Introduction

to
Indian Economy
Structure of Indian Economy
at
the eve of Independence
Indian Economy at the time of Independence was
an underdeveloped economy.

A/C. to UNO
“An underdeveloped economy is one whose per
capita income is low in comparison to America,
Australia and Western Europe.”

The above definition given by UNO is not justifiable

because there are many oil producing countries whose per
capita income is very high yet they are not fully developed
due to lack of industrialisation.
Features of Indian Economy at the eve of Independence

• Low per capita Income

• Poor Infrastructure
• Illiteracy
• Fully dependent on agriculture and imports
• No industrial development
• Capital deficiency
• High population growth
• Unemployment
• Economic disparity and stagnation
Indian economy on the eve of independence
deals with the Indian economy as we inherited it
from the British in 1947.

It focus on the following points.

State of agriculture and industrial sectors on the eve of

independence.

India’s foreign trade under the British rule.

Demographic profile during British rule.

• .

Occupational structure and infrastructure on the eve of

independence.
Organisation Structure
of Villages of Towns

AGRICULTURAL INDUSTRIAL
SECTOR SECTOR

FOREIGN DEMOGRAPHIC
TRADE CONDITION

OCCUPATIONAL INFRASTRUCTUR
STRUCTURE E
Organisation of Villages
The Indian villages in the Pre-British period were isolated and self
sustaining. Some of the important facts are summerised below-
• Isolated and self sufficient villages
• Three classes of villages: Agriculturists
Village Artisans
Village Officials
• Villages based on Division of Labour concept
• Food produced by villages was consumed by village population
itself
• Raw material produced by primary industry were feed for
handicrafts
Structure & Character of Towns
The existence of towns were mainly due to following
reasons-
•Towns were places of pilgrim or sacred religious centers.
E.g.- Allahabad, Gaya, Puri, Nashik, etc.
•Towns were the seat of the court or a capital of province.
E.g.- Delhi, Lahore, Poona, Lucknow, etc.
•Towns were trading or commercial centers. Such towns
existed on important trade routes. E.g.- Mirzapur, Hubli,
Banglore, etc.
Agricultural Sector
Agriculture plays an important part in economic
development. It provides the food security to the country.
Also, it’s a backbone for many industries.
At the time of independence, almost 85% of the total
population was depended on the agriculture.
India’s agriculture sector saw no growth during the colonial
period. Productivity was stagnant. In fact, it was
deteriorating.
The total output increased by just 0.5% per annum before
independence. Farm output from year 1891 to 1947 was not
more than 0.11%.
Indian agriculture became backward, stagnant and non-vibrant
under the British rule. The main causes of stagnation of
agriculture sector was as follows:
•land settlement and exploitation of Indian farming by the
British India for their benefit
•Negligence of colonial government and zamindars to improve
farming
•Low level of technology
•Negligible use of chemical fertiliser and pesticides
•Low irrigation facility
•Inferior quality of seeds
•Commercialization of agriculture(shifting of production from
food grain to cash crop)
Industrial Sector
Indian Industrial sector was also crying off for the
development in the colonial rule like agriculture. No
importance was given for the development of Industries.

To see India growing industrially was against British rule.

There were two reasons for keeping India away from
modern Industries.

One was to keep India reduced to just as an exporter of

prime raw materials for the major Industries in Britain.

Two, it was to turn the domestic market of India into a

prime consumer of finished British goods.
Classification of Industries

Chief Industry: Textile Handicraft

e.g. Muslin of Dacca, Calicos of Bengal, Sarees of Banaras, etc.

Artistic Industry: Marble work, Stone carving, Jewellery, Brass and

Copper work, Wood carving, etc.

Spices: Pepper, Cinnamon, Opium, Indigo, etc.

Foreign Trade
India’s foreign trade goes back to ancient times. It used to
be one of the most important trading country. In the
colonial period India’s foreign trade was restricted to
Britain only. They had the monopoly over the Indian
exports.
India was allowed to trade with only few neighbor
countries. Still, there was the generation of large export
surplus. This surplus came with heavy cost. A spurt in
export didn’t bring any fortunes to India. Rather, it was
used to pay for British expenditures on maintaining the
army and setups.
Features of Foreign Trade
•Generation of large export surplus
•Surplus used to meet expenses
•Exporter of primary products: Raw Silk, Cotton, Wool,
Indigo, Jute, etc.
•Importer of finished consumer goods like silk, cotton
and woolen clothes and capital goods like machinery
produced in factories of Britain.
Demographic Condition
According to census data of 1921 some of the important
demographic features of Indian Economy were:
•Literacy rate: less than 16%
•Female literacy rate: 7%
•Inadequate health and education facilities
•Frequent air and water borne diseases
•Infant mortality rate- 218 per thousand
•Life expectancy- 32 years.
Occupational Structure
The important feature of India’s occupational
structure during the British period were

70% to 75% of India’s working population was

involved with agricultural sector.

10% were engaged with manufacturing sector

and

15% to 20% were with service sector.

Infrastructure
The state of infrastructure facilities especially in
the field of transport, communication and energy
was very poor in India during the British rule in
India.
However some efforts were made to develop
basic infrastructure like roads, railways, ports,
water transport, and post by the Britishers.
The British rulers introduced railways in 1850
and Indian railways begun operations in 1853.
The development and the construction of railways by the
British rulers had affected the Indian economy in the
following ways:-
1.It provided cheap and rapid transport system especially for
distant travel.
2. It broke geographical barriers and thus promoted national
unity and understanding
3. It created new employment opportunities
4. It helped in controlling famines
5. It promoted foreign trade but benefited British more than
Indians
6. It encouraged the process of industrialization
The End