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TOPPERS POINT ACUMEN ACADEMY

INDIAN ECONOMY ON THE EVE OF INDEPENDENCE

1) The sole purpose of British colonial rule in India was to reduce the state of the country
to being merely an exporter of raw materials for Great Britain’s own rapidly expanding
modern industrial base.
2) Before the advent of Britishers, India was well known for its handicraft craft industries,
metal works and its precious stones. But, the focus of the economic policies pursue by
the Britishers were concerned more with the protection and promotion of their own
economic interests rather than with the development of the Indian economy.
3) The economic condition of a nation can be judged with the data of national income and
per capita income. The colonial government never made any sincere attempt to
calculate India’s national income or per capita income but some of the notable
economists did. They were:
a. Dadabhai Naoroji
b. William Digby
c. Findlay Shriyas
d. R.C.Desai
e. V.K.R.V.Rao
And it was Rao whose statistics were most significant. 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 per capita income per
year.
4) AGRICULTURE SECTOR:

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Most of the population used to live in villages and agriculture was the main source of income.
About 85% of the working population was employed in agriculture and related activities directly
or indirectly. The state of agriculture however, was not so good. It was stagnated and obsolete.
The main causes for this stagnation were:

a.
Lack of irrigation facility
b.
Dependence on monsoon
c.
Negligible use of fertilizers
d.
Use of traditional techniques
e.
Zamindari, ryotwari and mahalwari system. This was the most important reason
for stagnation in agriculture. Under these systems, profits accruing out of
agriculture sector went to Zamindars in the form of lagan. The main interest of
the Zamindars was to collect the lagan regardless of the economic condition of
the cultivators; this caused immense misery and social tension among the latter.
To the great extent, the terms of the REVENUE SETTLEMENT were also
responsible for the Zamindars adopting this attitude; dates for depositing
specified sum of revenue were fixed, falling which the Zamindars were to lose
their rights. Zamindars and the Britishers did nothing to improve the condition of
agriculture in India.
f. Lack of knowledge or widespread illiteracy.
g. COMMERCIALISATION OF AGRICULTURE: it means production of cash crops
instead of food crops. During the colonial rule, farmers were given a high price
for producing cash crops like cotton or jute.
h. Lack of investment in agriculture.
i. ADVERSE EFFECTS OF PARTITION: India’s agricultural production received a
further setback due to the country’s partition at the time of independence. A
sizeable portion of the undivided country’s highly irrigated and fertile land went
to Pakistan. Almost, the whole of jute producing area became East Pakistan (now
Bangladesh).
5) INDUSTRIAL SECTOR:

a. Like agriculture, India could not develop a sound modern industrial base under
the colonial rule. The famous Indian handicrafts industry also declined during

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colonial regime and no other corresponding modern industrial base was allowed
to come and take over the place of handicrafts industry. The reason behind the
systematic deindustrialization of the India was two fold:
i. To get raw materials from India at cheap rates to be used by the
upcoming modern industries in Britain;
ii. To create a sprawling market to sell finished goods produced in Britain at
a higher price in India.
b. Following were the adverse effects of the decline of handicrafts industry in India:
i. High level of unemployment
ii. The decline of indigenous handicrafts industry created not only massive
unemployment in India but also a new demand in the Indian consumer
market, which was now deprived of the supply of locally made goods.
This demand was profitably met by the increasing imports of cheap
manufactured goods from Britain.
c. During the second half of the 19th century, few modern industries began to take
roots in India but its progress remained very slow. They were cotton and jute
textile mills.
d. The cotton textile mills, mainly dominated by the Indians were located in
Maharashtra and Gujarat while the jute mills dominated by the foreigners were
mainly concentrated in Bengal.
e. Subsequently, the iron and steel industries began coming up in the beginning of
the 20th century. The TISCO was incorporated in 1907 at Jamshedpur. A few
other industries in the fields of sugar, paper and cement came up after the
second world war.
f. During British rule, there was hardly any capital goods industry to promote
further industrialization in India. CAPITAL GOODS INDUSTRY refers to those
industries which can produce machine tools, which are, in turn, used for
producing articles for current consumption. Britishers did not pay any attention
for the promotion of capital goods industries in India as they wanted India to be
dependent upon them for the supply of capital goods and heavy machinery.
g. The limited role of public sector was also a significant reason for drawback of the
industrial sector. The public sector remained confined only to the fields of
railways, power generation, communications, ports and some other
departmental undertakings.
h. Due to the all of the above reasons, the contribution of the industrial sector to
the overall GDP remained very small.

