London, September 8, 1860

The *Tribune* was the first newspaper to draw attention to the alarming decline in British export trade with East India, a decline which became most clearly apparent in the staple articles, such as cotton goods and cotton yarn. The reaction to this is making itself felt in Lancashire and Yorkshire just at the moment when the home market is shrinking as a result of a harvest that begins fully five weeks later than last year’s and which, despite the improved prospects since Thursday, 30 August, will in any case fall below the average yield. The British Chamber of Commerce has therefore raised an outcry and bombarded the government with protests against the new Indian tariff law, by which the duty on the main imports from Great Britain has been increased from 5 to 10 per cent, i.e., by 100 per cent. The English press, which until then had cautiously avoided touching on this point, has thereby finally been forced to abandon its reticence. The London *Economist* serves us up “The Trade of India” and “The Cause of Its Depression.” Apart from the fact that the *Economist* is regarded as the leading English authority in matters of this kind, its articles on India are of particular interest because of their connection with the desk of Mr Wilson, the present Indian Chancellor of the Exchequer. The best answer to the first part of the article, which represents an attempt to absolve the latest Indian tariff legislation from all responsibility for the present contraction of the Indian market, is that the Governor-General of Calcutta found himself compelled to convene in Calcutta a commission composed of representatives of the revenue departments of Calcutta, Bombay and Madras and their various chambers of commerce, and to entrust it with the task of reviewing and revising the recently introduced tariff. This tariff did not, as I already pointed out when I first made your readers acquainted with this subject, bring about the Indian commercial crisis; it did, however, accelerate its outbreak by its sudden introduction at a time when Indian trade had already been inflated beyond its natural capacity. The overstocking of the Indian market with British goods and of the English market with Indian goods is openly admitted by the *Economist*.

“We believe,” it says, “it will be universally admitted that the enormous profits realized in the Indian trade during a part of last year led suddenly to a greater increase in market supplies than was required for consumption, so far as this country was concerned, and to a very extended speculative trade by native capitalists in supplying the internal markets from the sea ports. For example, in 1859 the export of cotton fabrics to British India amounted to £12,043,000, against £9,299,000 in 1858 and £5,714,000 in 1857; in yarn, the export in 1859 came to £2,546,000, against £1,969,000 in 1858 and £1,147,000 in 1857. For a long time the goods were taken off as rapidly as they arrived, and so long as prices rose there was no lack of enterprising mahajuns (moneylenders) who made purchases and brought them to the inland markets, and, according to the best information we have been able to obtain, there can be no doubt that
*large stocks of goods accumulated in all the markets of the North-West*
. On this point the reports from Mirzapur, Allahabad, Lucknow, Agra, Delhi, Amritsar and Lahore agree.”

The *Economist* then goes on to enumerate at length certain circumstances that helped to intensify to a certain extent the overstocking of the Indian markets. The main cause—the continual heavy shipments from England—it does not so much as mention. In the first place, the yield of the autumn harvest of 1859 fell far below the average throughout Northern India as a result of the general drought and suffered damage both in quality and quantity. Hence the high food prices in winter and spring, which were further raised in the later part of the year by the prospect of a famine. Moreover, in addition to the scarcity and high prices, epidemics were raging.

“In the whole of the North-West, cholera raged in the densely populated towns to such an alarming extent that the routine of daily life was in many cases interrupted and the population fled as if before a hostile invading army.”

But worse still was that

“Upper India was struck, a month or six weeks before the departure of the last mail, by a dreadful calamity. The rainy season, on which alone the autumn harvest depends, usually sets in by the middle, or at the very latest by the end, of June. This year, no rain had fallen until the middle of July. From the North-West frontier down to Lower Bengal, from the Khyber Pass to Benares, including the great regions between the Sutlej, the Jumna and the Ganges, the whole land was a dry, hard and solid surface of parched soil. Only in the very few places irrigated by the rivers that flow through them or by the feeders of the great irrigation works, the Jumna and Ganges canals, was cultivation possible. The prospect of a famine equal to that of 1837 and 1838 excited everywhere the greatest alarm. Prices continued to rise. Cattle died in droves, or were driven into the hills instead of being used to till the soil; the people, it is reported, are said to be on the verge of starvation.”

