply from Rs. 128.22 lakhs to Rs. 61.59 lakhs, i.e. by over 50 percent. Germany

took 4.500 tons of Chromate or chrome ore valued at Rs 1.78 lakhs as compared

with 3,000 tons worth Rs. 1.13 lakhs in 1937-38.

180
Monthly Digest of Economics and Statistics Madras state, January, 1939.
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RUBBER

The United Kingdom and the United States of America curtailed their

demand for rubber by about Rs.3 lakhs each to Rs. 35.95 lakhs and Rs.

11.13 lakhs respectively, and Czechoslovakia and France by about Rs. 4 lakhs each

to Rs. 5.54 lakhs and Rs. 0.85 lakhs. Germany was the only country, which

increased her purchases by Rs. 2 lakhs to Rs, 8.11 lakhs.181

SPICES

The demand for cardamoms decreased noticeably from Rs. 23.66 lakhs to

Rs. 15.83 lakhs, for chilies from Rs. 16.95 lakhs to Rs. 15.26 lakhs and for pepper

from Rs. 2.12 lakhs to Rs. 1.73 lakhs; but exports of ginger improved slightly from

Rs. 3.41 lakhs to Rs. 3.63 lakhs. The principal markets for cardamoms in order of

importance were Sweden (Rs. 5.43 lakhs), Germany (Rs. 1.76 lakhs), the United

States of America (Rs. 1.80 lakhs) and the United Kingdom (Rs. 1.79 lakhs).

181
Vengatraman, K.S. - The Handloom Industry in South India, Madras, 1940, PP-210-212.
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HIDES AND SKINS, RAW

Shipments of raw goatskins to the United Kingdom and the

Commonwealth of Australia declined from 526 tons (Rs. 12.7 lakhs), and

378 tons (Rs. 12.7 lakhs), and 378 tons (Rs. 13.81 lakhs) to 187 tons (Rs. 3.31

lakhs) and 352 tons (Rs. 11.14 lakhs) respectively. The United States of America

increased her purchases from 148 tons (Rs. 2.34 lakhs) to 376 tons (Rs. 5.56

lakhs).182

TOBACCO, RAW AND MANUFACTURED

Exports of raw tobacco expanded from 25.91 million lbs, valued at Rs.

87.19 lakhs to 43.19 million lbs, valued at Rs. 87.19 lakhs to 43.19 million lbs

valued at Rs. 172.38 lakhs. Shipments to the United Kingdom more than doubled in

value and amounted to Rs. 149.74 lakhs, China which had not trade in raw tobacco

in 1937-38, purchased 4.01 million lbs of the value of Rs. 11.63 lakhs, Ceylon took

cigarettes including beedies to the extent of Rs. 0.94 lakh as against Rs. 2.79 lakhs

last year.183

182
South Indian Chamber of Commerce, Golden Jubilee, 1910-1960, (Madras, 1961) PP315-317).
183
Ibid, PP 317-320.
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SEEDS

Exports of groundnuts, which formed 97.38 percent of the trade in seeds and

26.58 percent of the total foreign export trade of the province, increased by Rs.

86.18 lakhs to Rs. 879.72 lakhs in the year under review. Shipments to the

Netherlands doubled in value from Rs. 80.60 lakhs to Rs. 170.40 lakhs.

France took Rs. 165.99 lakhs (Rs. 101.44 lakhs), the United Kingdom Rs.

126.52 lakhs (Rs. 87.92 lakhs) Belgium Rs. 120.61 lakhs (Rs. 59.33 lakhs)

and Denmark Rs. 26.94 lakhs (Rs. 5.18 lakhs) purchase by Germany

declined from Rs. 134.42 lakhs to Rs. 106.78 lakhs and those by Italy from

Rs. 170.11 lakhs to 35.39 lakhs. Exports of castor seeds contracted from Rs.

25.40 lakhs to Rs. 6.24 lakhs, the share of the United Kingdom being Rs. 1.24

lakhs, as against exports worth Rs. 13.50 lakhs in the previous year. Italy and

Japan took no castor seeds during the year as against exports worth Rs. 3.50

lakhs and Rs. 5.61 lakhs respectively

in the previous year.184

184
G.O. MS. No 2515, Trade dated 14th October, 1939, TNA.

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COFFEE

Shipments of coffee advanced substantially from Rs. 51.90 lakhs to Rs.

72.02 lakhs. The United Kingdom took 60,905 cwts. (Rs. 33.87 lakhs) Belgium

9,924 cwts.(Rs. 3.76 lakhs) (Rs. 33.87 lakhs), Belgium 9,924 cwts (Rs. 3.76

lakhs) and the Commonwealth of Australia 5,859 cwts (Rs. 2.12 lakhs). The other

principal consumers were France (87,926 cwts, valued at Rs. 11.98 lakhs),

Norway (22,501 cwts Rs. 8.25 lakhs), Iraq (7,230 cwts worth Rs. 2.79 lakhs) and

Germany 91,130 cwt worth Rs. 0.43 lakhs.).

TEA

Shipments of tea improved from Rs. 453.26 lakhs to Rs. 491.59 lakhs, the

chief consumer being the United Kingdom, which increased her purchases from

Rs. 423.17 lakhs to Rs. 458.20 lakhs.

TREASURES

Imports of gold showed a marked improvement from Rs. 14.84 lakhs to 23.43

lakhs of which Ceylon contributed Rs. 22.80 lakhs worth of billion and Burma Rs.

0.62 lakhs. Exports of gold, on the other hand, fell from Rs. 1.10 lakhs to Rs. 0.14

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lakhs. Supplies of silver fell heavily from Rs. 3.95 lakhs to Rs. 0.80 lakhs of

which Rs. 0.71 lakh came from the United Kingdom.185

COASTING TRADE

The aggregate value of coasting trade excluding trade with Burma declined

from Rs. 20.37 crores to Rs 17.48 crores i.e by 14.19 percent, imports decreasing

by 18.63 percent and exports by 8.24 percent. The trade with Bombay (Rs. 830.51

lakhs) Bengal (Rs. 463.63 lakhs) and Sind (Rs. 249.60 lakhs) declined, while

that Orissa improved from Rs. 3.02 lakhs to Rs. 4.26 lakhs.)

TRADE BY COUNTRIES - BRITISH EMPIRE

The total import and export trade of the British Empire (including Burma)

with the province of Madras amounted to Rs. 3,987.93 lakhs as against Rs.

4,339.06 lakhs in 1937- 38. Imports decreased by 13 percent and exports by 4

percent. The trade with the British Empire formed 66.14 percent of the total

foreign trade as against 64.60 percent in the previous year. The trade with foreign

counties contracted by Rs. 336.42 lakhs to Rs. 2,041.60 lakhs of which imports

accounted for a fall of Rs. 163.83 lakhs and exports Rs. 172.59 lakhs.186

TRADE BY PORTS

185
Census Handbook 1939. PP 237-239.
186
G.O. MS. No 1845, Trade dated 17th June, 1939, TN.
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 The value of the total trade of the port of Madras amounted to Rs. 29.63

crores as against Rs. 34.03 crores in 1937 - 38. This trade formed 38 percent of the

total trade of the Province. The decrease in foreign trade was 19.1 percent and in

the coasting trade 5.6 percent, the relative importance of the subordinate ports

continued unchanged; Cochin stood first, followed by Tucticorin and Calicut.187

SHIPPING

There was a decrease in the number of ships (from 1, 298 to 1,273)

participating in the foreign trade of the Province188. Of these 986 were British, 69

British Indian, 54 German, 40 Italian, 33 Japanese, 24 French, 19 Dutch, 17

Norwegean, 16 Greek, 5 Swedish, 4 American and 6 of other nations. Six hundred

and ninety six ships of a total net tonnage of 2,642,866 entered the port of Madras

as against 684 of a burthen of 2,578,186 tons in 1937-38 of these 321 were

engaged in the foreign run and 375 in the coasting.

TRADE WITH BURMA

From 1st April 1937, when Burma was separated from India, the trade with

Burma is treated as foreign. Total imports from Burma amounted to Rs. 924.39

187
Administration Report of the Department of Industries and Commerce for 1939 - 40. PP 227-
229.
188
Ibid.
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lakhs as against Rs. 1,086.35 lakhs in 1937 - 38. The chief items of import were rice

(Rs. 499.31 lakhs), petroleum (Rs. 101.89 lakhs), Kerosene (Rs. 127.98 lakhs),

Teakwood (Rs. 47.89 lakhs) Pulse (Rs. 29.11 lakhs) and Paddy (Rs. 29.10 lakhs).

Exports to Burma decreased by Rs. 3.43 lakhs to Rs. 224.64 lakhs Shipments of

coloured piece goods advanced from Rs. 76.23 lakhs to Rs. 80.12 lakhs, and of

groundnut oil from Rs. 20.77 lakhs to Rs. 34.17 lakhs while exports of cigarettes

declined from Rs. 41.22 lakhs to Rs. 21.90 lakhs.189

EXPORTS AND IMPORT

The aggregate value of private foreign and coastwise trade of the province,

excluding treasure, in the first eleven months of the year showed a decrease of Rs.

31.12 lakhs as compared with the corresponding period of 1939. Foreign imports

dropped by Rs . 266.71 lakhs, owing to smaller

receipts under sugar, machinery and mill work, cotton twist and yarn, cotton

piecegoods, metals and ores, grain, pulses and flour, manures, soap, hardware

and vehicles other than locomotives; there were, however, increases under

chemicals, seeds, artificial silk and oils. Foreign exports, including re - exports rose

by Rs. 296.53 lakhs owing to larger shipments or tanned cow hides, castor seeds,

cotton coloured piece goods, raw rubber, fruits and vegetables, rice and black tea;

189
Op cit P -146.
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shipments of groundnut seeds on the other hand recorded a steep fall of Rs. 196

lakhs. The total value of the import trade with British Empire declined by Rs. 6.60

lakhs, while that export trade rose by Rs. 679.38 lakhs; imports from Burma

dropped by Rs. 356.74 lakhs while exports rose by Rs. 77.50 lakhs.190

The total import revenue amounted to Rs. 561.55 lakhs, a decrease of Rs.

107.00 lakhs attributable chiefly to smaller arrivals of tobacco, cotton fabrics,

machinery, and metals other than iron and steel, the revenue from artificial silk yarn

and kerosene oil, however, recorded an increase. The total export revenue improved

by Rs. 4.43 lakhs of which Rs. 3.15 lakhs were realized from the cess collected

under the Indian Agricultural Produce Cess Act.191

The war had naturally affected the everyday life of the people. As

compared with the previous years, the prices of food grains were

considerably higher while those of commercial products were more or less the

same and showed an improvement only in the latter years. The index numbers of

average prices during the period of World War II were as follows.192

(Base - - Price in week ended 21st August 1939= 100)

Portol Food grains Commercial All commodities
products

190
The Indian Annual Register, 1939, P 114.
191
Ibid, P.115.
192
G.O.MS. No. 236, Trade dated 14th January, 1939, TNA
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Quarter ending
December 1939 106 117 112
March 1940 104 124 114
June 1940 169 117 112
September 1940 112 100 166
December 1940 119 96 107
March 1941 118 94 105
June 1941 122 95 108
September 1941 133 111 122
December 1941 104 114 126
(Source: Report of the Administration of the Madras Presidency for the years-
1939-1941)

The principal factors which contributed to the rise in prices were the partial failure

of the rice crops in parts of India in the previous years and the shortage of shipping

for imports from Burma in the early part of the war period, the broadening of export

demand for raw products like cotton and groundnut. The speculative rise in

commodity markets consequent on the freezing order against Japan and the

irregular behaviour of the monsoon. The accelerated rise in prices reached the

climax in December following Japan's entry into the war. The markets were for a

while unsteady and disorderly elements in a few places such as Madura and

Bezwada took advantage of the situation to loot shops, but with the advent of the

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new crop in the middle of the month the situation became normal. The prices of

grains, commercial products and all commodities were respectively 44 percent, 15

percent and 29 percent above the pre-war prices.193 The price advisory committees

set up by the Government continued to function and they helped to keep retail

profiteering in check. A tendency of some price advisory committee to adopt bazaar

prices as fair prices was checked and prices were fixed on their relation to wholesale

prices and other factors such as cost of transport, etc. the number of articles for

which committees determined and published fair retail prices was increased by the

inclusion of charcoal and firewood. The news of declaration of hostilities by Japan

occurred at a time when the prices usually rose just before the harvest. To control

the upswing in prices the government ordered the local authorities to give wider

publicity than before to the fair prices published by the Advisory Committees by

means of leaflets and also to open retail shops wherever necessary and with the help

of merchants on the committee to sell at fair prices such of the articles in which

profiteering persisted. Grain depots under non official management were opened in

several districts in which rice was sold to the poor people at a rate more favourable

than bazar prices. Rather than prohibit exports of rice, as recommended by one or

two collectors, the Government ordered that where necessary Price Advisory

193
Ibid.
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Committees should open retail deposit. To check nay hoarding the government

called for weekly returns of stocks of paddy and rice from wholesale dealers. The

committees did not however interfere with the normal economic factors and

their activities did not affect the prices, which the agriculturists got for their

produce. The government also prepared schemes for the organisation of food

supplies in the Madras city and ten other important coastal towns.194

The government considered the question as to what prices the cultivator

was getting for his produce; whether the rise in prices was such as to bring it up to

the pre-depression level and whether the merchants were putting on too big a

margin over the agriculturist's prices. Accordingly it was decided to constitute a

small committee in the beginning of January 1942 to report on the question

whether the government should attempt to limit the primary prices of standard food

grains.195

The groundnut situation, which caused anxiety in the previous year,

improved. There was no carry-over from the previous crop and as a result of the

steps taken by the government to advise ryots to restrict cultivation to some extent.

