wish the committee to bear this fact prominently in mind

8/3/2019 Wish the Committee to Bear This Fact Prominently in Mind

http://slidepdf.com/reader/full/wish-the-committee-to-bear-this-fact-prominently-in-mind 1/29

wish the Committee to bear this fact prominently in mind, that

right throughout the statement I have to make, the one diffi culty

infl 1IMacroeconomic and EnvironmentalHistory: The Impact of CurrencyDepreciation on forests in British India,1873-1893*

Sashi Sivramkrishnawith which the Indian Government have to contend is the fall

in exchange²it has a blighting and withering inflfl uence in every

direction.

Lord George Hamilton, Secr etary of State for (Br itish) India.

GE 119

IntroductionTh e impact of macroeconomic var iables on the environment has been widely explor ed by economists and policy analysts. Th ese studies

have, however, by and large dealt with contempor ary concerns.Since the 1980s many develo ping countr ies f acing sever e macroeconomic

imbalances have been for ced to ado pt str uctur al adjustment progr ammes (SAPs). Such progr ammes, it is argued, have had an adver se

impact on their environment, par ticular ly under the for m of incr eased r ates of defor estation. In this paper, I attempt to study something

similar, though not quite the same. In the third quar ter of thenineteenth century, India went through a distinctive phase in ter ms

of the value and stability of its curr ency, the r upee. Th is is evident in Gr aph 1, which shows the exchange r ate of the r upee between 1835

and 1914.2Th e per iods 1835 to 1873 and 1893 to 1914 wer e clear ly ones of r elative stability in the r upee-ster ling exchange r ate as compar ed



to the per iod 1873-1893, over which the r upee depr eciated by almost 50 per cent. Th is exogenously induced distur bance in curr ency

value aff ected sever al other macroeconomic elements, including thequantum of home charges that had to be r emitted annually to Br itain,

government r evenues and expenditur e, debt and investment, and

for eign tr ade. Did these macroeconomic changes, which ar e akin to cer tain eff ects of SAPs, have an impact on India¶s environment? Finding an answer to this question def i nes the o b jective of this paper . Th e

issue is hither to unexplor ed in Indian environmental history.I begin with a sear ch through some r ecent studies on SAPs and

the environment for possible linkages between macroeconomic and *Th e author gr atef ully ack nowledges the cr iticisms and suggestions of the editor

and r ef er ees. However, r esponsibility for f i nal contents of this ar ticle is solely

the author ¶s

1 UK Par liament Proceedings, 4 September 1895, http://hansard.millbanksystems.

com/commons/1895/sep/04/east-india-r evenue-accounts#S4V0036P0_18950904_

HOC_44.

2 £-s-d or pounds-shillings-pence was the pr e-decimal coinage of Br itain in

which 12 pence (12d.) = 1 shilling and 20 shillings (20s.) = £1. Th is made 240d.

= £1.RESEARCH ARTICLES / Sivramkrishna 120

environmental var iables. Having done so, I pr esent an abr idged account

of India¶s curr ency history from 1835 to 1917 followed by aqualitative evaluation of the discour ses dur ing and of that per iod

on how this curr ency depr eciation had a ³blighting and wither ing´ - though sometimes quite the o pposite - inf luence on var ious macroeconomic

elements. If indeed the macroeconomic impact of a f alling r upee was as signif icant as it was made out to be by commentator s

of that time, then it is my contention that the ensuing eff ect on

the environment could also have been impor tant.The environment-sensitive var iables I have chosen to investigatear e r estr icted to those r elated, dir ectly or indir ectly, to for ests, suchGGrar pahp 1h. S t1er. liSngt-eR r ulpieneg ex-Rchuanpgee rea tee xchange rate

0510152025301835-61841-21847-81853-41860-11866-71872-31878-91884-51890-11896-7



1902-31908-91914-5

Year Pence per rupeeSour ce: B.R. Ambedkar, H istory of Indian Currency & Banking , Second Impr ession,

TShoauck r cer e :a nBd. R C.o mA pman bye dLk imar i,t e H d,i B st oomry b oay f , I 1n9d 4i7a,n p pC .6u6r -r 6en7 ca yn d& 1 7 B4a.

nking , Second Impr ession, Thacker and Company Limited, Bombay, 1947, pp.66-67 and 174.

GE 121

as r evenues from for ests and for estry, timber expor ts, incr eased ar ea

under cultivation of food and commer cial cro ps, expansion of plantations, a slowing down or incr eased investment in sector s like the

r ailways and public wor ks, and for est policy.3 Given that we f i nd only spar se mention of specif i c and dir ect linkages between the r upee-ster ling

exchange r ate and the environment, I will attempt to deduce possible connections in two stages: f i r st, between curr ency depr eciation

and var ious macroeconomic phenomena; second, between thesemacroeconomic phenomena and environmentally sensitive var iables.

Mor eover, since curr ency depr eciation could have aff ected environmentally sensitive var iables in contr adictory dir ections, and many of

the eff ects ar e not discr etely o bser vable in quantitative data, the natur eof my analysis will be mor e explor atory than computational.

Th e f i nal section will summar ize the justif i cation for and f i ndingsof my study, and in doing so will also cr itique Indian environmental

histor ical r esear ch, which I believe has either f ailed to r ecognize or not given adequate impor tance to the environmental impact of macroeconomic

distur bances.The Contemporary Discourse on SAPsand the EnvironmentAs mentioned in the Introduction above, this paper per ceives an

analogy between the impact of the Wor ld Bank¶s SAPs on the environmentand the depr eciation of the r upee in the nineteenth century. It is

impor tant for me to make clear that my br ief r eview of contempor ary discour se on SAPs is not intended to be an evaluation of empir ical r esults

or methodologies ado pted by these studies; r ather, its pur pose isspecif i cally to cull out ar ticulated theoretical linkages between macroeconomic

and environmental var iables. I will then attempt to make a caseof their r elevance and impor tance in the context of Indian history.

Th e oil shock of the 1970s, growing for eign debt, mismanagementof domestic economies, and the tightening of inter est r ates3 Other var iables per taining to the environment like soil erosion, wildlif e, biodiver sity

and water r esour ces have been lef t out of our study.RESEARCH ARTICLES / Sivramkrishna 122

on for eign borrowings led to a f inancial cr isis in many develo ping



countr ies in the 1980s. As growth r ates plummeted and unemploymentsoar ed in these countr ies, their governments turned to the

Wor ld Bank and International Monetary Fund (IMF) for bail-out packages to ser vice their debt and allow them continued access to

for eign loans. However, these packages came with a set of ter ms and

conditions widely r ef err ed to as ³str uctur al adjustment progr ams´, or SAPs, which aimed at compr ehensive economic r efor m of their f inancially unsound domestic economies and unsustainable policies

and progr ams. It is not the o b jectives of SAPs, namely growth, eff iciency, alleviation of pover ty and sustainable develo pment, that

ar e per se controver sial. Rather, o pponents to these mar ket-or iented r efor ms contend that the var ious instr uments of SAPs lead to outcomes

that ar e in f act contr ary to the stated o b jectives, amongstwhich is their negative impact on environment and sustainability.

Broadly speaking, SAPs have promoted the r emoval of all kinds of distor tions in the internal and external tax str uctur e, pr ice controls,

subsidies, f iscal policies and asset owner ship to allow economies to becomemor e competitive and their production mor e in line with r esour ce

endowments and compar ative advantage. Among the instr uments and policies implemented under SAPs, of specif ic inter est to us ar e:

Devaluation of domestic curr ency4

Reduction of f iscal def icits

Incr eased inf low of for eign investmentOne way that cr isis-r idden countr ies can alleviate their diff iculties

in ser vicing for eign debt is by letting the mar ket deter mine exchanger ates between domestic and for eign curr encies, and then o pening their

economies to for eign tr ade. Exchange r ates ar e essentially the pr ice of home curr ency vis-à-vis for eign curr encies and should r ef lect mar ket

demand for and supply of curr encies. An over valued curr ency, i.e., an excessively high pr ice of domestic curr ency encour ages impor ts but

makes expor ts uncompetitive, ther eby putting a country¶s tr ade ac-4 Devaluation is a planned and pur posef ully executed corr ection in exchange

r ates, wher eas depr eciation in curr ency value is an outcome of mar ket for ces.

GE 123

count in per petual def i cit. If countr ies ar e to be in a position to ser vice

their debts by having a tr ade account sur plus, a devaluation of their home curr ency is essential, so that expor ts become mor e competitiveand impor ts costlier . For many underdevelo ped countr ies, given their

compar ative advantage in pr imary products like miner als and metalor es, agr icultur al commodities and for est produce, curr ency devaluation

and the consequent incr eased expor tation of these products ar eexpected to adver sely impact the environment. An example is Mali,

wher e SAPs led to an incr ease in the ar ea under cotton cultivation



from 14,000 acr es in 1960 to 63,000 in 1993.5

However, many studies have found no overr iding empir ical evidence

to wholly suppor t the claim of pessimists who r e ject SAPs intoto. Countr ies which do not have a compar ative advantage in these

environmentally sensitive goods would actually not see any incr ease

in their r ates of defor estation. On the other hand, those countr ieswhich do have a compar ative advantage in such products, and ar efor est-r ich, may exper ience an incr ease in expor ts with ³a negative

impact on the for est and biodiver sity sector s, although they would contr ibute to the over all economic r estr uctur ing´.6 Nonetheless, I

will attempt to study the r elevance of this linkage between exchanger ate changes and environmental var iables in Indian history.

