Question

Read the following passage and answer the question that follows.

A major problem of Indian industrial and commercial development was the supply of capital. Until 1850, British capital was shy of Indian adventure. The risks and unknown factors were too great, and prospects in other directions too bright. The working capital of the agency houses after 1813 at first consisted mainly of the savings of the Company's servants. Their cries of woe when these houses fell as in the crisis of 1831 were loud and poignant. Indian capital was also shy for different reasons. It needed to acquire confidence in the new regime, and outside the presidency towns, to acquire the habit of investment. Investment for large-scale production for 'enabling' works like railways was an unfamiliar and suspected practice. Thus the first big developments came when European capital was coaxed into the country by government guarantees or went of its own free will to develop industries with which it was already familiar as in the case of jute or coal. Indian capital followed where it was in touch with European practice as in Bombay and dealing with familiar products like cotton. These considerations throw into all the greater relief the achievement of the Tatas in developing iron and steel. Thus the major part of the capital provided was British with a steadily increasing Indian proportion from 1900. As late as 1931-32 the capital of companies registered abroad was nearly four times that of companies registered in India. But this is not an exact guide because it leaves out of account the stock in British companies held by Indians, as well as government stocks. Speaking generally it may be said that the capital of the cotton industry was mainly Indian, that of the iron and steel industry entirely so, that of the jute industry about half and half, while the coal and plantation industries were mainly British, together with that used for the building of railways, irrigation, and other public works. Management in the cotton and steel industries was mainly Indian though European technicians were freely employed, that of the jute, coal, and the plantation industries being European, the jute men in particular being Scotch. Their capital, apart of course from government enterprise, operated through joint-stock companies and managing agencies. The latter arose through the convenience found by bodies of capitalists seeking to develop some new activity and lacking any Indian experience, of operating through local agents. It arose in the period after 1813 when private merchants took over the trade formerly monopolized by the Company. The money would be found in Britain to promote a tea garden, a coal mine, or a jute mill, but the management would be confided to a firm already on the spot. The managing agency was the hyphen connecting capital with experience and local knowledge. Until 1914 the policy of the government continued in the main to be one of 'enabling' private capital and enterprise to develop the country. Direct promotion was confined to public utilities like canals and railways. The line between enabling and interfering action became distinctly blurred, however, in the case of the cotton industry and there was a tendency for enabling action to pass over into the positive promotion of particular projects. This was most noticeable in the time of Lord Curzon with his establishment of an imperial department of agriculture with a research station at Pusa and a department of commerce and industry presided over by a sixth member of the Viceroy's Council. The first World War began the transition to a new period of active promotion and positive support. As the conflict lengthened there arose a demand for Indian manufactured goods. India failed to take full advantage of this opportunity, partly because of uncertainty as to the future and partly because the means for sudden expansion were lacking. The outcome of this situation was the appointment of an industrial commission in 1916 under pressure from London. The commission criticized the unequal development of Indian industry which had led to the missing of her war opportunity. A much closer co-operation with industry was planned through provincial departments of industry. Increased technical training and technical assistance to industry was proposed while it was suggested that the Central government should set up a stores department which should aim at making India self-sufficing in this respect. The commission's report was only partially implemented, but a stores department and provincial industrial departments were created and something was done towards promoting technical assistance. The importance of the report and its aftermath was that it marked the transition from the conception of Indian economy in broadly colonial terms with freedom for private enterprise to the conception of India as an autonomous economic unit.



During the early twentieth century, Indians were restricted to making investment in stocks of companies that were necessarily listed in India. This was done with the aim of confining Indian capital to India so that it could not compete with British capital.

• A. Definitely true as inferred from the passage.
• B. It was true on a selective case by case basis.
• C. This was the tact during the early part of the British rule.
• D. No evidence to support the same is given in the passage.

Hint:

Check whether the passage ever mentions a rule restricting where Indians could invest; it only discusses where capital was registered.

Answer 1

The Correct Option is D

This question presents a specific claim: that Indians were legally restricted to investing only in companies listed in India, and that this restriction existed to stop Indian capital from competing with British capital. We need to check the passage for any statement that supports this claim.

1. Definitely true as inferred from the passage: The passage mentions the 1931-32 figures comparing capital of companies registered abroad against those registered in India, but it never says Indians were restricted by rule from investing in foreign listed companies.
2. It was true on a selective case by case basis: There is no mention anywhere of a case where such a restriction was applied, selectively or otherwise.
3. This was the tact during the early part of the British rule: The passage does discuss the early period, roughly up to 1850 and beyond, but it talks about Indian capital being cautious on its own, not about the government forcing Indians to invest only within India.
4. No evidence to support the same is given in the passage: The passage explains the 1931-32 capital figures as an imperfect measure, since it leaves out British company stock held by Indians and government stock. It attributes the pattern of investment to confidence, habit, and familiarity with an industry, never to a rule confining Indian money to India. The claim about a deliberate restriction meant to stop competition with British capital is simply not something the passage discusses at all.

Because the passage gives reasons rooted in investor psychology and industry familiarity, and never mentions any legal restriction on where Indians could invest, the claim in the question cannot be shown true or false from the text; it is simply absent from it.

Let's summarize:

• The 1931-32 data compares registration location of capital, not any restriction placed on investors.
• The passage's own explanation for cautious Indian investment is habit and confidence, not a rule against investing abroad.

The correct answer is option 4: no evidence to support the same is given in the passage.