Did the end of the British Raj in India create an economic loss for Britain?

Question

I know the economic downturn of the World War and the victory of the Labour Party played some role in Britain deciding to quit India. Did GB have any serious economic implications because of this? There were a lot of Britons employed in various sectors in India. Did the quitting cause large-scale unemployment and downturn of British economy? How was the common public's reaction to this?

Answer 1

To begin, the following passage from Britain, the Commonwealth and the End of Empire by Dr John Darwin discusses the "staggering blow" Great Britain felt after granting independence to India.

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Repairing Britain

The huge sense of relief at a more or less dignified exit, and much platitudinous rhetoric, disguised the fact that the end of the Raj was a staggering blow for British world power. Britain had lost the colony that had provided much of its military muscle east of Suez, as well as paying 'rent' for the 'hire' of much of Britain's own army. The burden of the empire defence shifted back to a Britain that was both weaker and poorer than it had been before 1939.

Britain was overshadowed by two new superpowers, the United States and Soviet Union.

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Britain, the Commonwealth and the End of Empire 

By Dr John Darwin (Last updated 2011-03-03)

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That being said, after reviewing the unemployment rates for Great Britain (The United Kingdom) in the years following the independence of India (beginning in 1947), it does not appear that the rates changed as compared to the early 1940's.

NOTE: The next 3 links will connect you to a PDF. You will need to scroll or search for the specific page number for sourced information.

Average Unemployment Rates, Nine Countries, Six Major Periods, 1904-1950 CHART2 pg 458.

In fact the unemployment rate dropped from 2.5 (1946) to 2.0 in 1947.

INTERNATIONAL COMPARISON OF RATES TABLE 1 pg 456

As noted on page 462 the wartime employment rates neared 100%. Not noted but possibly assumed, post wartime employment rates remain high due to loss of life during wartime as well as job availability in disaster recovery (which certainly was evident in post war Britain after WWII.)

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It seems that the public reaction to the Labour Party's direction to providing a welfare state was not met with huge opposition. In fact the voters wanted an end to wartime austerity

The Labour Party, after winning the 1945 elections began the process of dismantling the British Empire when it granted independence to India and Pakistan in 1947, followed by Burma (Myanmar) and Ceylon (Sri Lanka) the following year.

These movements along with others parallel the Fabian Movement. The Fabian Society laid many of the foundations of the Labour Party and subsequently affected the policies of states emerging from the decolonisation of the British Empire, especially India.

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In conclusion, I would say that as a whole Great Britain did partially suffer in terms of world power, by granting independence to India . However, without the internal stability needed to enforce colonial or Imperial rule over India, (as well as other countries/states) India would not have provided the benefits Great Britain had once received. In regards to the return of British natives from India, I see no evidence to suggest that unemployment rates during this timespan rose. Also, as previously noted the ideas of the Fabian movement, which were pursued by the newly elected Labour party, do not seem to have been met with enough opposition to suggest there was a negative public reaction to the dismantling of the British Empire or those returning from said Empire.

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I based financial growth or financial diminishment on the unemployment rates throughout the years prior to and after India's independence. The data shows that throughout these years there was no difference in the employment rate. This suggests that the financial burden of the Britons returning home after India's independence did not have a negative impact on Great Britain.

Answer 2

TED quote...

"I hoped would show that in the return from Raj there was no difference in the employment rate and that in-turn would suggest that the financial burden of the newly arriving home Britons would not have had a negative impact on Great Britain." – E1Suave May 17 '12 at 13:35

... At Independence of India in 1947 a lot of British civilians in India migrated to Australia, Canada, Kenya, Tanganyika and British outposts like Kuwait, Bahrain etc in the Persian Gulf. To start with 'white Britons' ruling India were always demographically insignificant.

Answer 3

Britain had agreed to pay for Indian troops if used outside India after the first world war. This meant that it ended the second war with a huge debt to India. Britain wanted India to remain within the Sterling zone- i.e. India would use the pound as its reserve currency- and also honour all pensions and other payments to Britishers. Furthermore, British wanted to safeguard its investments in India. The Indians readily agreed and went the extra mile- because of suspicion of America- by 'buying British' even if the American product was superior. Thus Britain lost nothing financially- rather it gained. However, since the Indians pursued stupid economic policies of the sort popular with the British 'Fabian' Left, longer term, India declined even further in importance. Tiny Hong Kong- which pursued sensible policies- became much more important. Britain had 'over-full' employment after the war. It gained by the repatriation of British managers and civil servants. Interestingly, some returned British officials used their knowledge of Indian languages like Punjabi to bring in Indian workers for the expanding factories in U.K. Ultimately, India's real use to Britain turned out to be as an exporter of labour- both skilled (Doctors) and unskilled!

Britain was 'making a profit' on India prior to 1919, and 'breaking even' after that but India's economic stagnation meant that this profit had been declining in importance since the 1840's.