Economic history of India Indian reserve Bank held a positive balance of £1160 million, with it, on 14 July 1947, and that British India maintained a trade surplus, with the United Kingdom, for the duration of the British Raj eg. Source: Indian sterling balances, p. 2, 15 Jan.1.1947, Bank of England (BoE), OV56/55. Modern economic historians have blamed the colonial rule for the dismal state of India's economy, with investment in Indian industries limited since it was a colony. Under British rule, India's native manufacturing industries shrank. During the British East India Company's rule in India, production of food crops declined, mass impoverishment and
Political warfare in British colonial India required replacing of pre-existing political institutions and replacing them with centralised, territory-wide, and bureaucratic legal-administrative institutions that were controlled by colonial officials. Indirect rule was a form of colonial domination via collaboration with indigenous intermediaries who controlled regional political institutions. Colonial India was a mix of the two types of rule. While the Civil Service ran a large portion of the country, "in peripheral regions, chiefs, princes, sultans, and other indigenous leaders controlled "customary" legal-administrative institutions that were organised along patrimonial lines." Leading colonial officials believed indirect rule was more adaptive and culturally sensitive, far superior to direct rule, in