CHAPTER: 1

INDIAN ECONOMY

ON THE EVE OF INDEPENDENCE

TO 00

Colonial Exploitation of the Indian Economy Under the British Rule Features of Indian Economy on the
Eve of Independence

Agricultural Sector on the Eve of Independence Industrial Sector on the Eve of Independence

Foreign Trade Under the British Rule

Demographic Profile During the British Rule

Occupational Structure on the Eve of independence

Infrastructure on the Eve of Independence

1. COLONIAL EXPLOITATION OF THE INDIAN ECONOMY UNDER THE BRITISH RULE

Indian economy under the British rule was subjected to colonial exploitation. It implied a targeted
exploitation of all sectors of the economy by the British Government. This is how it happened: (1)
Colonial Exploitation of Agricultural Sector: Agriculture was

Exploited through zamindari system of land revenue.

Exploitation in Agriculture under the British Rule

Page 3

Following observations highlight how this system led to exploitation of the Indian agriculture:

Zamindar System of Land Revende

⚫ Zamindars were declared as owners of the soil. They were to pay a fixed sum to the government by
way of land revenue, and were free to extract as much as they wished (or as much as they could) from
the tillers of the soil (farmers),

The tillers of the soil (the actual cultivators) got bare minimum for survival. They were left with no
surplus for investment in agriculture.

The zamindars, on the other hand, spent their revenue income on the luxuries of life. Little or no
investment was made for the development of agriculture. (2) Colonial Exploitation of Industrial Sector:
Prior to the

British rule, industrial sector in India was well known for its handicrafts. Indian handicrafts (work
produced by hand labour) enjoyed a world-wide reputation for their variety and quality. But these were
destroyed by the British government in two ways:

Foreign demand for the Indian handicrafts was destroyed by

Way of heavy duty on their exports.

Domestic demand for the Indian handicrafts was destroyed

By way of duty-free import of the British goods in the Indian

Markets.

(3) Colonial Exploitation of International Trade: India’s international trade was exploited through
discriminatory tariff
(a tax on imports) policy. It implied:

Duty-free export of Indian raw material to fulfil the industrial needs in Britain.

Duty-free import of British goods to expand demand for the

British goods in the Indian markets. It was owing to discriminatory tariff policy that India became
importer of finished goods from Britain, and exporter of raw material to Britain.

Briefly, owing to its colonial exploitation, the Indian economy became both stagnant as well as
backward.

Indian Economic Development

Pg 4

2. FEATURES OF INDIAN ECONOMY ON THE EVE OF INDEPENDENCE

On the eve of independence. Indian economy had the following

Characteristics:

(1) Stagnant Economy: On the eve of independence, Indian economy

Was completely a stagnant economy. A stagnant economy is the one which shows little or no growth in
income. Between 1860-1925, growth rate of per capita income was as low as 0.5 per cent per annum
and between 1925 and 1950 it was 0.1 per cent per annum.

On account of this stagnation, bulk of Indian population lived in

Poverty. Standard of living of the people remained miserably low.

Epidemics and Famines were a recurring phenomenon. (2) Backward Economy: Indian economy was a
backward economy on the eve of independence. Backward economy is the one in which per capita
income is very low. In 1947-48, per capita income in India was just 230,

The bulk of the population was very poor, without sufficient food. Clothing and shelter. Unemployment
was rampant.

(2) Agricultural Backwardness: It is highlighted by the following facts:

Nearly 72 per cent of the country’s working population was

Engaged in agriculture. But, its contribution to GDP was only

50 per cent.

• Productivity was extremely low. Thus, per hectare output of

Wheat was only 660 kilograms, and of rice just 665 kilograms. Foodgrain production was barely enough
for subsistence. In

1947-48, it was recorded to be just 527 lakh tonnes.

(3) Industrial Backwardness: Here, following facts are of underlined significance:

There was a virtual lack of the basic and heavy industries in the

Country

• Production of machines was almost negligible.

• Small-scale and cottage industries were almost ruined.

For the bulk of its capital-goods requirement, the Indian industry was dependent upon imports from
Britain.

Indian Economy on the Eve of Independence

5pg

(4) Rampant Poverty: Bulk of the population was very poor. People were not getting two square
meals a day. They lacked shelter and clothing. This was largely owing to widespread
unemployment (caused by the destruction of handicraft industries).