194
Report of the Administration of the Madras Presidency for the year 1940-41. PP 57-58.
195
Ibid P.260
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 The British Food Ministry continued to make its purchases in India. Its

purchase price was increased from the minimum rate of £ 10 for, Indian port to £ 12,

The Madras government agreed to contribute to and participate in the fund

constituted by the Government of India with the shippers rebate on their purchase

passed on by British Government for the benefit of the Groundnut cultivators. The

prices of cotton continued to show improvement, but the closure of the Japanese

market affected the prices.

The control of prices of the German drugs worked smoothly. The control of

prices of other essential medical supplies was under the consideration of the

government. In view of the excessive prices of firewood in Madras city and

Chengalpat district towards the end of the year, the Government fixed under the

Defence of India Rules, the maximum prices for this commodity.196

The price of the dye stuffs was on the whole steady. The price of yarn began

to rise from April 1941 and there was an abnormal increase in July, the price having

reached 50 to 160 percent over the price in April 1941.197 The matter was at once

taken up by the State Government with the Government of India and powers

obtained for the control of the retail prices of yarn. They also arranged through the

196
Report on the Administration of the Madras Presidency for the year, 1940-41, PP. 57-58.
197
Ibid, PP 63-65.
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register of Co-operative societies for supplies of yarn by the Madras Mills for the

requirements of Weavers Co -operative Societies in the Province. Fixing of fair

prices for yarn by price advisory committees was however discontinued as being

unworkable as a result of difficulties such as the absence of control of mill prices

and the Government directed all persons having stocks of yarn over 400 lb. To

furnish periodical returns to district collectors, prices however began to weaken in

December owing to the fear of the loss of foreign markets in the east and of

insecurity of stocks, in the coastal towns.

EXPORT AND IMPORTS

The total value of the private trade, foreign and coastal, during the first

eleven months of the year fell by Rs. 560 lakhs as compared to the corresponding

period of last year.

Foreign imports increased by Rs. 44 lakhs as the result of larger arrivals of

vehicles, machinery and millwork, seeds, spices, silks, metals and ores. There was a

fall in the imports of grain, manures, chemicals, dyeing and tanning substances,

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artificial silk, oils, cotton piece goods, cotton twist and yarn and instruments,

apparatus and appliances.198

Foreign exports, including re-exports dropped by Rs. 545 lakhs as a result of

smaller shipments of groundnut and castor seeds, tanned hides and skins, raw cotton,

rubber and coffee. There was however an increase in the exports of rice, fruits and

vegetables, coloured cotton piece goods and raw tobacco.199

While imports from the British Empire, increased by Rs. 39 lakhs exports

dropped by Rs. 2.82 lakhs, imports from Burma, however, increased by Rs. 370 lakhs

while exports only increased by Rs. 19 lakhs. The total import revenue was Rs. 571

lakhs, an increase of Rs. 9 lakhs on the previous year; kerosene oil, tobacco, spirits

and liquors and raw silk being primarily responsible for the increase. There was a

fall in the revenue from imports of motor cars, pneumatic rubber tyres and tubes,

artificial silk yarn and cotton fabrics.

The export revenue of the Presidency increased by Rs. 2 lakhs, of which the

Cess collected under the Indian Agricultural Produce Cess Act accounted for over

Rs. IV2 lakhs.200

198
Ibid P-273
199
Ibid P -275
200
Ibid P -276
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EXPORTS AND IMPORTS

The total value of the private trade, both foreign and coasting, during the year

fell by Rs. 13.99 crores as compared with corresponding period of last year. Foreign

imports dropped by Rs. 12.95 Crores.201 There was a marked fall in the imports of

vehicles, metals and ores, oils machinery and mill work, seeds, paper and

pasteboard, provisions and oilman stores, chemicals, silk raw, and artificial silk.

Supplies of drugs and medicines recorded an increase. Foreign exports including

re-exports declined by Rs. 4.70 crores. Shipments of coffee, castor seeds, chillies,

coir manufacture and tea increased, while those of groundnut seeds, cotton raw,

cotton coloured piece goods, tanned cow hides, rubber raw, fruits, vegetables and

tobacco unmanufactured showed a reduction.

The import trade with the British Empire diminished by Rs. 9.91 crores and

the export trade by 2.20 crores. The total import revenue fell from Rs. 570.56 lakhs

in 1941 to Rs. 321.58 lakhs in 1942. Motor spirit, kerosene oil, tobacco, machinery,

betel nuts, raw silk, iron and steel, artificial silk yarn and artificial silk fabrics were

mainly responsible for the steep decline.

201
Ibid P -279
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 Export revenue improved slightly from Rs. 10.48 lakhs in 1941 to Rs.

10.95 lakhs in 1942. The Cess collected under the Indian Agricultural Produce

Cess Act amounted to Rs. 4.37 lakhs.202

INDUSTRIES AND COMMERCE

The Bureau of Industrial and Commercial Intelligence continued to provide

general and technical information on industrial and commercial subjects.

Applications for capital issues were scrutinized and forwarded to the Government

of India for sanction. One meeting of the Board of Industries wad held and the

subscription of shares worth Rs. 22 lakhs on behalf of the Government were

sanctioned in two concerns.203 During the year the scheme of District Industries

Officers was introduced and nine officers were appointed after a short period of

training. These officers helped the director to answer enquires regarding the

financial standing of firms and names of manufacture of various articles and to

report on the condition of the existing industries and on the possibilities of starting

new ones. They were also expected to supervise and guide the existing cottage

industries and help demobilized soldiers to set up new cottage industries.204

202
G.O. MS No, Trade, dated 7, March 1942; Krishna Rao., V.R War and Our Foreign Trade in the
Indian Review 1942, (May, 1942) PP 213 -214.
203
G.O. MSNo2296, Development dated 20 September, 1940, TNA.
204
Ibid
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 Spare parts required by the rice mills were not easily available and as it was

imperative that the mill should continue the produce rice, a scheme was worked

out to manufacture fabricated parts in various firms and workshops. Further,

whenever necessary, imported stores were requisitioned. During the period

under review the coal quota under the Provincial Distribution scheme was

increased form 67 to 150 wagons per month. The Iron and Steel section that was

inaugurated in 1944 met the demands of the manufacturers of consumer goods and

other industrialists of the province. During the year about 2700 tons of Standard

Steel and about equal quantity of usable defectives were distributed. With effect

from 1st November 1945 the control on the acquisition of defectives was relaxed. The

distribution of sole leather and grindery was released by the Footwear Controller.

Delhi was also entrusted to the provincial Government. Regarding paper, the

permissible quota under the Economy Order was raised by 40 percent on account of

a general improvement in the supply position.205

In pursuance of the Government policy of rapid industrialization of the

province this department organized a chemical laboratory where analysis and

investigations of various minerals could be carried out in order to collect fundamental

205
Op cit PP -44-46.
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data regarding their utilization for different industries. The department initiated a

scheme for the investigation of alkaline earth deposits for the manufacture of soda

ash and caustic soda. A special officer was appointed to prepare plans for a

vegetable ghee factory and in October 1945, Government sanctioned the

establishment of a factory at Calicut capable of producing 10 tons of vegetable ghee

and 5 tons of refined oil per day. Under a scheme for the expansion of vegetable

ghee industry, the Government of India allotted to this province the production of

21.00 tons per annum and it was decided to permit private industrialists to set up 7

factories each with a capacity of 3,000 tons. Government sanctioned a scheme

for the manufacture of coir and its products and Mangalore and Calicut were

selected for the erection of factories. Government granted Rs. 6,617 to a public

body in Tadpatri for the development of hand spinning in the famine

areas of ceded districts.206

206
Ibid, PP-47-49
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 SKETCH MAP

SHOWING DISTRIBUTION OF

CHIEF FACTORY INDUSTRIES

IN

BIRITISH INDIA

WITH THE MAIN RAILWAY LINE

SCALE

0 50 100 200 300

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Language in India www.languageinindia.com 207
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 CHAPTER – IV

PART - II

The aggregate value of the sea-borne trade of the Province increased

from Rs. 93.30 crores to Rs. 134.75 crores and the Government transactions

shot up from Rs. 11.39 lakhs to Rs. 257.11 lakhs. The total value of foreign

trade on private account increased by Rs. 19.88 crores to Rs. 63.64 crores of

which in imports accounted for 37.8 percent and exports for 62.2 percent. The

coastal trade expanded from Rs. 49.43 crores to Rs. 68.54 cores. Changes

in the aggregate value of sea-borne trade and Government transactions are

shown below: -

1937- 1938- 1939- 1940- 1941- 1942- 1943- 1944-

38 39 40 41 42 43 44 45
Sea-borne trade 88.49 79.04 82.89 75.60 77.00 65.51 93.30 134.75
(in crores of
rupees)
Government 44.99 45.63 28.89 75.60 11.63 9.16 11.39 257.44
transactions (in
lakhs of rupees)

(Source: Report of the Department of Industries and Commerce for the years
1937-38-1944-45)

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 Compared to pre-war years, the aggregate value of the sea borne trade

expanded considerably. The government transactions slumped sharply after 1938-

39, but the trend was suddenly reversed in 1944-45 when the value of such

transactions exceeded a total of the seven previous years.207

The total value of foreign trade on private account and the imports and

exports are shown below for the years 1937-1945.

FOREIGN TRADE

Total foreign Imports Rs. Exports Rs. Percentage

trade Rs. in in crores in crores of export to
crores total
1937-38 67.7 29.1 38.6 57.1
1938-39 61.1 24.9 36.2 59.3
1939-40 66.4 27.5 38.9 58.6
1940-41 59.0 22.6 36.4 61.7
1941-42 60.9 24.3 36.6 60.1
1942-43 40.9 10.2 30.7 76.8
1943-44 43.8 10.1 33.7 77.3
1944-45 63.7 24.1 39.6 62.7

207
G.O. M. SNo. 146 Trade, dated 12.01.1944, T.N.A. Annual Statement of the sea-borne trade
of British India in the British Empire and Foreign Countries,) 937-38 —1944-45.
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 Total foreign trade and imports tended to decline throughout the war period.

The imports were lowest in 1943-44, when the trade balance in favour of Madras

Province was the highest in the last eight years. On the other hand, exports were

fairly well kept up. It was satisfactory to note that already in 1944-45 the first post-

war year, imports and exports compared very favourably to the corresponding

figures for 1939-40. This is reflected in the graph given below:

IMPORTS Increase

1943-44 Rs. In 1944-45 Rs. In lakhs

Machinery and mill work lakhs

96.29 180.01
Manures - 180.91
Asphalt 4.22 35.85
Chemicals 49.97 70.74
Instruments 17.73 37.59
Paper 8.51 23.99
Drugs and Medicines 8.68 20.64
Vehicles 4.58 13.88
(Source: Report on the Administration of the Madras Presidency for the years
1943-44-1944-45)

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 Decrease

1943-44 (Rs. in lakhs) I944.45 (RS. in lakhs)

Wool (new) 52.28 2.77
Dyeing and tanning 62.19 33.39
substances
(Source: Report on the Administration of Madras Presidency for the years
1943-44, 1944-45)

Machinery and mill works

Consignments of electrical machinery from the United Kingdom rose from

Rs. 36.13 lakhs to Rs. 74.07 lakhs and those from the United States of America

from Rs. 0.17 lakhs to s. 8.04. Supplies of other sorts of machinery from the United

Kingdom increased from 6.50 lakhs to Rs. 33.03 lakhs.

Manures

Imports of manures, which previous year amounted to Rs. 70.00 lakhs, to

which the United Kingdom contributed Rs. 43.16 lakhs and Canada Rs. 24.40

lakhs.

Asphalt

Arrivals of asphalt from Iran went up from Rs. 4.22 lakhs to Rs. 30.81

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lakhs. Egypt, which had no trade in this commodity in the preceding year, supplied

to the value of Rs. 5.04 lakhs in the year under review.208

Chemicals

The United Kingdom enhanced the shipments from Rs. 35.03 lakhs to

Rs. 42.94 lakhs and Canada from Rs. 0.14 lakhs to Rs. 13.54 lakhs. Imports of

ammonia and its salts from the United Kingdom increased from Rs. 0.68 lakhs to

Rs. 2.96 lakhs, of sodium carbonate from Rs. 3.55 lakhs to Rs. 8.96 lakhs. Copper

Sulphate from Egypt accounted for Rs. 3.74 lakhs as against nil dispatches in the

previous year. Calcium compounds with Rs. 1.94 lakhs and other chemicals valued

at Rs. 11.20 lakhs arrived from Canada, which had no share in this line last year209

Instruments

Receipts from the United Kmgdom registered a rise from Rs. 16.36 lakhs to

Rs. 33.19 lakhs. Imports of electric wires and cables from the United Kingdom

expanded from Rs. 2.52 lakhs to Rs. 9.63 lakhs; of electric bulbs from Rs. 1.10

lakhs to Rs. 2.74 lakhs; of the photographic instrument from Rs. 0.74 lakhs to

Rs. 2.83 lakhs; of cinema films (raw) from Rs. 3.94 lakhs to Rs. 6.11 lakhs and

to expose cinema film for Ceylon, from Rs. 0.94 lakhs to Rs. 1.78 lakhs.210

208
Indian Annual Register, Calcutta, 1944, PP -117-121.
209
Ibid, PP -123-125
210
Indian Review, Madras, 1944.
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Paper

Shipments of printing paper advanced from Rs. 3.89 lakhs to Rs.

