HAPTER

INOIAN ECONOMY ON THE

EVE OF INDEPENDENCE
Focus: The chapter focuses on features of the Indian economy on
the eve of independence, and the way it suffered colonial
exploitation at the hands of the British Government in India.

■ Overall Features of Indian Economy on the Eve of Independence

■ State of Agricultural Sector
■ Industrial Sector
■ Foreign Trade
■ Demographic Profile
■ Occupational Structure
■ Infrastructure

I. OVERALL FEATURES OF INDIAN ECONOMY

ON THE EVE OF INDEPENDENCE
Prior to the British rule, Indian economy was a vibrant and prosperous
economy. On the agricultural front, it was a self-contained rural economy
where cultivators themselves were the owners of land. Industrial sector
was famous throughout the world for its handicraft products. Our exports
enjoyed global reputation. The silk and cotton textiles were famous for
th eir fine quality and the metal & precious stonework were famous for
excellent craftsmanship.
But th e advent of the British rule marked the beginning of a syS t ematic
exploitation of the Indian economy. The agricultural sector was exploited
asa
source of revenue. The industrial sector was destroye dbYexp1mtmg
..
the domestic market for the British products. Export of raw matena· 1was
encouraged to promote supplies to the British industry. Import of British
 . e impetus to the industrial revolution th
, w;1 s encouraged to g1v en.
goo ds ' . .
. in Britain. .
happen mg . ploitation of the agncultural and industri
1 , systemic ex . a1
owing lo t ,c . f India's foreign trade 1n favour of the British
., . d rcstructurt ng o
sccto• ~ an . d from a vibrant economy to a stagnant and
cconolll)', f ndw c 11ange
backward economy. .
, f' d pendence, overall features of the Indian econorny
'I hus, on I he eve o m c
were as under:
conomy· On the eve of independence, Indian economy
( 1) Stagnan t E ·
was comp letely a stagnant economy. A stagnant economy is the one
which shows little or no growth in income.
The British government never attempted to estimate India's national
and per capita income. However, Dadabhai Naoroji, William Digby,
Findlay Shirras, V.K.R.V. Rao and R.C. Desai were some notable
individuals who attempted to estimate India's national and per
capita income. Of course, these estimates yielded conflicting results.
Most of the estimates reveal that the country's growth of aggregate
real output during the first half of the twentieth century was less
than 2 per cent and growth in per capita output per year was a
meagre 0.5 per cent.
Standard of living of people was miserably low. Epidemics and
famines were a recurring phenomenon.
(2) Backward Economy: Indian economy was a backward economy on
the eve of independence. An economy is called a backward economy
when it has a very low per capita income.
In 1947-48, the per capita income in India was just ~230.
The bulk of the population was very poor, without sufficient food,
clothing and shelter. Widespread unemployment (caused by the
destruction of handicraft industries) was an important factor
contributing to poverty.

(3) Dominance of Agriculture: Agricultural sector dominated the

Indian economy as the principal source of livelihood.
Nearly 72 per cent of the country's working population was engaged
in agriculture. However, the contribution of agriculture to GDP was
only 50 per cent, indicating the backwardness of this sector.
This sector suffered from low productivity, owing to which it had
low contribution to GDP.
 (4) nlcnk lndu'»f riaH8ation : JJrior 10 the fJrit 1·,.h
J · d •a1
-' ,~ ru e, m ustn sector
in India wa~ wdl-J<11<JW11 for handicrafts Put it . •
• • w~ systematica11 y
,J

destroyed by the di i,c.riminatory British policies.

Hy the lime of indcp<.mdencc, sma1J-<;ca/c and cotta • d •
. · ge in ustnes
were almost rmncd. Heavy industry &h<,wcd a IJJc ... k h dc
. ' " , gr<)Wl , an 10r
the bulk of capital goods rcquin:rm.:nts we wcr, d d
, c epen cnt upcm
imports from Brilain.

(5) Heavy Dependence on Imports: 1hcc.ountrywasheavilydependent

upon imports, parlicularly for machinery and related equipment of
production .

Armed force& of the country also depended heavily on foreign

imports for most of the defence equipment.
Besides, several consumer goods like sewing machines, medicines,
kerosene oil, bicycles, etc., used to be imported from abroad.
(6) Limited Urbanisation: At the time of independence, bulk of the
population of India Jived in villages.
In 1948, only 14 per cent of population lived in urban areas while
86 per cent lived in rural areas.
Rural population lacked opportunities outside agriculture. This
compounded their poverty.
{7) Semi-feudal Economy: On the eve of independence, Indian
economy was neither wholly feudal nor a capitalist economy.
It was a mixed economy or a semi-feudal economy. Such an economy
had the mixture of feudalistic and capitalist modes of production.
Feudalistic mode of production leads to low productivity. Low
productivity leads to backwardness.
Briefly, we can state that on the eve of independence, Indian economy
was characterised with low level of economic development. It was
developed on]y to the extent it could serve the colonial interest of th e
Br.itish government. If railways, ports, post and telegraph were develop~d,
th1 s Was to promote the process of colonial exploitation of t~e In~ian
economy. It was directed towards the protection and promotion 1 the °
economic interest of the British economy rather than the In<lian economy.