(5) Poor Infrastructure: Infrastructural development (including means of communication and

transport, generation of power! Energy) was extremely low. In 1948, power generation capacity
was merely 2,100 MW, length of railway lines was 53,596 km, pucca roads had a coverage of
155 thousand km only.

(6) Heavy Dependence on Imports: The country had to depend on imports for machinery and other
equipments of production. Armed forces of the country also depended heavily on foreign
imports for most of the defence equipments. Besides, several consumer goods like sewing
machines, medicines, kerosene oil, bicycles, etc. Used to be imported from abroad.

(7) Limited Urbanisation: At the time of independence, bulk of the population of India lived in
villages. In 1948, only 14 per cent of population lived in urban areas while 86 per cent lived in
rural areas. Rural population lacked opportunities outside agriculture. This compounded their
poverty.

(8) Semi-feudal Economy: On the eve of independence, Indian

Economy was neither wholly feudal nor a capitalist economy. It was a mixed economy or a semi-feudal
economy. Such an economy had the mixture of feudalistic and capitalist modes of production.
Feudalistic mode of production leads to low productivity. Low productivity leads to backwardness.

(9) Colonial Economy: Indian economy was a colony of British government. It implied exploitation of
the Indian economy for the benefit of the British economy. Following observations highlight how
Indian economy suffered at the hands of the British rulers:

◆ British government curbed domestic industry by imposing heavy taxes. This forced the Indians to buy
the British goods.

• Indian economy was used as a source of raw material for the British industries. Exports of raw material
were almost duty- free. Thus, natural resources in India were drained for the growth of the British
industry.

• Atrocities were committed on the Indian artisans so as to force them to close their cottage industries.
This led to destruction of the Indian handicrafts.

Pg6

Indian Economic Development

3. AGRICULTURAL SECTOR ON THE EVE OF INDEPENDENCE

On the eve of independence, Indian agricultural sector revealed the following characteristics:

(1) Low Production and Productivity: Production refers to total output, while productivity
refers to output per hectare of land. Both (production as well as productivity) were
found to be extremely low on the eve of independence. If arose on account of lack of
means as well as incentive on part of the cultivator (the peasants).

Table 1 shows production and productivity levels in 1947 for wheat

And rice, compared with their levels in 2018-19.

Table 1. Production and Productivity of Wheat and Rice- A Comparison between the Levels in 1947 and
2018-19

Crop

Productivity (kg per hectare)

1947

660

2018-19

3,408

2 Rice

665

2.665

Notable Economists who Estimated India’s National and Per Capita Income

Notable Economiste who estimated indig national and per capita

Income were Dacha Nadro Wilm Digby Findlay Startas, VKRV Rao and RC Desar

Most of them find that

During the first hit of the twentieth century growth rate of national Income and per capita incorne were
less than 2 per cent and 05 per cent respectively

Production (in lakh tonnes)

1947

64

2018-19

991

220

1,156

Sara) D. Bhattacharya: Economic History of India, Economic Survey 2018-191

1. Wheat

Table shows that productivity of wheat was nearly 5.2 times lower in 1947 compared with its level in
2018-19. Productivity of rice was nearly 4 times lower in 1947 compared with its level in 2018-19.

Likewise, level of output of wheat was nearly 15.5 times lower, and

That of rice was nearly 5.3 times lower in 1947 compared with their
Levels in 2018-19.

Owners of the Soil vs. Tillers of the Soil

The zamindars and tillers of the coil were peasants and abourers who worked on

(2) High Degree of Uncertainty: Agriculture showed a high degree of uncertainty (in terms
of farm output). Because, it was excessively Owners of the soil were dependent upon
rainfall. Good rainfall implied good output, while poor rainfall implied poor output. No
effort was ever made under the British rule to develop permanent means of irrigation
(including the farms of zamindars. Wells and canals).

(3) Dominance of Subsistence Farming: Farming was taken mostly as a means of

subsistence. Subsistence farming is a form of farming in which the crops are produced
to provide for the basic needs of the family. There is little surplus left for sale in the
market. Implying a Jack of commercial outlook. Accordingly, backwardness prevailed
and poverty dominated.

Indian Economy on the Eve of Independence

Page 7

(4) Gulf between Owners of the Soil and Tillers of the Soil: Agriculture, during the British Raj
was characterised by a gulf between ‘owners of the sail on the one hand and ‘tillers of
the soil on the other While the owners shared the output, they seldom (hardly) shared
the cost of production. They were merely interested in maximising their rental income
(in terms of share of output). The tillers of the soil were merely given enough for
subsistence.