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6) FOREIGN SECTOR: India has been an important trading nation since ancient times.
However, due to the restrictive trade policies of commodity production, trade and tariff
pursued by the colonial government adversely affected the structure, composition and
volume of foreign trade in India.
a. India became an exporter of raw material such as raw silk, cotton, jute, wool,
sugar, indigo etc. and an importer of finished consumer goods produced in
Britain such as cotton clothes, woolen clothes, silk clothes and capital goods such
as machinery.
b. British government maintained a monopoly over India’s exports and imports. As
a result more than ½ of India’s foreign trade was restricted to Britain while the
rest was allowed with countries like China, Ceylon (Sri Lanka) and Persia (Iran).
The opening of Suez Canal further intensified British control over India’s foreign
trade.
c. The most important feature of India’s foreign trade during the British rule was
the generation of huge export surplus. But this surplus came at a huge cost to
the country’s economy. Several essential commodities like food grains, clothes,
kerosene etc were scarcely available in the domestic market. Furthermore, this
export surplus did not result in any flow of gold or silver in India. Rather, 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 British government.
iii. To import invisible items.
ALL OF WHICH LED TO THE DRAIN OF INDIAN WEALTH.
7) DEMOGRAPHIC CONDITION: Various details about the population of British India was
first collected through a census in the year 1881. Though suffering from certain
limitations, it revealed the unevenness in India’s population growth.
The year 1921 is called the year of great divide as before 1921, India was in the first
stage of demographic transition. The second stage of transition began after 1921. The
demographic condition of India was as follows:
a. Low level of literacy rate: the overall literacy rate was less than 16% and out of
this, the female literacy level at a negligible low of about 7%.
b. High birth rate and death rate. Birth rate refers to the number of children born
per thousand in a year. Death rate refers to the number of people dying per
thousand persons in a year. Both birth rate and death rate were high at nearly 48
and 40 per thousand.

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c. Public health facilities were either unavailable to the large chunks of population
or, when available, were highly inadequate. Consequently, water and air borne
diseases were rampant and took a huge toll on life.
d. Very high infant mortality rate. Infant mortality rate refers to the number of
infants dying before reaching the 1 year age per 1000 live births in a year. The
infant mortality rate was quite alarming about 218 per thousand in contrast to
the present infant mortality rate of 63 per thousand as per 2001 census and of
33 per thousand as per census of 2011.
e. Low level of life expectancy. Life expectancy at that time was 44 years in
contrast to the present 69 years.
f. 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
prevailed in India during the colonial period which contributed to the worsening
profile of India’s population of the time.
8) OCCUPATIONAL STRUCTURE: is the distribution of workforce into different sectors and
industries.

a. The agriculture sector accounted for the largest share of workforce, which
usually remained at a high of 70-75% while the manufacturing and the service
sectors accounted for only 10 and 15-20% respectively.
b. Another striking aspect was the growing regional variation. The states of Tamil
Nadu, Andhra Pradesh, Kerala, Karnataka, Maharashtra and W. Bengal witnessed

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a decline in the dependence of the workforce on the agriculture sector with a
commensurate increase in the manufacturing and service sector.
However, there had been an increase in the share of the workforce in agriculture
during the same time in states such as Orissa, Rajasthan and Punjab.