But according to telegraphic reports which arrived in Calcutta during the eight days preceding the departure of the last mail on 27 July and were published, the worst fears have not been confirmed. At last sufficient rain fell, just in time to avert a famine, if not to ensure a good harvest.

The details given in the *Economist* amply prove that in the immediate future there is not the faintest prospect of a revival of the Indian trade, which already fell by £2,000,000 in the first half of 1860 compared with the first half of 1859. The Australian markets also exhibit all the symptoms of contraction which result from excessive trade. Trade with France, which was expected suddenly to assume gigantic proportions as a result of the commercial treaty, has, on the contrary, fallen by more than £1,000,000, as can be seen from the following statement:

| The six months up to 30 June 1860 |
|------------------------------|------|------|
| Imports from France | £9,615,065 | £8,523,983 |
| Exports to France | £2,358,912 | £2,324,665 |
| Total | £11,973,977 | £10,848,648 |

The sharp decline in British imports from France may be attributable to this year’s high food prices in France, since in 1859 corn and flour were a principal export article of France to England. Great importance is attached to the presumably increasing consumption of English products in the United States as a compensation for the current heavy export of foodstuffs to the United Kingdom. But although there will always be a certain proportion between a country’s exports and its imports, the above conclusion seems somewhat premature when we judge it by the development of Anglo-American trade in the first halves of 1859 and 1860. There we find:

|--|------|------|
| British exports to the United States | £11,625,920 | £9,366,647 |
| British imports from the United States | £17,301,790 | £25,618,472 |

This means that in the same period in which British imports from the United States increased by more than £8,000,000, British exports to the United States declined by more than £2,000,000. The only branches of British international trade that have grown are the Anglo-Turkish, the Anglo-Chinese and the Anglo-German trade. At present Turkey is being shaken precisely by Russian and French interference. China is being shaken by the English themselves, and Germany, while suffering from a bad harvest in many parts, stands on the eve of severe political convulsions at home and of serious collisions with abroad. With regard to the Anglo-Chinese trade, I would further remark that a part of its growth is certainly caused by war requirements; that a part of the increased export to China went at the expense of a good many commodities which were withdrawn from the Indian market and tentatively thrown onto the Chinese market; and finally, that the import from China continues to be far more significant than the export to China, as may be seen from the following figures:

| The six months up to 30 June 1860 |
|------------------------------|------|------|
| Imports from China including Hong Kong | £5,070,691 | £5,526,054 |
| Exports to China excluding Hong Kong | £1,001,709 | £1,622,525 |
| Exports to Hong Kong | £976,703 | £1,236,262 |
| Total | £7,049,103 | £8,384,841 |

Meanwhile, unexpected failures in most branches of business continue to create a general feeling of distrust. The following compilation of the liabilities and assets so far ascertained in the latest bankruptcies in the leather trade shows that the assets amount on average only to 5s. 6d. in the pound, so that the holders of bills of the bankrupt firms are left with a loss of £1,471,589:

| Liabilities | | |
|-------------|--|--|
| Firms bankrupt £1,530,991 |
| in liquidation or arranging composition £499,806 |
| Particulars not disclosed — |
| Total £2,030,797 |

| Assets | | | |
|--------|--|--|--|
| | | Amounts per £ | Deficiency |
| Bankrupt £342,652 4s. 6d. | £1,188,339 |
| In liquidation or arranging composition £216,556 8s. 8d. | £283,250 |
| Particulars not disclosed | — | — | — |
| Total £559,208 5s. 6d. | £1,471,589 |