Datedness of the Tillers of the Soll and Conspicuous Consumption of the Owners

Of the Sell During the Entah nie, while tiers of the soil confronted poverty and accepted debtrichest as
the way of the the owners of the soil indulged in conspicuous consumption The filers of the sol viewed
agriculture merely as a source of subsistence. The owners of the sol wwed it as a hereditary source of
income without investment
 (5) Small and Fragmented Holdings: Landholdings were both small as well as fragmented.
[Fragmented holdings mean a piece here and a piece there). Accordingly, most
landholdings were uneconomic: yielding low output at high cost.

(6) Land Revenue System under the British Raj: The British government in India introduced
a unique system of land revenue. It set up a triangular relationship among the
government, the owner of the soil and the tiller of the soil. This was popularly known as
zamindari system of Land Revenue. The distinct features of this system were as these

Partition of the Country and its impact

(1) The zamindars were recognised as permanent owners of the soil.

The pon of the courty had a negative

3708

(ii) The zamindars were to pay a fixed sum to the government as land revenue.

Wage por cent of poculion and 65 per pet of food grain area Rich food producing ww of West Pureb and
wer to

(ii) The zamindars were free to extract as much from the tillers of

The soil as they could. The implications of the land revenue system were alarming for the farmers and
the farming. Most importantly:

It led to unlimited exploitation of the tillers of the soil by the

Zamindars.
Aggravated the lood the country

Rates of land revenue were frequently raised by the zainindars which led to frequent eviction of the
tillers of the soil.

Tillers were reduced to the status of landless labourers.

Page8

Indian Economic Development

As landless labourers, the tillers merely got subsistence wage

(in kind).

Backwardness of tillers (as landless labourers) meant that they had no means and little interest in
improving agriculture. The zamindars, on the other hand, led a lavish lifestyle and spent all their revenue
income on luxuries of life. Improvement of agriculture was totally neglected.

(7) Forced Commercialisation of Agriculture: Commercialisation of famines in India

agriculture refers to a shift from cultivation for self-consumption to During the British
Rule

Cultivation for the market. Following are some notable points in this

Context:

Mention need to be made of cash crops such as cotton, jute. Sugarcane which had a high demand in the
market were increasingly cultivated.

Farmers were forced to shift to commercial crops (indigo, in particular) from the conventional
subsistence crops (like rice and wheat). Reason: Indigo was required by the textile industry in Britain for
dyeing/bleaching of the textile. The farmers were either lured or forced to accept advance payments for
the cultivation of indigo. It exposed the subsistence

Farmers to uncertainties of the market.

While earlier they would grow grain for their family consumption, now they needed cash to buy it from
the market. But they would seldom have cash owing to their mounting indebtedness. Consequence:
Perpetual indebtedness of the farmers and perpetual stagnation of farming.

Briefly, on the eve of independence. Indian agriculture was both

Backward as well as stagnant (non-vibrant). Backward of agriculture is

Explained in terms of the following factors:

(1) Low production and low productivity, (ii) High degree of uncertainty, owing to huge dependence
on rainfall.

(iii) Dominance of subsistence farming, and

(iv) Small and fragmented holdings.

Stagnation of agriculture is explained in terms of the following factors:

(i) Gulf between the owners of the soil and the tillers of the soil,

(ii) Land Revenue System under the British Raj, and (iii) Forced commercialisation of agriculture.

Faminen refers to Severe shortage of lood Is through crop failure resulting in violent hunger and
starvation
Throughout the bod of Betish Fute most Indians aways lived on the verge of starvation

From 1760 till 1943 India was hit by terrible tamines on a regular

The most significant arhongst those was the great famine of Bengal of 1769-70, which claimed a large to
of

Lives More than 85 milion people died owing to repeated famines

In contrast there have been no famine related deaths since

Independence

Bengal Famine

Indian Economy on the Eve of Independence

Page9

Pre-British Pertud Agriculture Beckward stagnant and nonvibrant agricumur

Ding the tan Ra sharply contrastect with the pre-dritsh perod agre Porto the Beta Rinna rural India w
decribed as a system of self contained village