9) INFRASTRUCTURE:

Under the colonial regime, basic infrastructure such as railways, ports, water transport, posts
and telegraph did develop. However, the real motive behind this development was not to
provide basic amenities to the people but to serve various colonial interests.

a. ROADS: the colonial government could not accomplish much on construction of

roads due to scarcity of funds. Roads constructed in India prior to the advent of
British rule were not fit for modern transport. The roads that were built primarily
served the purposes of mobilizing the army within India and drawing out raw
materials from countryside to the nearest railway station or port to send these
to far away England or other lucrative foreign destinations. There always
remained an acute shortage of all-weather roads to reach out to the rural areas

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during the rainy season. Naturally, people living in these areas suffered
grievously during natural calamities and famines.

b. RAILWAYS:

Britishers introduced railways in India in the year 1850. This affected the structure of the Indian
economy in 2 ways:

i. Railways enabled people to undertake long distance travel. It broke

geographical and cultural barriers and promoted national integration.
ii. It fostered the commercialization of Indian agriculture which adversely
affected the self sufficiency of the village economies in India.

The volume of India’s exports undoubtedly expanded but its benefits rarely accrues to
the Indians. The social benefits Indian people gained owing to the introduction of
railways were thus overweighed by the country’s huge economic losses.

c. AIR & WATER TRANSPORT: along with the development of roads and railways,
the colonial government also took measures for developing inland trade and sea

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lanes. However, these measures were far from satisfactory. Inland waterways
proved to be uneconomical, as in the case of coast canal on the Orissa coast. This
canal was built at a huge cost, but it failed to compete with the railways and
finally, it had to be abandoned.
d. COMMUNICATION: posts and telegraphs were the most popular means of
communication.
i. The introduction of the expensive system of electric telegraph in India
served the purpose of law and order.
ii. The postal service, despite serving a useful public purpose, remained all
through inadequate.

Thus, the basic objective of British government behind the infrastructural development of India
was not to provide basic amenities to its people but to serve their own colonial interests.

1) Roads were built to mobilize the army within India and for drawing out raw
materials from the countryside to the nearest railway station or port and to send
these to far away England and other lucrative foreign destinations.
2) Railways were developed by the Britishers for 3 main reasons:
i. To have effective control and administration over the vast country.
ii. To earn profits by linking railways with major ports.
iii. To make profitable investment with British funds in India.

3) The system of the expensive system of electric telegraph in India served the purpose
of law and order.

ADDITIONAL QUESTIONS:

1 MARK QUESTIONS:

Q1) Define marketed surplus.

Q2) What was the sole purpose of Britishers in India?

Q3) In which year the Suez Canal built?

Q4) Bengal was famous for which industry?

Q5) What do you understand by the term “commercialization of agriculture”?

Q6) Define GDP.

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Q7) State the fields in which the role of public sector industries was confined during the British
rule.

Q8) Why was INDIA famous before the advent of Britishers?

Q9) Why the Britishers never tried to calculate INDIA’s national income or per capita income?

Q10) What was the reason behind the massive unemployment during colonial rule?

Q11) What was the reason behind the formation of “new social class”?

Q12) What do you mean by capital goods industries?

3/ 4 MARKS QUESTIONS:

Q1) Explain how trade through Suez Canal was operated under the colonial rule?

Q2) Explain the drain of Indian wealth during British rule.

Q3) Explain the reason why Indian Zamindars tend to exploit Indian farmers?

Q4) How did lack of investment led to stagnation in Indian agriculture?

Q5) Explain the two-fold motive of the colonial government behind the systematic
deindustrialization of India.

Q6) What were the effects of the decline of handicraft industry in India?

Q7) How does the introduction of DISCRIMINATORY TARIFF POLICY by the colonial government
led to the decline of Indian handicraft industry?

Q8) Why the Indian Zamindars tend to exploit their own Indian brothers?

Q9) Define Occupational Structure. How it changed during British rule?

6 MARKS QUESTIONS:

Q1) What were the causes for stagnation in Indian agriculture?

Q2) How did Britishers exploited the Indians in different scenarios?

Q3) Were there any positive effects of British rule in India? Explain.

Q4) What do you conclude about the state of Indian economy on the eve of independence?

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Q5) What objectives did the British intend to achieve through their policies of infrastructure
development in India?

Q6) Critically appraise some of the shortfalls of the industrial policy pursued by the colonial
government in India.

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