CHAPTER-1

INDIAN ECONOMY
ON THE EVE OF
INDEPENDENCE
 OBJECTIVES

RECOGNISE THE NEED FOR UNDERSTANDING

THE HISTORICAL DIMENSIONS OF THE PROBLEMS
OF ECONOMIC DEVELOPMENT.

 IDENTIFY THE BASIC CHARACTERISTICS OF

ECONOMY IN PRE-BRITISH INDIA.

 UNDERSTAND THE CIRCUMSTANCES IN WHICH

THE BRITISHERS CAME TO INDIA.

 UNDERSTAND THE STATE OF DIFFERENCT

SECTORS OF INDIAN ECONOMY ON THE EVE OF
INDEPENDENCE.
 INDIAN ECONOMY IN THE MID-18TH
CENTURY

•NATURE OF RURAL ECONOMY IN PRE-BRITISH

INDIA: BASED ON AGRICULTURE CARRIED ON
WITH THE PRIMITIVE METHOD OF PLOUGHING
AND BULLOCK POWER AND HANDICRAFTS BY
MEANS OF SIMPLE INSTRUMENTS.

• NATURE OF URBAN ECONOMY IN PRE-BRITISH

INDIA: IT WAS THE URBAN INDUSTRY WHICH
PRODUCED LUXURY ARTICLES FOR
ARISTOCRATIC AND WEALTHY PEOPLE OF THE
SOCIETY.
 ARRIVAL OF BRITISHERS IN INDIA
1. THE BRITISH COMMERCIAL EXPEDITION TO INDIA
BEGAN ON 31ST DECEMBER, 1600 WHEN THE BRITISH
EAST INDA COMPANY WAS GRANTED THE MONOPOLY
OF EASTERN TRADE.

2. THE COMPANY HAD ITS FIRST MAJOR SUCCESS WHEN

IT FOUGHT AND DEFEATED THE NAWAB OF BENGAL IN
BATTLE OF PLASSEY, 1757.

3. IN 1858, THE ADMINISTRATION OF THE COMPNY

CONTROLLED AREAS WAS TRANSFERRED TO THE
BRITISH CROWN. THUS INDIA BECAME A COLONY OF
THE BRITISH EMPIRE.
 LOW LEVEL OF ECONOMIC DEVELOPMENT UNDER
COLONIAL RULE

1. BEFORE THE ADVENT OF BRITISH RULE IN INDIA,

INDIAN ECONOMY IS CHARACTERISED WITH
FOLLOWING FEATURES:
PROSPEROUS ECONOMY
AGRARIAN ECONOMY
WELL KNOWN HANDICRAFTS

2. HOWEVER, DURING THE BRITISH RULE, THE

ECONOMIC POLICIES BY THE COLONIAL GOVT. IN
INDIA, WERE CONCERNED MORE WITH THE
PROTECTIONS AND PROMOTIONS OF THEIR OWN
ECONOMIC INTEREST, THAN WITH THE DEVELOPMENT
OF INDIAN ECONOMY.
 LOW LEVEL OF NATIONAL INCOME AND PERCAPITA
INCOME

THE ECONOMIC CONDITIONS OF A NATION CAN BE

JUDGED WITH THE DATA OF NATIONAL INCOME AND
PERCAPITA INCOME- HOWEVER,

1. NO SINCERE ATTEMPT WAS MADE BY THE BRITISH

GOVT. TO ESTIMATE INDIA’S NATIONAL AND
PERCAPITA INCOME.
2. SOME INDIVIDUAL ATTEMPTS WERE MADE BY EXPERTS
LIKE DADABHAI NAUROJI, WILLIAM DIGBY, R.C.DESAI,
etc.
3. MOST OF THE STUDIES REVEALED THAT COUNTRY’S
GROWTH OF AGGREGATE REAL OUTPUT DURING THE
FIRST HALF OF THE 20TH CENTURY WAS LESS THAN 2%
AND ONLY 0.5% GROWTH IN PERCAPITA OUTPUT PER
YEAR.
 AGRICULTURAL SECTOR

DURING THE BRITISH PERIOD, THE CONDITIONS OF INDIAN AGRICULTURE

WAS NOT AT ALL SATISFACTORY.

