Contents

1. Indian Economy on the Eve of Independence ... 1-10

2. Indian Economy (1950-1990) ... 11-20
3. Economic Reforms Since 1991 ... 21-34
4. Human Capital Formation ... 35-42
5. Rural Development ... 43-52
6. Employment-Growth, Informalisation and Other Issues ... 53-60
7. Environment and Sustainable Development ... 61-73
8. Development Experience of India - A Comparison with Neighbours ... 74-84
 CHAPTER
Indian Economy on the
1 Eve of Independence

TOPICS TO BE COVERED
‰ Agriculture Sector
‰ Industrial Sector
‰ Occupational Structure
‰ Demographic Conditions
‰ Foreign Trade
‰ Infrastructure
‰ The Features of the Indian Economy on the Eve of Independence

‰ Before the advent of British rule, India was:

1. Independent economy
2. Agriculture was main source of livelihood
3. Famous for handicraft (in the field of cotton, silk, metal, precious stones etc.)
‰ Sole Purpose of British Colonial rule in India: Development of modern industries in Britain by
making India a supplier of raw materials which was to be used in the production of final goods in
Great Britain.
The economic policies made by Britishers were more related to the protection and promotion of
economic interest of their home country than the development of India. This made India a supplier
of raw material and consumer of finished Industrial Products from Britain.
India a supplier of raw material

INDIA BRITAIN

Import of finished Industrial

Products from Britain

AGRICULTURE SECTOR
‰ State of agriculture sector on the eve of Independence:
1. Main Source of living
2. Low productivity/Stagnant
3. Dependence on monsoon
 So, the demand for expensive handicrafts products started to fall, thus heading to the
downfall of handicrafts industry.
2. Slow Growth of Modern Industry Reasons:
(i) Limited Growth of Public sector Enterprises: Only few public sector enterprises such
as railways, power, pot and telegraph were developed by the Britishers to increase the
market size for British products in India.
(ii) Lopsided Industrial Structure: The Industrial growth was lopsided; in the sense that
the consumer goods industry was not adequately supported by the capital goods Industry.
(iii) Lack of Basic and Heavy Industries: No Priority was given for the development of
basic and heavy Industries
TISCO was the only heavy Industry in India.

OCCUPATIONAL STRUCTURE
It refers to the distribution of workforce among different economic sectors such as Primary, Secondary
and tertiary sector.
‰ State of Occupational Structure on the eve of Independence:
1. Agriculture was the main source of occupation and about 72.7 percent of the working
population was engaged in agriculture.
2. Only 10.1 percent of the working population was engaged in the manufacturing sector, which
showed the backwardness of Indian Industry.
3. Only 17.2 percent of the working population was engaged in the service sector, which also
proved the slow growth of tertiary sector.
4. There was an unbalanced growth of the Indian economy at the time of Independence. It
indicates regional variations. There was a rise in agricultural workforce in Punjab, Rajasthan
and Orissa but a fall in that of Bombay and Madras Presidency.

DEMOGRAPHIC CONDITIONS
It includes a detailed estimation of population size, along with a complete demographic profile of the
country like death rate, birth rate etc.
India’s 1st official census operation was undertaken in the year 1881. After that the census is conducted
every 10 years.
Year of Great Divide 1921
Phase-I Phase-II
1921 was the year of great divide in the history After 1921, there was considerable and contin-
of population growth in India because the growth uous increase in the population that is called
rate of population was generally low before 1921 phase two of demographic transition.
‰ Demographic Conditions on the eve of Independence:
1. Both the birth rate and death rate were as high as 48 and 40 per thousand.
2. Life expectancy was as low as 32 years showing the lack of health care facilities.
3. Literacy rate was as low as 16 percent, which reflects the social and economic backwardness
of the country. Female literacy rate was very low at only 7 percent.

Indian Economy on the Eve of Independence 3

 4. The Infant mortality rate was 218 per thousand.
5. Rampant poverty was also lowering the demographic profile of Indians.

FOREIGN TRADE
Opening of the Suez canal is shortened waterway between Britain and India in 1869 gave easy access
of the Indian market to Britishers and also reduced their cost of transportation.
‰ State of Foreign Trade on eve of Independence:
1. Volume of Foreign Trade: Under 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. Direction of Foreign Trade: Britain maintained a monopoly control over India’s exports and
imports, Due to this, more than 50 percent of India’s foreign Trade was restricted to Britain
and the rest was allowed with a few other countries like China, Ceylon (Sri Lanka) and Iran.
3. Drain of India’s Wealth: Export surplus and profit earned from foreign Trade was not used
in any development activity of India. Rather, it was used to maintain the British administration
and as well as on war expenses. All of this led to the drain of Indian wealth.
Suez Canal was opened in 1869. Suez Canal is an artificial waterway running from North
to South across the Isthmus of Suez in North Eastern Egypt. It is one of the most important
waterways in the world.
Its opening reduced the cost of transportation and made access to the Indian market easier
and economical. A significant reduction in transport cost prompted monopoly control of
India’s foreign trade by the British government.

