Was capital expensive in the colonial countryside? The view from Uttar Pradesh

Working paper

Was capital expensive in Colonial India? This paper addresses this question by examining rents and land prices between 1800 and 1939 in the United Provinces (now Uttar Pradesh) in Northern India. I calculate four different estimates of the rate of return to landownership, which by arbitrage should be linked to the rate of return on land-like capital investment more generally. All show a major decline in real interest rates over the 19th century. By 1870, those used to price landownership were usually less than 5 per cent. By 1900, the rent (net of tax) to price ratio was much the same as in England. The rate of return to land was not far from formal sector interest rates: financial markets were integrated. Over the long run there was rather modest real rent growth. Land prices skyrocketed, however, because of falling interest rates. These results suggest that private property rights were expected to be secure and that capital was not expensive, at the relevant margin for land-like investments, in Colonial India: low investment was due to a low demand for it rather than an expensive supply.

Authors: Nagar, A

• Publication status: Published
• Publisher: University of Oxford
• Series: Oxford Economic and Social History Working Papers
• Publication date: 2026-03-01
• Paper number: 230
• Language: English