Another impor tant policy in SAPs is the control and corr ection of domestic f i scal or budgetary imbalances. Many develo ping countr ies

wer e spending in excess of their r evenue earning capacities because of internal mismanagement and external shocks. Th e consequences of

budgetary def i cits wer e many and ser ious: high inf l ation r ates, highinter est r ates to enable government borrowing, high exchange r ates of

domestic curr ency, tr ade account def i cits, crowding out of pr ivate investment, and poor cr edit wor thiness. Th e over all r esult of all these eff ects

was, however, one: a lower long-ter m economic growth r ate of the5 J. Win penny, ³Case Study for Mali´, in Structural Adjustment, the Environment,

and Sustainable Development , D. Reed (ed.), Ear thscan Publications Limited,

London 1996, p. 96.

6 R.A. Sedjo, Macroeconomics and Forest Sustainability in the Developing World ,

Resour ces for the Futur e, Discussion Paper, DP 05-47, 2005, p. 9.RESEARCH ARTICLES / Sivramkrishna 124

economy. Under SAPs it was, ther efor e, consider ed of utmost pr ior ity

to pr essur ize countr ies to corr ect their budgetary imbalances, which essentially tr anslates into r educing expenditur e and incr easing r evenues.

Effor ts to incr ease government r evenues usually focus on widening the tax base and mor e eff icient administr ation of tax collection. Government

r evenue can also be enhanced by gener ating higher r eturns on thegovernment¶s investments, including those in public sector enter pr ises

or other commer cial activities. Gener ating r esour ces from pr ivatization of state-owned enter pr ises to r epay debt and ther eby lower annual inter est

outgoings has also been consider ed an impor tant policy o ption. On the expenditur e side, governments may r esor t to cuts in the r ecr uitment

of new employees, subsidies and cr edit f acilities, pover ty alleviation progr ammes, health and education spending, and so on. In many cases,

such expenditur e-r educing policies could dir ectly aff ect for estry and environment protection progr ammes. Ther e could also be indir ect impacts

of expenditur e cuts on defor estation; for instance, a r eduction in agr icultur al subsidies and cr edit could for ce small and marginal f ar mer s

to expand cultivation into marginal lands, especially for ests, to maintain cro p yields.7 Once again, the curr ency r egime in Indian history led to a

situation wher ein budgetary control became cr ucial; the then Governmentof India had to look at ways and means to incr ease r evenues and,



at the same time, cur tail its expenditur e. If corr ection of f iscal imbalancescan be hy pothesized as aff ecting the environment in contempor ary

economies, ther e is no r eason why this may not have been so a century and half ago, especially in a situation wher e ³the r ur al sector, compr ising

agr icultur e, and ancillary activities such as animal husbandry, for estry

and f ishing, was the foundation of the colonial economy´.8

A key component of SAPs has been the r emoval of barr ier s inhibiting the fr ee f low of capital across nations. The incr eased inf low of

for eign capital is seen as unf avour able to the environment because7 J.M. Shandr a, E. Shor, G. Maynard, and B. London, ³Debt, Str uctur al Adjustment,

and Defor estation: A Cross-National Study´, in J ournal of World-Systems

Research, XIV, 1, 2008, p. 3.

8 B.R. Tomlinson , The Economy of Modern India, 1860-1970, Cambr idge Univer sity

Pr ess, New Delhi 1998, p. 30.

GE125

of incr eased activity in sector s in which develo ping countr ies have acompar ative advantage, such as mining, logging, r anching and agr icultur e.

Although hy pothetically convincing, the empir ical validity of these claims has not been established. Th is link between for eign

investment and the environment may, however, have been very impor tantin Indian environmental history given the impor tance of

for eign investment f l ows into the constr uction of the r ailways, publicwor ks and agr icultur e-plantation based industr ies.As mentioned above, the question of the existence of a link between

SAPs and the environment, which many studies have sought

to establish or r e ject, is beyond the sco pe of this paper . For the sakeof completeness it is only necessary to mention that the gener al conclusion that emerges from these studies is the diff i culty ³to demonstr ate

empirically a connection between str uctur al adjustment progr amsand deter ior ation of for ests´.9Th is is because the per ceived

theor etical linkage between SAPs and for est cover outcomes assumesa homogenous context; in r eality this is not so. Var iations across

countr ies and local situations ± including the ways in which governmentsmay r eact, in r egulatory ter ms, to changes in economic tr ends

± make the pr ediction of cause and eff ect in this ar ea extr emely diff icult. Per haps the dir ectional impact of SAPs or develo pment policy

lending (DPL) is best summar ized in a Wor ld Bank r epor t:Th is document « asser ts that it is clear that r elatively large-scale economic

changes can have signif i cant impacts upon for ests. However, ther e is gr eat

var iability in outcomes in for ests from such changes across the many diff er ent

countr ies and situations cover ed in the studies r eviewed. « It also is clear

that the gener ic model r ef err ed to above cannot be built at this point. Fur ther

infor mation on what is dr iving the o bser ved changes locally « is necessary.10

India¶s Currency History, 1835-1914India¶s colonial curr ency history from the beginning of the nineteenth



century till its independence from Br itish r ule can be divided into sever al9 Sedjo, Macroeconomics and Forest Sustainability cit., p. 12. Emphasis my own.10 Wor ld Bank , Development Policy Lending and Forest Outcomes Infl uences,

Interactions, and Due Diligence, Repor t n. 33537-GLB, 2005. Emphasis or iginal.RESEARCH ARTICLES / Sivramkrishna 126

mor e or less well def ined per iods.11 I focus her e on the 1835-1914 per iod,

which includes the phase of curr ency depr eciation, 1873 to 1893.Befor e analyzing the linkages between curr ency depr eciation and macroeconomicand environment-sensitive var iables, I will br ief ly descr ibe

the under lying curr ency r egime and the basis for stability and causes of instability in r upee-ster ling r ates over the per iod under investigation.

1835-1873The star ting point chosen for this study is 1835, the year when

Br itish India went on to a monometallic silver curr ency. By ActXVII of 1835, the silver r upee was made the standard coin of India.

With the tr ansf er of r ule from the Br itish East India Company to the Crown in 1858, India was no longer under the control of just

one company; it became accessible to all of Br itain¶s industr ialistsand f inancial capitalists. With this, India¶s expor ts gr ew and so did

investments in the country. In spite of an inf low of gold into thecountry, this was not usable for curr ency. Ther efor e, a large amount

of silver had to be impor ted into India, but, given the country¶scr aving for pr ecious metals, the amount of silver available for tr ade

and commer ce r emained def icient. Although this phase (1835 to 1873) within the 1835 to 1893 per iod witnessed a f ailed effor t at

putting India on a gold standard, the one thing that distinguished itfrom the next phase (1873 to 1893) was stability in the gold/silver

r atio. Over the pr evious two hundr ed and f if ty year s, the gold/silver

pr ice r atio had f luctuated only slightly, within a r ange of 1:13.75to 1:15.25. In 1870-71, with the gold pr ice of silver at about 60d. per ounce, the Indian r upee was wor th fr actionally less than 2s. By

1893, the gold pr ice of silver had gone down to just 39d. per ounce, so that the Indian r upee became equivalent to just 1s.3d.12

1873-1893Even as India continued to r emain on a monometallic silver standard,

the 1873-1893 per iod was tr uly dr amatic. The gold/silver r atio, 11 See D.K. Malhotr a, H istory and Problems of Indian Currency, 1835-1949: An

Introductory Study, Fif th Edition, Miner va Book Sho p, Simla 1949.

GE 127

which had maintained par ity over centur ies, was disr upted for ever .

With Br itain on a monometallic gold standard and India on a silver standard, the br eak down in par ity was r ef l ected in disr uption of a

stable ster ling-r upee exchange r ate, with the r upee depr eciating fromRs.10 to Rs.15 per ster ling pound over 20 year s. Th e r easons for this



change in exchange and par ity r ates wer e, in the f i r st place, the dro pping of silver as a money medium by the pr incipal countr ies of the

wor ld, and secondly an incr ease in the production of silver r elative to gold.13Th ough these r easons ar e contr adicted by f acts r elating to the

actual production of gold and silver, it is not necessary to delve f ur ther

into the cause of the depr eciation; most impor tant to us is the f act thatthe depr eciation was tr igger ed by external and exogenous f actor s and was not due to India¶s balance of payments position.14

Th roughout the per iod it was ho ped that the pr ice of silver would stabilize. Th e silver producer s¶ inter ests in sustaining demand for

the metal maintained pr essur e on the U.S. government to establish bimetallism. Many international conf er ences wer e held, in which

India too par ticipated, but the f i nal outcome at the InternationalMonetary Conf er ence held at Br ussels in 1892 sealed the f ate of

silver . Th e U.S. decided to abandon its pur suit of bimetallism and ado pt a pur e gold standard.

1893-1898When the U.S. announced its decision to give up the pro posal

for a bimetallic standard, and ther efor e the pur chase of silver for curr ency, the gold pr ice of silver witnessed a f ur ther f all. It was only

af ter 1898-1899 that the r upee stabilized and managed to maintain a minimum value of gr eater than 1s.3d; the r eason per haps being the

gener al incr ease in the demand for r upees among a growing po pulation, and a gr eater quantum of economic activity.15Th e 1893-1898

per iod is r egarded as one of tr ansition.12 Malhotr a, H istory and Problems of Indian Currency cit., pp. 5-6.

13 See, ibid., Chapter IV and B.R. Ambedkar, History of Indian Curr ency and

Banking, Butler & Tanner Ltd, London 1947.

