Indian Economy on the Eve of Independence

Class 11 Notes Chapter 1 Indian Economic

Development
Agricultural Sector on the Eve of Independence
India’s agricultural sector (on the eve of independence) exhibited three principal
characteristics, these characteristics pointed to backwardness of India’s agriculture as
well as its stagnation

 Low level of productivity

 High degree of vulnerability
 A wedge between owners of the soil and tillers of the soil.

Factors causing backwardness and stagnation of Indian agriculture during the British
rule

 Land revenue settlement under the British Raj

 Forced commercialisation of agriculture

Industrial Sector
“Systematic de-industrialisation” is the term that describes the status of industrial sector
during the British rule. It implied two things

 Decay of world famous traditional handicraft industry owing to discriminatory

policies of the British Government.
 Bleak growth of modern industry now to lack of investment opportunities.

Two-fold motive behind the systematic .(industrialisation during the British Rule in India.

 To exploit India’s wealth of raw material and primary products. It was required to
fulfill the emerging needs of industrial inputs in the wake of industrial revolution in
Britain.
 To exploit India as a potential market for the industrial products of Britain.

Foreign Trade India had occupied a place of eminence in the area of Foreign trade,
since ancient times. But the British rule in India ended this eminence.

Drain of India’s Wealth

Huge administrative expenses were incurred by the British Government to manage their
colonial i ale in India. Also huge expenses were incurred by the British Government to
fight wars in pursuit of their policy of imperialism.
Demographic Condition
Demographic conditions during the British rule exhibited all features of a stagnant and
backward economy. Both birth rate and death rate were very high nearly 48 and 40 per
thousand respectively.

Occupational Structure
Greater dependence on agriculture as suggested by occupational structure on the eve
of independence implied lesser availability of land per head for the farming population.
Accordingly agriculture was taken largely as a means of subsistence and less as an
occupation for profit.

Infrastructure
Infrastructure refer to the elements of economic change as well as elements of social
change which serve as a foundation for growth and development of a country.
Development of infrastructure is a precondition to the economic and social development
of a country.

Economy of a country includes all production, distribution or economic activities that

relates with people an determines the standard of living. On the eve of independence
Indian economy was in a very bad shape due to the presence of British colonial rule.

The Britishers generally framed policies that favoured England. The only purpose of
Britishers was to unjustly enrich themselves at the cost of India’s economic
development. Thus, in 1947, when British transferred power back to India, we inherited
a crippled economy.

India’s National and Per Capital Income

Under Colonial Rule There were no efforts from the part of the colonial government to
measure the national and per capital income of India. Some individual attempts were
made to measure such incomes but produced conflicting and inconsistent results. The
contribution of VKRV Rao and Dadabhai Naoroji are considered very significant in this
context.

Low Economic Growth Under Colonial Rule

India had an independent economy before the arrival of British rule. But the Britishers,
dominated it for over a period of 200 years. Britishers framed policies that protected and
promoted the economic interests of their own country. They transformed India into
supplier of raw materials and consumer of finished goods from the factories of Britain.
Such policies affected Indian economy very adversely.

In this context, we will discuss the conditions of certain sectors that were badly affected
by the presence of colonial rule, i.e. on the eve of independence.
State of Agriculture Sector
Agriculture was the main source of livelihood for most of the people of India, and about
85% of the country’s population lived mostly in villages and derived livelihood directly or
indirectly from agriculture.
Inspite of such a large segment of the population being dependent of agriculture, either
directly or indirectly, this sector was facing stagnation and constant deterioration, as is
brought forward through the following points.

 Low Level of Productivity Productivity, i.e. output per hectare of land was very
low. This led to a low level of output, inspite of a large area under cultivation.
 High degree of Vulnerability Agriculture was vulnerable to climatic factors and
mostly affected by erratic rainfall. Poor rainfall generally led to a low level of output
and also to crop failures. No effort was made by British Government to provide
permanent source of irrigation facilities for the farmers.