2
· STATE OF AGRICULTURAL SECTOR
On th
e eve of independence, f ndian economy was pnm
· arily an. agrarian
. d
econ 0 . d · ed its hvehhoo
f: my. Around 72 per cent of the populat10n env .
th
rom e agriculture sector which reflects the importance of this sector m
on the Eve of Independence 5
[ndwn Econo my

Zamindari System of
Land Revenue
A system of land revenue
that worked throug h
middle men called
zamindars; an interme diary
between the colonial
govern ment and the
peasants.
Owner s of the Soil vs.
Tillers of the Soil
Owners of the soil were
the zamindars and tillers of
the soil were peasants and
labourers who worked on
the farms of zamindars.
Indian Economic Development
.
the In d ian econ omy . .
However, this sector suffered from deep sta
gnatio11
·c
an d ch rom backwardness. Follo. wing were the principal features of
. · .1ture on the eve of mdep enden ce: the
Indian agnct u
(1) Low Production and Productivity: Produ ction refers to
total
ou tpu,t Wl1 ile produ ctivit y refers to outpu t per hectar e oflan d B
. . • oth
(production as well as product1v~ly) were found to be extremely low
on lhe eve of indep enden ce. This was a result of the lack of m~~
with the farmers, and lack of incentive to the tillers of the soil.
Table 1 shows produ ction and produ ctivit y levels in 1947 for wheat
and rice, comp ared with their levels in 2019-20.
Table I • Production and Productivity of Wheat and Rice-
A Comparison between the Levels in 1947 and 2019-20
Productivity
Crop
1947
(kg per hectare)
2019-20 1947
Production
(in lakh tonnes) l
~
2019-20
1. Wheat 660 3,421 64 1,076 (
2. Rice 665 2,705 220 1,184
[Source: (i) D. Bhattacharya: Economic History of India, Economic Survey 2020-21]
Table 1 shows that produ ctivit y of whea t was nearly 5.1 times lower
in 1947 comp ared with its level in 2019- 20. Produ ctivit y of rice was
nearly 4 times lower in 1947 comp ared with its level in 2019-20.
Produ ctivit y conti nued to be low despite the fact that area under
cultivation tende d to expan d (owing to press ure of population).
Likewise, level of outpu t of whea t was nearly 16.8 times lower, and
that of rice was nearly 5.3 times lower in 1947 comp ared with their
levels in 2019-20.
(2) Exploitative Land Settlement System: The British government
in India introd uced a uniqu e system of land settlement. It set-up
a triang ular relati onshi p amon g the gover nmen t, the owner of the
soil and the tiller of the soil. This was popul arly know n as :,1,n,r1c'c 1' • (
system of Land Settle ment and was partic ularly imple mente d in the
then Bengal Presi dency (comp rising parts of India's present-day
easter n states). The distin ct features of this system were as these:
(i) The zamindars were recog nised as perm anent owne rsofth esoil,
which impli ed that the profits gener ated from the cultivation
were to accru e to zamindars instea d of the cultivators.
(ii) The zamindars were to pay a fixed sum to the government as
land revenue.
 (iii) ·tht.· A,m1111dc11., wl'rt' li·l'·t" to extract .,s much frotn lhe tilll'rs or
thl'soilas thcycou1d. ln l:1ct, theon1y intc1·t·stor1lw ,1111111il,11,
was to maximise revenue colkction, ignoring the pliglil ol' the
tillers. The- m111,1dm ., did nothing to improve I hl' nrndil ion or
agriculture.
The implications of the land settlement syskm were nlarming for
the farmers and the farming. l'vlosl importanlly:
♦ It led to unlimited exploitation of Ihe tillers of the soil by th e
z,w1111clars.
♦ Rates of land revenue were frequently raised by the omi11clors f:amine, in Indio .
During the British Rule
which led to frequent eviction of the tillers or the soil. ■ r nrrnnGF> rnfr,r,, to r1
scvcrE: shortw]r- 0f fonrl
♦ Tillers were reduced to the status of landless labourers. (owing to crop frnlurr.)
resul ting in v10IP.nl
Farming, even though it was the principal source of livelihood, was
hunger cJnd s1mvcJt1on
driven to deep backwardness and long period stagnation . ■ from 1760 till 1943,
India was hit by terrible
(3) Forced Commercialisation of Agriculture: Co1nmercialisation of famines on a regular
agriculture refers to a shift from subsistence cultivation (cultivation basis.
■ The most s1gnif1cant
for self-consumption) to cultivation of cash crops for the market.
amongst those was
Farmers were forced to grow con1mercial crops to cope with the the great famine of
Bengal of 1769-70, which
needs of the British industry.
claimed a large toll of
Following are some notable points in this context: lives.
■ More than 85 million
♦ Farmers were forced to shift to produce indigo, as it was people died owing to
repeated fami nes.
required by the textile industry in Britain for dyeing/bleaching
■ In contrast, there
of the textile. The farmers were either lured or forced to accept have been no fam ine
rel ated dea th s since
advance payments for the cultivation of indigo.
independence.
♦ Production of commercial crops exposed the subsistence
farmers to uncertainties of the market for their own subsistence.
♦ Switching from subsistence to cash crops raised credit needs of
the farmers which led to their perpetual indebtedness.
(4) Lack of Investment in Agriculture Infrastructure: The colonial
government or :a111i11dm·s took no interest in promoting investment
in agricultural infrastructure. Permanent means of irrigation were a
far cry. Agriculture was heavily dependant on rainfall and therefore
continued to be uncertain. Flood-control, drainage and de-
salination of the soil which could have led to increased productivity
of the sector, were totally neglected.
 . ween Owners of the Soil and Tillers of the Soil: Agricul
(~) Gulf bet .· . h RaJ· was characterised by a huge gulf b lure,
. the BnL1s , etwe
during 'I' on the one hand and tillers of the soil' on th en
e Other
, nvners oft he sor .
< •rs shared the output, they seldom (hardly) h ·
While the ownc l . s areq
f duclion . They were meref y mterested in rnaXirn·s1n .
the cosl o pro 1
. . me (in terms of share o output).
their rcnla I ,nco &