INFRASTRUCTURE
There were some positive contributions of the British government in the field of infrastructure, However,
the contributions were not intentional but purely to satisfy the economic interest of their own country.
Positive effects of infrastructure on Indian economy during British Rule:
1. Providing transport facilities, especially railways, was introduced in 1850.
2. Development of ports.
3. Postal and telegraph services were introduced.
4. The British government gave a strong and efficient administrative set up.

THE FEATURES OF THE INDIAN ECONOMY ON THE EVE OF

INDEPENDENCE
1. Backward and stagnant economy - as the level of economic growth was very low. It is indicated
by a lower level of GDP and a lower level of national income.
2. Dependent economy - as India was relying on imports of food grains from other countries.
3. Depleted economy - as natural resources of India were exploited to the maximum level.
4. Disintegrated economy - as the partition of India resulted in a shortage of certain food grains,
shortage of cotton, and jute because major related areas went to Pakistan.

4 Indian Economic Development PW

 MULTIPLE CHOICE QUESTIONS
1. Identify the correct combination of the ‘Goals (c) Indian manufactured products enjoyed
of Indian Five Year Plans’: a worldwide market before the British
 (CBSE SQP 2023-24) established themselves in India.
(a) Growth, Equality, Modernisation, Self- (d) The role of the public sector under the
Reliance British rule was confined only to a few
(b) Development, Equality, Modernisation, industries.
Sustainability 5. Which major economic sector dominated the
(c) Good Health, Education, Modernisation, Indian economy on the eve of independence?
Sustainability (a) Agriculture (b) Manufacturing
(d) Growth, Equity, Modernisation, Self- (c) Services (d) Mining
Reliance 6. When was planning commission established?
2. The overarching objective of equitable  (KVS SQP 2019-20)
distribution goals in planning is to: (a) 1947 (b) 1948
 (CBSE SQP 2023-24) (c) 1950 (d) 1951
(a) ensure a fair and just society for all 7. Whose estimate of national income was
citizens considered very significant?
(b) fo s te r c o m p e t i t i o n by re d u c i n g  (KVS SQP 2019-20)
government intervention in markets (a) Dadabhai Naoroji (b) William Digby
(c) focus on short-term gains rather than (c) RC Desai (d) VKRV Rao.
long-term societal benefits 8. Major contribution to the GDP of the country
(d) enhance economic growth through on the eve of independence was from:
targeted investments in specific sectors  (KVS SQP 2019-20)
3. Main intention of the British rulers behind (a) Tertiary sector
the introduction of railways in India was: (b) Primary Sector
(a) to earn profit through foreign trade. (c) Secondary sector
(b) to break geographical and cultural (d) Both Primary and secondary sector.
barriers. 9. The main interest of the Zamindar was:
(c) cheap and rapid movement of people  (KVS SQP 2019-20)
from one place to another. (a) To collect rent
(d) to develop India’s cotton and jute (b) To improve the condition of agriculture
industry. (c) To produce food crops
4. Which of the following is not a true statement? (d) To produce cash crops.
(a) On the eve of Independence, agriculture 10. Details about the population of British India
was the principal occupation of the were first collected in: (KVS SQP 2019-20)
people in India. (a) 1871 (b) 1881
(b) Mining is the main secondary occupation. (c) 1891 (d) 1901

Indian Economy on the Eve of Independence 5

11. Initially, the industrial development was 12. In the history of demographic transition,
confined to the setting up of: which year is regarded as the year of great
 (KVS SQP 2019-20) divide?  (KVS SQP 2019-20)
(a) Cotton textile mills (a) 1901
(b) Jute textile mills (b) 1902
(c) Cotton and jute textile mills (c) 1921
(d) Capital goods industry. (d) 1923

SUBJECTIVE TYPE QUESTIONS

1. ‟During the colonial period, a number of independence. Investigate the factors that
socio-economic indicators were in a led to the trade imbalances and dependence
dilapidated state.” List any three such on imports during this period.
indicators that led to the worsening of India’s  (CBSE SQP 2023-24)
demographic profile. (CBSE SQP 2023-24)
7. Comment upon any two salient features of
2. “The pre-independent India’s occupational
the foreign trade policy of India, on the eve
structure experienced growing regional
variation.” Justify the above statement with of Independence.
valid explanation. (CBSE SQP 2023-24) 8. Highlight the challenges faced by the
3. Identify and briefly explain three key features agricultural sector in India during the eve of
of the Indian economy on the eve of independence.
independence that contributed to its
9. Do you agree with the view that the zamindari
predominantly stagnant structure.
 (CBSE SQP 2023-24) system brought stability to cultivation during
the British rule in India? Give reason for your
4. Describe three key features of India’s foreign
answer.
trade on the eve of independence. Illustrate
with examples the country’s trading patterns 10. (A) What was the state of Indian agriculture
with other nations.  (CBSE SQP 2023-24) on the eve of independence?
5. In order to understand the complexities of (B) Comment upon the state of agriculture
the industrial sector in India on the eve of in India during the pre-British period.
independence, elaborate on the prevailing
conditions that contributed to “Systematic 11. What was the monopoly control of India’s
de-industrialization” and technological foreign trade by the British government?
backwardness.  (CBSE SQP 2023-24) How was the two-fold motive behind the
6. Analyze the complex challenges posed by systematic de-industrialisations of the
India’s foreign trade situation on the eve of British in pre-independent India?