14 Ibid., pp. 71-80.15 Vakil, Mur anjan, Currency and Prices in India cit., p. 65.RESEARCH ARTICLES / Sivramkrishna 128

1899-1914³For once it seemed that the pro blem of the depr eciating r upeewas satisf actor ily solved´.16 Over the next f if teen year s India

witnessed a stable ster ling-r upee exchange r ate (see Gr aph 1). Thesystem that had evolved from Br itain¶s hesitancy to put India on a

pur e gold standard was ultimately r ecognized as a ³gold exchangestandard´. For mally, we can say that this phase in India¶s monetary

history began in 1899 when the sover eign and half -sover eign wer emade legal tender at Rs.15 = £1 (or Re.1 = 1s-4d), vide Indian Act

No. XXII.17 Under the gold exchange standard, gold was not used as curr ency, nor was a gold mint set up in India. The essential f eatur es

of this system wer e that both gold sover eign and silver r upeeswer e f ully legal tender, with the government under taking exchange

of sover eign for r upees but not vice-ver sa. The intr icacies of the gold exchange standard ar e beyond the sco pe of this paper ; to us what is

impor tant her e is the stability of the ster ling-r upee exchange r ate, which, as Gr aph 1 shows, endur ed until the outbr eak of the War .



Currency Depreciation, MacroeconomicEnvironment, and EnvironmentThe passion that the depr eciation of r upee aroused is quite akin to thef amiliar outbur sts of r esentment against the Wor ld Bank and the IMF

for their implementation of SAPs. A f ew r emar ks r eproduced below will

give a f eel of how economists of the time per ceived the situation. Vakiland Mur anjan summar ized the eff ect of this ³evil´ phase as ³very gr ave´ and one which put the peo ple of India in ³most ser ious diff iculties´.18

MacLeod descr ibed it in the following ter ms: ³A monetary cr isis of themost momentous gr avity has arr ived in the aff air s of India « which

have brought India onto the verge of bank r uptcy. The Governmentthemselves descr ibe the state of the country as µintolerable¶´.19 In the16 Ambedkar, H istory of Indian Currency cit., p. 152.

17 One r upee is wr itten as Re. wher eas r upees ar e wr itten as Rs.

18 Vakil, Mur anjan, Currency and Prices in India cit., p. 34, 38.

GE 129

Introduction to his book , Monson George stated that he had ³endeavour ed

to call attention to the gr eat evil to the univer se, and India and Gr eat Br itain in par ticular, caused by the depr eciation in the gold value

of silver´.20 According to Shirr as, who was on special duty in the FinanceDepar tment of the Government of India, ³No per iod of our curr ency

history is so r ich in liter atur e as is the third per iod, 1874-1893 « thecurr ency machine was the master of man, not the man of machine´.21

But, as we shall see, it is mor e than passion that makes the curr ency depr eciation

of the late nineteenth century compar able to SAPs.Th er e ar e thr ee broad categor ies within which I seek to study the link between curr ency depr eciation and the macroeconomic

environment: budget, investment and tr ade. If these elements of macroeconomy wer e indeed sever ely impacted by the curr ency depr eciation,

it is quite likely that ther e could have been signif i cantr eper cussions on the environment, par ticular ly for ests and for est

policy. Figur e 1 below outlines my line of argument.forests and the BudgetTh e depr eciation of the r upee proved to be an ³embarr assment´ to the Government of India when its annual budgetary exer cises

began to go awry. Every year the Government had to r eimbur se theexpenditur e incurr ed in England by the Secr etary of State for India.

Th ese ³home charges´ or ³dr ain´, which had to be paid in (gold)ster ling, needed a larger and larger amount of r upees with the f alling

gold pr ice of silver .22Th e situation wor sened with the gr adualincr ease in home charges over the year s so that ³the r upee cost of

the gold payments gr ew both by r eason of the growth in their mag-19 H. Dunning MacLeod, Indian Currency , Longmans, Gr een & Co., London

1898, p. v. Emphasis or iginal.



20 E.G. Monson, Th e Silver and Indian Currency Questions: Treated in a Practical

Manner , Eff i ngham Wilson & Co., London 1914, p. 5.21 G. Findlay Shirr as, Indian Finance and Banking , Macmillan & Co., London 1920, p. 114.

22Th is ³Dr ain´ became a symbol of economic nationalism and r allying point

for one of India¶s ear liest nationalist movements led by Dadabhoi Naoroji.RESEARCH ARTICLES / Sivramkrishna 130

nitude, and also by r eason of the contr action of the medium, i.e.the appr eciation of gold in which they wer e payable´. 23To Desai, it

was not the home charges per se that wer e the pro blem; ³The Dr ain cr eated pro blems of r epayment because it was incurr ed in ter ms of

Pound Ster ling then based on gold and paid in Rupees based on silver .Since the Rupee was depr eciating against the pound the domestic

burden of ser vicing the debt was getting heavier dur ing 1870¶sand 1880¶s´.24 Between 1873 and 1893 the r upee value of home

charges incr eased from 147 to 270 million; mor e than the combined r evenues from land and customs duties.

In hindsight one might suppose that the pro blem the Governmentof India was undergoing at that time was mer ely a depr eciating

curr ency. However, it is impor tant to r ealize that an even gr eater pro blem was the uncer tainty in anticipating the gold value of silver

and ther efor e the extent and dur ation of the f all in the r upee, whichchanged ³as much as 17 per cent within the cour se of one year´. 25

23 Ambedkar, H istory of Indian Currency cit., p. 83.

24Lord M. Desai, Drains, H oards and Foreigners: Does The Nineteenth Century

Indian Economy H ave any Lessons for The Twenty First Century India?, Reser veBank Of India Fir st P. R. Br ahmananda Memor ial Lectur e, http://r bidocs.r bi.org.

in/rdocs/Speeches/Pdf s/58008.pdf, p. 4. Emphasis my own.25 J. McGuir e, ³India, Br itain, Pr ecious Metals and the Wor ld Economy: The

FiFguirge u1. r Peos s1ib.l eP imopsacstsi bof leexc hiamngpe aracte tdsep roef ci aetixonchange rate depreciation

Exchange RateDepr eciation

Budget

Investment

Expor tsIncr ease r evenue, incr ease for est exploitation Decr ease expenditur e, decr ease for est

protection

RailwaysPublic Wor ksPr ivate investment ( jute, tea, cotton)Fall in r upee pr ice of expor ts, outputincr easesIncr eased speculation, r educed tr ade

GE

131

As Walter Bagehot, editor of Th e Economist , put it in 1877, ³Howlong the f all in the value of silver will continue no one can say´.26

Sir David Bar bour calculated that the additional burden imposed on the f i nances of India by the f all in exchange from 1s.6d. to 1s.5d.

would be mor e than 10 million r upees.27Th e outcome at the end of each year was not only uncer tain but also put incr easing pr essur e on

the Government of India to r aise r evenues to provide for unexpected



contingencies emanating from the curr ency depr eciation. Table 1shows how diff er ences in anticipated and r ealized r upee-ster ling exchange

r ates impacted the budgetary process; making budget calculationsand arr angements had become nothing mor e than illusory.

With limited r evenue sour ces available to the Government of India

and an incr easing and uncer tain expenditur e, a cr isis in Indian f i nancewas f ast develo ping. Even as ear ly as 1877, Bagehot o bser ved, ³the wholeinter est of the debate on the Indian budget center ed in the discussion on

the value of silver´.28 A f ew year s later, the situation had become mor eser ious: ³Th e discussion of the Indian budget of 1879 in Par liament will

not impro bably be long r ef err ed to as mar king the commencement of anew epoch in Indian f i nance.´29 In 1880, Fawcett made an urgent plea:

³Enough has pro bably now been said to prove that the time has arr ived when, in order to r estor e the f i nances of India and pr event them from

dr if ting into ho peless embarr assment, it is absolutely essential that the policy of µr igid economy in every br anch in the public ser vice¶, which

has been r ecently announced by the Government, should be carr ied out with promptitude and thoroughness´.30 And in the ear ly year s of

the last decade of the nineteenth century, Ellstaetter o bser ved that ³in R ole of the State Between 1873 and 1893´, in Evolution of the World Economy,

Precious Metals and India, J. McGuir e, P. Ber tola, and P. Reeves (eds), Oxford

Univer sity Pr ess, New Delhi 2001, pp. 179-198, p. 181.

26 W. Bagehot, On the Depreciation of Silver , Henry S. King & Co., London

1877, p. 6.27 Vakil, Mur anjan, Currency and Prices in India cit., pp. 40-41.28 Bagehot, On the Depreciation of Silver cit., p. 66.

29 H. Fawcett, Indian Finance: Th ree Essays, MacMillan & Co., London 1880,

p. 115.

30 Ibid., p. 149.R

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TICLES / Sivramkrishna 132Table 1. Fluctuations in exchange and rupee cost of goldpayments* See footnote 2 for descr iption of Br itish curr ency denomination.

Sour ce: B.R. Ambedkar, H istory of Indian Currency cit., p. 107.Table 1: Fluctuations in exchange and rupee cost of gold paymentsFinancial Year Estimated Rateof Exchange on

which the budgetof the year wasframed

Rate of Exchangeactually realised

on the averageduring the year

Changes in the rupeecost of sterlingpayments consequentupon changes between

the estimated andrealised exchange rates. All figures indicate an

increase in thenecessary rupee outlay,except for those

preceded by (-), whichindicate a decrease..



(s-d* per rupee) (s-d per rupee) ('000 rupees)1874-75 1-10.4 1-10.2 1,591

1875-76 1-9.9 1-9.6 1,9571876-77 1-8.5 1-8.5 (-)761877-78 1-9.2 1-8.8 3,843

1878-79 1-8.4 1-7.8 5,6871879-80 1-7.0 1-8.0 (-)8,4401880-81 1.8.0 1-8.0 424

1881-82 1-8.0 1-7.9 1,0171882-83 1-8.0 1-7.5 3,7461883-84 1-7.5 1-7.5 (-)362

1884-85 1.7.5 1-7.3 1,8971885-86 1-7.0 1-6.3 5,6821886-87 1-6.0 1-5.4 6,517

1887-88 1-5.5 1-4.9 7,1901888-89 1-4.9 1-4.4 7,7981889-90 1-4.4 1-4.6 (-)2,731

1890-91 1-4.6 1-6.1 (-)23,5511891-92 1-5.3 1-4.7 8,009* See footnote 2 for descr iption of Br itish curr ency denomination.

