Understanding The 5-point Indian Compact
The boycott of Simon Commission by Indian negotiators sounded the death knell of the British Raj in India. (Cartoonist - David Low (1891-1963) Published - Evening Standard, 11 Feb 1928). Click for larger image.
Beginning of the end
With the rejection of Simon Commission and the death of Lala Lajpat Rai, a triumphant Congress took pole position, in the race among Indians, to throw the British back into the sea. As the British realized their futile position, and the Indian leadership took over initiative from the British, a few things happened.
British favored the Congress
The Congress leadership (especially Gandhiji) was favored with a significant negotiating position by the British.
During these negotiations with the British Raj, the Congress adopted some unorthodox ideas, in the Indian political context of that time. These Congress proposals were momentous and path-breaking for India. Though Western opinion was uniformly derisive and dismissive, Indians suspended their judgment on these Congress proposals.
Asuric maya against the asurs
Based on the collaborative-school of ideology, promoted by Gokhale-Chiplunkar-Phule and Arya-Brahma-Samaj, Congress proposed that Indians must embrace the Western-Asuric model of the State as a pivot of their future.
August 1942 - Subhash Bose gains strength; Gandhiji and other Indian leaders call for Quit India. (British Cartoon - Cartoonist - Leslie Gilbert Illingworth, 1902-1979; Published - Daily Mail, 12 August 1942). Click for larger image.
Whatever elements that remained of भारत-तंत्र Bharat-tantra based on a defined, limited, narrow concept of polity related to rule as per dharmashastras, would take a back-seat, the Congress proposed.
Instead, the Congress strongly pressed its claim that the Western system of governance was what India needed to end and recover from the 100-odd years of ‘peak’ British misrule.
Congress writes its own ticket
After a few decades of debate and discussions, so be it, was the Indian decision on this Congress model. Since, the Congress seemed to be in a position to best deliver the ‘goods’, they got a carte-blanche from Indians.
The ways of the West
The Congress model was based on 5-points of significant departure from Indic model of polity.
- Common currency for India based on legal tender laws. Private coinage or multi-currency system would no longer be legal practice.
- English language and culture would be used extensively – even in independent India. Vishnu Shastri Chiplunkar (1850-1882), a Marathi essayist thought that English language and education were vaghiniche doodh or tigress’ milk.
- Democracy and Republicanism in. Princes and Rajas out. India is one of the few countries (less than 7) which survived the initial 50 years of Republican Democracy.
- Centralized powerful State rather the village level government – including the judiciary.
- Adoption of Western models of education – schools, colleges and universities.
India's political stability and smooth leadership changes happened against all odds - and predictions of disaster. (Cartoonist - David Low (1891-1963) Published - The Guardian, 27 Oct 1959). Click for larger image.
The one success
Republican Democracy has been a signal success, in providing a platform for:-
- Competitive electoral politics,
- Co-opting or exiling violent dissent
- Global respectability – precluding external overt interference (e.g. Iraq, Afghanistan, Iran, Pakistan, et al.)
- Most importantly continuity, without a power-vacuum
20:20 hindsight
The failure (partial success, if you must) of the State on 4 of the 5 parameters is clear and sure. Every Indian success has been hobbled by the remaining four elements of this compact.
Whether it was the Anglo-Jinnah idea of Pakistan or the significant corruption in the Indian system (like in any system based on concentration of power), each are a result of this 5-point compact that Congress sold to Indians.
Nehru, Patel, Ambedkar – all saw a need for a strong centre. Inspite of Gandhiji’s push for Ram-Rajya (his description of भारत-तंत्र Bharat-tantra) and village panchayats, decentralized governance was finally deemed as outdated, ancient and ‘inefficient.’
Where Sher Shah Suri failed
Never in India’s 5000 years of known-and-accepted history have Indians accepted fiat currency. From at least Sher Shah Suri onwards, many tried imposing a fiat currency on Indians, including the British. And failed.
