SHANTINIKETAN INDIAN SCHOOL, DOHA – QATAR

CLASS 12-ECONOMICS
INDIAN ECONOMY ON THE EVE OF INDEPENDENCE

Origin of British rule: The British rule over India changed the course of history in India. The
foundation of the British Empire in India was laid by the Battle of Plassey and lasted four almost
two centuries before India finally won its independence on 15 August 1947.
Indian Economy before British Rule:
(a) Prosperous economy: India had an independent and self-reliant economy before the advent of
British rule.
(b) Agrarian Economy: Agriculture was the main source of livelihood for most people. Around
2/3rd of the population was engaged in agriculture.
(c) Handicraft industries: India was particularly well known for its handicraft industries in the
fields of cotton and silk textiles, metal and precious stone works etc.
Low level of National Income and per capita income:
During British rule notable estimators are - Dadabhai Naoroji, William Digby, Findlay Shirras,
V. K. R.V. Rao and R. C. Desai - it was Rao, whose estimates during the colonial period was
considered very significant.
Significant estimate: The estimates given by V. K. R.V. Rao was considered most significant.
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the country’s growth of aggregate real output during the first half of the twentieth century was
less than two per cent coupled with a meager half per cent growth in per capita output per year.
Agriculture sector on the eve of independence: The main causes of stagnation of agricultural
sector were as follows: -
(a) Land Revenue Settlement Systems: Particularly, under the zamindari system which was
implemented in the then Bengal Presidency comprising parts of India’s present-day eastern
states, the profit accruing out of the agriculture sector went to the zamindars instead of the
cultivators.
(b) Low level of agricultural productivity: Productivity level was low due to low level of
technology, irrigation facilities etc.
(c) High dependence on Monsoon: Agriculture sector was mainly dependent on monsoon. No
effort was ever made under British rule to develop permanent means of irrigation.
(d) Commercialisation of agriculture: It means production of corps for sale in the market rather
than for self-consumption. Instead of producing food crops, farmers were enforced to produce
cash crops which were to be used by the British industries.
(e) Lack of Proper Input: Low level of technology, lack of irrigation facility and negligible use
of fertilizers, added to aggravate the plight of the farmers and contributed to the dismal level of
agricultural productivity.
Industrial sector at the time of Independence:

ST-NOTES-LESSON 1-INDIAN ECONOMY ON THE EVE OF INDEPENDENCE

(a) De-Industrialization-Decline of Handicraft industry: The primary motive of British rule
behind the de industrialization was too fold:
(i) To get raw materials from India at cheap rates to be used by upcoming modern industries in
Britain.
(ii) To sell finished products of British industries in the Indian market at higher prices.
(b) Adverse effects of decline in handicraft industries: The decline of handicraft industries
resulted in massive unemployment and increase in import of finished goods.
(c) Lack of capital good industries: There was hardly any capital goods industry to promote
industrialization. Britishers always wanted Indians to be dependent on Britain, for the supply of
capital goods.
(d) Low contribution to GDP: The growth rate of the new industrial sector and its contribution
to the GDP remained very small.
(e) Limited role of public sector: The public sector remained confined only to railways power
generation, communication, ports and some other departmental undertakings.
Foreign trade under the British rule:
(a) Exporter of primary products: During British rule, due to restrictive policies, India became
an exporter of primary products such as raw silk, cotton, wool, sugar, indigo, jute, etc.
(b) Importer of finished goods: India became an importer of finished consumer goods like
cotton, silk and woollen clothes.
(c) Monopoly control of Britain: More than 50% of India's foreign trade was restricted to Britain
while the rest was allowed with some other countries like China, Ceylon (Sri Lanka) and Persia 2
(Iran). The opening of the Suez Canal in 1869 served as a direct route for the ships operating
between India and Britain.
(d) Economic drain: During colonial rule large amount of export surplus was generated due to
excess export but it was misused by colonial government. It was used in wars fought with other
countries by British government and to build new office set up of British Government.
Demographic conditions the eve Independence:
(a) 1921 the year of great divide: Before 1921, India was in the first stage of demographic
transition at the time of independence, the features of demographic conditions were as follows:
(i) High birth and death rate
(ii) High infant mortality rate
(iii) Low life expectancy ratio
(iv) Low literacy rate
(b) High birth and High death rate implied low survival rate, which was nearly 8 per thousand
per annum.
(c) Life expectancy was as low as 32 years which shows the lack of health care facilities, lack of
awareness as well as lack of means for health care.
(d) Literacy rate was as low as 16 percent, which reflects the social and economic backwardness
of the country.
Occupation structure at the time Independence:

ST-NOTES-LESSON 1-INDIAN ECONOMY ON THE EVE OF INDEPENDENCE

(a) Predominance of agricultural sector:
(i) Agriculture was the principal source of occupation and about 72.7 percent of working
population was engaged in agriculture.
(ii) Only 10.1% of the working population were engaged in the manufacturing sector, which
showed the backwardness of Indian Industry at the time of Independence.
(iii) only 17.2 percent of the working population were engaged in the service sector, which also
proved the slow growth of tertiary sector at the time of Independence.
(b) Unbalanced growth: There was an unbalanced growth of Indian economy at the time of
Independence.
(c) Growing regional variation: Tamil Nadu Andhra Pradesh, Kerala, Karnataka, Maharashtra
and West Bengal witnessed a decline in agriculture and increase industrial sector.
Infrastructure at the time of Independence.
(a) Railway: Most important contribution of the British rule was the introduction of railways in
India in 1850.
(i) It enabled people to undertake long distance travel, broke geographical and cultural barriers.
(ii) It enhanced commercialization of Indian agriculture.
(iii) It promoted foreign trade but it benefitted the Britishers.
(b) Roads: The roads that were built, served the interests of mobilizing the army and shifting raw
materials. Shortage of roads to reach out to rural areas during rainy season. As a result, people
living in these areas suffered badly during natural calamities and famines.
(c) Water and Air transport: Britishers took measures for developing the water and air transport, 3
however their development was far from satisfactory.
(d) Communication system:
(i) Post and telegraph were the most popular means of communication.
(ii) Introduction of the expensive system of telegraph in India served the purpose of maintaining
law and order.
(iii) The postal services, despite serving a useful public purpose, remained inadequate.
Positive contribution of British rule:
Development of infrastructure: (i) Introduction of rail, postal services, ports, water transport,
posts were also developed under colonial regime.
(ii) Banking and monetary system: British rule helped the economy of India to shift from barter
system of exchange to monetary system of exchange. Modern banking in India originated during
British rule.
(iii) Set up of Effective Administrative System: The British Government left a base for strong
and effective administrative set up of India.

ST-NOTES-LESSON 1-INDIAN ECONOMY ON THE EVE OF INDEPENDENCE