Answers
1. (d) 2. (a) 3. (a) 4. (b) 5. (a) 6. (c) 7. (d) 8. (b) 9. (a) 10. (b)
11. (c) 12. (c)

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 Solutions

SUBJECTIVE TYPE QUESTIONS

1. India’s demographic indicators were in a as a supplier of raw materials for British
dilapidated state during the colonial period as: industries, while finished goods were
 The overall literacy level was less (below imported, leading to deindustrialization.
16%). The drain of wealth from India through
 Life expectancy was very low (32 years).
heavy taxation and unequal trade policies
hindered the growth of domestic
 Alarming infant mortality rate (218/1000).
industries and stifled economic progress.
2. The pre-independent India’s occupational III. L i m i te d I n d u s t r i a l i z a t i o n a n d
structure experienced growing regional Infrastructure: The Indian economy
variation as: lacked significant industrialization on the
 Parts of Madras Presidency, Bombay and eve of independence. The lack of domestic
Bengal witnessed a decline in the industries and a weak manufacturing base
dependence of the workforce on the limited employment opportunity outside
agricultural sector with a commensurate the agricultural sector. Additionally,
increase in the manufacturing and the inadequate infrastructure, including
services sectors. transportation and communication
 There had been an increase in the share networks, hampered the efficient
of workforce in agriculture in states such movement of goods and services, restricting
as Orissa, Rajasthan and Punjab. market integration and economic growth.
3. Three key features of the Indian economy on 4. On the eve of independence in 1947, India’s
the eve of independence that contributed to foreign trade was characterized by several
its predominantly stagnant structure: key features:
I. Agricultural Dominance and Low I. Dominance of British Trade Relations:
Productivity: The Indian economy was The country’s trade was largely focused
primarily agrarian, with agriculture being on exporting raw materials, such as
the main occupation for a significant cotton, jute and tea to Britain and
portion of the population. However, the importing finished goods in return. This
agricultural sector suffered from low trade pattern resulted from the
productivity due to traditional and exploitative economic policies imposed
outdated farming methods. Lack of modern by British colonial rule, which hindered
agricultural technology, inadequate India’s industrial development.
irrigation facilities, and fragmented land II. Limited Diversification of Trading
holdings limited economies of scale, Partners: India had limited trading
resulting in stagnant agricultural output partners outside the British Empire. The
and perpetuating rural poverty. colonial rule discouraged India from
II. Colonial Economic Exploitation: The actively engaging in trade with other
British colonial rule pursued economic countries, and the majority of its foreign
policies that were designed to serve trade was confined to British colonies.
Britain’s interests at the expense of Indian This lack of diversification in trading
development. India was primarily treated partners restricted India’s economic

Indian Economy on the Eve of Independence 7

 CHAPTER SUMMARY AND GLOSSARY

Before The Advent of British Rule In India State of Agriculture Sector on The Eve of
U Independent economy Independence.
U Famous for handicrafts U Main source of living
Sole Purpose of British Colonial Rule in India U Dependency on monsoon
U Exporting raw material from India to Britain U Low productivity/stagnant growth
U Importing finished goods to India from Britain for the Causes of Stagnation and Low Productivity in
economic interest of their home country. Agriculture
State of Infrastructure on The Eve of Independence U Terms of revenue settlement
U Positive contribution of the British govt. in the field of U Land settlement system
infrastructure. U Lack of proper inputs
U Provided transport facilities, Specially railway was U Commercialisation of agriculture
introduced in 1850s.
State of The Industrial Sector at the EVE of
U Development of ports Independence
U Postal and telegraph services were introduced.
Destruction of handicraft industry
U British govt. gave a strong and efficient administrative
U Discriminatory tariff policy of the british govt.
set up.
U Competition from machine - made products
U Evolution of Banking and Monetary system.
U Introduction of railways in India
Slow growth of public sector enterprises
U Limited growth of public sector enterprises
U Lopsided industrial structure

Indian Economy on the

Eve of Independence

State of Occupational Structure on The EVE of Independence

U Agriculture; Main Source of Occupation as About 72.7 % People Were Engaged In Agriculture.
U Only 10.1 % of the working population were engaged in manufacturing sector.
U An unbalanced growth of Indian economy at the time of Independence . It indicates regional variations.
Demographic Conditions on The Eve of Independence
U High birth rate and death rate indicating very low survival rate
U Life expectancy was low as 44%.
U Literacy rate was also low as 16%. Female literacy was only at 7%.
U Rampant poverty was also lowering the demographic profile of India.
U The Infant mortality rate was 218 per thousand.
State of Foreign Trade at The Eve of Independence.
U Volume of foreign trade
U Direction of foreign trade
U Drain of India’s wealth.



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