13.07 lakhs mainly due to larger arrivals from Canada amounting to Rs.

10.09 lakhs as compared to Rs. 2.32 lakhs in the preceding years. The United

Kingdom increased her supplies of writing paper from Rs. 0.44 lakhs to Rs.

2.16 lakhs and of other kinds of paper from Rs. 1.84 lakhs to Rs. 5.98 lakhs.

Drugs and medicines

Proprietary and patent medicines from the United Kingdom recorded an

improvement from Rs. 0.94 lakhs to Rs. 2.58 lakhs and other drugs and

medicines from that country from Rs. 3.53 lakhs to Rs. 9.29 lakhs. The Untied

States of America supplied drugs and medicines valued at Rs. 6.23 lakhs as

compared to Rs. 0.72 lakhs in the previous year.

Vehicles

Arrivals of carriages and parts for railways from the United Kingdom

registered an increase from Rs. 0.13 lakhs to Rs. 1.27 lakhs and those of wagons

and parts for railways, from the low figure of Rs. 498 to Rs. 1.03 lakhs. The United

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Trade in the Madras Presidency
R. Jeyasurya, Ph.D.
Kingdom enhanced her dispatched of cycles and parts of cycles, from Rs. 2.92 lakhs

to Rs. 6.82 lakhs.211

Dyeing and tanning substances

The Union of South Africa reduced her shipments of wattle bark from Rs.

32.77 lakhs to Rs. 26.71 lakhs. Supplies of coal-tar dyes other than alizarine from

the United Kingdom diminished from Rs. 9.96 lakhs to Rs. 2.13 lakhs. There

were no imports from Switzerland, which accounted for Rs. 14.62 lakhs last year.

Exports

The total value of exports of private merchandise (including reexports but

excluding treasure) increased by Rs. 1.88 crores. The chief export from the

Province of Madras to foreign countries and their proportion are shown in diagram

earlier.

The chief articles whose exports expanded or fell notably are given

below:-

Increase

211
Berna, James L. - Industrial Entrepreneurs hip in Madras state, New York, Asia publishing
House, 1950 PP - 212-14
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 1943-44 Rs. In 1944-45 Rs. In
lakhs lakhs
Cotton manufactures 453.64 750.97
Cashew Kernels 128.34 306.81
Coir manufactured 91.87 187.65
Fish 139.28 187.73
Rubber, raw 9.64 51.10
Tobacco unmanufactured 19.26 58.04
Lemongrass oil 8.17 32.02
Leather 274.15 303.37
Onion 38.00 58.02

Decrease

Groundnuts 812.68 630.16

Castor seeds 18.49 2.42
Tea 691.41 632.36
Manganese Ore 48.81 1.95
Coffee 51.81 22.87
Pepper 34.82 19.80
(Source: Report on the Administration of the Madras Presidency for the
years 1943-44 to 1944 - 45)

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Cotton manufactures

While shipments of cotton twist and yarn declined from Rs. 58.77 lakhs to

Rs. 36.82 lakhs, those of cotton piece goods short up form Rs. 385.56 lakhs

to Rs. 682.94 lakhs. Ceylon enhanced her demand for cotton piece goods from Rs.

355.95 lakhs to Rs. 643.77 lakhs.212

Cashew kernels

The requirements of the United Stated of America went up to Rs.

297.91 (110.40) lakhs while those of the United Kingdom diminished from Rs.

14.45 lakhs to Rs. 8.39 lakhs.213

Coir manufactured

Supplies to the United Kingdom increased from Rs. 58.98 lakhs to Rs.

97.87 lakhs and to the United States of America from Rs. 17.16 lakhs to Rs 51.61

lakhs. The contribution of the Union of South Africa improved from Rs. 4.55

lakhs to Rs. 7.31 lakhs of the commonwealth of Australia from Rs. 2.08 lakhs to

212
Commissioner of Labour and Chief Inspector of Factories - Report on the working of he
Indian Factories PP -211 - 213.
213
Ibid, PP 214-215.
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Rs. 6.55 lakhs, and of New Zealand, from Rs. 2.64 lakhs to Rs. 7.29 lakhs.

Portugal entered the market with a demand for Rs. 5.89 lakhs worth of coir.214

Fish

The trade under this head rose from Rs. 139.28 lakhs to Rs. 187.73 lakhs, of

which Ceylon accounted for Rs. 187.66 lakhs.215

Rubber, Raw

Exports of rubber, raw, advanced from Rs. 9.64 lakhs to Rs. 51.10 lakhs, the

United Kingdom being the sole purchaser.216

Tobacco, unmanufactured

The United Kingdom and Ceylon increased their off-take considerably from Rs.

12.89 lakhs and Rs. 6.35 lakhs to Rs. 31.98 lakhs and Rs. 11.98 lakhs, respectively.

The Union of Soviet Socialist Republics, which did not buy these goods last year

observed unmanufactured tobacco to the value of Rs. 10.05 lakhs in the present

year.217

214
Ibid, PP 221-22.
215
Report on the Administration of the Madras Presidency for the year 1944-45, PP 232-36.
216
Ibid -PP 237-239.
217
Modern Review. Calcutta, 1945, PP 107-109
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Leather

The United Kingdom reduced her takings from Rs. 242.52 lakhs to Rs.

233.51 lakhs. The share of the Union of South Africa rose from Rs. 16.97

lakhs to Rs. 46.65 lakhs, of the United States of America from Rs. 7.49 lakhs to

Rs. 12.51 lakhs and of Ceylon from Rs. 5.56 lakhs to Rs. 8.76 lakhs.218

Groundnuts

Exports to the United Kingdom declined by nearly 50 percent from Rs.

619.97 lakhs to Rs. 311.74 lakhs. The requirements of Ceylon and the

commonwealth of Australia also decreased from Rs. 12.38 and Rs. 16.16 lakhs to

Rs. 5.76 lakhs and Rs. 5.78 lakhs respectively. But Egypt increased her consumption

from Rs. 66.39 lakhs to Rs. 140.84 lakhs. Canada, Kenya Colony, Palestine and

Turkey entered the market with purchases to the value of Rs. 47.17 lakhs, and those

to Ceylon from Rs. 2.68 lakhs to Rs. 4.91 lakhs.219

218
Annual Report of the South Indian Chamber of Commerce, J 944-45, Annual Re PP, 87-89
219
Ibid, PP 89-91
Language in India www.languageinindia.com 218
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Manganese Ore

The United States of America cut down her requirements from Rs.43.87

lakhs to Rs. 1.25; also there were no shipments to the commonwealth of

Australia, which absorbed Rs. 2.98 lakhs last year.220

Coffee

Supplies to Ceylon dropped from Rs. 35.59 lakhs to Rs. 9.50 lakhs but the

United Kingdom absorbed almost half the exports.221

Coastal Trade

It is seen from the figures given below that the value of coastal trade in 1944-

45 was nearly three and a half times what it was in 1937- 38 and indicates the

growing importance of coastal service:

1937- 1938- 1939- 1940- 1941- 1942- 1943- 1944-

38 39 40 41 42 43 44 45
Value of
coastal trade in 20.37 17.48 16.18 16.32 15.58 25.54 49.43 28.54
crores of
rupees
(Source: Statistical Abstract of the British India- 1937-38 -1944-45)

220
Ibid, PP 91-93
221
G.O. Ms No. 527, Trade, dated 8th February, 1944, TNA
Language in India www.languageinindia.com 219
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 During the year 1944, imports rose from Rs. 26.79 crores to Rs. 35.02 crores

and exports from Rs. 22.64 to Rs. 33.52 crores. Trade with Bombay amounted to Rs.

17.35 crores, with Bengal Rs. 27.33 crores and with Sind Rs. 13.76 cores.222

1937- 1938- 1939- 1940- 1941- 1942- 1943- 1944-

38 39 40 41 42 43 44 45
Trade with 30.01 39.88 44.94 45.38 48.65 34.55 33.36 42.60
British Empire
countries (in
crores of rupees)
Percentage of 55.8 66.14 68.86 77.18 80.00 84.55 76.36 67.45
the foreign trade
(Source: Annual Statement of the sea-borne trade British India in the British
Empire and Foreign Countries- 1937-38-1944 - 45.)
The aggregate value of the sea - borne of the Province of Madras

decreased by Rs. 3.23 crores to Rs. 131. 52 (134.75 crores) during the year 1945-

46. This consisted of:

Rs.
Imports on Private account 24.23 (24.05) crores
Exports on Private account 44.68 (39.59) crores
Coasting Trade 62.50 (68.54) crores

Government transactions dropped very heavily to Rs. 95.00 (257.11) lakhs.

222
Ibid
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 Foreign Trade Imports

The total imports increased to Rs. 24.34 (24.05) crores, the

contributions from the different commodities being:

1944- 45 Rs. 1945-46 Rs. in Increases

in Lakhs Lakhs Rs. in Lakhs
Machinery 180.01 201.03 21.02
Iron and Steel 19.98 41.17 21.19
Vehicles 13.88 26.66 12.78
Instruments 37.59 58.08 20.49
Chemicals 70.74 96.00 25.26
Liquors 12.48 19.22 6.74
1944.45 RS. 1945-46 Rs. in Decreases
In lakhs Lakhs Rs. in Lakhs
Grain, Pulses and flour 409.33 191.85 217.48
Manures 70.00 57.76 12.24
Cotton Price goods 31.73 6.92 24.81

(Source : Indian Annual Register, Madras, 1944-45, 1945-46)

Imports from the United Kingdom of textile, sewing and knitting,

sugar and tea machinery increased, but there was a sharp fall in the imports of

other sorts of machinery from Rs.33.03 lakhs to Rs.10.78 lakhs, and

electrical machinery from Rs.74.70 lakhs to Rs. 53.86 lakhs. There were increases

under all categories of machinery imported form the United States of America.

Electrical machinery increased from Rs.8.04 to Rs. 16.03 lakhs.

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Iron and Steel

Imports from both the United Kingdom and the United States of America

increased. Steel ingots arrived for the first time from Australia to a total value of Rs.

8.48 lakhs.

Vehicles

Forty (nil) motor cars valued at Rs. 1.40 lakhs were received form the United

Kingdom and 9,134 (5,176) cycles.223

Instruments
Electric wires and cables from the United Kingdom increased to Rs.

14.48 (9.63 lakhs, telegraph and telephone instruments and apparatus to Rs. 5.15

(0.73) lakhs, electric bulbs to Rs.7.17 (2.74) lakhs, but Cinema, films, raw,

dropped to Rs. 3.05 (6.11) lakhs.

Chemicals

Import of Sodium Carbonate, Caustic Soda and Copper Sulphate from the

United Kingdom rose to Rs. 22.07 (8.96), Rs.24.75 (14.81), and Rs.3.53 (2.38)

lakhs respectively. Other chemicals from Canada increased to Rs. 21.20

223
Indian Review, Madras, 1945-46
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(11.20) lakhs. Egypt, which supplied Rs. 3.74 lakhs worth of Copper

Sulphate in the previous years, did not supply any this year.

Liquors

Brandy from the Union of South Africa and other spirits from the

United Kingdom increased to Rs. 3.46 (2.16) lakhs and Rs.3.55 (1.16) lakhs

respectively, but whisky from the United Kingdom fell to Rs. 2.43 (4.60).

Grain, Pulses and flour

The supply of wheat from Australia showed a sharp fall to Rs. 8.77

(363.98) lakhs for 4,019 (144.354) tons, and that of wheat flour decreased to

Rs.9.10 (21.48) lakhs for 3,095 (7,859) tons. Shipment of wheat from South

Africa was nil (3,852) tons. Canada increased her wheat exports to 11,646

(2,486) tons and the United States to 48,897 (2,570) tons. For the first time after the

war, Burma shipped 15,731 tons for rice to this province.

Cotton Piece goods

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 From the United Kingdom, supplies of white piece goods fell to Rs.2.26

(4.17) lakhs of printed piece goods to Rs. 1.59 (10.79) lakhs and coloured piece

goods to Rs.3.05 (16.77) lakhs224.

Foreign Trade - Exports

The income in the total value of export was contributed to as follows

Increase

1944-45 Rs. in Lakhs 1945-46 Rs. in Lakhs

Leather 303.37 505.41
Raw cotton Nil 10.58
Fruits and Vegetables 430.14 633.08
Coir manufacture 187.65 292.16
Fish 187.73 231.52
(Source: Report on the Administration the Madras Presidency for the years
1944.45 _ 1945-46).

Decrease

1944-45 Rs. in Lakhs 1945-46 Rs. in Lakhs

Groundnut 630.16 607.25
Tea 632.36 625.30
Cotton Manufacture 750.97 418.91

Source : Report on the Administration of the Madras Presidency for the years
1944-95-1945-46)

Leather

224
G.O.Ms.No.1207, Trade dated 23rd March, 1947, TNA.
Language in India www.languageinindia.com 224
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 Shipment to the United Kingdom increased to Rs. 440.61 (233.51)

lakhs.