Communites These age communities

Ecluded firmorta the functionaries The farmers were engaged in crop farming on cattle farming while
the functioneries would ander eenbil services like that of blacksmiths gobamisha washemen and shice-
Helios
Prosperdus Agriculture even without Mechanisation (Pre-British Period)

→There were no intermecheries (ie zamindars) between the state and the farmers the farmers

Would pay and revenue directly to the king

Prosperity and stabisty were the key characteristics of ife in rural inca, Thus the French trailer

Bimmer described Bengal in 17th century as richer than Egypt producing amply for self

Consumption and exporting in abundance

4. INDUSTRIAL SECTOR ON THE

EVE OF INDEPENDENCE Systematic de industrialisation is the term that describes the status of

Industrial sector during the British rule. It implied two things: (1) Decay of world famous traditional
handicraft industry owing to

Discriminatory policies of the British government, and (i) Bleak growth of modern industry owing to lack
of investment

Opportunities.

Decay of Handicrafts

Prior to the British rule, handicraft in India enjoyed the worldwide reputation of excellence and quality.
But, the British Raj contributed to their decay. It was owing to discriminatory economic and political
policies pursued by the British government. Following points may be noted in this regard
Yadian Handicrafts of Worldwide Reputation prior to British Bule

Page10

(1) Discriminatory Tariff Policy of the State: The British rule in India coincided with industrial
revolution in Britain.

The British found India as the best source of raw material as well as the best market for their industrial
products. Accordingly, “ discriminatory tariff policy was pursued. It allowed:

(i) Tariff-free export of raw material from India, and (ii) tariff-free import of British
Industrial products into India.

But, at the same time, heavy duty was placed on the export of Indian

Handicraft products which reduced their competitiveness in the

International market,

As a consequence, while the British products started gaining the Indian markets, the Indian handicraft
products started losing their domestic as well as foreign market. Decay of handicrafts was the end-
result.

(2) Disappearance of Princely Courts: Prior to the British rule, nawabs, rajas, princes and emperors
ruled different parts of the country. They used to patronise the handicrafts because of which the
Indian handicraft industry had acquired international reputation. The beginning of British rule
implied the end of princely courts. Consequently, the handicrafts started decaying.

(3) Competition from Machine-made Products: Machine-made products from Britain were low cost
products and gave a stiff competition to the handicraft products in India. Also, machine- made
products out-excelled Indian handicraft products in precision and quality. Competition the
Indian craftsmen to shut-down their enterprises.
 (4) New Patterns of Demand: Owing to the impact of British culture, a new class emerged in India
which was keen to adopt the western lifestyle. This changed the pattern of demand against the
Indian products and in favour of the British products. In the process, the Indian industry started
losing domestic market, and ultimately perished.

(5) Introduction of Railways in India: With the

Introduction of railways, size of the market for the low-cost British products tended to expand while it
started shrinking for the high-cost Indian products. This hastened/quickened the process of decay of the
Indian handicrafts.

First Train run from Bombay (Mumbai) to Thane (1853)

Indian Economy on the Eve of Independence

Page11

Briefly, the British government converted the Indian economy into a colonial market for the British
industrial goods. Implying, exploitation of the Indian market as: (1) a source of raw material (for the
British industry) and (ii) a destination of demand for the British products. In the process, the handicraft
industry in India was finally eliminated.

Bleak (Notional) Growth of Modern Industry Under the ‘British Raj, modern industry saw only a bleak
growth. It was only in second half of the 19 th century that the modern industry showed its emergence

Three observations need to be noted in this regard:

Two-fold motive behind

The Bystematic De industrialisation. During the British Rule In India

Of water and to fulfil the erging need of exdal puts in of industral non in Britan est andis as a
 (i) Some industries were established by the private entrepreneurs. These included: iron and
steel (Tata Iron & Steel Company was founded in 1907), sugar, cement and paper industries.
These were established in the wake of worldwide scarcity of

Ponential market for the indul products of

Industrial good because of World Wars I and II. (ii) The state participation in the process of modern
industrialisation was limited. It was confined to such strategic areas (like railways and means of
communication) which helped expansion of the Indian market for the British products.

(ii) There was no capital goods industry worth the name. Capital goods

Industry produces goods like machines and industrial plants which

Are used for further industrialisation. In the absence of this industry,

Industrialisation in India remained lopsided.