The British started deifying Gandhiji. This cartoon titled "The saint and the tiger" (Cartoonist - David Low (1891-1963) Published - Evening Standard, 20 Jan 1948). Click for larger image.
But the newly independent Indian State was allowed to implement the system of fiat currency without much ado. Morarji Desai’s hare-brained gold control laws were accepted with a slight whimper.
As the existence of a pan-Indian currency is seen as an essential to the well-being of the Indian nation, enthusiasm for the Indian currency idea remains strong. Witness the steady public demand for RBI’s periodic issues of commemorative coins and notes.
Indians have enrolled with the State system of education, using English language, in stupendous numbers. Indians have hesitantly used the Indian judicial system – as a measure of faith and participation in nation building.
All these point towards a certain trust and space that Indians have vested with the Indian Government. Some may say, it is not faith, trust and hope, but a long rope given to the Indian Government.
The time has come when Indians must do two things:-
- Plan to phase out this 5-point compact. This was not an endless, open-ended agreement by both sides.
- Hold the GOI’s feet to fire on defence preparedness. After 63 years of British departure, this is the last thing that the State must deliver to India.
The idea of co-opting India into the Anglo-Saxon Bloc is apparent from this cartoon. India - a source of 'immi-grunts'. (Cartoonist - David Low (1891-1963) Published - Evening Standard, 10 Jan 1950). Click for larger image.
Empty shell of a giant crustacean
India and Indians must come out from the shell of this now irrelevant compact. This compact has proved three things clearly:-
- The ‘erstwhile’ Muslim rulers of India, who claimed they were superior to Indians and the nation of India. After more than 6 decades, they have demonstrated themselves to be the inept rulers of Pakistan.
- The British stand, naked and shivering in fright, at their emerging irrelevance. The British claim of superiority, based on how they had ‘built’ England to Great Britain can now be seen as false and hollow. British misrule of Britain, has presided over the downhill ride of Britain. From super-power status to a situation where British themselves question British claim as a P5 State in the UN Security Council – with gross national debt (public, individual and corporate) of 500%.
- Indian capability to rebuild – after salvaging whatever of value was left from the wreckage of colonialism, the Partition, the Great Bengal Famine, impoverishment, hunger, disease, social destruction on an unprecedented scale.
India’s 5-point compact is in its terminal stage of irrelevance – having outlived its usefulness to India. Time to junk it – and all those who propose its continuation.
Be as it may, the turning point is still some distance away. It is early days to start work on a road-map for a smooth transition from the democratic Republican State to an India based on भारत-तंत्र Bharat-tantra.
2ndlook at British Empire
- Rise of the British Empire – A 2ndlook
- Indian Ships – British Navy
- British Empire & The Anglo Saxon Bloc
- Indian Gunpowder – the Force Behind Empires
- How Britain ‘lost’ America. Really!
- Indian Railways – The British Legacy
- 1945 Britain – Imperial ambitions of a starving nation
- Looking back at India’s Partition
- Where would India be without the British Raj
- David Hume on British character
- How 1857 changed world history …
- 1857 – Some History … Some Propaganda
- The Debt That India Owes Britain
- Quick … When Did India Become Free
- Asuras and Slavery – The Indic Disconnect
American aid came at a price; recalcitrant nations had a 'regime' change'; India became closer to Soviet Russia. (Cartoonist - David Low (1891-1963) Published - The Manchester Guardian, 20 Aug 1957). Click for larger image.
Related Articles
- Africa keen to learn from Indian elections: Zambian poll chief (topinews.com)
- A funny view of Indian history – courtesy comedian Vir Das (topinews.com)
- Lesson Plan of The Day – Global Studies – India – Toward Independence (socyberty.com)
- Indians talk about their dreams (search.japantimes.co.jp)
India’s Money Lenders – The Colonial Stereotypes
“Families have lost land, farmers have been asked to prostitute their wives to pay off debts …” writes Krittivas Mukherjee / Reuters.