Raw cotton

Exports to the United Kingdom and the United States of America

amounted to Rs. 5.41 (nil) lakhs and Rs.5.17 (nil) lakhs respectively.

Fruits and Vegetables

Cashew kernels to the United States of America increased to Rs.526.87

(297.91) lakhs and onion to Ceylon to Rs.70.61 (58.02) lakhs.

Coir manufacture

The United Kingdom purchased Rs. 109.28 (97.87) lakhs and the United

State Rs.98.01 (51.61) lakhs. For the first time after the war, Sweden, Norway,

Denmark, France and Switzerland entered the market.

Tobacco - Raw and Manufactured

The United Kingdom increased her requirements of unmanufactured

tobacco to Rs. 90.72 (31.98) lakhs, while Ceylon, imported beedies to the extent

of Rs.40.56 (38.63) lakhs.

Fish

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 Ceylon was the sole consumer of dry salted and unsalted fish225.

Groundnut

Shipments to Egypt, Kenya colony and New Zealand were nil (140.84),

nil (4.56) and nil (2.52) lakhs of rupees, respectively. South Africa, Australia and

Canada reduced their requirements to Rs.46.12 (147.97) lakhs. The United Kingdom

purchased Rs. 471.02 (311.74) lakhs, while France re-entered the market to the

extent of Rs. 34.75 lakhs.

Tea

The United Kingdom and Canada decreased their requirements to Rs.

434.51 (460.36) lakhs ad Rs.49.34 (51.90) lakhs, respectively.

Cotton Manufacture

Exports of cotton twist and yarn fell to Rs. 18.81 (36.82) lakhs and those of

cotton piece goods to Rs.360.38 (682.94) lakhs.

Coastal trade

Imports decreased to Rs.29.67 (35.02) crores and exports to Rs.32.82

(33.51) crores. The total decreased to Rs.62.50 (68.54) crores. Trade with

Bombay, Bengal and Sind amounted to 19.54 crores, Rs.24.56 crores and Rs.

10.83 crores, respectively 226

225
Census of India, 1957, Vol. XIV, Part I & II, pp. 207-210.
Language in India www.languageinindia.com 226
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 The aggregate value of the sea-borne trade of the Province increased to Rs.

170.65 crores as shown below during 1946-47.

Rs
Imports 43.42 (24.34) crores
Exports 63.47 (44.68) crores)
Coasting trade 63.76 (62.5) crores
Total 170.65

Government transactions declined from Rs.95.06 lakhs to Rs.56.87 lakhs227.

Foreign Trade – Imports

The total value of foreign imports on private account increased to Rs.43.41

crores form Rs.24.34 crores. Transactions in important commodities are shown

below.

1945-46 Rs. 1946-47 Rs. Increase Rs. Decrease Rs.

in lakhs in lakhs in lakhs in lakhs
Grain, Pulses and 191.85 1,382.51 1,190.66 —
flour
Machinery 201.03 446.91 245.88
Manures 57.6 142.33 84.57
Metals other than 38.43 148.91 110.45 —
iron and steel

226
G.O.Ms. No. 1233, Trade, dated 9th January 1945, TNA.
227
Report of the Department of Industries and Commerce for the years 1945-46 & 1946-
47, pp. 119-121, pp. 123-125.
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Paper and Paste 35.04 112.24 77.20 —
Board
Cotton raw -- 112.16 112.16 --
Vehicles 26.66 188.89 162.23 —
Building, and an 39.90 5.20 34.70
increasing
materials
Mineral oils 1,219.40 515.98 — 703.42
Tea chests 30.77 20.99 9.78
(Source : Report on the Administration of the Madras Presidency for the years
1945-46-1946-47).

Grain, Pulses and Flour

Burma, Siam, Brazil and Java supplied paddy and rice. Canada, Australia

and the United States of America supplied larger quantities of wheat and wheat

flour. The Argentine Republic, Australia, Burma and the United States of America

accounted for other grains and pulses.

Machinery

Imports of all kinds of machinery increased, the increase being marked in

the case of electrical machinery, textile machinery, metal working machinery, tea

machinery, boilers, sewing and knitting machines and sugar machinery228.

228
G.O.Ms. No. 4620, Trade, dated 17th December 1946, TNA
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Manures

There were larger shipments of Sulphate of ammonia from the United

Kingdom and of ammonium phosphates from Canada, Egypt sent Rs. 2.46 lakhs

worth of Super phosphates.

Metals other than Iron and Steel

The United Kingdom supplied Rs. 52.19 lakhs worth of brass (13.46) and

Rs.22.83 lakhs of copper (8.96). Italy sent Rs.3.26 lakhs worth of quick silver.

Paper and Paste Board

The chief suppliers of paper were Canada and Sweden. The United

Kingdom dispatched writing paper to the extent of Rs. 13.76 lakhs (4.04).

Cotton - Raw

This was received from Egypt.

Vehicles

Thirty four thousand one hundred and twenty nine (9,134) cycles of the value of

Rs.30.33 lakhs (6.85) 1016 motor cars (40) of the value of Rs.43.98 lakhs (1.40)

were received from the United Kingdom. Four hundred and thirteen motor cars of

the value of Rs. 17.30 lakhs were received from Canada. 133 cars valued at

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Rs.6.29 lakhs from the United States of America and 75 of the value of 3.27

lakhs from France. There were no imports from these countries in the

previous year. Motor cycles and omni buses were also received while none was

received in the previous year229.

Building and Engineering Materials

The United Kingdom, Egypt, Iran and Palestine curtailed their

shipments of asphalt.

Mineral Oil

Iran reduced its supplies in fuel oil and motor spirit but increased its

shipments under kerosene oil.

Tea Chests

There were no imports of metal tea chests during the year and there

was a fall in the imports of wooden chests230.

229
G.O.Ms.No.955, Trade, dated 4th March, 1946, TNA
230
G.O.Ms. No. 2482, Trade, dated26th January, 1946, TNA.
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Foreign Trade - Exports

The total value of private merchandise increased from Rs.44.68 crores to

Rs.63.47 crores. The chief articles, which accounted for increase. and decrease are

shown below.

1945-46 Rs. 1946-47 Rs. Increase Rs. Decrease Rs.

in lakhs in lakhs in lakhs in lakhs
Hides and skins 24.38 86.12 61.74 ~
Raw
Leather 505.41 1,582.49 1,077.08 ~
Metals and Ores 39.00 108.03 69.03 ~
Oil 83.71 313.54 229.83
Coir raw and 293.59 570.13 276.54 ~
manufactured
Tobacco raw and 169.03 583.78 414.75 ~
manufactured
Rubber raw 51.37 3.03 48.34
Seeds 687.11 45.21 ~ 641.90
Tea 625.30 519.36 103.94

(Source : Report on the Administration of the Madras Presidency for the year
1945-46-1946-47).

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Hides and Skins - raw

There were large shipments to Australia and America. Leather

There were large exports to America, the United Kingdom, Burma, Belgium,

Sweden, Switzerland, France and Denmark. The Netherlands also received supplies

to a small extent through them did not get them in the previous year.

Metals and Ores

Manganese was exported in large quantities to America.

Oil

There were large exports of lemon grass oil and sandalwood oil. Burma,

which made no demand on groundnut oil in the previous year, received an

appreciable quantity during the year.

Coir - Raw and Manufactured

There were no exports of coir raw while the exports coir manufactured

increased.

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Tobacco - Raw and manufactured

The United Kingdom and Soviet Russia received a major share of the exports.

Burma, which had no trade in besides in the previous year, received some supplies in

the year23125.

Rubber Raw
There was no demand from the United Kingdom and America which were

the usual markets.

Seeds

There were no exports of groundnuts owing to restrictions imposed on them.

The United States reduced her demand under Linseed and so did Ceylon in

respect of Coriander of which she was the sole consumer23226.

The war had shakened the pace of the tendency of the diversion of trade

from Great Britain. Next to Great Britain, United States of America had become

the biggest customer and on the import side also, she stood second only to

England. The Madras State enjoyed favourable balance of trade both with the

Empire and non - Empire countries and in both cases, there was an appreciable

increase. It may be mentioned that as a result of war, the balance of payments had

231
Proceedings of the Madras Chambers of Commerce, 1946-47, pp. 203-205.
232
Annual Report of the Southern Chamber of Commerce, 1946-47, pp.87-9\.
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also become favourable to the Madras Presidency as well as India. This was due to

the repatriation of our sterling debt and the commutation of sterling pension.

Finally, it may be stated that in spite of favourable position in which Madras was

placed in respect of foreign trade, the terms of trade i.e. the exchange of import for

the exports were going against us.

The conclusions from the above study are:

1. The favourable position of foreign trade (export trade) was at the expense

of the domestic consumer and reacted on the internal price system

unfavourably.

2. The fall in imports created shortage of many articles and this produced

rise in the price level.

3. The favourable position indicated by changes in the composition was

deceptive. It did not indicate further industrialization of the Presidency.

On the contrary, the heavy reduction in the import of machinery shows

that our capital equipment was seriously subjected to greater wear and

tear and thus to greater depreciation; and

4. In spite of our favourable position, in regard to our export trade, the

imports were growing costly in terms of our exports.

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Trade in the Madras Presidency
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 CHART - III
CHIEF ARTICLES IMPORTED 1946-47
TOTAL IMPORTS - Rs.4342 LAKHS (VALUE IN LAKHS)

OTHERS 1292

COTTON RAW 112

PAPER AND PASTE BOARD 112

MANURES 142

METALS OTHER THAN IRON AND

149
STEEL

VEHICLES 189

MACHINERY 447

MINERAL OILS 516

GRAIN PULSE AND FLOUR 1383

0 200 400 600 800 1000 1200 1400 1600

Source : Madras Administration Report for the year, 1946-47

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 CHART - II
TRADE OF THE PROVINCE BY COUNTRIES 1946-47 TOTAL IMPORTS -4,342 LAKHS (VALUE
IN LAKHS)

OTHERS CHART
428 - IV

PORTUGESE EAST AFRICA

CHIEF
107
ARTICLES IMPORTED 1946-47
(VALUE IN LAKHS)
EGYPT 112

ARGENTINE REPUBLIC 122

OTHERS 930
CEYLON 127

METALS AND ORES 108

BRAZIL 140

CANADA 204
FISH 280
COMMON WEALTH OF AUSTRALIA 269

SPICES BURMA 257 355

IRAN 447
OIL 314
UNITED STATES OF AMERICA 749

TEAUNITED KINGDOM 519 1292

0 200 400 600 800 1000 1200 1400

COIR 570
Source: Madras Administration Report for the year, 11946-47.

TOBACCO 584

FRUITS AND VEGETABLES 617

COTTON MANUFACTURERS 636

LEATHER 1582

0 200 400 600 800 1000 1200 1400 1600 1800

Source: Madras Administration Report for the year, 1938-39, p.144.
Source : Madras Administration Report for the year, 1946-47

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 CHAPTER – V

Chamber of Commerce

The Madras Freight Association formed earlier merged again with the

Chamber of Commerce to avoid redundancy. The mill owners of South India formed

a separate Association in 1910. The chamber together with the Bombay Chamber

addressed the London Chamber of Commerce to get a better voting strength for the

Indian Chambers in the Empire Congress of the Chamber of Commerce, functioning

from 1902. The basis suggested was the average value of external trade which was

over £430 millions, exceeding the combined figures of any two colonies. It wanted

the Empire Congress to discuss the methods of avoiding double taxation1.

In 1918-19, a proposal to form an Associated Chamber of Commerce in India

was mooted. Though the first attempt at concerted action by the Chambers was

made in 1905, when a conference was held at Calcutta, no further steps were taken

until 1917 when the second conference was held at Delhi to consider Indian Trade

after the First World War. The need,

1
Thirumalai, C. - The Voice of Enterprises-150 years of Madras Chamber of Commerce and
Industries, MacMillan India Ltd., Madras 1986, P. 131.
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however, was felt for such a Federated Organisation from time to time. It was only

January 1920, an Association was constituted for the promotion and protection of

trade and commerce, industries and manufacturers of India and Ceylon. The

immediate issues suggested for discussion therein were the levy of Excess profits

duty and the post-war problems. The Madras Chamber intended to raise the labour

unrest as well, as Madras was having quite a bit of it in 1919-20. A concerted

approach by all the Chambers on this issue could help. The Associated Chambers

of Commerce took shape and commenced function from 1920.2

Thereafter, questions of national policy and importance were considered more in

the joint deliberations of the Associated Chambers of Commerce. The regional

chambers were concentrating on problems of local and regional interest and brought

up issues of common interest before the Associated Chambers of Commerce for

collective deliberation and action. It was, however, the convention that only

unanimously agreed the Associated Chambers of Commerce would project

resolutions to the Government and when any constituent had strong views of its

own, it could address the authorities concerned directly3.

In 1920s and 1930s, protection for the infant industries in India was the cry of the

nationalists and of the Indian industrialists. The Government appointed the Tariff

2
Ibid, p. 131
3
Ibid
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Board in 1923 to enquire into the claims for protection. It rejected several claims and

even some recommended by it for protection, like cement (1928), glass (1931) and

woolen goods were declined by the Government. The Chamber, too, held that

neither imported cement nor imported paper could be charged enhanced duties to

protect Indian Manufacturers. Between 1923 and 1939, eleven industries were

granted specific protection -iron and steel, cotton, textiles, sericulture, paper, sugar,

plywood and tea-chests, silver-thread and wire, magnesium chloride, salt, heavy

chemicals and matches. The Indian industrialists characterized it as a halting policy

of protection. Others attributed it to the Government's desire to help the British

enterprises set up in these sectors.4

A conference of British Empire countries, called the Imperial Economic

Conference was held in Ottawa in 1932. A lot of hope was pinned on this conference

by the Indians. But the outcome of the conference caused only disappointment.