Sour ce: B.R. Ambedkar, H istory of Indian Currency cit., p. 107.

the pr esent depr essed conditions of the r ates of exchange the situation of the Indian Government has become decidedly cr itical. The amounts

which ar e needed to meet the gold demands have become, owing to the r enewed decline in the r ates of exchange, even much gr eater than

GE 133

was expected by Sir David Bar bour in his very pessimistic estimate for

1893-4; and the def i cit will accordingly be consider ably gr eater´. R other mund consider ed that by 1893 ³the bank r uptcy of the Br itish Indian

government was imminent´.31Th e home charge, mor eover, wasnot the only outgoing in ter ms of (gold) ster ling; expenses for Euro pean

troo ps maintained in India, pensions and non-eff ective allowances payablein England, and stor es pur chased in England for consumption in

India wer e other payments that had to be r emitted abroad. ³In order that this def i cit should not become chronic, the means of r elief ado pted

must be dr astic. Th is is only possible by either a r eduction of expenditur es, or by an incr ease of income´, wrote Kar l Ellstaetter . 32 All this

bear s witness to the urgency and cr iticality of the situation of India¶s budget that had develo ped on account of the depr eciation of the r upee

and the consequent pr essur e on the Government of India to set r ight its burgeoning budgetary imbalances by incr easing r evenues and cutting

back expenditur es; an outcome not unlike what some countr ies later

exper ienced under SAPs. It now r emains to be seen how this incr eased pr essur e on r evenue gener ation and expenditur e cuts could have specif i -cally impacted the environment at that time and whether ther e exists

any tangible qualitative evidence to that eff ect.Two main viewpoints hold sway in the study of colonial India¶s

environmental history: one is that of Guha, who argued that ³organized for estry in colonial India develo ped in r esponse to the r evenue

and str ategic needs of empir e´; the other is exemplif i ed by Grove, who



claims that ³the roots of For est-Depar tment pr actices lie pr incipally in the desiccationist movement´.33 From these contr asting viewpoints,

a consensual per spective has emerged that situates Guha and Grove¶sarguments in diff er ent per iods. In the last decades of the nineteenth31 D. R other mund, An Economic H istory of India: From Pre-colonial Times to1991, Second Edition, R outledge, London 1993, p. 43.

32 K. Ellstaetter, Th e Indian Silver Currency: An H istorical and Economic Study, tr anslated by J.L. Laughlin, Univer sity of Chicago Pr ess, Chicago 1895, p. 73.

33 A. Skar ia, ³Timber Conser vancy, Desiccationism and Scientif i c For estry:

Th e Dangs 1840s-1920s´, in Nature and the Orient: Th e Environmental H istoryof South and Southeast Asia, R.H. Grove, V. Damodar an, and S. Sangwan (eds),

Oxford Univer sity Pr ess, Delhi 1998, pp. 596-635.RESEARCH ARTICLES / Sivramkrishna 134

century the For est Depar tments wer e tr ansfor med, ³with commer cialconsider ations of r evenue becoming the war p to [their] wef t´.34 Based

on a quantitative content analysis of the Indian Forester, Weil too agr eeswith the view that ³the For est Ser vice embr aced an incr easingly exploitationist

argument ± emphasizing prof its, the cultivation of commer cial

species, and the develo pment of new minor for est products «(and) o bviated the need for a broad based, ecological, under standing of for ests´.35 But why this shif t in for est policy? To Weil, ³the deeper

r easons for the shif t to a commer cial or ientation r equir e consider ation of the internal cultur e of the For est Ser vice along with its bur eaucr atic

context ± par ticular ly its competition with, and sense of inf er ior ity to, the Civil Ser vice and the engineer s´.36The For est Policy Resolution

of 1894 gave the distr ict off icer a super ior position to the for ester ¶s by off icially declar ing that ³whenever an eff ective demand for cultur able

land exists and can only be met from for est ar ea, the land should ordinar ily be r elinquished without hesitation´.37

I, however, contend that a mor e o bvious r eason for this shif t towardscommer cialization of for ests may have been the growing pr essur e on

the Government of India to gener ate additional r evenue from newsour ces to meet its f inancial o bligations. This pr essur e to gener ate r evenues

may have in f act been the root cause for giving Distr ict Off icer sof the Revenue Depar tment an upper hand vis-à-vis the for ester s; contr ary

to Weil¶s argument that the For est Depar tment ado pted a mor ecommer cial postur e because of an inf er ior ity complex towards civil

ser vices. Though many environmental histor ians agr ee that ther e wasan incr easing dr if t of the For est Depar tment towards ³r evenue gener ation´,

we gener ally cannot f ind def initive statements that this was specif ically

tr igger ed by the curr ency depr eciation. A f ew r emar ks by an off icial of the Indian For est Depar tment, however, do suggest that this34 Ibid., p. 596.35 B. Weil, ³Conser vation, Exploitation, and Cultur al Change in the Indian

For est Ser vice, 1875-1927´, in Environmental H istory, 11, 2006, p. 337.

36 Ibid., p. 322.

37 Ibid., p. 335; National Forest Policy 1894.

38 G.H. Str ettell, New Source of Revenue for India, Mar lborough & Co., London

1878. Emphasis my own.



GE 135

change in attitude may have indeed been dr iven by a desper ate need

for r evenue gener ated by the emerging cr isis in the macroeconomy, including the depr eciation of the r upee. George H. Str ettell published a book entitled New Source of Revenue for India in 1878, a f ew year saf ter the depr eciation of the r upee, wher e he makes an ardent plea for

the develo ping of extensive bamboo cultivation for paper -making.38

Th e title of the book and a par agr aph entitled ³ Present time specially

suited for this enquiry´ captur es the link between the curr ency question and pr essur e on the state to incr ease r evenues.

At a time when it is necessary to borrow eight and a-half millionsto defr ay the expenses of f amine r elief, and when the future of the silver

question is wholly uncertain, the impor tance of develo ping every

sour ce of wealth must be appar ent «39

A car ef ul r eading of Str ettell¶s wor k and the under lying tone of his pro posal r eveals the sense of urgency and necessity for the For est

Depar tment to r aise r evenues:It has of ten str uck me, while engaged in my off i cial duties in the Indian For est

Depar tment, that a large r evenue might be der ived from plants which ar e looked

upon as mer e weeds « I should be f ailing in my duty, if I did not dr aw prominent

attention to a sour ce of r evenue which has, for r easons which I have attempted to

give, hither to r emained compar atively neglected. «Th e r aw mater ial might besold at such a pr ice as to add consider ably to the Imper ial r evenue «My o b ject

in wr iting this essay is to show that the r evenue of India may be largely incr eased

« It is because of the deep inter est I take in the o pening out of the f i br e tr ade of

India, and because I am convinced that an energetic and thorough enquiry into the sub ject will r esult in a gr eat gain to the r evenue of that country, that I have

wr itten his essay in the inter ests of the Government whose ser vant I am.40

Th ough for ester s like Str ettell had o bviously seen a pr essing need

for the For est Depar tment to gener ate r evenues, some equally eminent per sons argued, instead, that the For est Depar tment was not

dir ectly called upon to contr ibute to India¶s incr eased need for r evenue.Th e Str achey brother s, who modestly claimed that ³ther e is

hardly a gr eat depar tment of the administr ation for the managementof which, at some time, one or other of us has not been r esponsible39 Ibid., p. 38. Emphasis my own.

40 Ibid., pp. 37-38.R

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TICLES / Sivramkrishna 136«´, commented specif ically on the role of the For est Depar tment.

Their tone is r ather desiccationist:41

The stationary condition of the net for est r evenue has been r ather a matter of satisf action than other wise. The for est administr ation, which is of compar atively

r ecent cr eation, looks to the f utur e inter ests of the community mor e

than to perf ect prof it, and is mor e occupied in the pr eser vation and improvement

of State for ests than in r ealizing an immediate large r evenue. The gross

r evenue is now, however, close to £700,000.42



This r emar k is actually quite ambiguous because, in spite of absolving the For est Depar tment from prof it-making, it nonetheless points

out to an incr ease in gross r evenue gener ation by the Depar tment. And this tr end of incr easing for est r evenues is borne out by other r ecords

as well, as shown in Gr aph 2, which r ef er s to United Provinces (U.P.),

and Gr aphs 3a and 3b, which r ef er to all of Br itish India.Although the tr end in incr easing r evenues and sur pluses illustr ated in Gr aphs 2 and 3a coincides quite closely with the per iod of

curr ency depr eciation, one cannot hastily assume a def initive causalconnection between them because, as is commonly k nown, this was

also the per iod when the constr uction of the r ailways was dr iving upthe demand for timber . However, the role of the For est Depar tment

as a provider of timber to the r ailways was itself contested, and her etoo a conf lict of views was fought out in which r evenue gener ation

gained the upper hand. In my tr eatise on environment changein colonial India, I pointed out that ³diff er ences emerged between

diff er ent levels of government´ as to whether sale of timber to ther ailways should be the pr ior ity of the For est Depar tment.43 ³The

state government argued that for ests wer e pr eser ved at consider ablecost and should be exploited for sale of timber and other produce

without r estr iction. The Governor of Bengal, Sir Char les Elliot, initially disagr eed, holding that this would interf er e with affor estation, 41 Sir J. Str achey, Lt-Gen. R. Str achey, The Finances and Public Works of India,

1869-1881, Kegan, Paul, Tr ench & Co., London 1882, p. vii.