Briefly, industrial sector on the eve of independence revealed four core

Characteristics, pointing to its backwardness and limited growth:

The twen motive resulted in anquence destruction of handicrafts in India

Impetus to the process

Of industrialisation

Exitain
 (1) Handicraft industry was systematically destroyed by the British government. It was largely owing
to the discriminatory tariff policy of the British government.

(i) Modern industry showed a bleak expansion. It was by and large restricted to the
expansion of railways. It helped expansion of the Indian market for the British
products. (iii) Capital goods industry (which is the core element of industrial

Growth) was almost non-existent. (iv) While the traditional Indian industry (handicrafts) were decaying,
modern industry remained in an infant stage. This again pointed to the backwardness of the Indian
economy with little or no evidence of dynamic change.

Indian Economic Development

Page 12

5. FOREIGN TRADE UNDER THE BRITISH RULE

India had acquired eminence in the area of foreign trade, since ancient times. The Romans used to call
India, “the sink of world’s bullion”. But the British rule in India brought an end to it. India was a well-
known exporter of finished goods (such as fine cotton, silk, textiles, iron goods, wooden goods, ivory
work and precious stones). But the British converted todia into a net exporter of raw material and
importer of finished goods. It was all due to discriminatory policy of trade and tariff pursued by the
British government.

State of India’s foreign trade at the time of independence can be described in terms of the following
observations:

(1) Net Exporter of Primary Products and Importer of Finished

Goods: Owing to colonial exploitation of the Indian economy, India became net exporter of raw
materials and primary products (like raw silk, cotton, wool, jute, indigo, sugar, etc.). On the other hand,
it became net importer of finished goods produced by the British industry. Our imports included cotton,
silk and woollen clothes, besides several types of capital goods produced in England.

Composition of exports and imports reflected utter backwardness

Of the Indian economy. (2) Monopoly Control of India’s Foreign Trade: During the British rule, exports
and imports of the country came under monopoly control of the British government. In this context, two
observations are of critical significance:

More than 50 per cent of India’s foreign trade was directed

Towards Great Britain.

While exports of primary products (raw material) from India supplied inputs to the British industry,
imports of finished goods from Britain provided a huge market to the British industry,

Colonial policy of the British government resulted in a monopoly control of India’s foreign

Market for the British industry

These are typical characteristics of a backward economy.

Canal and Access to Indian Markets

Opening of Suez Canal in 1869 significantly

Reduced the cost of transportation of goods between Britanand

Because the canal served as a direct route for the ships operating between India and Brin avoiding the
African continent

A significant reduction in transport cost promoted monopoly control of indias foreign trade by the
British government
Trade Exports and imports were largely restricted to be between India and Britain India’s exports
provided raw material to the British industry, while India’s imports provided a huge

Indian Economy on the Eve of Independence

13pg

Drain of India’s Walth

(2) Surplus Trade but only to Benefit the British: Surprisingly, during the British regime, our exports
exceeded our imports. It implied a surplus of balance of trade. But, note these points carefully
This surplus was owing largely to the export of primary

Shetty me overment to bolicy of

A these powe tome by the indian Exchedum

Goods (not the industrial goods) which is a sign of economic backwardness. The trade surplus was not
used for growth and development of the country. Instead, it was used to meet: (1) administrative
expenses of the British government in

India, and

(i) Expenses of wars fought by the British government. Administrative and war expenses led to
a huge drain of wealth from India. It compounded the backwardness of the Indian economy.

The mped a dan of

Surplus generated as balance of trade was only spent to meet administrative and war experises

By the British government in india

These expenses led to a huge drain of wealth as it was not used for investment Consequently poverty
and backwardness were elevated

6. DEMOGRAPHIC PROFILE DURING THE BRITISH RULE

Demographic conditions during the British rule exhibited all features of a stagnant and backward
economy. Here, we focus on the following parameters:

(1) Birth Rate and Death Rate: Both birth rate (BR) and death rate (DR) were very high-
nearly 48 and 40 per thousand respectively. High BR and High DR suggest a state of
massive poverty in the country.

(2) Infant Mortality Rate: Infant mortality rate (death rate of children below the age of one
year per 1000 live births) was very high. It was about 218 per thousand, while at
present, it is 32 per thousand. High infant mortality is a sign of poor healthcare
associated with extreme poverty.

(3) Life Expectancy: Life expectancy (average life of a person) was as low as 32 years, while
presently it is 69.4 years. Low life expectancy reflects lack of healthcare facilities, lack of
awareness as well as lack of means to avail them.