Instead of giving concessions to its colonies, Britain tried to strike a businesses

deal in furtherance of its own interests. At this conference, Great Britain declared

which goods of each colony would be admitted free of duty and which British

goods should be granted access to each empire country5. Canada, Austria and

South Africa refused to give up any thing for the benefit of England. India alone

4
Ibid, pp.181
5
Rothermund .D., - Global Impact of Great Depression, pp.65.
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 was compelled to agree to give preferential treatment to British goods6. The Indian

delegation was forced to conclude an agreement with the British representatives,

giving preferences over non-empire manufacture exported to India. In return, the

British guaranteed free entry for some Indian goods7. At current volumes and

1928-29 prices, Indian preferences on British goods were worth about $ 55 million

while British preference on Indian goods were worth about $ 47 million.8

The South Indian Chamber of Commerce in the course of a lengthy

communication to the Secretary of the Federation of Indian Chamber of Commerce

and Industry said that the Ottawa agreement had tilted the scale against India. The

Chamber complained that it was progressively subjecting India to helpless

dependence on trade with United Kingdom.9 The dominos and India hoped that

currency policy would be fully discussed at the Ottawa Conference and that the

British authorities would commit themselves to a definite policy to raise the

prices of primary commodities. But the expectation was belied and the British

Chancellor only expressed his wish to see world prices rise. Increased public works

6
Nehru, - Glimpses of World History, pp.906
7
Tomlinson B.R., - Political Economy of the Raj, pp.136-137.
8
Ibid
9
Modern Review, 56, 1934, pp.367
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expenditure was ruled out and emphasis was laid on the control of production to

raise the price.10

The Ottawa Conference turned out to be a business deal to grant preference

to some special British commodities, as the gain accrued to India was small.

The Ottawa agreement came up for renewal in 1936. By then the Congress

had lifted its boycott of legislature programme. The entry of Congressmen into the

Legislative Assembly led to increasing attack on the Ottawa agreement.11 A

resolution for its rejection was carried in the Legislative Assembly by sixty-six

votes to fifty eight on 26th January 1935, Though this did not affect the validity of

the Ottawa agreement, since the viceroy could ratify it through his Certificate

procedure, it was indicative of the attitude of the Congress Party to the imperial

trade policy of the Government of India.12

The Madras Chamber declared in 1921 that "very ancient but still existing

grievance- the vexed question of the provincial contracts" should be "fought in a last

battle to secure full financial success". It supported a resolution in the Madras

Council, agreed to take a deputation to the Viceroy and urged all the mofussil

10
Tomlinson B.R., - Political Economy of the Raj , 1914 – 1947.
11
Rothermund D., - Op.cit., pp.151
12
Anstey .V., - Economic Development of India , pp.488
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Chambers, the Southern India Chamber of Commerce, the Traders' Association,

the Madras Skins and Hides Merchants' Association, the Ryotwari Landholders'

Association and even the political organisations like the National Home Rule

League, the South Indian Liberal Federation and the Dravidian Association that

they send a telegram to the Viceroy so that the voice of Madras could be heard by

the Government of India. This veritable campaign mounted in 1921, enlisting the

support of all the sections of the Indian opinion did not yield the result.13

In 1922, a joint delegation of the Associated Chambers of Commerce met the

Viceroy to urge retrenchment and economy in the Government of India, consistent

with efficiency and ultimately to lighten the grievous burden under which Madras

was labouring. The Chamber stated in the Associated Chambers of Commerce

meeting in 1926 that it would give priority to the withdrawal of the Provincial

Contribution over the abolition of Super-tax. It pointed out the iniquity of the

Government of India demanding a provincial contribution from Madras when the

Province of Bengal was exempted there from in 1927. The inadequacy of the

Central allocation to the Madras Province and the discrimination against this

province were persistent complaints the Chamber made, urging their remedy,

which was slow to arrive.14

13
Ibid, pp.182
14
Thirumalai C., - Op Cit.,pp.183
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Provincial taxation

With Provincial autonomy coming into force and the introduction of prohibition,

the Congress Government introduced legislation to levy a number of taxes; The

Madras General Sales Tax Act, The Tobacco Tax Act, Entertainment Tax Act and

The Madras Sale of Motor Spirit Taxation Act, with the expansion of road transport,

increase in the motor vehicles taxation was also contemplated.15

The Chamber was particularly agitated over the legality of the Madras General Sales

Tax with reference to the Government of India Act, 1935 and petitioned the

Governor- General to make a reference to the Federal Court but it was rejected. In

particular, it was concerned with the levy of Sales Tax on the first sale and the last

sales destined for exports. It urged the imperial Parliament to define the legislative

powers of the Centre and the Provinces more clearly. At the same time, it raised a

number of points of details with the Provincial Government. It raised the question

of the constitutional tenability of The Madras Tobacco Taxation Act but the

Government of India declined to make a reference to the Federal Court. It

enlisted the participation of the European Associations (the Trades, the UPASI

and the mofussil) and also the Southern India Chamber of Commerce and other

Indian bodies in questioning the constitutional tenability and the taxation affected
15
Ibid, pp.183, PMLC-66, 1937, pp.43-45.
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trade and commerce as a whole. The General Sales Tax Act came into force in

1939. In 1940-41, the rate was reduced to ¼ % from ½ %. A commercial taxes sub-

committee critically examined every provision, rule and procedure and advised the

members of the Chamber on all aspects of the new law. When the Act was proposed

to be applied to import sales the incidence falling on the purchaser, the Chamber

opposed it. The Chamber carried on a campaign to reduce the rates of taxation and

bring about uniformity in the rates of taxes.16

Stamp duty

It was persistently seeking (1926, 1930 and 1931) a reduction in the duty on Usance

Bills (Hundis), which was too high and restrictive. In 1931, the Chamber was

categorical that there was no evasion of stamp duty in Madras and the loss of

revenue was negligible. In 1937, it agreed with the Reserve Bank of India's

recommendation that the duty on inland usury hills of less than one year's usance

should be drastically reduced. The Chamber was not for its abolition as a stamped

paper was held to carry title. It was for continuing the unified stamps for both

postage and revenue purposes.17

16
Ibid, pp.184, PMLC,66, 1939 and 1940-41, pp.35-36 & 47-49.
17
Ibid, pp.185, PMLC,66, 1931, pp.35-36
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The Chamber's efforts predictably, were directed to containing the level of

taxation at the minimum levels and seeking exemption from Local taxation for

the smaller constituents. While the municipalities could freely tax the firms,

even iniquitous levies could not be gone into, by any independent judicial

body, as appeals against the assessment lay only to the Council, which assessed

them. The Provincial Government was contemplating a legislative remedy in

1921. The Chamber enlisted the support of the Southern India Cha mbe r

of Commerce and the Trades Association as well and jointly discussed with

them the objectionable features of a Bill to levy companies' tax on the basis of

the business turnover of a company in 1924. It objected to all the inclusive

definition of 'turnover' contemplated and the Local and Municipal Advisory

Committee accepted its protest.18 In 1929, the Chairman gave notice of a motion

to abolish the Companies Tax and the Profession Tax or alternatively to limit the

taxation to a business tax. In 1934, again, it opposed the increase in the

municipal levies on companies.

In 1940, the Central Assembly provided for continuing the right of the Provincial

Governments to impose Professional Tax, subject to a limit of Rs.50/- when the tax

was imposed after the date of that Act. The Chamber urged that the limit should

18
Ibid, pp.186, PMLC,66, 1924, pp.34-36.
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 apply to the earlier enactments of Madras where the maximum for Profession Tax

for the city was Rs. 10,000- and in the mofussil Rs.550 in a year. The Madras

Government rejected the Proposal. But in 1941, Frederick James was able to get a

legislation passed in the Central Legislature to apply the limit to the existing local

taxation. In 1946, a further amendment was made in the Profession Tax

Limitation Act to clarify that the Madras City Municipality Tax would not come

within the limit of Rs.50-. The Chamber rather morosely recorded: "Now we must

continue to pay this iniquitous tax with no possible doubt whatever, we would

continue to object".19

The Chamber agreed in 1939 with the Madras Corporation that the annual

election to the 15 divisional seats by rotation might be replaced by a simultaneous

election to all the 45 divisions once in three years. Accordingly, the necessary

legislation was put through.20

The Government appointed in 1921 the Indian Fiscal Commission with

Ibrahim Rahimtulla as the Chairman and J.K. Keynes, the Economist as the Vice-

Chairman.21

19
Ibid, pp.187, PMLC,66, 1950, pp.35-37.
20
Ibid, pp.188, PMLC 66, 1939, pp.37-39.
21
The Indian Fiscal Commission, 1921.
See also: Jon E., War Time Development in Indian Currency-Post-War, Development and Lessons of War-time
Developments in Indian Economy, M.Litt-Thesis, 1989, University of Madras.
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 The Chamber made several suggestions to the Commission to be considered

in evolving a fiscal policy. It favoured a policy of free trade, but had no objection to

the imposition of customs duties for the purpose of obtaining revenue. A tariff

system was a more suitable form of taxation for Indian than direct taxation, which

was unpopular and sometimes evaded and beset, frequently, with difficulties of

collection. The Chamber, to repeat, had changed its preference for direct taxes. The

existing tariff policy did not hinder but helped the Indian Industries to flourish

greatly and as such it might be continued. The Chamber would agree to some

latitude to the strict theory of the Free Trade Policy that a tariff imposed should call

for an excise duty on the same article of Indian manufacture. The excise duty

should be imposed for revenue purposes only. The object of fostering Indian

industries should be a secondary consideration. For the purpose of developing

Indian industries, temporary protective duties on some imported manufacture could

be imposed but certainly not on all imports, for protraction might lead to quasi-

monopoly.22

For developing Indian industries, an increase in prices to the Indian consumers

would be justifiable. This might lead to a cost-push and increase the cost of living,

which could not be fully compensated by the rise in wages or salary. No duties,

22
Annual Review of Trade of India (Publications – 1929-1946) published by the Governor – General in Council.
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however, on import or export could be imposed without raising the price to the

ultimate consumer and the rise in price would be as permanent and as much as the

duty. If the export offered a more attractive price than the home market, the

producer should be allowed to produce for exports. If an export duty was levied on

foodstuffs, their exports could be controlled but there was the danger of the

agriculturists going in for commercial; crops to get better prices. The economic

philosophy of the chamber was, as usual, a mix of Free Trade and Protectionism and

it was, as every, pragmatic in its approach23.

In the wake of economic crisis, the first positive action of the Government of

Madras was appointment of a committee of officials and non - officials to conduct an

enquiry. On 16th January 193124, the Madras Oil seeds and Ryotwari Association

called on the Governor, to represent to him the depressed condition of the groundnut

trade. In response, the Government decided to form a committee of officials and

non-officials to examine whether some system of co-operative marketing of the

Madras groundnut crop could be devised and organized. At the same time, the

Government also wanted to know how far the economic conditions of the

agriculturists of the Presidency had been affected by the fall of agriculture prices. It

decided-in-suppression of the earlier decision - to appoint an Economic Depression

23
Ibid
24
The Hindu, Madras, dated 17th January, 1931
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Enquiry Committee, to probe into the effects of the Depression and to report whether

any measures should be adopted by the Government to mitigate them25.

The government, however, had to yield to the rice lobby. In 1935, import duty was

imposed on broken rice, as it was a major item in the import bill26. But the import

duty did not have much impact. The Special Officer, Sathyanathan himself had to
admit this frankly in his report - "the recent levy of a small import duty on broken

rice will undoubtedly afford much relief; but it may not be high enough or

comprehensive enough, I submit, to prevent paddy, whole rice and even broken

rice form being imported in sufficient quantity to depress local prices seriously27.

The Japanese piece goods flooded to the Indian market and depressed the

Indian Cotton Industry. When the situation became worse, the

Government imposed high duties on these imports. In 1930-31, the duty on

cotton piece goods was raised form 11 percent to 15 percent, with an

additional 5 percent on non - British goods and the supplementary budget

imposed a surcharge of 25 percent of these rates28. Japan was the largest

single consumer of all varieties of Indian cotton. When import duties were

raised, it embarked on a boycott of Indian cotton as a retaliatory measure. As a

result, the Government of India was forced to sign a trade agreement with

25
G.O.No.328, Revenue (Confidential), dated 11th February, 1931, TNA
26
Rothermund D., - British Foreign Trade Policy in India, pp.3-4.
27
Sathyanathan, SS – Rural Co-operation in Madras Indian Journal of Economics, 1941-42,pp.22
28
Thomas P.J., - Growth of Federal Finance in India, pp.366.
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Japan in 1934. The Anglo - Japanese agreement of 1934 permitted the

Japanese to sell 325 million yards of cotton cloth annually to India, if they

bought 1 million bales (one bale is five hundred pounds of cotton) of Indian

raw cotton29. Japan could skillfully increase her export of textiles by

increasing her consumption of raw cotton while the agreement was in force

(1935-37). The competition of Japanese textiles with Indian Textiles

therefore called for the revision of first agreement in 1937. This time, the

quota of Japanese exports of textiles was reduced from 325 million yards to

283 million yards and her import of Indian raw cotton was fixed at 1.5

million bales.30

Government's Remedial Measures

The Government of Madras, relying on the reports of the District Collectors,

initially did not take any serious view of the Depression. The Secretary in the

Department of Commerce of the Government of India addressed a letter to the

Chief Secretary to the Madras Government on 2nd August 193031, calling for a

report on the economic condition of the Presidency in the wake of the fall in prices.