The reasons for stagnation of agricultural sector were

(i) Land Revenue System
The Britishers introduced the zamindari system. The zamindars were recognised as
permanent owners of the soil. Zamindars were to pay a fixed sum to the government as
land revenue and they were absolutely free to extract as much from the tillers of the soil
as they could.
Their main interest was in rent collection regardless of the economic conditions of
cultivators and this caused misery and social tension among the latter.
Apart from this there are two more systems namely, the Ryotwari and the Mahalwari
were prevalent.

(ii) Lacking of Resources

Because the tillers had to pay huge amount of rent, referred to as ‘Lagaan’, they were
not left with any surplus to be able to provide for resources needed in agriculture in the
form of fertilisers or providing for irrigation facilities. This further lowered the agricultural
productivity.

(iii) Commercialisation of Agriculture

Commercialisation of agriculture refers to shift from cultivation for self-consumption to
cultivation for sale in the market. It also refers to cultivation of cash-crops like cotton,
indigo, etc.
Due to commercialisation of agriculture, there was some evidences of a relatively higher
yield of cash crops in certain areas of the country. But this could not help in improving
the conditions of Indian farmers.
Instead of producing food crops, farmers were producing cash crops, which were
ultimately to be used by British industries.

State of Industrial Sector

In the pre-british period, India was particularly well-known for its handicraft industries, in
the fields of cotton and silk textiles, metal and precious stone works, etc. These
products enjoyed a worldwide market based on the reputation of the fine quality of
material used and the high standards of craftsmanship.

But the Britishers followed a policy of systematic de-industrialisation by creating

circumstances conducive to the decay of handicraft industry and not taking any steps to
promote modern industry and reduced India to a mere exporter of raw material and
importer of finished goods.
The following points bring farword the state of the industrial sector at the eve of
independence
1. Decay of Handicraft Industry
The traditional handicraft industry in India enjoyed worldwide reputation, but the British
misrule in India led to the decline of Indian handicraft industry. The Britishers adopted
the following policies to systematically destroy the handicraft industry.

 Discriminatory Tariff Policy of the State The Britishers followed a discriminatory

tariff policy by allowing tariff free exports of raw material from India (to provide for
the requirements of their industries in Britain) and tariff free import of British
Industrial products (to promote British goods in India), but placed a heavy duty on
the export of handicraft products. So, Indian handicraft products started loosing
their domestic as well as foreign markets.
 Competition from Machine-made Products Machine-made products from Britain
were cheap and better in quality than the handicraft products. This competition
forced many a handicrafts to shut down their business.
 Introduction of Railways in India The Britishers introduced Railways in India, to
expand the market of its low priced industrial products. Consequently, the demand
of high-priced handicraft products started to fall, thus leading to the downfall of
handicraft industry.

2. Slow Growth of Modem Industry

Under second half of 19th. century, modern industry showed slow growth. This
development was confined to the setting up of cotton and jute textile mills.

Subsequently, the iron and steel industries began coming up in the beginning of the
20th century.
In this context, the Tata Iron and Steel Company (TISCO) was incorporated in August,
1907 in India. It established its first plant in Jamshedpur [Bihar, at present Jharkhand].

But, these industries were the result of private endeavour. The state participation in the
process of modem industrialisation was very limited, as is evident from the following
points
  Limited Growth of Public Sector Enterprises The public sector enterprises such
as railways, power, post and telegraph were confined to areas which would
enlarge the size of market for British products in India.
 Lopsided Industrial Structure The industrial growth was lopsided, in the sense
that consumer goods industry was not adequately supported by the capital goods
industry.
 Lack of Basic and Heavy Industries No priority was given for the development of
basic and heavy industries. Tata Iron and Steel Mills was the only basic industry in
India.

Textile Industry in Bengal

Muslin is a type of cotton textile which had its origin in Bengal,particularly, places in and
around Dhaka (now the capital city of Bangladesh). Daccai Muslin had gained
worldwide fame as an exquisite type of cotton textile.
The finest variety of muslin was called malmal. Foreign travellers also used to refer to it
as malmal shahi or malmal khas meaning that it was worn by or fit for, the royalty.