'lhcl1.11 crso ,· the 'soil were merely given enough for subsistence·
. resources to invest Wh·1le
'I hus, t I,c l.I 11 c,rs of lhc so il did ,not have
the ownc rs, had no inlcrest. Stagnat10n and backwardness'· uf
. . Jture was
agncu • lhe obvious consequence.

Consumption of Owners of the Soil

d bted ess of Tillers ofthe SoII and Conspicuous
In e D " the Bnt1sh. . I u1e, w1111e tillers. of the soil confront I dabsolute
. ed . poverty
. and ace.em•::'JJ
urmg
.J indebtedness as thetr. way o f ltfe. the owners of the soil mdu ge m. conspicuous cons 1mpt,'1r 1

..J The ti/le, s of the soi.1v1ewe

• . as a .source of subsistence. The owners of th-=-
d agriculture merely ' - "' J
r •

v,ewed it as a heredita1 Y source of income without investment

(6) Small and Fragmented Holdings: Landholdings were both smal]

as well as fragmented. [Fragmented holdings mean a piece here and
a piece there]. Accordingly, most landholdings were uneconomic:
yielding low output at high cost.
(7) Subsistence Outlook: Farming was taken mostly as a means of
subsistence. Subsistence farming is a form of farmmg m ;~ ii1c1. tr.e
crops are produced to provide fo r the basic needs of the family.
There is little surplus left for sale in the market. Implying a lack
of commercial outlook. Accordingly, backwardness prevailed and
poverty dominated.
Briefly, on the eve of independence, Indian agriculture was both
backward as well as stagnant (non-vibrant). BJt.k,. a_ ~11t:~s 01 agn (wrnre
b e.x.pldined in terms of these charactenstll~ of agriculture on the ew 0
Partition of the Country
and its Impact independence:
■ The part,t,on of the
country had a negative
(i) Low production and low productivity,
impact on Indian
(ii) Lack of investment in the agriculture infrastructure,
agriculture.
■ India got 82 per cent of (iii) Small and fragmented holdings, and
Th
population and 65 per (iv) Subsistence outlook.
cent of food grain area. by
t
■ Rich food producing S agnation of agriculture is explained in term s of these characteristics oi (I
areas of West Punjab
and Sindh went to
agriculture on the eve of independence:
Pakistan.
(i) Exploitative Land Settlement System under the British Raj,
■ This aggravated the food
crisis in the country. (ii) Forced commercialisation of agriculture, and
(iii) Gulf between the owners of the soil and the tillers of the soil.
Indian Economic Development
 Pre-British Period Agriculture
:.J Backward, stagnant and non-vibrant agriculture
during the British Raj sharply contrasted with
the pre-British period agriculture.
□ Prior to the British Raj in India, rural India was
described as a system of self-contained village
communities. These village communities
included farmers and the functiona, ies.
□ The farmers were engaged in crop farming or
cattle farming while the functionaries would
render essential services like that of blacksmiths, Prosperous Agriculture even without
goldsmiths, washermen and shoe-makers. Mechanisation (Pre-Brrtish PenodJ

□ There were no intermediaries (like zamindars) between th e state and the farmers, the farmr:;rs
would pay land revenue directly to the king.
□ Prosperity and stability were the key charactenst,cs of life in rura l India Thus, the French traveller,
Bernier, described Bengal in 17th century as "richer than Egypt" producing amply for self-
consumption and exporting in abundance.