29
Rothermund D., - British Foreign Trade Policy in India, during the Great Depression, 1919 to 1939, pp.9-12.
30
Ponniah J.S., - The Production and Marketing of Raw Cotton in the Madras Presidency with special reference to
the Districts of Bellary, Kurnool, Coimbatore, Madura, Ramnad and Tinnevelly, D.Litt., Diss, University of Madras,
1944, 2:87
31
The Hindu, Madras, dated 3rd August 1930.
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The government of Madras called for reports from District Collectors. On the basis

of their reports, it wrote to the Government of India, stating that "the reports

received from the Collectors of districts and the Director of Agriculture do not

indicate that there is any ground for apprehending anything like a serious economic

crisis in this Presidency owing to the fall in prices" (The report further state that,

"the case with which the land revenue had been called, in spite of sharp decline of

prices, suggests that the ryots have so far not been seriously hit by the low prices)32.

The Government of India decided to appoint a Retrenchment Committee

to suggest means of economy in public expenditure.33 In line with the Government,

of India, the Madras Government also appointed a Retrenchment Committee in

Madras 1931, under the Chairmanship of the finance member of the Government

of Madras, H.G. Stokes, I.C.S, with K.Kuppuswami Chowdary, Raja of Bobbli.

Mahmud, Raja of Calicut, S. Ellappa Chettiar, F.F. James, T.M Narayanswami

Pillai, T.S Ramaswami Ayyar, N. Sivaraj and C.S Rathnasabapathi Mudaliar as

members. All the members were legislators. But the Government chose to appoint

only nominated members and close associates of the Justice Ministry. G.R.F

32
Proceedings of Board of Revenue, No.3315 (Mis), 10th November 1930.
33
Indian Annual Report, 1931, Vol – I, pp.152
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Tottenham was appointed Secretary to the Committee. Thus the Retrenchment

Committee was virtually a Committee of the Government34.

The appointment of a Committee came under severe criticism. The Tamil

Nadu wrote: "we are glad at the Government taking such an interest in the matter.

But no one can deny that when a person asks for water when he is about to die, it

is foolishness to offer it to him only after a committee has been appointed and it

has made enquiry. Committees should, of course, be appointed for matters, which

need them. But when an emergency arises, action has to be taken to suit it also".35

The composition of the Committee caused misgivings about the probable

outcome of the enquiry. Referring to the Committee, the Andhra Patrika observed,

"No good will result from such a Committee as it will depend on the statistics

furnished by Hood (the Collector of Madras) and not upon the evidence gathered

from those who are directly affected by the economic crisis. It will be no wonder if

this should prove useless as all other committees"36. Paradoxically, even the

recommendations made by such a pro-government committee were unacceptable to

the colonial government.

34
Report, Madras Retrenchment Committee, pp.74
35
The Tamil Nadu, Madras, dated 19th February 1931, NNR.
36
The Andra Patrika, Madras, dated 20th February 1931, NNR.
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 However, the orders of the Government on the recommendations of the

Economic Depression Enquiry Committee were disappointing37 the Government

used this as an alibi and relegated the recommendation to the dustbin. The

Government of India, for its part, was promoted to take this initiative by one

curious factors38. Though the Civil Disobedience Movement had been officially

called of, the agitation had not died down till 1934.

In a press communique, the Secretary of the Retrenchment Committee,

G.R.F. Tottenham said, "Apart from the imposition of new taxation, a matter in

which the field open the Local Government is limited, the only further possibility of

securing the necessary savings is by making an emergency cut in salaries39. At the

time, when the cut was introduced, it was definitely needs of the exceptional

emergency. The Government order on the 10 percent salary cut said that, "the cut

would be removed as a first measure of relief as soon as financial conditions

improved, and there was no intention that it should remain in operation after the 31st

March 1933"40. Addressing the scheme of retrenchment in the Legislative Council,

the Governor said: "in order to assist the country, a cut has been foreshadowed in the

37
The Hindu, Madras, dated 2nd March 1932.
38
The Hindu, Madras, dated 2nd March 1932.
39
G.O. Ms. No.4043, Land Revenue and Settlement Department, dated 16th December, 1931, NAI.
40
Ibid
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pay of the services.... The Hon'ble Chief Justice and the Judge of the High Court

have also agreed to a voluntary cut"41.

The Retrenchment Committee made a series of recommendations, based on

which the Government started issuing orders. On the grounds of financial

stringency, the Retrenchment Committee recommended that a cut from 10 percent

to 15 percent should be applied to all fixed traveling allowances. The Government

directed that all fixed traveling allowances be reduced by 12.5 percent42. The

Committee recommended an immediate cut in all compensatory allowances,

including those granted to officers of All India Service stationed at Madras. The

Government ordered at 31.25 percent on all allowances above Rs. 50, a 25 percent

on all allowances above Rs. 20 but below Rs. 50 and a cut of 12.5 percent on

allowances below Rs. 2043. The Committee also suggested that conferences and

Committees be curtailed as far as possible and the government implemented the

recommendation44.

41
Proceedings of the Madras Legislative Council, 1991, pp.13
42
G.O.Ms.No.631, Finance Department, dated 6th October, 1931, NAI.
43
G.O.Ms.No.612, Finance Department, dated 29th September, 1931, NAI.
44
G.O.Ms.No.687, Finance Department, dated 23rd October, 1931, NAI.

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The Government in accordance with the recommendation of the Committee

directed that all heads of department and their subordinates to make considerable

reduction in the cost of printing by reducing the size of their departmental

administration reports and the statistical tables attached to them45. The indenting

officers of departments were instructed to restrict their requirements under stores to

absolute minimum46. The government accepted the recommendation of the

Committee that expenditure under charges for electricity should be reduced as much

as Possible Avenue of economy47. The use of cheaper materials in the construction

of Government buildings, as recommended by the Committee, was also accepted48.

The recommendations of the Committee concerning the Department of Education

were the closure of certain colleges or discontinuation of affiliation to certain

subjects or reduction of the status of the staff employed. In the Madras Presidency

College, the Philosophy and Sanskrit Departments were wound up. A 5 percent cut

was made in all teaching grants during 1931-32. The special grant of Rs.15 million

for the improvement of pay of trained teachers in aided elementary schools was

withdrawn. The grant to Boys Scouts and Girl Guides Associations was reduced

45
G.O.Ms.No.2462, Public Health Department, dated 29th November, 1932, NAI.
46
G.O.Ms.No.3232, Public Works and Labour Department dated 22nd December 1932, NAI.
47
Ibid
48
G.O.Ms.No.1769, Public Works and Labour Department, dated 22nd August, 1932, NAI.
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by 25 per cent49. The Committee recommended that all Government grants for

medical inspection in secondary and elementary schools, a schemes that had been

made compulsory education areas, should be suspended until more prosperous

times return. The Committee considered the proposals made by the Director of

Public instruction for the abolition of scholarships. The Government not only

accepted their recommendation but also granted no new scholarships during 1931-

3250.

On the revenue side, the Committee made various recommendations for the

enhancement of fees in Government Arts and Professional Colleges. It accepted the

proposal of the director that a registration fee of five rupees should be collected

from each student admitted in the Presidency College and three rupees in other

Government-run colleges51. The Government implemented the recommendation.

The retrenchment in the Department of Education was massive and Sami

Venkatachalam Chetty complained in the Council that, "the Education Department

is practically reduced to its former position probably earlier than 1920 or 1921. By

one method or other, the Finance Member is so clever as to introduce the Minister

49
Report, Madras Retrenchment Committee, pp.123
50
Ibid.
51
Ibid.
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 to fall in line with his proposals, so much so that a good deal of Education

budget is cut

away"52.

The Government dispensed with the officially financed propaganda against

drinks and drugs carried on by the Central Propaganda Board, temperance

publicity Committees and the District Propaganda Committees.53

Provision of funds for the maintenance of roads and buildings was reduced to even

below the minimum required for efficient up-keep. No new works were undertaken

in the department.54 There was reduction in the strength of menial staff in the

Labour Department. District Labour Officers of the grade of Tahsildars replaced

officers of Deputy Tahsildars. Grants in aid to societies and institutions working

for the uplift of the depressed classes were reduced. The industrial centres in

Madurai, Ramanathapuram and Thanjavur Districts remained closed. The grant of

land to Kallars was dispensed with. New building and repair works were kept in

abeyance55.

52
PMLC, 69, 1934, pp.173
53
G.O.No.1583, Public Health Department, dated on 28th August, 1931, NAI.
54
G.O.Mas.No.44, Finance Department, dated 28th January, 1933, NAI.
55
History of Higher Education in South India, The University of Madras (1857-1957), Madras, 1957,pp.126
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 The Corporation of Madras followed the principle of equity while imposing

pay cuts. The number of meetings of the Academic Council and the Boards of

Study was reduced. On the grounds of financial stringency, the opening of new

branches of research was deferred56.

The net effect of retrenchment measures was that in the revised estimate

for the year 1931-32, the Government was able to show a saving of Rs.l 1.27 million

under the expenditure.57

Criticism

When the whole world was reeling under acute financial depression of an

unprecended nature, the Madras Government's budget was at surplus. The

retrenchment policy of the Government enabled it to maintain budgetary

equilibrium. But it led to reduction in Government spending on development

activities. The Government's drastic cut in their capital expenditure reduced the

century's purchasing power.58 The retrenchment hit the department of Public Work

most severely. The Hindu wrote: "the retrenchment policy of the Madras

Government had caused quite a sensation among the members of the District

56
Ibid
57
G.O.Ms.No.15, Finance Department, dated 12th January, 1932, TNA
58
Thomas P.J., - Op.Cit.,pp.363
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Educational Councils and the Managers of aided elementary schools in the

Presidency."59

After the First World War, when a readjustment of production lines had been

completed in the western countries, the demand for the primary commodities from

Madras rose. Exports increased and the terms of trade moved in favour of the

Province with treasure in unprecedented volume combining in between 1920 and

1930. The Depression thereafter affected the primary produce exporters. Prices fell,

though the volume was expanding Modestly. The terms of trade drifted against

Madras.

In the thirties, the Central European countries like Germany were closing

in their commercial channels and Japan was getting into the "Empire"

countries like Ceylon, displacing Indian piece-good exports. The Government of

India was invited to the Ottawa Conference to consider tariff arrangements

embodying a reciprocal preference regime for the mutual benefit of the

participants from the Empire. The Indian nationalist opinion was opposed to any

Imperial Preference, as it felt India would have to give more than what it

received.60
59
The Hindu, Madras dated 6th March, 1932.
60
Thirumalai C., - Op.Cit.,pp.175.
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The Madras Chamber, too, apprehended the possibility of the Import Duties Act

of 1932 of the United Kingdom being applied to India's exports to the United

Kingdom, to the disadvantage of India, which could be one of the side effects of

the protectionist policy of India followed from 1923 onwards. The Ottawa

Conference agreed that India might increase her import duty on a large

number of goods in manufactured or produced outside the British Empire. The

Madras Chamber favoured the agreement. The Imperial Legislative Assembly

ratified it. But the Ottawa Agreement had not been effective in getting favourable

treatment for Indian products the "Kailies" in Ceylon, despite India's import of

Copra and Coconut oil and products from Ceylon. The Chamber left this issue in

the hands of the Associated Chamber of Commerce.61

In 1936, the Indian Chamber of Commerce made a strong case for

discontinuing the Ottawa Agreement. The Central Legislative Assembly refused to

continue the Agreement on its termination. India concluded a new Trade Agreement

with the United Kingdom in 1939. This, too, preserved India's privileged position

as an exporter to Britain but considerably narrowed the scope of preference

granted to imports.

61
Ibid, pp.176
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 The Chamber had, however, no misgivings on the continued utility of the

Ottawa Agreement as the basis for negotiating a new treaty for trade within the

Empire. It analysed the prospects of each commodity and urged a higher rate of

preference where necessary, as for example, oils and oilseed and Indian cigars. It

also quoted the British Government's recognition the India's fiscal policy should

be largely determined by (i) the protection deemed necessary for developing her

own industries and (ii) the exigencies of the revenues of the Government of India.