42 Ibid., p. 29.

43 K. Sivar amak r ishnan, Modern Forests: Statemaking and Environmental Change

in Colonial Eastern India, Oxford Univer sity Pr ess, New Delhi 1999, p. 137.

GE 137

which was for him the pr imary f unction of the For est Depar tment.Th at he had to def er to mor e pr essing def i nitions of the For est Depar tment

as a µquasi-commer cial agency¶ is not sur pr ising given thelarge prof i ts from for est o per ations in the f i r st two decades´.44

Graph 2. forest revenue, expenditure and surplus: unitedProvincesSour ce: C.G. Tr evor and E. Smythies, Practical Forest Management , Government

Pr ess, United Provinces, Allahabad, 1923, p. 20.Graph 2. Forest revenue, expenditure and surplus: United Provinces

Sour ce: C. G. Tr evor and E. Smythies, Practical Forest Management , Government Pr ess, United Provinces, Allahabad, 1923, p. 20.

0

500

1000

1500

2000

2500

3000

3500



1876 1881 1886 1891 1896 1901 1906 1911

Yea r

R upees ('000s )G ros s R evenue

E xpenditure

S urplus

44 Ibid., p. 137.

RESEARCH ARTICLES / Sivramkrishna 138Graph 3a. Financial results of forest administration in BritishIndiaGraph 3a. Financial results of forest administration in British India

051015202530351864-691869-741874-79

1879-841884 -891889-941894 -991899-041904-091909 -14Quinquennial PeriodRupees (millions)Gross RevenueExpenditureSurplusSour ce: R.S. Troup, The Work of the Forest Department in India, Super intendent

Government Pr inting, Calcutta, 1917, p. 63.

Sour ce: R.S. Troup, The Work of the Forest Department in India, Super intendent

Government Pr inting, Calcutta, 1917, p. 63.

Gr aph 3b also shows some inter esting aspects concerning the For estDepar tment¶s expenditur e. The r atio of sur plus to gross r evenues,

which was around 36% in the 1860s, declined over the next two decades, but then began to incr ease steadily. This growth in absolute

r evenues and r evenue/sur plus r atio r ef lects the changing agenda of For est Depar tments, which I believe was, to some extent at least,

dr iven by ³r eal´ (or mor e pr ecisely, monetary) macroeconomic disGE139tur bances r ather than a mor e insidious ³subtext in the story of theconsolidation of imper ial control over India´.45

Investment Impacts on Forests

Like contempor ary SAPs, the depr eciating silver r upee also had an

eff ect on for eign investment in India and consequently on the environment.Th e question, however, is whether a depr eciating r upee had a

net positive or negative eff ect on investment in India. Gener ally speak-



Graph 3b. Percentage surplus to gross revenue in forestadministration in British IndiaSour ce: Troup, Th e Work of the Forest Department in India cit., p. 63.Graph 3b. Percentage surplus to gross revenue in forest administration in British

India

05

1015202530354045501864-691869-741874-791879 -841884-891889-94

1894-991899-041904 -091909-14Quinquennial periodPercentageSour ce: R.S. Troup, The Work of the Forest Department in India cit., p. 63.

45 M. Rangar a jan, ³Production, Desiccation and For est management in the Centr al

Provinces 1850-1930´, in Grove et al. (eds), Nature and the Orient cit., p. 576.RESEARCH ARTICLES / Sivramkrishna 140

ing, a depr eciating curr ency has contr adictory eff ects on investment

decisions. On the one hand, when the exchange r ate of the curr ency of country X f alls, for eign companies in country Y may incr ease investment

because they can buy mor e per unit of curr ency Y. On the other, once they have invested, a continued depr eciation of curr ency X would

mean that prof its, when r epatr iated in ter ms of curr ency Y, shr ink. Thisis a disincentive for companies in country Y to invest in country X.

Ellstaetter argued that the net impact of curr ency depr eciation on investment was negative: ³If India had no depr eciating standard, their

industr ies would sur ely have had a very much larger capital at their disposal´, indicating that the declining prof it r epatr iation eff ect fromcontinual r upee depr eciation was dominant.46 Other commentator s

of that time also seemed to think so. MacLeod (1898) conjectur ed that r educed inf low of capital to India due to curr ency depr eciation

between 1861 and the 1898 was mor e than £100,000,000.47 In 1892David Bar bour, Finance Minister to the Indian Government, similar ly

ar ticulated the impact of the depr eciation on the constr uction of the r ailways: ³The f ear of a f all in silver, however, stands in the way of

their constr uction « the small, though cer tain, prof it which Indian r ailways ar e likely to r eturn for the f ir st f ew year s the r isk of investing

capital in a country with a silver standard deter s the pr udent investor, while such r ailways have no attr action for the mor e speculative´.48



The depr eciation and instability of the r upee made the r aising of capital incr easingly diff icult and expensive for both the Government of

India and pr ivate investor s. For instance, the government had to guar anteeminimum r eturns on the stocks of the r ailway companies. Since

this capital was r aised in England, a decline in the gold pr ice of silver

o bviously meant an incr ease in the quantum of r upee payments. In adispatch to the Secr etary of State for India, the government pleaded:We ar e for ced, ther efor e, either to incr ease our ster ling liabilities, to which

cour se ther e ar e so many o b jections, or to do without the r ailways r equir ed for 46 Ellstaetter, The Indian Silver Currency cit., p.53.

47 Dunning MacLeod, Indian Currency cit., p. 42.

48 Sir D. Bar bour, The Silver Crisis: India¶s Financial and Commercial Sufferings,

J.E. Cornish, Manchester 1892, p. 5.

GE 141

the commer cial develo pment of this country, and its protection against invasion and the eff ects of f amine.49

With almost 50 per cent of Br itain¶s for eign investment abroad

made in the tr anspor tation sector, a slowing down of investmentin the r ailways would have had a ³positive´ environmental impact,

given the sector ¶s gluttonous demand for timber .50 However, when we look at the growth r ates in the laying down of r ailway tr acks, they

ar e so spectacular that it is hard to see any dampening eff ect of thecurr ency depr eciation on investment in this sector : ³In 1860 ther e

wer e about 850 miles of tr ack o pen in the subcontinent, 16,000 by 1890 «´.51 An enor mous volume of sleeper s was r equir ed for this

new constr uction. Each new mile of r ailway tr ack r equir ed 1760sleeper s. One tr ee yielded 3 to 5 broad gauge and 6 to 10 narrow

gauge sleeper s.52 In spite of this growth r ate in the r ailway networ k and the consequent demand for timber, it is diff i cult to dismiss the

counterf actual claim that had it not been for the r upee depr eciation these growth r ates may have been even higher .

Th e develo pment of other public wor ks such as irr igation tanksand canals also suff er ed on account of the Government¶s diff i culties

in r aising capital.53 With inadequate domestic savings, the governmenthad to tap for eign capital. As long as gold/silver par ity existed,

this was not pro blematic. However, when the gold pr ice of silver

f ell the government had to incr easingly issue ster ling debt as for eign investor s wer e not willing to hold r upee debt. Th is led to an incr easein silver r upee expenditur e in ser vicing ster ling debt and outf l ows

for r epayment of pr incipal on matur ity, with the r esult that ³theexpansion of extr aordinary public wor ks did not proceed at a pace49 Ambedkar, H istory of Indian Currency cit., p. 90.

50 R. John, G. Ietto Gillies, H. Cox, and N. Gr imwade, Global Business Strategy, Cengage Learning EMEA, 1997, p.18.

51Tomlinson, Th e Economy of Modern India cit., p. 55.



52 E.P. Flint, ³Defor estation and Land Use in Nor thern India with a Focus on

Sal (Shor ea ro busta) For ests, 1880-1980´, in Grove et al. (eds), Nature and the

Orient cit., pp. 421-458, p. 437.53Th ese ³public wor ks´ accounted for almost 20 per cent of Br itain for eign

investments abroad. See John et al. (eds), Global Business Strategy cit., p. 18.RESEARCH ARTICLES / Sivramkrishna 142

demanded by the needs of the country .54T

he impact of this slowdown of investment in public wor ks can be expected to have dampened agr icultur al expansion. At the same time, the depr eciation pr esumably

had an o pposite eff ect on expor ts and the spatial expansion of cro p cultivation. The possibility of such impacts, ambiguous as

they may be, is nonetheless impor tant to r ecognize.Pr ivate business investment in India, though not guar anteed by

the government like the r ailways and public wor ks, may also have been aff ected by incr easing r isk from the declining ster ling value of

accumulated prof its due to a depr eciating silver r upee. The growthof the cotton, jute and tea industry may ther efor e have been impeded

to some extent by the pr evailing curr ency situation, though at thesame time a gr eater pur chasing power of ster ling would have meant

an incentive to invest in as well as expor t from India. According to Jevons, it is the latter tr end that pr evailed. Thanks to the f alling r upee,

mer chant pr inces of Bombay and Calcutta made large for tunesin the expor t tr ade, which wer e r einvested in cotton and jute millsin India.55Table 2 shows the ³growth of these industr ies as a r esult of

capital invested dur ing the per iod of f alling exchange´.56

In the case of investment in the tea industry, Rungta points out

that even though the pr ice of tea f luctuated a gr eat deal on accountof the f luctuations in the exchange r ate, par ticular ly around 1890,

the f low of investment was deter mined pr imar ily by the r ate of growth of the mar ket. This is substantiated by the Darjeeling and

Ter ai Planter s Association¶s memor andum to the Viceroy of India, which states that ³whatever diff iculties they meet with in procur ing

f inancial assistance from the capitalists in England ar e « attr ibutableto over -production of tea, and not to any deterr ent eff ects produced

upon English capitalists by the f luctuations in Exchange´.57

In f act, the steady decline in r upee value may have contr ibuted to 54 Ambedkar, H istory of Indian Currency cit., p. 88.55 H. Stanley Jevons, Money, Banking and Exchange in India, Super intendentGovernment Centr al Pr ess, Simla 1922, p. 128.