3. INDUSTRIAL SECTOR
Systematic de-industrialisation is the term that describes the status of Prior to the British Rule
industrial sector during the British rule. The textile industry o• ·,..,d a
was famous worldw,ae.
The motive behind the systematic de-industrialisation during the British 'Deccai Mus ·11· foJ:1d ,,
Rule in India was two-fold: Bengal, in places near
Dhaka (present capirn! of
♦ To exploit India's wealth of raw material and primary products Bangladesh) was famous
all over the world as tr e
(like cotton and jute). It was required to fulfil the emerging finest cotton textile. Mafrra'
was the finest vane~ oi:
needs of industrial inputs in the wake of industrial revolution muslin and v,as p~ma•i ~
in Britain. worn by ro}alty giving 't
the name of malma 1 s1ai,
♦ To exploit India as a potential market for the industrial products or ma/ma/ khas.
of Britain.
This systemic de-industrialisation led to:
♦ Decline of the handicraft industries and the consequent massive
unemployment.
♦ The penetration of British goods in the Indian markets.
The poor state of the industrial sector during the British rule is highlighted
by th e following points:
(I) Decay of Handicrafts: Before suffering the decay during th e
British Raj, handicraft in India enjoyed a worldwide reputation
for excellence and quality. The main reason for the decay of the
handicraft was the discriminatory tariff policy of th e 5tate.

on the Eve of /nde endence 9

 Id "de Reputation prior to British Rule _____ _
Indian Handicrafts of Wor w1

. le in India coincided with industrial revolution in

.. 11 1u
The Bntts
Britain.
The British found India as the best source of raw material as WeU
as the best market for their in dustrial products. Accordingly, a
discriminatory tariff policy was pursued. It aJlowed:
♦ tariff-free export of raw m aterial fro1n India, and
♦ tariff-free import of British industrial products into India.
But, at the same time, heavy duty was placed on the export of Indian
handicraft products which reduced their competitiveness in the
international market.
As a consequence, while the British products started penetrating Bri
the Indian markets, the Indian handicraft products started losing ch
their domestic as well as foreign market. D ecay of handicrafts was
the end-result.

The Indian handicrafts also faced tough competition from the

machine-made British products, which were better in quality and
precision than the Indian products.

The pattern of demand of Indian consumers also ch anged, as more

people, under the influence of British culture, took to western
lifestyle.

Thus, the Indian craftsmen started losing their domestic markets (iv
and eventually, perished.
2
< ) !'e.ak (Notional) Growth of Modern Industry: Under the 'British
aJ' modern industry saw only a bleak growth. It was only in
nd
~eco half of the 19th century that the modern industry showed 4.
its emergence.
Five observations 11 d b . Ind
· ee to e noted 111 this regard: tim
(i) Initially, cotton d • . . xttle
an Jute textile mills were set-up. Cotton te The
mills were located · . . . h and
In Western India mainly 111 Maharas tra Bri
Gujarat au d were mainly controlle~ by the Indians. Jute textile
Indian Economic Development
 industries were concentrated in Bengal and were primarily
controlled by the foreigners.
(ii) In the beginning of twentieth century, iron and steel industry
came up and Tata Iron and Steel Company (TISCO) was
incorporated in 1907. After World War II, cement, paper and
sugar industries also started coming up.
(iii) There was hardly any capital goods industries in India. Capital
goods industry produces goods like machines and industrial
plants which are used for further industrialisation.
(iv) Contribution of the new industrial sector in the Gross Value
Added (GVA) or Gross Domestic Product of the economy
remained extremely low.
(v) The state participation in the process of modern
industrialisation was limited. It was confined only to the
strategic areas (like railways and means of communication)
which helped expansion of the Indian market for the British
products.
Briefly, industrial sector on the eve of independence revealed four core
characteristics, pointing to its backwardness and limited growth: -
(i) Handicraft industry was systematically destroyed by the British
government. It was largely owing to the discriminatory tariff policy
of the British government.
(ii) Modern industry showed a bleak expansion. It was by and large
restricted to the expansion of railways. It helped expansion of the
Indian market for the British products.
(iii) Capital goods industry (which is the core element of industrial
growth) was almost non-existent.
(iv) While the traditional Indian industry (handicrafts) were decaying,
modern industry remained in an infant stage. This again pointed to
the backwardness of the Indian economy with little or no evidence
of dynamic change.

4. FOREIGN TRADE
India had acquired eminence in the area of foreign trade, sjnce ancient
times.
The Romans used to call India, "the sink of world's bullion". But the
British rule in India brought an end to it.