The new agreement in the long run, proved to be of great advantage especially

after the Second World War.62

An impressive favourable movement in the terms of trade, associated with

the post-war boom and the release of the Sterling balances built up during the War

was accompanied by a steep rise in imports in the late 1940s.63

An Export Advisory Council was set up in 1940 and the Madras Chamber

had two European nominees in addition to a Government nominee, Kumararaja,

M.A. Muthiah Chettiar (who was an individual member of the Chamber till

his demise in 1984). In 1946, it pointed out that the Government of India should

62
Ibid, pp.177
63
Ibid, pp.178.
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decide what quantities of each commodity could be the exportable surplus so that

free export could be allowed within that limit. It felt the export trade, as for

example, leather, was unduly and unnecessarily distorted by controls. Even

otherwise vexatious delays had discouraged the export trade. It supported the

proposal for an association of exporters to check on the quality of the products to be

exported, but doubted if it could be effective. That could not check an unscrupulous

exporter but might hamper and honest merchant unless the Association was

empowered by the Government to demand a banker's guarantee that every

exporter would pay any claim upheld in arbitration. It felt, at the same time, any such

restriction would be, on the whole, counter- productive. It would rather leave it to the

customers to accept the exported product, even at the risk of a possible temporary

reduction of the exporters.64

Industrial policy

The Government of India Act of 1919 had made industries a provincial

subject.65 Thereafter the government lost direct interest in industrial

development and the provinces had neither the financial nor the technical resources

to stimulate development on any significant scale. Under the Government Act of

1935, the development of industries was still a provincial subject66. But it was open to

64
Ibid, pp.179.
65
Government of India Act, 1919.
66
Government of India Act, 1935.
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the center to declare Central control and was expedient in the public interest.

Thereupon, the development of such industries would become a Central subject.

However, the Central Legislature with the result had in fact passed no such Act

that the development of industries remained a wholly provincial subject. In 1945, the

Government of India felt that the continuance of their existing policy would not

help India meet the objectives of post war development. In other countries,

technical advances had been immense with a striking increase in the total volume of

skilled labour.67

JP India was to make a rapid headway and if the standard of living of the

masses had to be effectively raised a vigorous and sustained effort was necessary in

which the state no less than private industry had to take a part.

In India, ordinance factories, public utilities and railways formed a

considerable proportion of the total industrial enterprise, which was already

largely state-owned, and state operated. Further it was decided that the bulk

generation of electric power would, as far as possible, be a state concern.

Besides, basic industries of national importance would be nationalized

provided adequate private capital was not functioning and it was regarded as
67
G.O.No. 2785, Development Department, dated 17th July, 1945-NAI.
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 essential in the national interest to promote such industries. For the purpose

of government policy basic industries could be defined as aircraft,

automobiles and tractors, chemicals and dyes, iron and steel, prime movers,

transport vehicles, electrical machinery, machine tools, electro chemicals

and non ferrous metal industries. All other industries would be left to private

enterprise under varying degrees of control. There was to be no control

except such as was required to ensure fair conditions for labour in the case

of such industries68.

The government of India had also come to the conclusion that they must take

power to license industrial undertakings. They had then no power except for

emergency war time controls, to regulate the growth of industry. One effect of this

unregulated freedom to promote industrial enterprise had been the concentration of

industry in certain areas. Further there was a tendency for entrepreneurs to go in

for schemes, which promised quick returns leading to lopsided development, a

scrabble for some industries with the danger of over production and excessive

competition and inadequate attention to other industries which were equally

necessary in the national interest. To overcome this difficulty, the government felt it

68
Post-War Development- Government of India’s statement on Industrial Policy: Annual statements of the Sea and
Airborne Trade of India- Published by the Director General of Commerce and Intelligence, 1920-1947.
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necessary to fix targets, to allocate them on a regional basis and to see that these

targets were achieved. As government had no authority then to do all this, it was

proposed to take power to license the starting of new factories, the expansion of

existing factories, for without this power, planned industrial development would be

impossible. At the same time in order to avoid unnecessary delays it was proposed

to set a monetary limit to the plants or projects requiring licence so that very small

plants moderate extension of existing plants or replacements, which do not add to

output, would not be subject to licensing. It was realized that the administration of

the licensing system must be such as to assure Indian states that their legitimate

desire for industrial development was not overlooked. It was accordingly proposed

that a Board should be constituted at a higher level to advise the Central

Government in the matter of granting licenses for specified industries.69

Reacting to the Government of India's Statement on industrial policy, the

Madras Government felt that India was moving towards the Central Government

exercising unified control over matters of wide and vital concern to Provinces

which was an anomaly considering the federal structure the existing constitution.

Emphasizing that industry could not be built piecemeal, the Madras Government

made it clear that the function of the Centre was more properly coordination than

69
Ibid.
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direction in respect of subjects which had been accepted as falling within provincial

competence.

The Madras Government, therefore, preferred the formation of an All India

Board of Industry to which the Central and Provincial Governments were

represented at a high level and the decisions in the framing of which they had

their share. The mechanisms of such a Board of Industries would fit both into

the present constitution and a future federal constitution70.

The Government of Madras hoped that this organisation commended itself

to the Government of India. If, however, the Central Government did not agree

then, the Madras Government laid down that in all the industries, which affected

the Province, and to the extent that they affected, the centre and financial interest

of the Province would be on a par with that of the Central Government. The

Provincial Government felt that there was practical agreement between the

policy of the Government of Madras and the views expressed by the Government

of India.71

70
G.O.No.2785, Development Department, dated 17th July, 1945, TNA.
71
Letter from the Development Department, Madras to the Secretary to the Government of India, Department of
Planning and Development, dated 27th July, 1945.
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 However, while the Government of Madras welcomed the re-iteration that

central control could give industrially backward provinces a preference over

others through the machinery of licensing, no serious attempts was being made to

determine in what form and how the broad objectives of regionalization could best

be achieved in practice72.

In regard to the promotion of new industries in this Province, this

Government considered that they would be fully justified while issuing licenses to

company promoters in stipulating that they should in the allocation of shares,

give preference to subscribers of capital in the province. Such stipulation would not

be unfair to the companies for it leaves the door open to them to allocate shares

upto any amount which they have not been able to raise locally to persons outside

the province. It is not the intention that any restriction should be placed on the

freedom of the public to buy and sell shares after they been allotted.73

We do not have the reactions of the public to Government's statement on

Industrial Policy but an extract from the journal 'Eastern Economist' (which the

72
Ibid.
73
Letter from the Development Department, Madras to the Secretary to the Government of India, dated 28th July
1945.
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provincial government had deemed important enough to be filed). Could be taken as

some sort of representative opinion of the private sector. Commenting on the

objectives of industrial development as spelt out by the Government's press

communique, the journal said: 'The country has heard all this before and if it is not

impressed by these new declarations and affirmations, it is because this

Government when it had the chance of a generation had miserably failed to avail

itself of it. If a gigantic and totalitarian war requiring every ounce of resource for

the purpose, defence and attack has failed to carry India towards, what is the hope

that anything tangible will be achieved so long as the same regime continues to be

in the saddle?"74

On controls, the article argued that controls were essential but should be the

very minimum required and that they should be informed by adequate knowledge

and administered by men with an average degree of honesty. "It is no condemnation

of the Government's enunciation of the principle of control to say that the public

have no confidence in the present machinery of control which has been singularly

incompetent and restrictive development. The objectives of control have been set

down in too vague and general terms; one would like to know the methods which

74
H.N.Mitra, Indian Annual Register, Calcutta, 1946.
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would be adopted to secure balanced investment in industry, agriculture and social

services. Apparently they have not been worked out".75

In 1949 the Government was still taking of the procedure to be adopted for

Government assistance to intending industrialists. There had been no response to

the communique issued by the Provincial Government in August 1944.

Subsequently the Provincial Post-War Reconstruction Committee with sub-

committees to deal with specific groups of Industries was constituted as a

subsidiary body formed out of the post war reconstruction general committee.

The sub committees and the general committee had examined the possibilities of

starting various industries in the frovince. But as always, action and

operationalisation of the recommendations eluded the political system76.

75
Annual Report of the Government of India, 1944-45.
76
Annual Reports of the Director of Industries and Commerce Government of Madras, Madras, 1947.
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 CONCLUSION

India in the pre-colonial period had a stable economy. Self-sufficient

agriculture, flourishing trade and rich handicraft industries were some of the

features of the Indian economy. India enjoyed extensive trade both within the

country and with other countries. A balance of imports and exports was maintained

India towards the 18th century was undoubtedly one of the main centers of

world trade and industry. This status was completely destroyed under Colonial

times. The western writers have made two points clear regarding the impact of

British rule over India. First, on the eve of colonial expansion, the British found

highly underdeveloped India with productivity in agriculture, very low per capita

income and absence of any developed technology or tools for manufacturing. The

benevolent policies of the British helped in the establishment of political unity, a

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system of governance and it had the foundations of economic development in

India.

As against the modem viewpoint, the Indian nationalist scholars representing

the nationalist perspective highlighted two important aspects of the British

Colonial rule over India-'drain-theory' and 'de-industrialization'. The

industrialization of England was accompanied by the decline and destruction of

Indian industries. As a result, India witnessed a steady decline in population

dependent on indigenous industries and consequent over-burdening of agriculture.

This was partly due to the competition of cheap goods produced by machinery and

partly due to the unwillingness of Government of the company to protect or

encourage trade and crafts. So, by the first half of the 19th century, India lost the

proud position of supremacy in the trade and industry of the world which she had

been occupying for well over two thousand years and was gradually transformed

into a plantation for production of raw materials and a dumping ground for cheap

manufactured. goods from the west.

The First World War led to great dislocation in the economic life of the

nation. Production had suffered by industrial organization being diverted to the

purposes of war. The war brought about disruption of normal international trade

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channels because of the fact that countries involved in war directed much of their

natural and human resources for the production, of goods necessary for the

prosecution of war.

The war affected the trade of India both directly and indirectly. The first

direct effect was that it stopped considerably the trade with Germany

and Austria. There was further a complete stoppage of trade with Belgium and

France. Trade with Turkey had also ceased. In addition to the loss of trade with

enemy countries, the export trade with allied and neutral countries-had also

suffered.

The dislocation of trade in the Madras Presidency during the war was

enormous. The coasting trade, whose recrudescence was the result of the war, had,

of course, suffered severely; freights for timber, for instance, had fallen from

Rs.120/- per ton in 1918 to the low figure ofRs.30/-. Super dues on exports and

imports were necessary to maintain the solvency of the Port of Madras in view of

the depleted volume of trade. The shortage of land naturally affected the movement

of products by sea; thus an enormous and unprecedented quantity of Burma rice

was imported while no Indian rice was exported owing to the prohibition. There

was a notable decrease in imports of sugar owing to the retrial from the market of

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Bombay buyers; the general increase of the value of sea-borne trade over the

figures for 1918 was as much as forty per cent. There was a tendency to multiply

the installation of cotton, rice-mill and manufacturing industries. The activities of

the Department of Industries had been vigorous and comprehensive and the

financial results had been everywhere favourable.

Trade in the Madras Presidency during 1920-21 was more abnormal than

any of the war years, consequent on the dramatic collapse of the European changes

the depreciation in the value of rupee as a result of the adverse balance of trade, the

accumulation of large stocks brought at high prices by overseas customers and

unfavourable season. In the first year of 1921-22, the reduced purchasing power of

the country consequent on the unsatisfactory monsoon of the previous years

coupled with the high price of imported goods presented absorption of the heavy

stocks in the market. Owing to the increase in the general rate of import duty on

luxuries, fresh imports received a check. The export trade failed to come up to

general expectations. In the next two years, the trade of the Presidency was passing

through a period of recuperation and although under the stimulus of high prices,

the value of the export trade expanded by over 10 crores of rupees, the value of

imports declined by over 1 1/2 crores of rupees. The depression in Europe

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generally restricted the Presidency's outlet for produce and in turn diminished her

purchasing power. The year 1924-25 witnessed further expansion in the export

trading owing to fairly good crops in that year, the 'large demand for them as a

result of improved economic conditions in buying countries and the consequential

rise in the prices of the most of the exported produce. In the next year, the import

trade in most articles was depressed despite favourable exchange and the tendency

of the fall in prices considerably restricted imports, especially cotton piece goods,

the price paid by the customer was still above the general average before the war.

Consequent on a marked improvement in the importation of cotton

manufacture, sugar, dyes and colours, machinery and mill work, paper and paste

board, there was an expansion in the foreign import trade of the year '1926-27. In

the next two years, the trade assumed prosperous dimensions. Exports and imports

in the year 1928-29 in particular attained a level never reached previously or

subsequently. This was due to a general stability in the financial condition of the

world; a stable exchange and a comparatively good supply of freight and

reasonable rates. The year 1929-30, however, showed a slight diminution in the

foreign trade of the Presidency. Following Great Britain's departure from the gold

standard September 1931 and the linking of the rupee with the deprecated sterling,

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there was an immediate rise in price of all the principal commodities and this

afforded a definite stimulus to the export trade.

The conditions created by the Depression in the Madras Presidency. such as

availability of raw materials at low prices, cheap labour, low rates of interests for

the money lent by banks, all proved to be conducive to the growth of certain

industries registered commendable advances during the inter war period.

Though the Presidency witnessed industrial development, handloom, cottage

and small scale sector had a trying time. The Government's taxation policy turned

out to be disastrous to those sectors. When the tanners were demanding high export

duty on raw skins and hides, the Government abolished the duty much against

Indian interests. An excise duty levied on matches crippled the industry and the

governments protective tariffs extended the Indian textile mil\s affected the

handloom sector. A large number of weavers in handloom centres and labourers in

small industrial establishments lost their jobs. In large factories, the workers had to

suffer wage cuts. Instead of taking the offensive, the working class, in the face of

acute crisis, remained passive. Even the strikes and struggles launched by the

organized labour unions were of short duration, fizzling out in the end.

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 The damage and dislocation due to World War II left most of the, countries

very short of real capital. They needed imports of equipment, raw materials and

foodstuffs well in excess of their normal peacetime requirements, in order to

rehabilitate their industries.

