India’s income inequality problems are well-acknowledged and many believe that the roots of this inequality were laid down by the British Raj.
The institutional and commercial policies of British India made the rich richer and poor poorer during colonial rule, according to this popular view.
However, a new research by economic historian Tirthankar Roy of the London School of Economics finds that the role of the British in worsening income inequality may be overstated.
The British rule transformed India’s economy, shifting the nation from an exporter of manufactured goods (such as textiles) into an exporter of agricultural goods, according to Roy.
Most economic historians claim that this increased inequality between those owning property and the property-less because of capitalist exploitation and colonial intervention, favouring landlords, traders and money-lenders over peasants, artisans and landless labourers.
Reclassifying historical national income data from around 90% of the workforce compiled by statistician F.J. Atkinson into broad occupation classes and looking at the income shares of the top and bottom end of the distribution, Roy finds inconclusive evidence for this claim.
His research finds that the fortunes of the core propertied group, the rentier-landlords, actually fell.
Propertied classes also include the land-owning peasants, who experienced a rise in income share in the pre-war decades between 1875 and 1895 followed by a decline. This, according to Roy, is because the open economy of the 19th century affected land- and trade-dependent occupations differently.
Low and stagnant land yields in India limited average incomes of those engaged in land-dependent occupations. Despite the limited growth, Roy finds that the distance between average income and the poverty line did not change significantly, suggesting that the poorest did not become poorer under British rule.
By contrast, trade-dependent occupations could escape this land-yield constraint and saw incomes grow. Roy concludes that this caused the emergence of a middle class with no other significant effect on income distribution.
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