Indian Economy on the Eve of Independence 11

 . . rule India was a well-known exporter of fi .
. to the Bntls11 ' . . I11sh
Pnor fi cotton, silk, textiles, iron goods, wooden eq
d (such as ne . . good
goo s d ecious stones). But th e BnLJsh converted Inct· . ~
. ry work an pr . . ia into
ivo f , w material and importer of finished goods. It q
net exporter o r,1 I . was all
. _ .. . torv policy of I radc anc tariff pursued by lhc B ..
due to d1scnm1na ' r1ti\~
government. . .
~
Statco [l 1.. , , forei
Ill ia s . z:.,11 n tr~1dc at th e •t1111c of 111dcpcndence can be desc ri beo
i tJ,c following obscrvc1llons:
111 term ." o,
•

( 1) Nl•l Exporter of Raw Material and I mportcr of Pinished Good,

Suez Canal and accoss to
Indian Markets
Due to exploitative colonial policies of trade and ta riff, Jndia becarne
■ It s an art1f1c1al \._ atcrway net exporter of raw materials and primary products (like raw sill
t. 1"'n ng from ri0rth to
cotton, wool, jute, indigo, sugar, etc.)
SC' ~h 8Cr0SS lstl~mus of
s ez r '11..""°th eastern At the same time, it became net importer of fini sh ed goods producer.
Eg,rt
• - t Ccn3 PfC'vldes by the British industry. Our imports included cotton, silk ar..:
"' ect ade route woollen clothes, besides several types of capital goods produced L
betv.eeT' EJropean or
A..... er caP Perts and England.
i::-c-ts ocated n South
As a East Africa and
Composition of exports and imports reflected u tter backwardne.£
C.:ea!" a by removing of the Indian economy.
·'le neecf to sail around
(2) Monopoly Control of India's Foreign Trade: D uring the Britsh
■ ':pe-- Tl9 cf Suez Canal rule, exports and imports of the country came under monopor
- '8t9 s gn f cantly
'ed...,:;.ed the cost of control of the British government. In this context, two obsen-ations
t...a,.,.spc,rrauon of goods are of critical significance:
oeNeen 8ntain and
♦ More than 50 per cent of India's foreign trade ·was directee
■ /J s gr ncant reduction m
trar.sport cost promoted
towards Great Britain. The rest of the trade was directed tow-ar6
~oc0po I i:ontrol of China, Ceylon (Sri Lanka) and Persia (Iran). The control cl
d a':, fore gn trade by
the Brr sh government.
Britain over India's foreign trade intensified after the openit~
of Suez Canal in 1869.

♦ While exports of primary products (raw matt~rial) from IoiliJ

supplied inputs to the British industry, imports of finished
goods from Britain provided a hngc market to th<.? British
jndustry.

□ th
e. po/icy of e British government resulted in a monopoly control of
Codlonisl
tra
India s fare,g ·

□ Exd~o~ts
8nd
Imports were lsrge/y restricted to be between India and Britain.
□ In ,as exports provided raw t 1 .. . d huge
market for the British lndust,;s ena to the Bnttsh industry, while India's imports provide 8
These are typical characteristics of s bai '-.. d
w0Jf. vver economy.
(3) Surplus Trade but only to Benefit the Rriti&h: Surprisingly, during
the British regime, our cxporls exceeded (1Ur imports. It implied a
surplus of balance of trade. Hut:
♦ This surplus wa~ owing largely Lo the export of primary goods jt@@W~~-
(nottheindustrial good~)which isasign ofecnnomicbackwardness. ■ Hugeadministrat1'-1e
e, penses 1Nere
♦ Despite the surplus trade, supplies of several essential incurr"3d by the Bntish
commodities like food grains, and clothes remained defici ent grf1ernrnt;:nt to manage
i hrjir col0ni&I rule In
in the domestic market. India
♦ The trade surplus was not used for growth and development of ■ Alz,, hug8 r:vp1::n::,es
•11er'-J rnr✓ urred b / the
the country. Instead, it was used to meet: 8nti:,h grJ 1e:rnrr 8nt t0
frght wars in p Jr::,u1t
(i) administrative expenses of the British government in of th1:::ir 1:.olre,; of
India, and rrnperial srn
■ All these e1 pw1s% v1ere
(ii) expenses of wars fought by the British government. borne b / trie lndran
Administrative and war expenses led to a huge drain of wealth E; i:,rieq Jer
• This ·rnplisd a d-a1n o~
from India. It compounded the backwardness of the Indian India's wealth
economy.

J Surplus generated as balance of trade was only spent to meet administrative and iJ1ar experises
by the British government in India.
0 These expenses led to a huge drain of wealth as it was not used for investment.
□ Consequently, poverty and backwardness were elevated.