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Indian Economic Development

High Mortality Rate and Low Life Expectancy are important social indicators of backwardness and
poverty of the magnes a Daning the British rule frequent famines and recurring epidemics were the
prime causes behind

A high mortality rate

While famines occurred largely due to droughts epidemics occurred due to the neglect of public health
service
 (4) Literacy Rate: Literacy rate (referring to those who can read and write) was nearly 16
per cent, reflecting social backwardness as a reflection of economic backwardness.
Female literacy rate was still worse-only 7 per cent. This indicated gender-bias in the
society.

Demographic Transition

Following are some notable points relating to demographic transition in Population Census

India: (1) In the history of demographic transition, 1921 is regarded as the

“Year of Great Divide. (ii) Prior to 1921. Population growth in India was never consistent.

Size of population kept fluctuating, increasing in one census and decreasing in the other.

(ii) After 1921, population in India recorded a consistent rise. (iv) Thus, the census 1901 showed
a decline of 0.04 crore in total population (from 23.87 crore in 1891 to 23.83 crore in 1901).

(v) The census 1911 showed a rise of 1.38 crore (from 23.83 crore in 1901 to 25.21 crore in 1911).

(vi) Again, the census of 1921 showed a decline of 0.07 crore (from

25.21 crore in 1911 to 25.14 crore in 1921). (vii) From the year 1921 onwards, total population in India
never declined; it showed a consistent rise: the census 1931 recorded a rise of 2.76 crore; the census
1941 recorded a rise of 3.96 crore; the census 1951 showed a rise of 4.24 crore, and so on.

(viii) A consistently rising population (on the eve of independence) led to excessive burden of
maintenance investment. It is an expenditure which a country has to incur on the maintenance of the
existing population.

(ix) When the maintenance investment is high, growth-oriented investment

Remains low.

A Consistent Rise in Population post 1921

Indian Economy on the Eve of Independence

Population census in india is a deteinda estimation of population size along with a complete
demographic profile of the country

It was first conducted under the British rule in 1881 Since then it is conducted after every ten years

15pg

(x) High maintenance and low growth-oriented investment on the eve of independence is another
feature of the Indian economy pointing towards its backwardness and stagnation.

High maintenance investment (expenditure on the maintenance of existing population and low
vestment for growth and development kept india in a state of perpetual backwardness (xi) However, the
underlying fact is that till 1951, the rise in India’s

Population was never alarming; it ranged between mild to modest (xii) It was only from 1951 onwards
that the rise in population became explosive in nature, and the country started facing a serious
challenge in terms of population explosion.

7. OCCUPATIONAL STRUCTURE ON THE EVE OF INDEPENDENCE

Occupational structure refers to distribution of working population across primary, secondary and
tertiary sectors of the economy. Table 2 shows occupational structure of Indian economy at the time of
independence. The data relates to the 1951, because reliable statistics for

The year 1947 are not available.

Pie Chart

Table 2. Occupational Distribution of India at the Time of Independence

Primary Sector

72.7%

Secondary Sector 10.1% Tertiary Sector

1. Primary Sector

Occupation

1951 (in %)

72.7

() Agriculture

(i) Agricultural Labour

50.0

19.7

24

17.2%
 (1) Forestry Fisheries, Animal Husbandry Plantation

(iii) Mining

0,6

10.1

2. Secondary Sector

(iv) Small and Large Scale Industries

(v) Building Construction

9.0

3. Tertiary Sector

17.2

5.2

14

(vi) Trade and Commerce

(vii) Transport. Storage and Communication

 (viii) Other Services

10.6

100,00

Source: Census of India 20111

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Indian Economic Development

Table 2 offers the following observations:

(1) Agriculture The Principal Source of Occupation: On the eve of independence, about 72.7 per
cent of working population was engaged in agriculture

Percentage of population dependent on agriculture is much less in advanced countries of the world. For
instance, in England and America 2 per cent, in Japan 12 per cent and in Germany 4 per cent of the
population depend on agriculture. This establishes backwardness of the Indian economy at the time of

Independence. (2) Industry-An insignificant Source of Occupation: On the eve of independence, barely
9.0 per cent of the working population in India was engaged in manufacturing industries, mining, etc.. As
against it. 32 per cent in the USA, 42 per cent in England and

39 per cent in Japan are engaged in these activities. It further proves how backward the Indian economy
was at the time of independence.