56 Ibid., p. 128.

57

R. Shyam Rungta, The Rise of Business Corporations in India, 1851-1900, Cambr idge Univer sity Pr ess, Cambr idge 1970, p. 171.

GE 143

the over all growth in over seas demand for Indian tea and have been an incentive to invest in the tea industry.



As r egards pr ivate investment, the gener ally accepted view is that³depreciation facilitated expansion of small scale commodity production

such as wheat, cotton, jute, tea and other pr imary products and also led to the r ise of two f actory based industr ies in India: textiles and

jute´.58 What concerns us her e, however, is the impact of industr ial

growth on the environment; to estimate it, we must look at the role played by curr ency depr eciation in the growth of agr icultur al expor t. Agricultural Trade and forestsPer haps the most dir ect outcome of a depr eciating curr ency is incr eased expor ts. One of the concerns with SAPs was the impact of

curr ency devaluation on incr eased expor ts of environmentally sensitivecommodities and goods. I pose a similar question her e: Did theTable 2.Growth of Cotton and Jute Manufactures between1878-79 and 1898-99* Ster ling shar e capital in millions of r upees conver ted at Rs.10 = £1.

Sour ce: Stanley Jevons, Money, Banking and Exchange in India cit., p. 128.Table 2. Growth of Cotton and Jute Manuf actures between 1878-79 and 1898-99

1878-79 1898-99 Per centage Incr ease

Cotton Manuf acture Number of mills 58 174 200 Number of looms 12,983 37,288 187

Number of spindles 1,436,464 4,463,342 211

Author ised capital* 57.1 150.4 163

Jute Manuf acture

Number of mills 22 33 50

Number of looms 4,946 13,421 172

Number of spindles 70,840 279,482 294

Author ised capital* 26.7 49.3 85* Ster ling shar e capital in millions of r upees conver ted at Rs.10 = £1.

Sour ce: H. Stanley Jevons, Money, Banking and Exchange in India cit., p. 128.

58 J. McGuir e, ³India, Br itain, Pr ecious Metals and the Wor ld Economy: Th e

R ole of the State Between 1873 and 1893´, in McGuir e et al. (eds), Evolution of

the World Economy cit., p. 181. Emphasis my own.

RESEARCH ARTICLES / Sivramkrishna 144

r upee depr eciation stimulate (investment and) expor ts of goods and

commodities in the late nineteenth century? This impact is impor tantto us because Indian expor ts pr edominantly consisted of a r angeof environmentally sensitive commodities and goods, including timber,

bamboo, plantation products such as tea and r ubber, agr icultur al produce such as wheat and sugar cane, and commer cial cro ps such as

jute. Table 3 shows the composition of India¶s expor t products.Befor e answer ing this question, I must mention that many economists

and economic histor ians of the ear ly twentieth century believed that the depr eciation of the r upee per se may not have had a signif icant

impact on expor t. For instance, Vakil and Mur anjan argued that theadvantage of a depr eciating r upee to Indian expor ter s was only a tr ansient;

a benef it accr uing to Indian expor ter s only in the time inter val between the depr eciation of curr ency and the pro por tionate incr ease in

domestic pr ice levels.59 Ambedkar too argued that the long-ter m impactof r upee depr eciation was a steep incr ease in pr ice levels without a

corr esponding incr ease in nominal wages. ³The conclusion, ther efor e, is that the f alling r upee exchange could not have distur bed established



tr ade r elations or displaced the commodities that enter ed internationaltr ade´.60The depr eciation would thus have benef ited Indian producer s

but lef t labour wor se off, with lower r eal wages. In spite of the argumentthat domestic pr ice incr eases would have nullif ied the benef its of a f all

in the r upee, a continual depr eciation of curr ency could have meant a

sustained benef it to expor ter s, since pr ice adjustments occurr ed witha time lag. Mor eover, in India the habit of hoarding pr ecious metalsr esulted in the non-monetization of silver into coins, so that pr ice incr eases

may not have been commensur ate with the sur pluses in the balance of payments. In this r egard, Schmidt commented: ³Pr ices in

the silver countr ies have admittedly not r isen, and the equilibr ium of tr ade has ther efor e not been r eestablished in the manner which the text

books lead us to anticipate. But I even doubt whether conditions suchas would produce a r ise in pr ices exist in the silver countr ies .61

59 Vakil, Mur anjan, Currency and Prices in India cit., p.42.

60 Ambedkar, H istory of Indian Currency cit., p. 105.

61 H. Schmidt, The Silver Question in its Social Aspect: An Enquiry into the

GE 145

Although it is diff i cult to pin point a specif i c causal link between

r upee depr eciation and expor t growth in the late nineteenth century, ther e is extensive evidence that India did witness growth in expor ts in

this per iod. Th e r easons ar e many, including ³the wor ld tr ade boomthat began in the 1870s and lasted, with some minor interr uptions,

until 1913...´62 accompanied by a ³complete r evolution in the conditions

of tr ade in the country´,63

which arose from a multitude of f actor sincluding the o pening of the Suez canal in 1869, the r eplacing of sailing vessels with steamships, an expanding r ailway networ k within

India, declining fr eight r ates and the elimination of the middleman.In this changing glo bal macroeconomic environment, ³the steady

depr eciation of silver -based curr encies such as r upee against the gold based curr encies of Euro pe and Nor th Amer ica kept Indian expor t

pr ices competitive in the 1870s, 1880s and ear ly 1890s´.64

Existing Depression of Trade, and the Present Position of the Bimetallic Controversy,

Eff i ngham Wilson, London 1886, p. 34.

62Tomlinson, Th e Economy of Modern India cit., p. 119.

63 Ellstaetter, Th e Indian Silver Currency cit., p.26.

64Tomlinson, Th e Economy of Modern India cit., p. 53.Table 3. Indian exports (percentage share in total exportvalue)Sour ce: Tomlinson, Th e Economy of Modern India cit., p. 52.Table 3. Indian exports (percentage share in total export value)

Commodity 1860-1 1870-1 1880-1 1890-1 1900-1Raw cotton 22.3 35.2 17.8 16.5 9.4Cotton goods 2.4 2.5 4.2 9.5 9.4

Indigo 5.7 5.8 4.8 3.1 2

Food gr ains 10.2 8.1 17.1 19.5 13.1Raw jute 1.2 4.7 5.2 7.6 10.1



Jute goods 1.1 0.6 1.5 2.5 7.3

Hides & skin 2 3.7 5 4.7 10.7

Opium 30.9 19.5 18.2 9.2 8.8Oilseed 5.4 6.4 8.6 9.3 8.3Tea 0.5 2.1 4.2 5.5 9

Sour ce: B.R. Tomlinson, The Economy of Modern India cit., p. 52.

RESEARCH ARTICLES / Sivramkrishna 146

Rather than as a positive develo pment, Hyndman per ceived this

expor t growth as one which arose from India¶s desper ation for gold to r emit its o bligated charges to Br itain: ³Many millions mor e tons

of agr icultur al produce [had to be expor ted] in order to make up theamount of the dr ain for home payments in gold´.65This viewpoint

is f ur ther exemplif ied by Schmidt who saw a continued pr essur e for Indian expor ts to incr ease in order to r eceive enough gold to balance

the budget of the Indian Government.India has been develo ped and protected by English capital for many year s past,

and for these ser vices she owes a year ly payment to England which, to a very large extent, has to be made on the gold basis. As silver has f allen, the burden

of these payments has incr eased, and India has had to augment her expor ts

to r e-establish the balance.T

he larger off er s of her produce r esulting fromthis cause, together with the possibility of o btaining it for less gold, owing to

the lower pr ice of silver, brought about the f ir st f all in the pr ices of the gold

countr ies, which took place in the quotations of the produce of the East. As

exchange continued to f all India had to still f ur ther incr ease her expor ts and,

taught by necessity, she began mor e and mor e to turn her attention to the cultivation

and production of ar ticles which, hither to, had been chief ly supplied by gold countr ies, her expor ts of which would ther efor e enjoy to the f ull the

benef it of the lower pr ice of silver, i.e., wheat, cotton, hides, etc.66

The incr eased expor t of goods and commodities from India was

not a matter of choice, it was a necessity. Viewed in this way, it isthen appar ent why the For est Policy Resolution of 1894 would have

f avour ed agr icultur e expansion over for est pr eser vation.67 Whichever

way we choose to look at the possible r easons for expor t growth, theoutcome was unequivocal: Indian commodity expor ts incr eased signif icantly.For instance, ³in 1891-5« about 17 per cent of the wheat

har vest was expor ted, as against 8 per cent of the r ice har vest´. 68Theexpor t of jute bales from Calcutta almost doubled, from 173,255 in 65 H.M. Hyndman, The Bankruptcy of India: An Enquiry into the Administration of

India under the Crown, Swan Sonnenschein, Lowr ey & Co., London 1886, p. 210.66 Schmidt, The Silver Question cit., p.10.