5. DEMOGRAPHIC PROFILE
Demographic conditions during the British rule exhibited all features
of a stagnant and backward economy. Here, we focus on the following
parameters:
( 1) Birth Rate and Death Rate: Both birth rate (BR) and death rate (DR) Population Census
were very high-nearly 48 and 40 per thousand respectively. High ■ Population census
In India is a detailed
BR and High DR suggest a state of massive poverty in the country. estimation of population
size, along with a
(2) Infant Mortality Rate: Infant mortality rate (death rate of children
complete demographic
below the age of one year per 1000 live births) was very high. It profile of the country
was about 218 per thousand, while at present, it is 30 per thousand. ■ It was first conducted
under the British rule
High infant mortality rate is a sign of poor healthcare connected in 1881. Since then it Is
with extreme poverty. conducted after every
ten years.
(3) Life Expectancy: Life expectancy (average life of a person) was as
low as 44 years, while presently it is 69.4 years. Low life expectancy
reflects lack of healthcare facilities, lack of awareness as well as lack
of means to avail them.

Indian Economy on the Eve of Independence 13

 . ortant social indicators of backwardn ess
. £-xpe cwncy are ,mp
L w Ltfe
. rtI Rate and o .. .
u High Mot ta Y
d poverty of the mas, , . ses f .
,es ond recumn g epidemics were the prime causes behino
an I frequent c11r111
ti 1e British r u e, d h
::.i a high mortality ra te.
Owmg I J ., lo droughts, optiiu•rnic"
,.., occurrecl ue tot e neglect of Pubtic
,ad /a1ge Y < ,1 tu
U While fammes occw ,
health services
. .acy ralc
L1lc1
Rah." ' (referring lo th ose . who can read and
(4) J.ilcrufy • · . er cc nl, refl ecting soc1al backwardness as
. ) w·1s ncaily I 6J p I J a
write . of cco1101111 c
L •backwardn ess. Fema e iteracy rate 'w a,
worse- on Jy 7 pe r cent. '] hi s indicated gender-bias in th e
reflcclwn
slill
society.

DEMOGRAPHIC TRANSITION
•
table points .
re 1ating to demographic transition in Ind ia: ..
Following are some no . . . is regarded as the 'Year of Great D1v1de'.
. O f demographic trans1t1on, 1921
(i) In the history I . rowth .in In d.,a was never consistent. Size of popJlation kept
(ii) Till 1921, popu at,o~ 9_in one c~~sus an d decreasing in the other. It is descr.bed as th::
fluctuating, increasing
first stage of demographic trans1t1on. . .
(iii) The census 1901 showed a d ec I.ine o f o.04 crore in total population (from 23.87 crore in
1891 to 23.83 crore in 1901). .
.
· of 1.38 crore (from 23.83 crore in 1901. to 25.21 c rore m 1911).
(iv) The census 1911 showe d a rise
(v) The census 1921 showe d a decline of o•07 crore (from 25.21 crore in 1911 to 25.14 crore in
1921). .
(vi) After 1921, India entered the second stage of demographic transition w hen popu latton
recorded a consistent rise.
(vii) It is after this year that the total population in India never declined; it recorded a consistent
rise: the census 1931 recorded a rise of 2.76 crore; the census 1941 recorded a rise of 3.96
crore; the census 1951 recorded a rise of 4.24 crore, and so on.
(viii) A consistently rising population (on the eve of independence) led to excessive burden
of maintenance investment. It is an expenditure which a country has to incur on the
maintenance of the existing population.
I (ix) When maintenance investment is high, investment for GDP growth remains low.
I
(x) High maintenance and low investment for GDP growth is another parameter of the
I backwardness and stagnation of the Indian economy.

(xi) However, the underlying fact is that ti// 1951, the rise in India's population was never
alarming; it ranged between mild to modest. It was because both birth rate and death
rate were high and the gulf between two was small.

(xii) It was only from 1951 onwards that the rise in population became explosive in nature, a
nd
the countr_y started facmg a serious challenge in terms of population explosion. Because, '
whereas birth rate continued to be high, death rate recorded a significant decline. _J
- - - - -- -- - -- ------ - -
6. OCCUPATIONAL STRUCTURE
Occupational structure refers to distribution of working population
across primary, secondary and tertiary sectors of Lhe economy.
Table 2 shows occupational structure of Indian economy at the time of
independence. The data relates to 1951, because reliable statistics for the
year 1947 are not available.
Table 2. Occupational Distribution of India
at the T"uneofl n d epen d ence Pie-Chart
IL ...~.:;.
Occupation 1951 (in%)
- - -
-
1. Primary Sector 72.7

■
(i) Agriculture 50.0 Primary Sector 72.7%

(ii) Agricultural Labour 19.7 ■ Secondary Sector 10.1%

17.2%
Tertiary Sector
(iii) Forestry, Fisheries, Animal Husbandry, Plantation 2.4
(iv) Mining 0.6