Outdated Bollywood Style
I wonder what is the source of Krittivas’s article. I wonder how many prostitutes these money lenders have – from their 2,00,00,000 farmer-borrowers. Which era are you in, Bro. Krittivas? Apparently, the ghost of East India Company is alive, well and kicking. Is this the kind of grovelling that has to be done to be a part of Reuters, Krittivas? Friend Krittivas is reading a lot of colonial era propaganda – and seeing old Bollywood movies.
Even Bollywood has stopped this kind of portrayal of money lenders now. TV serials these days have business families as stars of the show.
A financial newspaper, The Mint, dutifully carries this Reuters article. Published jointly by The Hindustan Times and The Wall Street Journal, The Mint, regularly carries such bloopers. In yet another article that the Mint carried, for instance, writes how Indian “cities began suffering chronic milk shortages soon after independence in 1947” – implying that colonial India was the land of milk and honey. This kind of editorial blindness nearly makes me believe that the Indian Government got it right with the previous policy of excluding foreign media.
Some Stats About Money Lenders
There are 34,000 money lenders – and they have lent money to more than 2,00,00,000 farmers. They account for nearly 30% of the rural credit flows – and more credit than all the nationalized banks put together. They charge between 18% to 36% p.a. interest generally. Lesser than what most ‘educated’ credit card users pay – and what ‘modern’ banks charge their English-speaking customers.
So much about ‘usury’ by money lenders.
The Seths Who Funded The East India Companies
The vilification of the money lender by the British Colonial Raj at various times for political and economic gains has unfortunately been carried forward in post-colonial India. The English East India Company (EEIC) was initially funded and grew on Indian capital. The House Of Jagat Seth was most famous – and one of the largest banking families in the world. Virji Vora, Shantidas were other merchant bankers who funded the various European Indian Charter Companies in their trade. EEIC officials could not forget their supplicant status with these ‘seths’ – when they were desperate borrowers.
After 1757, and the occupation of the Bengal, Bihar and Orissa, transactions with the East India Company caused the ruin of many Indian lenders.
The other reason why money lenders were portrayed as villains by the the Colonial administrations was merchandise. Instead of bonded producers of Europe, Indian producers were free to sell their product to the highest bidder. The EEIC found that their contracts could be annulled by repaying the advance amounts. And the weavers and other producers could repay the advances by borrowing from the local money lender.
20th Century Vilification
Later during the Great Depression and the so-called ‘Indian currency crises’, Britain was extracting gold from Indian peasants, to overcome its own problems. For British loot to happen and to make their policies effective, they needed to leave the peasant without options. The only way to do that was to curb the money lender. To achieve this aim, between 1925-1940, enquiry commissions were created – and propaganda ‘reports’ flooded the system.
The colonial India Government passed many of the laws restricting money lending activities. These reports – Central Banking Enquiry Committee (CBEC) report (1929) and its associated Provincial Banking Enquiry Committee reports (of Assam, Bombay, Burma, Ceylon, Central Provinces, Bengal, Punjab, et al) of which the Madras Provincial Banking Enquiry Committee (MPBEC) report is cited by lazy academics and out-moded bureaucrats as authoritative – even in post-colonial era.

April Fool Jokers?
April Fool Joke – The RBI
On April 1st, 1934, while the ‘Squeeze India’ campaign was under execution India’s banking authority was set up – choreographed by Montagu Norman, Neville Chamberlain, Winston Churchill (some sickness … some racism) Lord Willingdon. From that April Fool’s day till now, RBI’s character has not changed. It remains isolated, out of touch with the India – and looks at India through colonial viewing glasses.
The tragedy is that RBI is not alone. The IAS (a successor to the ICS) and the Planning Commission are the other two. Compare that with the brilliant track record of modern Indian regulators and organizations like the SEBI, TRAI.
