IED_On the Eve of Independence Amy Farzana

CHAPTER 1
INDIAN ECONOMY ON THE EVE OF INDEPENDENCE
1. What was the focus of the Economic policies pursued by the colonial govt in India? What
were the impacts of these policies?

Ans • The main focus of the economic policies pursued by the colonial govt in India were
concerned with the protection and promotion of the economic interest of their home
country than with the development of the Indian Economy.
The impact of these policies are:
• It brought about a fundamental change in the structure of the Indian Economy-
transforming the country into net supplier of raw materials and consumer of
finished industrial products from Britain.
• De-industrialisation of Indian Economy- By imposing heavy tariff on exports of
Indian handicrafts/finished goods and allowing free imports of finished goods from
Britain
• Backwardness of Agriculture – The policies made the agriculture sector backward
due to prevalence of various Land Revenue systems, particularly Zamindari System
which exploited the tillers of the soil and due to the forced commercialization of
agriculture it further pushed the state of the farmers.
• Low level of Economic development – It was estimated according to some individual
attempts to measure national income and per capita income the growth of the GDP
during the first half of the 20th century was only less than 2% and that of the per
capita income only 0.5%

2. Explain in brief the state of agriculture sector during the colonial period?

Ans About 85% of the country’s population lived mostly in villages and derived its livelihood
from agriculture and allied activities. The status of agriculture was both backward and
stagnant

i. Low productivity:
• Level of productivity was extremely low. Low productivity implied low output
despite large area under cultivation
• Level of productivity of wheat was 4.7 times lower in 1947 compared to present
2015-16
• Level of productivity of rice was 3.6 times lower in 1947 compared to 2015-16
ii. High Vulnerability:
• Lack of irrigation facilities, outdated technology, absence of mechanization,
negligible use of fertilizers kept the levels of productivity very low.
• Excessively dependent on rainfall showed high degree of vulnerability as good
rainfall meant good output and bad rainfall meant bad output
iii. Gap between the owners and tillers of the soil:
• There were various systems of Land Revenue system introduced by the colonial
government especially Zamindari system.
• The zamindars took the major share of crop as land rent and did very little to
improve the condition of agriculture
Page 1 of 8
IED_On the Eve of Independence Amy Farzana
• The tillers were given only enough for subsistence. This led to wedge between the
owners and tillers of the soil
iv. Small and fragmented land holdings:
• Land holding was both small as well as fragmented which meant land was
uneconomic and yielded low output at high cost.
3. What are the main causes of the India’s agricultural stagnation during the colonial
period?
Ans a. Land Revenue system:
• One of the unique system of Land settlement was Zamindari system. This set up
a triangular relationship between the government, owners of the soil and the
tillers of the soil.
• The owners (zamindars were recognized as permanent owners of soil.
• They had to pay a fixed amount to the government as land revenue.
• The zamindars were free to extract as much as they wanted from the tillers of
soil.
• This led to problems such as
(i) unlimited exploitation of the tillers
(ii) higher rates of rent collected
(iii) inability to pay the rents by the tillers
(iv) reducing the status of the tillers to landless labourers
(v) paid only subsistence wages in kind
b. Forced Commercialisation of Agriculture
Commercialisation refers to shift from cultivation for self-consumption to cultivation for
market. Farmers were shifted from growing commercial crops (cotton and indigo) from
conventional crops (like wheat, rice)
Forced commercialization was done by luring the farmers in growing commercial crops.
Earlier the farmers needed to grow crops for family consumption by now they needed cash
to buy it from the market. But they rarely had cash due to mounting indebtedness.
This led to perpetual indebtedness and perpetual stagnation of farmers.
c. Partition of the country:
Agriculture production received further setback due to country’s partition at the time of
independence as a sizeable portion of the undivided country’s irrigation and fertile land
went to Pakistan, particularly jute and wheat growing areas
4. Mention some of the notable economists who were considered significant on the eve of
independence?

Ans Dadabhai Naoroji,William Digby, Findlay Shirras, VKRV Rao and RC Desai

5. Brief on the state of agriculture during Pre-British India.

Ans On the basis of observation in Bengal, it was noted that

a. It was richer than Egypt
b. Exports was in abundance in cotton, silks, sugar, rice and butter
c. Ample Production for its own consumption
d. Endless number of canals from the Ganges through immense labour involved in
irrigation and navigation.

