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I recently read Imperial Twilight, an excellent history of the opium wars. The author claims several times that while the British trade with China was very lucrative, India was by contrast "spectacularly unprofitable" and that the East India Company there would have "quickly gone bankrupt" without the opium money that supplemented their more legitimate ventures.

This caught me by surprise, because my impression was that the British valued their possessions in India as being generally very profitable, and that British nabobs had a reputation for getting rich there long before the opium trade took off. It feels like there's some context or caveat that I'm missing here.

How profitable was India for the British Empire, and what were the most important sources of Indian wealth in the 1800s? (Particularly in the decades leading up to the First Opium War.)

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    Maybe by 1815, all the money from South Asia had already been taken to London?
    – Astor Florida
    Commented May 24, 2018 at 5:22
  • In the decades leading up to the First Opium War, was India in the British Empire? The East India Company was not quite the same as the British Empire.
    – Rodrigo de Azevedo
    Commented May 1, 2020 at 10:58

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The 18th century saw a rapid decline in India's fortunes. The Mughal dynasty was on its way out which gave the English East India company the opportunity to conquer large parts of the country. These merchants had no loyalty to the local populace and were predominantly interested in profits and how to maximize them. Robert Clive, the governor of Bengal made a personal fortune valued at £234,000 which made him the richest self-made man in Europe. Large famines began to make their presence felt during this time which would continue till the end of British rule. Different taxation policies in the north and the south also lead to disparities in wealth which continue till today. This overall decline or "drain" was accurately summed up by economist William Playfair who wrote in 1805 {159}

In 1707, only ninety-eight years ago, the Great Mogul ruled over a country equal in extent, and little inferior in population, to France, Spain, Germany, and England. His revenues amounted to thirty-two millions sterling, which, at that time, was nearly equal to the whole revenues of all the monarchs of Europe. He is now circumscribed to a territory less than the smallest county in England, and is the vassal at will of a company of English merchants, who, with all their greatness, do not divide profits equal to one week of his former revenues!

This was also a period of great ascendancy in the West due to the Industrial Revolution. The cotton textile industry shifted from East to West which reduced the worth of India as a colony since it could no longer produce high-value manufactures and instead was reduced to exporting low-value raw cotton.

When a country produces the raw material, and labour is cheap, and the art established, we might suppose the superiority secure; but it is not. The cotton trade was first established in the East Indies, where the material grows, where the labour is not a tenth of the price that it is in England, and the quality of the manufactured article is good; yet machinery and capital have transplanted it to England

Similarly the value of silk fell rapidly as more and more Western countries decided to manufacture it. The Italians took the lead but were soon followed by other countries including England.

The people of Asia found silk a natural produce of their country; till the Europeans saw it, they never attempted to produce so rich a material; but no pains has since been spared to try to produce it, in almost every country, where there was the least chance of success. We imitated the silk mills of Italy, and the Italians (as well as many other nations) are now imitating our cotton mills.

In general, the value and profitability of India's goods fell as the centre of production shifted from East to West. Europeans grew rapidly through imitation and innovation and Asiatics could not keep up with them since they did not develop the right institutions to compete economically.

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By the 1800s, the trade with India wasn't particularly profitable. In fact, control of India wasn't particularly profitable (for the Empire as a whole, as you note, local 'nabobs' made themselves wealthy). The costs of running a large standing army, and a small local navy, easily balanced out any profit from trade and revenue out of India.

In an exhaustive study of Trade in the Eastern Seas around the year 1800 Professor C.N.Parkinson neatly summaries the particular changes which had overtaken the company. Since it was still officially 'The United Company of Merchants of England trading to the East Indies', 'There would be nothing manifestly reckless', writes Parkinson, 'in concluding that India House sheltered a body of Englishmen trading with India'.

Nonetheless, such a conculsion would be wrong: the men within were not merchants, and they were not trading with India. One might add, a little unkindly, that they were not always united and that they were not all Englishmen.

How was the East India Company controlled [continues Parkinson]? By the Government. What was its object? To collect taxes [i.e. revenue]. How was its object attained? By means of a large standing army. What were its employees? Soldiers, mostly; the rest, Civil Servants. Where did it trade to? China. What did it export from England? Courage. What did it import from China? Tea.

For courage one might substitute 'men and guns'. Otherwise the summary may stand. For as of 1813 all that remained of the Company as a self-governing commercial enterprise was its partial monoploy of the China trade.

The Honourable Company, A history of the English East India Company, J. Keay (HarperCollins, 1993) pg.450

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While Britain may not have gained a large profit directly from trading with India, the resources extracted from the colony, particularly silver, allowed for that profitable trade with China which you reference. Later, opium grown in India was used to preserve this economic situation.

Starting in the 18th century after the Ming opened up trade in Canton, "the structure of the Western trade with China was based on silver and colonial products from India and the Malay archipelago, like silver, cotton, pepper, lead." Source These resources acted as bullion in the exchange for prized Chinese products such as tea and fine porcelain.

Due to the immense profit of this trade structure, the British were also keen to protect it when it faltered. As shown in the following table, silver export to China fell dramatically in the last decades of the 18th century.

enter image description here

This effect is commonly ascribed to a saturation of the silver market in China. To alleviate the economic stress, "the Company became involved in a triangular trade by smuggling opium (a highly addictive and illegal drug) from India into China." Source All this opium was grown in India, and came to be an important point of British foreign policy leading up to the Opium wars.
In this way India contributed to the economy of the empire in a less direct manner than indicated in other answers.

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    The figures in your table are not very clear, on my screen at least, is it possible for you to post a larger/clearer image?
    – Steve Bird
    Commented May 25, 2018 at 7:41
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    So then would it be fair to say that India’s primary value was being vital to produce goods useful for the lucrative trade in China, but that it produced small total profits in isolation of that? If so that seems very plausible economically, but still leaves me a little confused politically. So far as I can tell India and the route thereof defined British foreign policy for a century, a position from which China is (or at least seemed to me to be) notably absent. Have I got that wrong or is there another explanation for the high political valuation?
    – Random
    Commented May 27, 2018 at 0:45
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    @Era That's a fair analysis. As for political aims, it was in the government's interests to support the EIC's presence in India because it was bringing in so much wealth to British citizens. This is mostly speculation, but I will look into it and maybe edit my answer accordingly.
    – creeon
    Commented Jun 6, 2018 at 5:52
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    The table is unreadable
    – CopperKettle
    Commented Jun 7, 2018 at 12:35

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