(2) Unbalanced Growth: The table shows unbalanced growth of the

Indian economy.

Growth is said to be balanced when all sectors of the economy are equally developed. However, in case
of India, secondary and tertiary

Sectors were in their infant stage of growth. Hence, the conclusion that Indian economy at the time of
independence was lopsided and therefore, backward.

Assessed in terms of occupational distribution of the working population in India at the time of
Independence, we get e disappointing picture of the Indian economy Since bulk of the working
population was engaged in agricultural sector (along with the fact that agriculture was merely a means
of subsistence) Indian economy was in a state of extreme backwardness

The masses led their life in extreme poverty

8. INFRASTRUCTURE ON THE

EVE OF INDEPENDENCE

Infrastructure refers to the elements of (i) economic change (like means of transport, communication,
banking, power/energy), and the elements of (i) social change (like growth of educational, health and
housing facilities), which serve as a foundation for growth and development of a country.

Agriculture a Means of Subsistence

Dacer dependere

Structure on the eve of dependence aphed Inser brity of land per heart of the farming poculation

Wes taken largely o means of subsistence

And less as bccupation for prof

Indian Economy on the Eve of Independence

17pg

The state of India’s infrastructure on the eve of independence can be described in terms of the following
observations: (1) Railways were developed to transport finished goods from Britain

To the interiors of the colonial India (with a view to widening the size of the market). It aimed at
widening the size of the market for the British products in India. (H) Ports were developed to handle
export of raw material to Britain and import of finished goods from Britain. (i) Post and telegraphs were
developed to enhance administrative

Efficiency

(iii) Roads were developed to facilitate transportation of raw material from different parts of the
country to the ports.

Briefly, some modest infrastructural change in the economy during the British Raj is not denied. But, the
motive behind this change was not the growth and development of the Indian economy, rather it was
the growth and development of the British economy through colonial exploitation of the Indian
economy. Consequently, Indian economy remained to be backward.

IMPACT OF RAILWAYS IN INDIA

Positive Impact

(Railways facilitated expansion of the domestic

Marker. Accordingly, exports and imports of the country showed a significant rise.
(Railways facilitated commercialisation of agriculture, as goods could then be moved to distant places.
This implied a modest change in the outlook of the farmers. They started viewing farming as a business,
rather than merely as a source of subsistence

Railways in the British Rule

(1) Railways enabled people to break the barriers of distance and undertake journeys to far off
places. This promoted cultural affinity among the countrymen. (iv) Faster movement of food
grain across different parts of the country (owing to Railways) helped control the spread of
famines. Food supplies could reach the people before they

Were driven to starvation,

Negative Impact

(1) Railways contributed to colonial exploitation of the Indian economy. Because, primary goods
(raw material) could then be easily transported from the fields and farms to the ports for the
purpose of exports to the British economy. (1) Finished goods coming as imports to the Indian
economy could be easily transported to

The interiors of the country for purpose of sale. (iii) Thus, the spread of railways led to the spread of the
domestic market for the British products.

Indian Economic Development

Pg19

Was there any Positive Impact of the British Rule in India?

Certainly not, if the impact of the British rule is studied with reference tomotive’ of the British
government in India. The motive was clear and focused: it was colonial exploitation of the Indian
economy. However, the means to achieve the end yielded some positive side-effects. These are as under

(1) Commercial Outlook of the Farmers: Forced commercialisation of agriculture under the British
rule exposed the subsistence farmers to uncertainties of the market. True, but it also led to a
 gradual change in outlook of the farmers. The farmers started considering market price of the
produce as an important determinant of their production decisions.

(2) New Opportunities of Employment: Spread of railways and roadways opened up new
opportunities of economic and social growth.

(3) Control of Famines: Rapid means of transport facilitated rapid movement of food grain to the
famine-affected areas. Accordingly, famines were controlled.

(4) Monetary System of Exchange: There was a transition from barter system of exchange to
monetary system of exchange Growth of monetary system of exchange facilitated division of
labour,

Specialisation, and large-scale production. (5) Efficient System of Administration: The British government
in India left a legacy of an efficient system of administration. This

Served as a ready-reference for our politicians and planners.