Page 2 of 8
IED_On the Eve of Independence Amy Farzana

6. Explain in brief the state of industrial sector during the colonial period?

Ans: As in the case of agriculture, so also in manufacturing, India could not develop a sound
industrial base under the colonial rule.
The rule of the British India Government led to the collapse of India’s world-famous
handicraft industries declined without any corresponding contribution from modern
industrial base.
Two-Fold motive behind Systematic De-Industrialisation policy of the British:
1. The intention to reduce India to the status of a mere exporter of important
raw materials for the upcoming modern industries in Britain
2. To turn Indian into a sprawling market for the finished products of those
industries o that their continued expansion could be ensured to the
maximum advantage of their home country-Britain.

Systematic De-industrialisation implied:

1. Decay of handicrafts industries: The handicrafts industry in India was
systematically destroyed through the following measures:
a. Discriminatory tariff policy of the state: British Government allowed tariff
free export of Indian raw material and tariff free import of British finished
goods but placed heavy duty on Indian handicrafts, which led to loss of
market for these goods in the foreign market.
b. Disappearance of Princely courts: The princes, nawabs, rajas etc. used to
patronize Indian handicrafts enabling them to achieve international
reputation but beginning of British rule implied the need of state patronage.
c. Competition from machine made products: The machine-made products gave
a stiff competition to Indian handicrafts. This forced the Indian crafts to shut
down their enterprises forever.
d. Introduction of railways: Railways expanded the British market and
hastened the process of decay of Indian handicrafts.
The effects of decline of handicrafts industries were:
a) It created massive unemployment in India
b) It also created a new demand in the Indian consumer market -the
increasing imports of cheap manufactured goods from Britain

2. Bleak Growth of Modern Industry:

The modern industry began to take root in India during the second half of the nineteenth
century:
a. Initially, this development was confined to the setting up of cotton and
jute textile mills. The cotton mills, mainly dominated by Indians, were
located in the western parts of the country, namely, Maharashtra and
Gujarat,
b. The jute mills mostly dominated by the foreigners were mainly
concentrated in Bengal.

Page 3 of 8
IED_On the Eve of Independence Amy Farzana
c. Subsequently, the iron and steel industries began coming up in the
beginning of the twentieth century. The Tata Iron and Steel Company
(TISCO was incorporated in 1907.
d. A few other industries in the fields of sugar, cement, paper etc came up
after the Second World War.
7. Discuss the shortfalls of the industrial policy pursued by the British colonial
administration.

Ans: The following were the shortfalls of the industrial policy pursued by the British Colonial
administration:
1. Slow Progress: The progress of the modern industry remained very slow.
2. Lack of capital goods industry: There were hardly any capital goods industry to help
promote futher industrialization in India.
Capital goods industry means industries which can produce machine tools which
are in turn, used of producing articles for current consumption.
3. No substitute to the country’s traditional handicrafts industries: The
establishment of a few manufacturing units was no substitute to the near wholesale
displacement of the country’s traditional handicraft industries.
4. Low growth rate: The growth rate of the new industrial sector and its contribution
to the Gross Domestic Product (GDP) remained very small.
5. Limited area of operation of Public sector: Another significant drawback of the new
industrial sector was the very limited area of operation of the public sector. This
sector remained confined only to the railways, power generation, communications,
ports and some other departmental undertakings.
8. What is meant by capital goods industry? Discuss the status of such industry during the
British Rule?

Ans Capital goods industry refers to those industries which can produce machine tools, which
are, in turn, used for producing articles for current consumption.
(i) During the British Rule there was hardly any capital goods industry to promote
further industrialisation in India
British rulers did not pay any attention for their promotion as they always wanted Indians
to be dependent on Britain, for the supply of capital goods and heavy equipments.

9. What is meant by Drain of Indian wealth during the colonial period?

Drain of Indian wealth refers to the use of large export surplus of India for Britain. Under
the British Rule India became an exporter of primary products (raw materials) and an
importer of finished goods. There was huge export surplus due to excess exports. But this
export surplus was used :
(i) To make payments for expenses incurred by an office set up by the colonial
government in Britain.
(ii) To meet expenses on war fought by the British government.
To import invisible items.
10. Highlight the salient features of India’s Foreign Trade during the British Colonial period.