State of Foreign Trade

India has been an important trading nation since ancient times.
But when the restrictive policies of commodity production, trade and tariff were imposed
by the colonial government, it adversely affected the structure, composition and volume
of India’s foreign trade.
Following were the reasons behind the poor growth of foreign trade
1. Exporter of Primary Products and Importer of Finished Goods
Under the colonial rule, India became an exporter of primary products such as raw silk,
cotton, wool, sugar, indigo, jute, etc and an importer of finished consumer goods like
cotton, silk and woollen clothes and capital goods like light machinery produced in the
factories of Britain.

2. Britain’s Monopoly Control

Britain maintained a monopoly control over India’s exports and imports. Due to this,
more than half of India’s foreign trade was restricted to Britain while the rest was
allowed with a few other countries like; China, Ceylon (Sri Lanka) and Persia (Iran). The
opening of Suez Canal in 1869 further intensified British control over India’s foreign
trade.

3. Drain of India’s Wealth

An important characteristic of foreign trade throughout the colonial period was the
generation of a large export surplus. But this surplus came at a huge cost to the
country’s econo Several essential commodities like food grains, kerosene, were
scarcely available in the domestic market.
Also, this surplus was not used in any developmental activity of India. Rather, it was
used to maintain the administrative set-up of the Britishers or bear the expenses of war
taught by Britain.
All of this, led to the drain of Indian wealth.
State of Occupational Structure
During the colonial period, the occupational structure of India exhibited its
backwardness. The agricultural sector accounted for the largest share of the work force
which remained at a high of 70-75% of the work force and the manufacturing and
services sectors accounted for only 10 and 15-20% respectively.

There existed a growing regional disparity with few states such as Orissa, Rajasthan
and Punjab witnessing an increase in agricultural workforce while the states which were
the parts of Madras presidency. Bombay and Bengal witnessed a decline in the
percentage of work force dependent on agriculture.

State of Infrastructure
Infrastructure comprises of such industries which help in the growth of other industries.
Under the colonial period, basic infrastructure such as railways, port per transport, posts
and telegraphs developed.
However, the real motive behind this development was not to provide basic amenities to
the people but to sub serve various colonial interests.
The state of infrastructure under the colonial rule can be understood with the help of
following points
1. Roads
Roads constructed before independence were not fit for modern transport. It was very
difficult to reach rural areas during rainy season.
The roads were built only to serve the purpose of mobilising the army within India and
transporting raw materials from the countryside to the nearest railway station or the port
for exporting it.

2. Railways
British rulers introduced railways in India in 1850 and it began its operation in 1853. It is
considered as one of the important contribution of Britishers.
The railways affected the structure of the Indian economy in the following two ways

 It enabled people to undertake long distance travel and thereby break

geographical and cultural barriers.
 It fostered commercialisation of Indian agriculture which adversely affected the
self-sufficiency of the village economies in India.

So, the social .benefits provided by the Railways was outweighed by the country’s huge
economic loss.

3. Water and Air Transport

The colonial rulers took measures for the development of water transport. The inland
waterways, at times, also proved uneconomical as in the case of the coast canal on the
Orissa coast. The main purpose behind their development was to serve Britain’s
colonial interest.
The colonial government also showed way to the air transport in 1932 by establishing
Tata Airlines. Thus, in this way it inaugurated the aviation sector in India.

4. Communication
Modern postal system started in India in 1837. The first telegraphy line was opened in
1857. The introduction of the expensive system of electric telegraph in India served the
purpose of maintaining law and order.

Demographic Condition
Various details about the population of British India were first collected through a
census in 1881. Before 1921, India was in the first stage of demographic transition. The
second stage began after 1921. However neither the total population of India nor the
rate of population growth at this stage was very high. Though suffering from certain
limitations, it revealed the Unevenness in India’s population growth. The population
grew at a rate of 1.2% up to the year 1951.
On the eve of independence the demographic condition was as follows

 The overall literacy level was less than 16%.

 The female literacy level was at a negligible low rate of about 7%.
 Public health facilities were either unavailable to large chunks of population or
when available, were highly inadequate. Infant mortality rate was 218 per
thousand in contrast to present infant mortality rate of 63 per thousand.
 Life expectancy was very low 44 years in contrast to the present 66 years.
 Both birth rate and death rate were very high at 48 and 40 per thousand of
persons respectively