Legalized Harassment & Extortion
Debt Conciliation Acts were passed between 1933 and 1936 by the governments of Assam, Bengal, Central Provinces and Berar, Madras and Punjab; the Punjab Regulation of Accounts Act (1930) and the Debtors Protection Acts of 1935 and other such burdensome laws buried the money lender in mountains of paperwork and licences. These laws required money lenders to comply with extensive and prolonged compulsory licensing and registration – and extensive recording of transactions and accounts.
What these laws achieved was what was desired – a license for police and other ‘inspectors’ to start an extortion racket from money lenders (these days called corruption). A bureaucrat from colonial Punjab, Malcolm Darling (1925) shedding crocodile tears stated “the Indian peasant is born in debt, lives in debt and dies in debt” became a by line for tarring the money lender – while the cause was extractive, colonial revenue practices.
Options Foreclosed
These restrictions on money lending foreclosed the liquidity option for the Indian peasant, which would have averted the gold outflow from India and the impoverishment of the Indian peasant. With this legalized persecution, money lenders’ activities were curtailed all over India. RBI joined in this hounding of the money lenders – which continues to this day. The Bengal Burma link of the ages was broken. Chettiar money lenders were thrown out of Burma. From being a granary of Asia, Burma started declining – and there was no rice for exports. Result – The Bengal Famine of 1943. Tally – 40-50 lakh deaths. Similarly, the role of Chettiars in Singapore was wiped clean.
After the fall of Singapore, and the rapid Japanese advance, with Subhash Chandra Bose in the vicinity, a revolt by Bengal would have had catastrophic effect on the colonial administration. Howard Fast, in his novel ‘The Pledge’ believes that the Bengal Famine was deliberate creation– possibly to weaken the local population.

Subhash Chandra Bose occupied a large mindshare within and outside India. (Image source and courtesy - editstreet.com). Click for a larger image.
The RBI, a colonial era body, continues with these colonial anti-Indian policies. They keep ever-greening and recycle colonial policies. Old laws with new labels and different wordings are made – with the same intent. Kill the money lender. In all this, it is Indian agriculture and the peasant who suffers.
Even the rare modern supporter of the money lender does not see the colonial baggage that India and Indians governance carries, sees only half the picture – and little opportunity.
The Pre-WW2 Currency Crisis
After (colonial) India’s accession to the world gold standard in 1898, India rapidly built up a export surplus – and British reserves of gold started drying up – in spite of gold export restrictions to India by the USA, Britain and much of the Western world. There was hysteria in popular press and politicians on the subject of India and its appetite for gold. To overcome this payment crisis, it was decided to pay India in silver released by the Pittman Act. Subsequently, even payments in silver became difficult. India then started getting paid by Bank Of England credit notes.
By WW1 end, it was evident that sooner rather than later, India would obtain independence. Between 1920-40, in a series of measures, it was decided to reverse this policy. Central bankers from the USA, Britain, France and Germany had many meetings to “coordinate monetary policy.” The agenda – gold flow management between themselves and an obvious understanding – don’t let the browns get the gold. They (Hjalmar Schacht, Governor, Reichsbank, Charles Rist, Deputy Governor, Banque de France, Benjamin Strong, USA Federal Reserve, Montagu Norman, Bank Of England) agreed that Indian demand for gold had a “deflationary effect on global liquidity,” therefore “Indian demand for gold had to be regulated.” So, while the West consumed Indian production and goods, they regulated Indian demand for gold!! The result – Bengal Famine of 1943 which killed 40-50 lakh Indians. As Gideon Polya has pointed out, Australian sheep have lower mortality rates.
Like much of Western history, the British (Lord Willingdon, Neville Chamberlain, Montagu Norman, Winston Churchill – as the Chancellor of the Exchequer) executed a scorched earth policy in India. (After all what is brown life worth?) They implemented a series of economic and administrative measures that killed millions in the Bengal Famine would impoverish India – and sustain the empire.
Montagu Norman, Winston Churchill (then the Chancellor of the Exchequer) returned to the gold standard – with the famous prediction by Keynes that this action would result in a world wide recession – of which much came to pass. Churchill confessed “I’m lost and reduced to groping,” but went along with Montagu Norman, united by their racism.