67 See footnote 37 above.68Tomlinson, The Economy of Modern India cit., p. 61.

GE 147

1880-81 to about 363,770 in 1894-5.69Tea also ³gr ew spectacular ly dur ing the last quar ter of the nineteenth century, when tea production

incr eased from 6,000,000 lb in 1872 to 75,000,000 lb in 1900´.70Teaexpor ts, which wer e a very substantial por tion of total production,

rose shar ply from about 33 million lb in 1877-8 to about 58 million



lb in 1882-83.71 Gr aph 4 below shows the upward tr end in the expor tof timber (mainly teak) between 1868 and 1904. Since ³the gr eat

expor t staples, on which India¶s whole tr ade depends, [wer e] mainly agr icultur al´,72 these incr eases in production ³exer cised a ma jor inf l uence

on the r ur al economy from about 1870 until the late 1920s´.73

Th e link between agr icultur e and for ests has always been close, though pr imar ily a negative one. As Flint points out, ³defor estation,

dr iven by agr icultur al expansion and aggr avated by the extr action

of for est biomass at unsustainable levels, has long been r ecognized as the dominant tr end in the history of Indian land use´.75

Th is negative r elationship can only have been accentuated dur ing the expor t boom of the late nineteenth century, in which the production

of agr icultur al commodities witnessed substantial incr eases.Th e incr eased production pr esumably came from both a tempor al

expansion, wher eby ³f ar mer s incr eased the pro por tion of ar able land which was cro pped mor e than once per year´, and a ³spatial expansion;

and, of all the land available for such expansion, for est land was the easiest to conver t. However, the latter was in no way insignif i

cant; R oy estimates that between 1885 and 1938, cultivable ar ea69T. Sethia, ³Th e Rise of the Jute Manuf actur ing Industry in Colonial India: A

Glo bal Per spective´, in J ournal of World H istory, 7, 1, 1996, p. 79.

70 R.P. Behal, ³Power Str uctur e, Discipline and Labour in Assam Tea Plantations

dur ing Colonial Rule´, in Coolies,Capital,and Colonialism: Studies in Indian

Labour H istory, R.P. Behal and M. van der Linden (eds), Cambr idge Univer sity

Pr ess, Cambr idge 2007, p. 143.71 W.W. Hunter, Th e Indian Empire: Its People, H istory and Products, Asian

Educational Ser vices, New Delhi 1905 (r epr int 2005).

72 H.J. Tozer, British India and Its Trade, Har per & Brother s, London 1902, p. 8.

73Tomlinson, Th e Economy of Modern India cit., p.59.

74 E.P. Flint, ³Defor estation and Land Use in Nor thern India with a Focuson Sal (Shor ea ro busta) For ests, 1880-1980´ in Grove et al. (eds), Nature and the

Orient cit., p. 421.RESEARCH ARTICLES / Sivramkrishna 148

in coastal Madr as incr eased by sixty million acr es´.75The incr easein ar able land ar ea was not limited to the subsistence agr icultur al

sector ; agr icultur al clear ance for cash cro ps such as cotton, tea and sugar also destroyed large ar eas of for est dur ing the colonial per iod.76

Mor eover, this commer cialization was ³dr iven by tr ans-local mar kets.Between 1880 and 1925, the r eal volume of tr ade to and from

India doubled. The value of expor t quintupled between 1870 and Graph 4. Quantity of timber exported from British India to

foreign countries on private accountSour ce: Based on data compiled from Digital South Asia Libr ary, Statistical Abstr acts

Relating to Br itish India, 1868-1904, http://dsal.uchicago.edu/statistics/Graph 4. Quantity of timber exported f rom British India to foreign countries on

private account

010000200003000040000



500006000070000800009000018681872

18761880188418881892189619001904

Year Timber exports in cubic tonsSour ce: Based on data compiled from Digital South Asia Libr ary, StatisticalAbstr acts Relating to Br itish India, 1868-1904,

http://dsal.uchicago.edu/statistics/ .

75T. R oy, Rethinking Economic Change in India: Labour and Livelihood ,

R outledge, London 2005, p. 35.76 Flint, Deforestation and Land Use cit., p. 432.

GE 149

1914. Mor e than half of Indian expor ts now consisted of agr icultur algoods such as gr ains, seeds, r aw cotton and r aw jute. Th e age of

the ar tisan had ended, and the age of the peasant had arr ived´.77Th isis also evident from the changing composition of expor ted products

pr esented in Table 4. Th e conf l ict between the civil ser vice and for estoff i cials, with the for mer gaining the edge, has alr eady been highlighted

above. Th us, the conver sion of for ests to agr icultur al landscould only have acceler ated dur ing this per iod.

Wr iting in 1897, Br andis descr ibes how domestic agr icultur algrowth impacted for ests dur ing the Indian cotton boom, c. 1860-65,

which came about as an eff ect of the Amer ican Civil War and ther esulting dro p in the supply on the international mar ket. Th er e is no

r eason to suppose the situation would have been any diff er ent withthe extensive incr eases in cotton cultivation in the 1880s.In cer tain for est tr acts the water shed of the timber tr ade has entir ely changed since the Amer ican war has stimulated the expor t and cultivation of cotton.

From the for ests of nor th Canar a, the for mer expor t of timber was all seawards, and for tunately it was not of gr eat impor tance, and has not exhausted

the for ests. Th e expor t inland was tr if l ing. Since the Amer ican war, however, a

consider able demand of timber and bamboos for the cotton producing tr acts

east of Dhar war has spr ung up, and br isk tr ade is now carr ied on in that dir ection.

Similar changes in the lines of expor t have taken place in the Kandeish

Dangs, and elsewher e in many places.78

Evidence of the impact of expansion of plantations on for estsis strong. For instance, Reisz r epor ts of r ubber tapping on defor estation;



³Indian expor ts peaked in 1869 and then declined r apidly as the r ubber for est r etr eated under extr action pr essur e. In 1869,

Gustav Mann, Assistant Conser vator of For ests in Bengal, claimed r ubber tapper s would f ell tr ees µwith axes, or, if this was too troublesome,

collect f i r ewood and burn them down, so as to r ender the

o per ation of tapping mor e convenient than it would have been had 77 R oy, Rethinking Economic Change in India cit., p.35.

78 D. Br andis, Forestry in India: Origins and Early Developments, with a for eword

by Samar Singh, Natr a j Publisher s, Dehr a Dun 1994 (or iginal 1897), p.30.79 E. Reisz, Free Trade and the Pursuit of H egemony: Imperial Britain in Global

Rubber Markets, 1860-1922, http://www.ehs.org.uk/other content/r eisz.htm, p. 3.RESEARCH ARTICLES / Sivramkrishna 150

the tr ees been lef t standing¶ ´.79 In his pr actical guide on tea cultivation,

Money descr ibes how planter s would have to get r id of the jungle befor e under taking a new ventur e: ³In Bengal I do not think

the natur e of the jungle on land contemplated signif ies much. As ar ule, the thicker the jungle the r icher the soil; but in seeking for a

site large tr ees should not be a sine qua non. Much of the coar se gr assland is very good, and large tr ees add enor mously to the expense of

clear ings. It is not cutting them down which is so expensive, it iscutting them up and getting r id of them by burning, or other wise,

af ter the for mer is done´.80 Hunter gr aphically descr ibes the processof br inging new land into condition, for which ³the jungle should be cut down in December, and burned on the spot in Febr uary´.81 In

his study of Ceylon (now Sr i Lanka), Meyer too found that ³for estdestr uction intensif ied (c.1870) with the develo pment of new plantation

products such as tea, coconut and r ubber « like in India´.82

Their need for land for the expansion of production r equir ed tea

planter s to pr event ³the state¶s For est Depar tment, their competitor for control of for est lands, from gaining control over wide for est ar e-Table 4. Approximate area in µ000 acres occupied by cottonand wheatSour ce: Hunter, The Indian Empire cit., p. 501.Table 4. Approximate area in '000 acres occupied by cotton and wheatProvince Wheat Cotton 1877-78 1882-83 1877-78 1882-83Madr as 16 27 1,000 1,456Bombay & Sind 915 1,626 1,420 2,640Punjab 7,000 6,731 660 860Centr al Provinces 3,600 3,619 810 612

W.W. Hunter, The Indian Empire cit., p. 501.

80 E. Money, The Cultivation and Manufacture of Tea, Four th edition, W.B.

Whittingham & Co., Calcutta,1883, p. 34.81 Hunter, The Indian Empire cit., p. 508.

82 E. Meyer, ³For ests, Chena Cultivation, Plantations and the Colonial State in

Ceylon 1840-1940´, in Grove et al. (eds) Nature and the Orient cit., p. 799.

GE 151



as´.83 Fur ther mor e, and this eff ect is largely over looked, many cro ps, including tea ³gener ate negative environmental impacts because of

their indir ect eff ects, for example, dur ing the processing stage af ter the cro ps ar e har vested´. 84Th is was all the mor e tr ue in the nineteenth

century dur ing the expansion of tea cultivation in India, when

for every 500 acr es under tea another 400 was needed for char coal.85

Th is led to the ³wholesale destr uction of for ests that (took) place in all Tea distr icts, in order to supply char coal for Tea´.86

Money¶s guide also br ings out the sensitivity of Br itish demand to the(ster ling) pr ice of tea: ³Quotations last year r eceded step by step, and, as

pr ices dro pped, so we found the consumption gr ew, till for the last quar ter of 1882, with its very low r ange of pr ices, the aver age monthly deliver ies

r eached the un pr ecedented f i gur es of over 5.25 million pounds «a consider able check was given to deliver ies of Indian Teas dur ing the

latter par t of 1881 and the ear ly par t of 1882 through the r ise of pr icesdur ing that per iod´.87 Fur ther evidence of the close connection between

curr ency pr ices and the pr ices and production of tea can be found in adebate in the Br itish Par liament against the closing of the mint in 1893.