Page 4 of 8
IED_On the Eve of Independence Amy Farzana
Ans The restrictive policies of commodity production, trade and tariff pursued by the colonial
government adversely affected the structure, composition and volume of India’s foreign
trade.
1. Structure and composition of foreign trade:
i. India became an exporter of primary products such as raw silk, cotton, wool,
sugar, indigo, jute etc. and an important importer of finished consumer goods
like cotton, silk and woolen clothes and capital goods like light machinery
produced in the factories of Britain.
ii. For all practical purposes, Britain maintained a monopoly control over
India’s exports and imports.
2. Volume and Direction of India’s foreign trade:
i. The opening of the Suez Canal in 1869 further intensified British control
over India’s foreign trade as it reduced the cost of transportation
significantly.
ii. More than 50% of India’s foreign trade was restricted to Britain while the
remaining was allowed with a few other countries like China, Ceylon and
Persia (Iran).
Large export surplus:
The most significant characteristic of India’s foreign trade throughout the colonial period
was the generation of a large export surplus. But this export surplus came at a huge cost
to the country’s economy.
a) Several essential commodities – food grains, clothes, kerosene etc., - were scarcely
available in the domestic market.
b) This export surplus did not result in any flow of gold or silver into India. Rather
this was used to make payments for the expenses incurred by an office set up by the
colonial government in Britain, expenses on warm and the import of invisible
items, all of which led to drain of wealth.

11. Comment on the demographic condition of the Indian economy on the time of independence.

Ans: The first official census was conducted in the year 1881. This census revealed unevenness
in India’s population growth.
The demographic conditions during the colonial rule can be described from major
social development indicators were not encouraging which can be as follows:
(i) High Birth Rate and Death Rate: Birth rate refers to number of children born
per thousand in a year. Death rate refers to number of people dying per
thousand persons in a year. Both birth rate and death rate were very high at
nearly 48 and 40 per thousand respectively.
(ii) Extremely low Literacy rate: The overall literacy level was less than 16
percent. Out of this, the female literacy level was at a negligible low of about
7 %.
(iii) Lack of adequate Health facilities: Public health facilities were either
unavailable to large chunks of population or when available, were highly
inadequate. Consequently, water and air-borne disease were rampant and took
a huge toll on life.

Page 5 of 8
IED_On the Eve of Independence Amy Farzana
(iv) High Mortality Rates: The overall mortality rates was very high and in
particular, the Infant mortality rate refers to number of infants dying before
reaching one year of age per 1000 live births in a year. Infant mortality rate
was quite alarming – about 218 per thousand in contrast to the present infant
mortality rate of 40 per thousand.
(v) Low Life Expectancy: It refers to the average number of years for which people
are expected to live. Life expectancy was also very low – 44 years in contrast
to the present 68 years
(vi) Widespread Poverty: In the absence of reliable data, it is difficult to specify
the extent of poverty at that time but there is no doubt that extensive poverty
prevalent in India during the colonial period which contributed to the
worsening profile of India’s population of the time.
12. Which year is called the ‘YEAR of GREAT DIVIDE’? Why?

The year 1921 is called the YEAR of GREAT DIVIDE.

•Before 1921, India was in the first stage of demographic transition i.e., it had very
high birth rate and very high death rate because of which the population remained
stagnant.
• The second stage of transition began after 1921 i.e., where the death rate fell down
due to improved medical facilities, control of epidemics and famines.
• As a result, population started recording very high growth rate known as population
explosion. Hence 1921 was called the ‘Year of Great Divide’
13. What was the status of Occupational structure on the eve of independence?

Occupational structure – refers to distribution of working population across different

industries and sectors i.e., primary secondary and tertiary sectors.
During British rule, occupational structure showed little signs of change.
The state of occupational structure is as follows:
(i) Predominance of Primary occupation: The agricultural sector accounted for
the largest share of workforce which was approximately at a high of 70-75%.
Whereas the percentage share of population depending on agriculture is much
less for e.g., England and US account for 2 % only and Japan and Germany 12
% and 4% respectively. This indicates the backwardness of the Indian economy
at the time of independence.
(ii) Industry and tertiary – an insignificant source of occupation: The
manufacturing and services sectors accounted for only 10 and 15 – 20%
respectively. Whereas the percentage of population is 32% in US, 42% in
England and 39% in Japan are engage in activities.
(iii) Unbalanced Regional Growth: Another striking aspect was the growing
regional variation.
a. Parts of Madras presidency – present day states of TN, Andhra Pradesh,
Kerala, Karnataka, Maharashtra and West Bengal witnessed a decline
a dependence of workforce on the agricultural sector with a
commensurate increase in the manufacturing and the services sectors.