On October 27th, 1931, the Ramsey Macdonald led “National” Government (Conservatives and Liberals coalition, fearful of the rising Labour Party) in Britain won a huge majority of 554 MPs of 615. The economic crisis of September (misnamed as the Indian Currency Crisis), ensuing Depression era problems in the US, the Weimar Republic problems – and other issues pushed this ‘National’ government to ram through a series of measures (page 130-131) that depressed silver prices, inflated gold prices and raised interest rates in India.
Done over the protests by Gandhiji, trade bodies and merchants and threats of resignation by the Viceroy and his Executive Council , the resulting ‘money famine’ (page 155) had the Lord Willingdon ecstatically say ‘… Indians are disgorging gold … (page 156). Indians have a different reason to revile Neville Chamberlain who with great satisfaction said “…The astonishing gold mine that we have discovered in India’s hordes has put us in clover …”after impoverishment of the Indian serf.
What Can be Done
The largest rural credit agency system, which knows Indian agriculture like the back of its hand, is available to the Indian economy. Trash the colonial propaganda – and use these money lenders.
Step 1 – Stop calling them money lenders. This term was used and has acquired pejorative connotations.
Step 2 – Bring them under SEBI – an effective organization, not reputed for corruption.
Step 3 – Increase credit supply – and interest rates will automatically fall. Allow re-finance to these ‘banias’ – based on their loan books.
Step 4 – Create credit enhancement tools – by use of traditional adhatiyas, other money lenders, property collateral of the end user, etc.
Step 5 – Induce competition by simplifying registration and inducing initial success for existing and new comers.
These credit experts can become low cost credit delivery mechanisms – which will revolutionize Indian agriculture. Will Indian planners grow out of their colonial moulds? Will Indian legislation go native? Sooner the better.
What Can The Money Lenders Do?
Under generations of persecution, extortion and discrimination has blunted the organizational capability of the ‘native money lender.’ He needs to look at himself afresh – and exploit business opportunities and use his knowledge of the Indian financial ‘consumer.’
A simple outline of an action plan for the money lenders to reclaim their position can be as follows: –
1. Incorporate a holding company.
2. Contribute one lakh rupees capital per member – with 34,000 members.
3. Create a paid up promoter capital of Rs.340 crores – and an IPO for 660 crores.
4. Obtain RBI licence for a rural bank with this paid up capital of 1000 crores.
5. Enrol all money lender members as DSAs.
6. Refinance money lender portfolio – and create further liquidity.
7. Use the money lender network to raise deposits, sell insurance, obtain refinance mortgage for housing, etc.
Even a conservative estimate of Rs.1.00 crore lending, guaranteed by these money lenders can inject Rs.34,000 crores of investment in the agricultural economy in India. SEBI can be co-opted to create appropriate supervisory and oversight measures.
Post Script – The source of Krittivas’s article
It is 6 months and Krittivas has not seen it fit to give sources or details of his dubious charges. So, let me give the details. This entire story of prostitution of wives to money lenders was a colonial idea that the British plagiarised from a very successful French Emile Zola novel, Germinal (1885).
Of course, most of Zola’s work was propaganda for the Socialist causes that were dear to him. The Vatican banned Germinal – and proscribed its reading by Catholics. India’s vernacular press fighting for survival had no sources to overcome this propaganda. Indian English press was, of course, under colonial domination. When Emile Zola died in 1902, he was given a State funeral and the crowd chanted ‘Germinal, Germinal’.
Does this give you some idea, Bro.Krittivas, on how much propaganda we are targetted with, before you start hitting the keyboard.
Related articles
- Desi Nostalgia For British Raj (quicktake.wordpress.com)
- Flag error leaves Jeremy Paxman University Challenged (telegraph.co.uk)
- Explaining the Methods of Hard-Money Lenders (blogs.wsj.com)
- How British Raj Ended Thugee in India (2ndlook.wordpress.com)
6 comments