A Mr . Burdett-Coutts of Westminster claims that ³the tea-planter s of Southern India « want « a f alling r upee « because, selling their tea

in Euro pe in gold, they get, with a f alling r upee, mor e r upees per sover eign, while at the same time, they do not pay their labour er any mor e

of these depr eciated r upees´.88 A Mr . Wylie r eiter ates that ³expor ter sfrom India, the planter s, and the Br itish manuf actur er s in India, who

had been making enor mous prof i ts by the f all in the exchange, wished 83 R.P. Tucker, ³Th e Depletion of India¶s For ests under Imper ialism: Planter s,

For ester s, and Peasants in Assam and Ker ala´, in Th e Ends of the Earth: Perspectives

on Modern Environmental H istory, D. Wor ster (ed.), Cambr idge Univer sity Pr ess,

Cambr idge 1988, p. 124.84 D. Reed, ³Conclusions: Shor t-ter m Environmental Impacts Of Str uctur al

Adjustments Progr ams´ in Reed (ed.), Structural Adjustment cit., p. 305.85 Money, Th e Cultivation and Manufacture of Tea cit., p. 2.86 Ibid., p. 121.

87 Ibid., pp. 197-198.

88 Commons Sitting of 29 Mar ch 1898, Order s, Indian Curr ency, http://hansard.

millbanksystems.com/commons/1898/mar /29/indian-curr ency RESEARCH ARTICLES / Sivramkrishna 152

it to be allowed to decline still f ur ther´.89 Obviously then a steep depr eciation in the r upee-ster ling exchange r ate would have inf luenced

the demand and ther eby cultivation of tea. Rungta (1970) also givesan inter esting account of how tea companies, which accounted for the

largest investment in India af ter the r ailways, wer e r esponding to thecurr ency situation when ³towards the latter par t of the nineties many

r upee companies wer e conver ted into ster ling companies, since the depr eciation of the r upee gave a higher capitalized value in ster ling´.90 By

the last decade of the nineteenth century, when the r upee had ³touched its lowest value in ter ms of ster ling and a f ur ther f all was very unlikely

in view of the curr ency measur es of 1893´, and tea expor ts wer e booming, investment in the tea industry incr eased since ³ster ling could «



buy mor e of the f actor s of production whose money cost did not r ise´.91

Rungta then goes on to quote something which is of even gr eater inter est

to us, namely, the comments of a tea planter :While the jungle, for est, bamboo, sunn and ok r a gr ass ar e being cut to make

room for tea plants, agency houses in London, Glasgow and Calcutta wer e

busy turning land syndicates into gardens, established gardens into companies,

and companies into still bigger companies. The bones of the industry wer e churning with a vengeance. 92

The f act that in Assam alone the ³ar ea under tea cultivation expanded

from 27,000 acr es to 204,000 acr es´ is a clear corro bor ation of how the macroeconomic environment, with additional suppor t

from curr ency depr eciation, was def initively having an impact on the environment.93Tucker captur es the argument I have made thus

f ar, albeit for a per iod just a f ew year s later :The impact of Wor ld War I on Assam¶s for est lands center ed on war time prosper -89 Ibid.

90 Shyam Rungta, The Rise of Business Corporations in India cit., p. 170.

91 Ibid., p. 172.

92 Ibid., p. 172.93 R.P. Behal,´ Power Str uctur e, Discipline and Labour : Assam Tea Plantationsdur ing Colonial Rule´, in Behal, van der Linden (eds), Coolies, Capital, and Colonialism

cit., p. 124.

GE 153

ity and expansion in the tea industry. Pr ices in Euro pe rose; acr eage under tea in

Assam extended r apidly; and dividends to the planter s rose corr espondingly.94

If a depr eciating r upee encour aged Indian expor ts, a counter vailing

eff ect was the f l uctuations and uncer tainty in exchange r ates thataccompanied the over all downward tr end in the r ate. Without eff icient hedging institutions, ther e was the danger that r eturns from

speculation could over shadow those from tr ade, ther eby dr iving outgenuine exchange of goods and ser vice between India and other gold

curr ency countr ies of the wor ld. Ellstaetter narr ates how sever e theimpact on tr ade could be:Th e native mer chants of Kurr achee, an exceedingly f l our ishing seapor t at the

mouth of the Indus, because the f i r ms engaged in the impor tation of cotton goods lost heavily in 1890 by the sudden r ise of exchange, and the expor ter s

of gr ain also had lost heavily by the f all in 1891, r esolved, as a consequence, in

1892 to buy no mor e Euro pean goods.95

Th e over all impact of curr ency depr eciation on expor t growthmay, however, be consider ed positive. Based on a r egr ession analysis,

Br ahmananda found that ³except in r egard to coff ee, the downward

tr end in exchange r ate seems to have had an upward eff ect upon the quantity of expor t of every other commodity « for a one per cent

decr ease in exchange r ate, the quantity of expor t went up by about 0.4 per cent «´.96 In another impor tant quantitative study,

Nugent argued that the exogenous depr eciation of silver r elative to



gold-based curr encies benef i ted the for mer . Between 1871 and 1899India, for instance, witnessed ³with a single exception « the largest

2-decade incr ease in r eal per capita income in its history´.97

94 R.P. Tucker, ³Th e Depletion of India¶s For ests under Imper ialism: Planter s,

For ester s, and Peasants in Assam and Ker ala´, in Wor ster (ed.), Th e Ends of the

Earth cit., p. 124.

95 K. Ellstaetter, Th e Indian Silver Currency cit., p.23-24.96 P.R. Br ahmananda, Money, Income and Prices in 19th Century India: A H istorical,

Quantitative and Th eoretical Study, Himalaya Publishing House, Mumbai

2001, p. 481.

97 J.B. Nugent, ³Exchange-Rate Movements and Economic Develo pment in

the Late-Nineteenth Century´, J ournal of Political Economy, 81, 5.RESEARCH ARTICLES / Sivramkrishna 154

This investigation shows the var ious possible, though o pposing,

linkages between the macroeconomic environment and for ests, tr igger ed off by a depr eciating and unstable curr ency. The net eff ect is no

doubt a pur ely empir ical question, which is complicated by other simultaneousmacroeconomic events and socio-political changes. The

communication and tr anspor t r evolution of the 1850s and 1860s ± which included the inaugur ation of the Indian telegr aph system in

1854, the over land cable connection to Euro pe in 1868, the o pening of the Suez Canal in 1869, and the laying of the sub-mar ine cable in 1870

- tr ansfor med the r elationship between centr al (Br itish) and provincial(India) governments, ultimately allowing a gr eater degr ee of f inancial

centr alization and control.98These simultaneous events only add to thecomplexity of my r esear ch but do not play down the impor tance of the

exchange r ate depr eciation on the economy. In f act, Sir Char les Muir even put its impor tance at a level gr eater than other s.War s, f amine, and drought have of ten inf licted losses on the Exchequer f ar

gr eater than the charge that thr eatens us in the pr esent year . But such calamities pass away; the loss is limited; and when it has been provided for the

f inances ar e again on sur e and stable ground. This is not the case with the

pr esent cause of anxiety (r upee depr eciation). Its immediate eff ects ar e ser ious

enough « but that which adds signif icance to it is that the end cannot beseen; the f utur e is involved in uncer tainty.99

Summary and ConclusionThis study has attempted to establish a linkage between two f acetsof Indian history: f inancial and environmental. Although these

two ar eas have been the separ ate focus of contempor ary r esear ch in the context of str uctur al adjustment progr ammes, their connection

has never been explor ed so f ar . Mor e of ten than not, histor ians have

investigated ³r eal´ causes r ather than ³monetary´ ones for defor esta-98 S. Bhattacharya, The Financial Foundations of the British Raj: Ideas and Interests

in the Reconstruction of Indian Public Finance, 1858-1872, Revised Edition,

Or ient Longman, New Delhi 2005, p.3.

99 Quoted from Ambedkar, H istory of Indian Currency cit., p. 114-115.



GE 155

tion and for est policy in the nineteenth century. It is quite possible,

however, that monetary distur bances could in f act have been theroot, or at least a signif i cant, cause in the shif ting pr ior ities and policiesof India¶s colonial government.In my o pinion, the environment in Indian history must be seen

as par t of a whole. Th e policies and decisions of the For est Depar tmentand its colonial r epr esentatives wer e situated within a macroeconomic

context in which per sonal belief s and views may have played an impor tant role in shaping outcomes. At the same time,

the larger economic context, including the larger glo bal macroeconomiccontext, cer tainly exer ted pr essur es on individuals and institutions

and led to outcomes that wer e not always the same as

those or iginally intended. Th is is evident in r ecent liter atur e on theimpact of SAPs on the environment, wher e r esear cher s and policymaker shave highlighted the close linkages that exist between

macroeconomic policy and the environment. Th er e is no r eason to believe that these linkages wer e not as vital in the past, especially

in nineteenth century colonial India, whose economy was in many ways mor e ³o pen´ than today, and hence mor e vulner able to international

f i nancial and monetary distur bances. As we have seen in Table 4 above, in the year 1880-81 just thr ee commodities (r aw

cotton, food gr ains and o pium) accounted for mor e than half thetotal value of expor ts. Th e situation in colonial India was thus mor e

akin to that of many pr esent Afr ican economies that ar e dependenton the expor tation of r elatively f ew pr imary commodities, ther eby

making for ests and environment highly vulner able to macroeconomicdistur bances; pr ecisely the economies in which the implementation

of SAPs has been r egarded as most pro blematic, at leastin so f ar as its adver se impact on the environment is concerned.

Our paper is an attempt to extend this contempor ary model of SAP-environment linkages to a diff er ent, but not entir ely dissimilar context in Indian history.

wish the committee to bear this fact prominently in mind

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