What Adam Smith Said About India And East India Company In The Wealth Of Nations

Adam Smith, in his book “An Inquiry into the Nature and Causes of the Wealth of Nations” published in March 1776, discussed India and the East India Company.

Adam Smith (1723-1790) made copious notes about India and the British East India Company’s presence and impact on the contemporary Indian economy. (Artist unknown. Source: British Museum/Wikimedia Commons)

Adam Smith’s more popular book – An Inquiry into the Nature and Causes of the Wealth of Nations – was published in March 1776. Though not often referenced, Smith (1723-1790) made copious notes about India and the British East India Company’s presence and impact on the contemporary Indian economy. Here are a few excerpts from the book:

Ganga and the business of inland navigation

The improvements in agriculture and manufactures seem likewise to have been of very great antiquity in the provinces of Bengal, in the East Indies, and in some of the eastern provinces of China… In Bengal, the Ganges and several other great rivers form a great number of navigable canals in the same manner as the Nile does in Egypt… It is remarkable that neither the ancient Egyptians, nor the Indians, nor the Chinese, encouraged foreign commerce, but seem all to have derived their great opulence from this inland navigation.

Profit of trade in Bengal

Salt is said to be the common instrument of commerce and exchanges in Abyssinia; a species of shells in some parts of the coast of India; sugar in some of our West India colonies… The highest ordinary rate of profit may be such as, in the price of the greater part of commodities, eats up the whole of what should go to the rent of the land, and leaves only what is sufficient to pay the labour of preparing and bringing them to market… The profits of the trade which the servants of the East India Company carry on in Bengal may not perhaps be very far from this rate.

Precious metals in India

The precious metals, therefore, would naturally exchange in India for somewhat a greater quantity of the precious stones, and for a much greater quantity of food than in Europe. The money price of diamonds, the greatest of all superfluities, would be somewhat lower, and that of food, the first of all necessaries, a great deal lower in the one country than in the other. But the real price of labour, the real quantity of the necessaries of life which is given to the labourer, it has already been observed, is lower both in China and Indostan, the two great markets of India, than it is through the greater part of Europe. The wages of the labourer will there purchase a smaller quantity of food; and as the money price of food is much lower in India than in Europe…

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Silver versus gold in India

In China, and the greater part of the other markets of India, ten, or at most twelve, ounces of silver will purchase an ounce of gold; in Europe it requires from fourteen to fifteen ounces. In the cargoes, therefore, of the greater part of European ships which sail to India, silver has generally been one of the most valuable articles. The great quantities of silver carried annually from Europe to India have, in some of the English settlements, gradually reduced the value of that metal in proportion to gold. In the mint of Calcutta an ounce of fine gold is supposed to be worth fifteen ounces of fine silver.

Rani Velu Nachiyar was the Tamil queen who led an army of women against the East India Company.

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