2. Secondary Sector 10.1

(v) Small and Large Scale Industries 9.0

(vi) Building Construction 1.1

3. Tertiary Sector 17.2

(vii) Trade and Commerce 5.2

(viii) Transport, Storage and Communication 1.4

(ix) Other Services 10.6

100.00

Table 2 offers the following observations: Agriculture as a

Means of Subsistence
(I) Agriculture-The Principal Source of Occupation: On the ■ Greater dependence
eve of independence, about 72. 7 per cent of working population on agriculture
(as suggested
was engaged in primary sector with agriculture as its principal by occupational
component. structure on the eve of
independence) implied
Percentage of population dependent on agriculture is much less in lesse, availability of land
per head of the farming
advanced countries of the world. For instance, in England and USA population.
2 per cent, in Japan 12 per cent and in Germany 4 per cent of the ■ Accordingly, agncultur e
was taken largely as a
population depend on agriculture. means of subsistence,
and less as an
This establishes backwardness of the Indian economy at the time of occupation for profit
independence.
 .
An 1ns1
·gnificant Source of Occupation: On th
t ee
(2) Indus ry- barely 9.0 per cent of the working popular Ve
1. 1 dependence, . . . . 1011 i
of ~ ed in manufactunng 1ndustnes, nuning, etc. n
India was engag .
. . per cent in the USA, 42 per cent m England
As agamst 1t, 32 . h . .. and
_. J an are engaged 1n t ese activities.
39 per cent 111 ap
It further p1.oves how backward the Indian economy was at the t·l11Je
of independence.
. ifican t Transition from Agriculture to Industry: The tab]e
( 3) Jnsign
shows un b alan ced growth of the Indian economy.
Trans1.ti. on of workforce from agriculture to industry marks the
economic • 'tal<e -off'· But in case of the Indian economy, it was by anJIi
large absent. There were some green shoots in the_ parts of Madra,
Presidency (comprising areas of present-day Tamil Nadu, Andhra
Pradesh, Kerala and Karnataka), Bombay and Bengal. These area,
witnessed an increase in manufacturing and services sector alor.g (
with a decline in dependence on agricultural sector. Bu~ at tht
same time, Odisha, Rajasthan and Punjab recorded an increase ii;
workforce engaged in agricultural sector. ("

On the whole, occupational structure of India (on the eve er

independence) pointed to backwardness and lopsidedness of the
Indian economy.
B
O Assessed in terms of occupational distribution of the working population in India at rhe rime:.-
independence, we get a disappointing picture of the Indian economy.
Br
ili~
0 Since bulk of the working population was engaged in agricultural sector (along with rhe ~c:
.tac
that agriculture was merely a means of subsistence), Indian economy was in a state of exE'2"'2
backwardness.
rer
0 The transition from agriculture to industry was insignificant or almost negligible.
i:::h,
0 Rampant poverty and occupational structure were closely related to each other

Vv
7. INFRASTRUCTURE Br
Ce1
Infrast ructure refers to the elements of (i) econo1nic change (like meaJli to '
of transport, communication, banking, power/energy), and the elem~1~ foci
of (ii) social change (like growth of educational health and housiP~ the
faciI·t·
1 ) h· h , t of 1 are
ies , w Ic serve as a foundation for growth and developrnen
country.
(1:
Elements 0f. f aY bl
in rastructural change during the British rule rn
described as under:
 (i) R,,ilw.1r were introduced in India in 1850 and were
developed to transport finished goods from Britain
to the interiors of the colonial India (with a view to
widening the size of the market). It aimed at widening
the size of the market for the British products in India.
However, introduction of railways is considered one
of the most important contributions of the British in
India. First Train run from Bombay (Mumbaij
to Thane (1853)
(ii) Ports were developed to 'handle export of raw
material to Britain and import of finished goods from Britain.
1he development of inland waterways proved uneconomical. For
example, coast canal on the Odisha (erstwhile Orissa) Coast was
built at a huge cost, but failed to compete with railways and was
ultimately abandoned.
(iii) Post and telegraphs were developed to enhance administrative
efficiency. Doubtless, it served the purpose of maintaining law and
order.
(iv) Roads were developed to facilitate transportation of raw material
from different parts of the country to the ports. There were no efforts
made to develop all-weather roads to reach out to rural areas during
the rainy season. As a result, people living in rural areas suffered at
the time of natural calamities.
Briefly, some modest infrastructural change in the economy during the
British Raj is not denied. But, the motive behind this change was not
the growth and development of the Indian economy; rather it was to
facilitate colonial exploitation of the Indian economy for the growth and
development of the British economy. Consequently, Indian economy
remained backward, even when it experienced some infrastructural
change.