MAIN REASONS FOR STAGNATION IN AGRICULTURAL SECTOR:

1. LAND SETTLEMENT SYSTEM
2. COMMMERIALISATION OF AGRICULTURE
3. LOW LEVEL OF PRODUCTIVITY
4. ADVERSE AFFECTS OF PARTITIONS

ABOUT 85% OF POPULATION LIVED MOSTLY IN VILLAGES AND DERVIED

THEIR LIVELIHOOD FROM AGRICULTURE.
AGRICULTURAL PRODUCTIVITY BECAME LOW BECAUSE VARIOUS SYSTEMS
OF LAND TENURE INTRODUCED BY COLONIAL GOVT.
ZAMINDARI SYSTEM AND REVENUE SETTLEMENT, BESIDES THIS LOW
TECHNOLOGY, LACK OF IRRIGATION FACTILITIES & CARELESS USE OF
FERTILISERS.
HIGH YIELDING OF CASH CROPS IN CERTAIN AREAS DUE TO
COMERCIALISATION OF AGRICULTURE. THIS COULD HARDLY HELP FARMERS
IN IMPROVING THEIR ECONOMICAL CONDITIONS, INSTEAD OF FOOD CROPS
THEY ARE PRODUCING CASH CROPS WHICH BACKED BRITISH INDUSTRIES.
NO INCENTIVES, NO SHARE, NO RESOURCES, THIS DECLINE OF
AGRICULTURAL SECTOR.
 INDUSTRIAL SECTOR
THE POOR STATE OF INDUSTRIAL SECTOR DURING THE BRITISH RULE
IS ILLUSTRATED IN THE FOLLOWING:
1. DE-INDUSTRIALISATION – DECLINE OF HANDICRAFTS-PRIMARY
MOTIVE BEHIND DE-INDUSTRIALISATION ARE:
1. TO GET RAW MATERIAL FROM INDIA AT CHEP RATES.
2. TO SELL FINISHED PRODUCTS OF BRITSH INDUSTRIES AT
HIGHER PRICES.
2. ADVERSE EFFECT OF EDCLINE OF HANDICRAFT INDUSTRY:
1. HIGH LEVEL OF UNEMPLOYMENT
2. IMPORT ON FINISHED GOODS.
3. LACK OF CAPITAL GOODS INDUSTRIES, DURING 2nd HALF OF THE
CENTURY, MODERN INDUSTRY BEGAN TO DEVELOP BUT REMAIN
SLOW.COTTON TEXTILE, JUTE TEXTILES dominated by Indians mainly
in BENGAL , MAHARASHTRA AND GUJARAT. LATER, TISCO IN 1907,
FEW OTHER LIKE CEMENT, PAPER, SUGAR etc CAME AFTER 2nd
WORLD WAR.
4. LOW CONTRICUTION TO GDP
5. LIMITED ROLE OF PUBLIC SECTOR ONLY TO RAILWAYS, POWER
GENERATION, COMUNICATIONS, PORTS AND SOME OTHER
DEPARTMENTS UNDERTAKING BY BRITISH GOVT.
 FOREIGN TRADE

THE STATE OF INDIA’S FOREIGN TRADE DURING BRITISH RULE IS DISCUSSED

AS UNDER:

1. EXPORTER OF PRIMARY PRODUCT AND IMPORTER OF FINISHED

GOODS SUCH AS RAW SILK, COTTON, WOOL, SUGAR INDIGO, JUTE
etc.

2. MONOPOLY CONTROL OF BRITISH RULE;

1. MORE THAN HALF OF INDIA’S FOREIGN TRADE WAS
RESTRICTED TO BRITAIN.
2. OPENING OF SUEZ CANAL SERVED AS A DIRECT ROUTE FOR THE
SHIPS.

3. DRAIN OF INDIAN WEALTH DURING BRITISH RULE:

1. TO MAKE PAYMENTS OF EXPENSES INCURRED BY AN OFFICE
SETUP BY THE COLONIAL GOVT. IN BRITAIN.
2. TO MEET EXPENSES ON WAR FOUGHT BY BRITISH GOVT.
3. TO IMPORT MANY ITEMS, ESSENTIAL COMODITIES- FOOD
GRAINS, CLOTHES, KEROSENE etc WERE SCARCELY AVAILABLE IN
THE DOMESTIC MARKET.
 DEMOGRAPHIC CONDITION

DEMOGRAPHIC CONDITIONS DURING THE BRITISH RULE EXHIBITED ALL

FEATURES OF A STAGNANT AND BACKWARD INDIAN ECONOMY.
VARIOUS DETAILS ABOUT THE POPULATION OF BRITISH INDIA WERE FIRST
COLLECTED THROUGH A CENSUS IN 1881.
EVERY 10 YEARS SUCH CENSUS WERE CARRIED OUT.
BEFORE 1921, INDIA WA IN THE FIRST STAGE OF DEMOGRAPHIC TRANSITION.
THE 2nd STAGE OF TRANSITION BEGAN IN AFTER 1921.