Page 6 of 8
IED_On the Eve of Independence Amy Farzana
b. However, there had been an increase in the share of workforce in
agriculture during the same time in states such as Orissa, Rajasthan
and Punjab.

14. Examine the state of infrastructure at the time of independence.

During the colonial rule the basic infrastructures such as railways, ports, water transport,
posts and telegraphs did develop. However, the main motive behind such development was
not to provide basic amenities to the people but to subserve various colonial interests.
(i) Roads:
a) The roads that were built were primarily served the purposes of mobilizing the
army within India and drawing out raw materials from the countryside to the
nearest railway station or the port and provide administrative ease to the British
officers.
b) There was always acute shortage of all-weather roads to reach out to rural areas
during the rainy season. As a result, the people mostly living in these areas
suffered grievously during natural calamities.
(ii) Railways: The British introduced Railways in India in 1850 which was considered as
one of its most important contributions. Railways affected the structure of the Indian
economy in the following ways:
a) It facilitated people to undertake long distance travel and thereby break
geographical and cultural barriers
b) It fostered commercialization of agriculture which adversely affected the
comparative self-sufficiency of the village economies in India.
c) It facilitated expansion of the domestic market and accordingly, exports and
imports showed significant increase, but it benefited the British than the Indians.
(It helped in controlling famine to a certain extent)
d) The social benefits the Indian people gained owing to the introduction of the
railways were thus outweighed by the country’s huge economic loss.
(iii) Inland transport and ports: The colonial measures to develop the inland trade
and sea lanes was far from satisfactory.
a) The ports were developed to handle export of raw material to Britain and import
of finished goods.
b) Inland waterways proved to be uneconomical, as in the case of Coast Canal on the
Orissa coast. This canal was built with huge cost and ultimately it had to be
abandoned.
(iv) Posts and Telegraphs: The posts and telegraphs were developed to enhance
administrative efficiency.
(a) The introduction of expensive system of electric telegraph in India served the
purpose the maintaining law and order.
(b) The postal services on the other hand remained all through inadequate.

15. Was there any positive contributions made by the British In India? Discuss.

The following were some positive effects of the British Rule on the Indian economy.

Page 7 of 8
IED_On the Eve of Independence Amy Farzana
1. Commercialisation of agriculture: The commercialization of agriculture implied a
good breakthrough as it started changing the outlook of farmers, farming gradually
came to be accepted as a business rather than merely a means of subsistence.
2. Better means of transportation: Development of roads and railways provided cheap
and rapid transport system and opened up new opportunities of economic and social
growth.
3. Check on famines: Roads and railways served as a support system to combat the
spread of famines as food supplies could be transported to the affected drought hit
areas.
4. Transition from barter to monetary system of exchange: British rule the Indian
economy to shift from barter system of exchange to monetary system of exchange
facilitating division of labour etc.
5. Efficient administrative system: The British Rule left a legacy of efficient system of
administrative machinery which served as a ready reckoner for Indian politicians at
a later date.

16. What were the adverse effects of partition on the India’s agricultural production ?

India’s agricultural production received a further set back due to the country’s partition at
the time of independence.
(i) A sizeable portion of the undivided country’s highly irrigated and fertile land went
to Pakistan.
(ii) Almost the whole of jute producing areas became part of East Pakistan (now
Bangladesh).
India’s jute goods industry , which enjoyed a world monopoly so far, suffered heavily for
lack of raw materials.
17. What were the main features of economic development of the Indian Economy on the eve of
independence?

Features of Indian Economy on the eve of independence:

1. Low level of economic growth: The country’s growth rate of real GDP was less than
2 % coupled with only 0.5 % growth rate in per capita real GDP per year.
2. Low agricultural productivity: The agricultural sector was already saddled with
surplus labour and extremely low productivity.
3. Lack of a sound industrial base: The industrial sector was crying for modernization,
diversification, capacity building and increased public investment.
4. Foreign trade: Foreign trade was oriented to feed the Industrial Revolution in
Britain.
5. Inadequate infrastructure: Infrastructure facilities including the famed railway
network, needed upgradation, expansion and public orientation.
6. Poverty: prevalent of rampant poverty and unemployment required welfare
orientation of public economic policy.

*******

Page 8 of 8