Our country had also been affected by war. Exports to the enemy countries

had also been stopped and our imports had also been reduced on accounts of the

lack of adequate shipping accommodation and the lack of power of foreign

countries to supply good to us. Insurance premia had also gone up. Our industries

had not expanded as much as they could. The currency circulation in the country

now stood at about Rs.280 crores and the metallic content of the rupee had been

reduced and the one rupee .inconvertible note had been issued. Control had been

exercised over exchange and the imports and exports had been brought under

control. The level of taxation had increased and the excess profits tax had been

imposed. A system of price control had been instituted and certain commodities

had been rationed. Thus Indian economy was turned into war economy.

The war opened scope for the development of some of our industries, e.g.

the automobile industry, the aeroplane manufacturing industry and the like. But

adequate steps had not been taken to bring these industries into existence. Our
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shipping industry was in a very backward condition. But, whatever industries had

received the stimulus, they continued after the war.

In the post-war period, the war economy had to be converted into a peace

economy. The readjustment caused as little inconvenience as possible. The

industries that grew up during the war were allowed to continue in the post-war

period with as little disturbance as possible. Then there were trade agreements. All

these became a part and parcel of a plan of post-war economic development or

economic reconstruction.

The Government prepared a plan of post-war economic reconstruction in

which due importance was given to problems of labor, industries, agriculture,

trade, tariff, finance, transport and the like. India was allowed to occupy her due

place in the comity of nations by being declared a self- governing Dominion

immediately after the war.

The war had an appreciable effect on the foreign trade of the Presidency. On

account of the war, the balance of trade of the Presidency soon moved in its favour.

As regards the quantum of trade, there was an increase in exports of materials

needed by the Allies for the war. Both imports and exports fell during the war

period, but the exports increased more than the fall in imports.
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 As a result of the war, the European markets were lost to the Presidency.

The oil-seeds market was very much affected and it could not find out an

alternative market in the United States of America since it was also a large

producer of Peanuts. The Presidency market for linseed-oil was strongly completed

for by Argentina and substitutes were used in U.S.A for jute. In regard to the

Presidency trade with the British nation, there was not much of a definite increase

or decrease in imports while there had been a steady increase in export side. Trade

with the Middle East Countries, Australia and Canada also increased.

The industrial workers of the Presidency confronted an extremely difficult

situation after 1930. The mill owners tried to pass the burden of trade crisis on to

the shoulders of the workers by way of wage cuts and retrenchments. During the

period, the workers did not achieve any new concession, rather they had to engage

in a resolute struggle to retain not only whatever they had already gained but their

very jobs. Yet, there was a rival in the trade union movement after 1933. It was

mainly due to the revival of leftist forces, the constitutional reforms introduced by

the Government and the recovery of economy after the Great Depression. The

labourers in view of the Congress policy looked to the Congress Government in the

Madras Presidency for support. The Congress refused to intervene directly to deal

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with the situation in arising out of strikes. The Congress Government led by C.

Rajagopalachari treated the question of strike as dispute between two parties and

hence favoured only internal settlement. The Government appointed arbitrators to

implement the awards of the Court of Enquiry.

The Congress Government's two generation of office in Madras achieved

nothing for the protection of worker's rights. This was probably because of the

Congress continuous approach of not antagonizing the employers or factory

owners while intervening in a labour dispute.

The Second World War had shakened the pace of the tendency of the

diversion of trade from Great Britain. Next to Great Britain, U.S.A had become the

biggest customer and on the import side also, she stood second only to England.

Madras Presidency enjoyed favourable balance of trade. both with the British

Empire and Empire countries and in both the cases, there was an appreciable

increase. It may be mentioned that as a result of war, the balance of payments had

also become favourable to the Madras Presidency as well as to India. This was due

to the repatriation of sterling pensions. Finally, it may be stated that inspite of

favourable position in which Madras was placed in respect of foreign trade, the

terms of trade i.e. the exchange of imports for the exports were going against us.

The study of trade between 1940 and 1947 may be thus concluded:
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 1. The favourable position of foreign trade (export trade) was at the expense of

the domestic consumer and reacted on the internal price system

unfavourably.

2. The fall in imports created shortage of many articles and this produced rise

in the price level.

3. The favourable position indicated by changes in the composition was

deceptive. It did not indicate further industrialization of the Presidency. On

the contrary, the heavy reduction in the import of machinery shows that our

capital requirement was seriously subjected to greater wear and tear and thus

to greater depreciation and

4. Inspite of our favourable position in regard to our export trade, the imports

were growing costly in terms of our exports.

The Government of India had been pursuing a policy of discrimination

towards trade and industry during our period of study. It demanded provincial

contribution from stares to promote and develop trade and industries. The

allocation of Central financial assistance to the Madras Presidency was inadequate.

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 In 1921, the Government of India insisted on the Provincial Contracts. The

Madras Chamber of Commerce fought against the vexed question and enlisted the

support of all other Associations and all sections of the Indian opinion but its

attempt did not yield any success.

In 1922 like the Central Government, the Madras Government implemented

retrenchment and economy measures to balance the deficit budget. The Chamber

urged to lighten the grievous burden and questioned the legality of the Super Tax

levied. It also pointed out the iniquity of the Government of India demanding a

Provincial Contribution from Madras for its development of trade.

The Imperial Ottawa conference held in 1932 for giving some concessions to

India's trade proved to be a business deal in furtherance of British Interests. The

Chamber made a strong case for discontinuing the Ottawa Agreement in 1936.

Though the Ottawa Agreement was renewed in 1939, it also proved to be

beneficial to the British Trade rather than to the Indian trade.

The Congress Government led by Rajaji passed a number of Acts and levied

taxes such as the Madras General Sales Tax Act, The Tobacco Tax Act, The

Entertainment Tax Act and the Madras Sale of Motor Spirit Tax Act in 1937. The

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Chamber questioned the constitutional tenability of these Acts and urged the need

for the reduction of Stamp Duty, Excise Duty and Profession Tax in the city.

The Madras Chamber of Commerce always favoured a policy of Free Trade

and its economic philosophy had been a mix of Free Trade and Protectionism as its

pragmatic approach for the development of trade and industry in the Presidency.

It is said that the decline outweighed growth and that both growth and

decline derived mainly from colonial policies. The economic interests secured by

British rule led to the exploitation and impoverishment of India.

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GOVERNMENT OF INDIA ANNUAL

Annual Statement of the Sea-borne Trade of British India with the British

Empire and Foreign Countries, 1920 to 1947.

Review of Trade of India, 1920 to 1947.

Statistical Abstract for British India, from 1920 to 1947.

Census of India, 1911, 1921 and 1931. Madras Volume XIV - Parts I and II.

Hand Book of Information on the Administration of the Madras

Presidency, Madras, 1928.

Hand Book of Statistics, Government of India.

Report of Royal Commission on Labour in India, Calcutta, 1931.

MADRAS GOVERNMENT ORDERS

Development Department.

Education Department.

Finance Department.

Public Department.

Public Works and Labour

Revenue Department

Department of Trade and Customs

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Administration Report of the Labour Department, 1914 to 1947, Madras.

Madras Legislative Assembly Debates- 1920-1947.

Madras Legislative Council Debates-1920-1947.

Proceedings of the Madras Chamber of Commerce, 1924 to 1947,

Madras.

The Manual of the Coimbatore District.

Madras Year Book.

Annual Review of Trade of Indian (Publication, 1929-1946), by the

Governor General - in Council.

Under Secretary's Secret Safe.

Annual Reports of Chamber of Commerce.

Annual Report of the Southern India Chamber of Commerce, 1924 to

1947, Madras.

Annual Report of the Department of Industries, 1914 to 1947, Madras.

Indian Industrial Commission: Minutes of Evidence 1916-1917, Vol. ll,

Madras and Bangalore Calcutta, 1918.

Indian Industrial Commission - 1916-1918: Appendices to the Report,

Calcutta, 1919.

The Indian Fiscal Commission, 1921.

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The Montagu-Chelmsford Proposals, S. Satyamurthy (ed.)-

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The Anandha Vikatan, Madras

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The Indian Express-1920-1947, Madras.

The Indian Labour

The Janasakti

The Justice- 1931 to 1935, Madias.

The Kanthirava, Mangalore.

The Kudi Arasu

The Mail, Madras

The Malayala Manorama, Kottayam

The Manikkodi, Madras.

The Mathrubhumi, Calicut

Monthly Digest of Economics and Statistics, Madras

The Navasakthi

The Rashtra Bandhu, Mangalore.

The Samarasa Bhodhini, Tanjore

The Swadesamitran

The Swathantharasangu

The Tamilmani, Madras

The Tamilnadu, Madras

The Thozhilalar Murasu, Madras.

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The Thozil Sangu

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TheVidutalai

The Viswa Bnahdu, Karaikkudi.

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The Indian Review, 1920 to 1947, Madras, G.A, Natesan.

The Indian Textile Journal: Golden Jubilee by J.M. Doak.

The Indian Textile Journals.

The Indian Year Book, Calcutta, Bennet Coleman, 1920 to 1947.

The Journal of Madras Geographical Association. Vol. V. Nos-2-3 July,

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Modern Review, Calcutta.

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 APPENDIX

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 CHART - XV
TRADE OF THE PROVINCE BY COUNTRIES 1945-46
(VALUE IN LAKHS)

OTHERS 76

COMMON WEALTH OF
41
AUSTRALIA

BURMA 41

PORTUGESE EAST AFRICA 41

UNION SOUTH AFRICA 45

CEYLON 82

CANADA 88

UNITED KINGDOM 674

UNITED STATES OF AMERICA 644

IRAN 802

0 100 200 300 400 500 600 700 800 900

Source: Madras Administration Report for the year, 11945-46., P.152.

Source: Madras administration Report for the year 1945-46, P.152

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 CHART - XII
TRADE OF THE PROVINCE BY COUNTRIES EXPORT (1944-45)
(VALUE IN MILLIONS)

OTHERS 14.6

MADAGASCAR 2.1

AUSTRALIA 7.9

CANADA 10.3

EGYPT 15.1

UNION SOUTH AFRICA 17

UNITED STATES OF AMERICA 57.5

UNITED KINGDOM 130.7

CEYLON 193.7

0 50 100 150 200 250

Source: Madras Administration Report for the year, 11945-46., P.152.

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 CHART - V
TRADE OF THE PROVINCE BY COUNTRIES EXPORT (1946-47)
(VALUE IN LAKHS)

OTHERS 67

FRANCE 62

STRAIT SETTLEMENTS 93

CANADA 96

BELGIUM 103

COMMON WEALTH OF AUSTRALIA 151

UNITED STATES OF SOVIET RUSSIA 158

BURMA 357

CELON 102

UNITED STATES OF AMERICA 1361

UNITED KINGDOM 2280

0 500 1000 1500 2000 2500

Source: Madras Administration Report for the year, 11946-47

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 CHART - XVI
CHIEF ARTICLES EXPORTED 1944-45
(VALUE IN MILLIONS)

OTHERS (JUTE, OILS. COFFEE, ETC) 50.3

SPIECES 6

ORES. METALS AND MINERALS 7.6

RUBBER 9.3

TOBACCO 9.5

FISH 18.8

COIR 18.9

LEATHER 30.3

FRUITS AND VEGETABLES 43

TEA 63.2

SEEDS 63.5

CONTTON MANUFACTURERS 75.1

0 10 20 30 40 50 60 70 80
Source: Madras Administration Report for the year, 11945-46, P.207

CHART - XIV
CHIEF ARTICLES EXPORTED 1945-46
(VALUE IN LAKHS)

OTHERS 481

WOOL MANUFACTURES 30

FIBRE 35

RUBBER 51

OILS 84

SPICES 164

TOBACCO 169

FISH 232

COIR 294

COTTON MANUFACTURERS 400

LEATHER 505

TEA 625

SEEDS 687

FRUITS AND VEGETABLES 711

0 100 200 300 400 500 600 700 800

Source: Madras Administration Report for the year, 11945-46

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 CHART - XI
SEA - BORNE TRADE
160

Total Sea-borne Trade

140 Exports
134.6
Imports 131.5

120

100
93.3
88.6
82.8
80 78.6
75.3 77

66.5
60

44.7
40 38.6 38.6 39.6
36.5 36.2 36.4 36.6
32.6 33.7
29.1 30.7
24.9 26.9
24.3 24.1 24.3
20
15.6
10.2 10.1

0
1936-37 1937-38 1938-39 1939-40 1940-41 1941-42 1942-43 1943-44 1944-45 1945-46
Source : Madras Administration Report for the year 1945-46

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 CHART - X
SEA - BORNE TRADE
180
170.7
Total Sea-borne Trade
160
Exports
Imports
140
134.8
131.5

120

100
93.3
83.5 82.7
80
75 75.3 77

66.5
63.3
60

43.4
40 38.6 38.6 38.6 39.4 40.7
36.2 36.4
33.7
29.1 30.7
24.9 26.8
22.6 24.3 24.1 24.3
20
10.2 10.1
0
1937-38 1938-39 1939-40 1940-41 1941-42 1942-43 1943-44 1944-45 1945-46 1946-47
Source : Madras Administration Report for the year 1946-47

R. Jeyasurya, Ph.D.
Department of History
PSGR Krishnammal College for Women
Peelamedu
Coimbatore 641 004
Tamilnadu, India
jlg_12@yahoo.in

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