DEMOGRAPHIC CONDITON DURING THE COLONIAL RULE IS DESCRIBED IN

THE FOLLOWING POINTS:
1. HIGH BIRTHRATE AND DEATHRATE.
2. EXTREMELY LOW LITERACY RATE. THE OVERALL LITERACY WAS JUST
16%. OUT OF THIS FEMALE LITERACY WAS ABOUT 7%.
3. POOR HEALTH FACILITIES WERE HIGHLY INSUFFICIENT.
4. HIGH INFANT MORTALITY RATE- ABOUT 218 PER THOUSAND IN COMPARE
TO PRESENT 40 PER THOUSAND.
5. LOW LIFE EXPECTANCY 44 YEARS IN CONTRAST TO PRESENT 68 YEARS.
6. WIDE SPREAD OF POVERTY.
 OCCUPATIONAL STURUCTURE
THE STATE OF OCCUPATIONAL STRUCTURE DURING THE BRITISH RULE CAN
BE SUMMARISED AS UNDER:

1. PREDOMINANCE OF PRIMARY OCCUPATION: AGRICULTURAL SECTOR

ACCOUNTS FOR 75% OF THE WORK FORCE AND REMAINING 25% FOR
SERVICE AND MANUFACTURING SECTOR.
2. REGIONAL VARIATIONS: WHILE THERE IS A DECLINE IN DEPENDENCE OF
WORKFORCE ON AGRICULTURAL SECTOR IN FEW STATES, THERE ARE
SOME STATES WITH HIGH LEVEL OF AGRICULTURAL DEPENDENCE.
3. BOMBAY AND BENGAL WITNESSED A DECLINE IN DEPENDENCE OF
AGRICULTURAL SECTOR WITH A TREMENDOUS INCREASE
MANUFACTURING SECTOR.

PRIMARY SECTOR
 INFRASTRUCTURE

UNDER THE COLONIAL REGIME, BASIC INFRASTRUCTURE SUCH AS

RAILWAYS, PORTS, POSTAL TELEGRAPH DID DEVELOP.
BRITISH RULE WERE NOT FIT FOR MODERN TRANSPORT.
ROADS WERE BUILT PRIMARILY SERVED THE PURPOSES OF
MOBILISING THE ARMY AND MOVEMENT OF RAW MATERIAL TO
ENGLAND, THEIR DESTINATIONS.
NATURAL CALAMITIES AND FAMINES WERE FREQUENT.
BRITISH INTRODUCED RAILWAYS IN 1850 FROM MUMBAI TO THANE
ON THE BASIS OF COMMERCIALISATION OF RAWMATERIALS.
BRITISH GOVT. TOOK MEASURES FOR DEVELOPING THE WATER AND
AIR TRANSPORT.
TATA AIRLINES, A DIVISION OF TATA AND SONS WAS ESTABLISHED IN
1932 INAUGURATING THE AVIATION SECTOR IN INDIA.
THE POSTAL SERVICE ON THE OTHER HAND, SERVING A USEFUL
PURPOSE REMAINED IN SUFFICIENT.
 BRITISH RULE- SYSTEMATIC EXPLOITATION OF INDIA
1. INDIA REMAINED AN AGRICULTURAL COUNTRY THROUGHOUT
THE BRITISH PERIOD.

2. BRITISH RULERS NEVER TRIED TO MODERNISE THE INDUSTRIAL

STRUCTURE OF INDIA.

3. BRITISHERS GAINED COMPLETE CONTROL OVER INDIAN

MARKETS.

4. BRITISH RULERS TRANSFORM INDIAN ECONOMY INTO A PRIMARY

PRODUCING COUNTRY.

5. BRITISH RULERS BUILT UP ECONOMIC INFRASTRUCTURE JUST TO

EXPLOIT NATURAL RESOURCES OF INDIA.

6. BRITISH RULERS THOROUGHLY EXPLOITED THE INDIAN

ECONOMY THROUGH ECONOMIC DRAIN.
 CONCLUSION

FOLLOWING POINTS ARE THE CLEAR PROOFS OF

ECONOMIC UNDER DEVELOPMENT DURING BRITISH
PERIOD.

1. CONSTANT PERCAPITA INCOME DECLINE.

2. AGRICULTURAL SECTOR BECAME EXTREMELY LOW
PRODUCTIVITY.
3. ZAMINDARI SYSTEM FULLY EMERGED.
4. DESTRUCTION OF INDIAN HANDICRAFTS.
5. INSUFFICIENT INDUSTRIALISATION.
6. PREVALENCE OF RAMPANT POVERTY AND
UNEMPLOYMENT.
7. SOCIAL AND ECONOMIC CHALLENGES WERE
ENORMOUS.
8. FOREIGN TRADE WAS ORIENTED ONLY TO FEED
INDUSTRIAL REVOLUTION IN BRITAIN.
Thank you very
much
Prepared
By
Akram Sir
Social
HOD