Was there any Positive Impact of the

British Rule in India?
Certainly not, if the impact of the British rule is studied with reference
to 'motive' of the British government in India. The motive was clear and
focused: it was colonial exploitation of the Indian economy. However,
the means to achieve the end yielded some positive side-effects. These
are as under:
(I) Commercial Outlook of the Farmers: Forced commercialisation of
agriculture under the British rule exposed the subsistence farmers

Indian Economy on the Eve of Independence 17

 rket True, but it also led to a g
. s of the ma . radu
to u ncertaintie th
ok of e i; c.arrners. The farmers started cons·d
l eri
aj
change in outlo the roduce as an important determinant of th ~g
mar
ket price of
.. ns
tion dec1s10 .
p elf m
■ (
produc . . f Employment: Spread of railway
rtun1t1cs o . . s and
(2) New Oppo d new opportunities of economic and .
roadways opene up soc1a1
■ 5
growth. f
. ·s·. Rapid means o transport facilitated rap1d.
trol of Fa1111nc c
(3) Con f fioo d grain to the famine -affected areas. According1Y,
movement o
famines were controlled. ■ I
s
(4) Monetary Sys t eJn of Exchange: There was a transition from harter C

system of exChange to monetary system of exchange. Gro1;,.b ,, l • r;

0 f mone t ary Sys tem of exchange facilitated division of labou ~

'ali
spec1 sa ti·on , and large-scale production.
(S) Efficient System of Administration: The British government i:.
India left a legacy of an efficient system of administration. ~ •
served as a ready-reference for our politicians and planners.

IMPACT OF RAILWAYS IN INDIA

Positive Impact
•
(i) Railways facilitated expansion of the domestic
market. Accordingly, exports and imports of the
country showed a significant rise.
(ii) Railways facilitated commercialisation of
agriculture, as goods could then be moved to
distant places. This implied a modest change in • a
the ~utlook of the farmers. They started viewing -
farming as a business, rather than merely as a Railways in the British Rule
■ s
source of subsistence. C
I

(iii) Railways enabled people to break h b . . I

places. This promoted cultural ~ .e arners of distance and undertake journeys to far off r
(iv) Faster movement of food g . affinity among the countrymen. a
helped control the spread ;:~:~~~oss different P~rts of the country (owing to Railways)
were driven to starvation. es. Food supplies could reach the people before they
Negative Impact

(i) Railways contributed to •

co 1on1al expl 01·t . . .
goods (raw material) could then be ~tion of the Indian economy. Because, pnmarY
ports for the purpose of ex easily transported from the fields and farms to th e
( .. ) . . Ports to the B •r h
" Finished goods comin . n 1s economy.
th . . 9 as imports to th I .
e rntenors of the country for e ndian economy could be easily transported to
Thus, the spread of railway I d Purpose of sale.
. s e to the spre d O f .
· · _ a the domestic market for the British products.
18 Indian Economic Development -
 1

Power , : , ,. :.; Revision W1ndow ..__ _ _ _ _ _ _ _ _ ___

■ Overall Features of Indian Economy on the Eve of Independence: (i) Stagnant economy, (ii) Backward
economy, (iii) Dominance of agriculture, (iv) Bleak industrialisation, (v) Heavy dependence on imports,
(vi) Limited urbanisation, (vii) Semi-feudal economy.
■ State of Agriculture: Indian agriculture under the British rule showed these characteristics: (i) Low
production and productivity, (ii) Exploitative land settlement system, (11i) Forced commercialisation of
agriculture, (iv) Lack of investment in the agriculture infrastructure, (v) Gulf between owners of the soil
(zamindars) and tillers of the soil, (vi) Small and fragmented holdings, (vii) Subsistence outlool<.
■ Industry: Indian industry (as dominated by handicrafts) which at one time enJoyed global reputation,
suffered a systematic destruction during the British rule. It was largely owing to discriminatory policy
of the British government. While cheaper industrial goods were allowed tariff-free access to the Indian
markets, handicraft products from India were subjected to heavy export-duty. Handicrafts in India lost
both domestic as well as international market. Growth of the modern industry was tardy. It lacked
state-initiative. Capital goods industry was almost non-existent. Process of industrialisation remained
lop-sided.
■ Foreign Trade: Foreign trade of India took a hit in two ways:
• Composition of trade showed a shift from the export of finished goods to the export of raw material
and from the import of bullion (gold and silver) to the import of finished industrial products, largely
from Britain, and
• It was monopolised by the British government, ending multinational exports from India.
■ Demographic Profile: India's demographic profile showed high birth rate, high death rate, high infant
mortality rate, low expectancy of life and low rate of literacy. These characteristics point to economic
and social backwardness of the country.
■ Occupational Structure: More than 72 per cent of working population was engaged in primary sector.
Industry offered employment merely to 9 per cent of the working population. This is yet another pointer
to economic and social backwardness of a country.
■ Infrastructure: Infrastructure-economic as well as social-continued to be highly deficient. There was
a modest change, but only to facilitate colonial exploitation of the Indian economy.
■ Some Positive Side-effects of the British Rule in India: With a view to enlarging size of the market
for British goods in India, the British government needed to provide some infrastructural facilities in
India. These included: (i) Transport facilities, largely in terms of railways, (ii) Development of ports,
(iii) Provision of post and telegraph services. Besides, the British government left a legacy of a strong
and efficient administrative set-up.