In Financing the Raj, David Sunderland continues his scholarly exploration of the “nuts and bolts” of the British Empire. His earlier pair of books on the Crown Agents showed how that office often mismanaged the empire, using unqualified staff and buying costly equipment to keep the colonies running. In the present book, Sunderland turns to the India Office (IO) and finds that, contrary to prevailing assumptions, the IO was in fact “an efficient institution, staffed and advised by committed and highly knowledgeable individuals, who wished to and generally succeeded in protecting India from City exploitation” (vii).
Financing the Raj focuses on the IO's financial operations, examining Indian finance as part of the financial ecosystem of London. Sunderland carefully illustrates how money moved between India and the City through a “financial labyrinth.” IO officials themselves “delight[ed] in the lucidity of mystification,” which “acted as a cloak” for their work” (207). The author methodically breaks the IO's financial operations into four sections: the sale and purchase of debt in the City, the purchase of silver for rupee coinage, the transfer of funds between India the UK and the related management of the exchange rate, and the IO's investment activity. The author introduces his theoretical framework—“the prism of principal agent theory and the concepts of trust, the gift economy and enlightened self-interest”—in the introduction (15), but these tools are not thoroughly used until the concluding chapter.
The book's eleven chapters are arranged topically rather than chronologically, creating some unnecessary repetition across chapters. In each section, Sunderland uses a range of archival and published sources to describe what the IO actually did and to explain the rationale behind IO decisions. The IO raised capital for Indian projects, but it also bought and sold financial products to facilitate trade and to invest in the London financial system. Indeed, the IO's chief concern was not the financing of specific projects but the general fiscal health of India. IO employees worked to avoid default “at all costs” (209) and ensured that Indian government and railway debentures, stocks, and bills always had a ready market in the City. Indian money was committed to keeping the City's financial markets working, even when those funds could have served some useful purpose in India. In effect, the IO lent money to the City to help City investors buy Indian debt. Sunderland uses the idea of a “gift economy” to explain this behavior, arguing that the IO's use of funds kept in the United Kingdom (the “home balances”) were “the subcontinent's contribution to the City's gift economy” (206). Sunderland argues that this policy was economically rational, if not always politically palatable in India. Loans to the City “generated relatively high returns,” gave the IO “financial patronage that it could use to India's advantage,” “had a benign impact on money market interest rates,” and “had a positive impact on the sale of Indian government and guaranteed railway company loans/bills and council bills” (200–201). These were no small accomplishments in the “sheer savagery of the London financial ecosystem” (100), where speculators, brokers, and bankers battled to corner commodities, manipulate markets, and earn hefty commissions.
The IO's policies were conservative, but in Sunderland's view, they were right. They facilitated trade between India and the United Kingdom, made Indian borrowing cheaper and more reliable, and earned interest on India's reserves. Even during the First World War, the IO looked to India's financial health, rather than Britain's, fighting with the Treasury over war loans. Sunderland presents a convincing argument that critics of the IO were uninformed, not knowing the IO's real intentions or the “customs of the City” (206).
India itself is curiously absent from the book. Sunderland is solely focused on the IO's operations in the City, and he does not address the broader institutional history of the IO or the results of its policies in India. Some articulation between Sunderland's new research and existing studies of the IO, such as Alfred P. Kaminsky's The India Office, 1880–1910 (London, 1986), would have been fruitful. The book does engage with the politics of finance in India, particularly in chapters dealing with exchange rates and currency reserves, but Sunderland—writing from the vantage point of the City—dismisses nationalists' critiques and finds IO decisions sensible for India. The major political struggle in the book pits the IO not against Indian nationalists but against the Bank of England, which provided the IO with services but also competed with the IO in lending to the City.
Individual actors make only a few appearances in the book, despite Sunderland's emphasis in the introduction and conclusion on the importance of personalities, family and business networks, and trust. The exception is the chapter on silver purchases, which addresses a 1912 scandal involving a firm connected to undersecretary of state for India Edwin Montagu. Sunderland uses the case to show how personal ties helped the IO defeat speculators and save India money, at the cost of anti-Semitic backlash from City investors. The framework Sunderland has introduced would serve as a useful base for more biographical studies of the businessmen, financiers, and officials involved in imperial finance.
Financing the Raj will be a useful guide to historians of imperial economic and financial history, as well as to advanced students of international finance. Two helpful appendices mapping out the movement of money should be especially handy for historians researching Indian or imperial business and investment. Readers looking for a general account of the IO or Indian economic history between 1858 and independence should begin elsewhere, before reading this specialized study of the IO.