Indian Economy on the Eve of Independence

19pg

EXERCISE

1. Objective Type Questions (Remembering & Understanding based Questions)

A. Multiple Choice Questions

Choose the correct option:

1. The Indian economy on the eve of the independence was (a) developed
(b) underdeveloped

(c) stagnant

2. Landholdings at the time of independence were: (a) fragmented

(c) small

(5) Large

(d) both (b) and (c)

(d) both (a) and (c)

3. Farming which focuses on basic needs of the family is called: (a) stagnant farming (b)
subsistence farming

(c) commercial farming 4.

(d) none of these

Decay of handicrafts was caused by: (a) British tariff policy

(b) competition from machine-made products

(c) change in the patterns of demand

(d) all of these

 4. Suez Canal was opened in: (a) 1867

(b) 1868

(c) 1869

(d) 1870

5. On the eve of independence, India was net exporter of: (a) primary products (b) industrial
products

(c) capital goods

(d) all of these

6. High infant mortality is a sign of:

(b) poor healthcare

(a) Extreme poverty (c) both (a) and (b)

(d) none of these 8. Gender-bias in the society on eve of independence was indicated

(a) Mortality rate (c) death rate

(b) Literacy rate (d) life expectancy

 9. During colonial period, India’s demographic profile showed:

(a) High birth rate

(b) High infant mortality

(c) High death rate

(d) All of these

10. On the eve of independence, bulk of the population was engaged (a) agriculture sector in: (b)
trade and commerce

(c) Mining sector

(d) Industrial sector

Indian Economy on the Eve of Independence

By:

Pg 21

11. Which sector was the major contributor to GDP of the country as well as the biggest employer
on the eve of independence?

(b) Industry

Al Agriculture ( Services
 (c) Manufacturing

12. Railways were introduced in India in the year:

(b) 1853

(0) 1554

(d) 1850

13. Which industry of India got severely affected under the colonial rule? (a) Sugar industry (c)
Handicraft industry (b) Iron & Steel industry

(e) Paper industry

14. On the eve of independence, (a) approx 40% the proportion of population engaged in
agricultural sector was

(c) approx 65%

(b) approx 60% (d) approx. 70%

15. Stagnant economy is the one which shows:

Fal little growth in income (c) low level of productivity

(b) high growth in income (d) both (a) and (c)

Answers

1 (d)

11. (a)

3 (b) 13 (c) 14. (d) 15 (d)

5 (c)

6 (a)

7 (c)

8 (b)

9. (c)

10 (a)

2 (d) 12, (b)

4. (d)

B. Fill in the Blanks

Choose appropriate word and fill in the blank:

1. On the eve of independence, Indian economy was a

(feudal economy/semi-feudal economy)

2. Zamindari system of land revenue worked through the system of middlemen called 3. An
economy made to serve the interests of its colonial rulers is called a

(jagirdars/zamindars)

Is a form of farming in which crops are produced to provide for the basic (Commercial
farming/Subsistence farming) needs of the family. 5.

(colonial economy/feudal economy)

Infrastructure includes educational, health and housing facilities. (Economic/Sociali

5. During the colonial rule, India was a

Of finished products from/to Britain. (net exporter/net importer)

6. The year

Is regarded as the Year of Great Divide in the history of demographic transition of India.

7. Occupational structure refers to the distribution of

(1921/1931)

Across primary.
Secondary and tertiary sectors of the economy.

(population/working population) as a production activity, belongs to primary sector of the economy.

Indian Economic Development

(Animal husbandry/Storage)

Pg22

10. At the time of independence, secondary and stage of growth.

Sectors were in their infant (primary/tertiary)

Answers

Sem feudal economy 4 Subsistence farming

A working population

5. Social

9 Animal husbandry

3 colonial economy

6 net ithporter

10 tertiary
FX 1923

C. True or False

(True/False)

State whether the following statements are True or False:

1 Landholdings on the eve of independence were fragmented.

2. It was owing to the discriminatory tariff policy of the colonial government that
handicraft industry in India got destroyed.

3. Per capita income refers to the income per head of the total work force

Of the country. 4. Railways were developed by the colonial government to promote the

Market for British goods in India.

(True/False)

(Trun/False)

(True/False) (True/False)

4. From the year 1921, total population in india never declined.

 5. Infant mortality rate refers to the death rate of children below the age

Of 2 year per 1000 live births. 7. Muslin is a type of cotton textile which had its origin in Bengal.

[True/False) (True/False)

8. Commercialisation of agriculture refers to a shift from cultivation for self-consumption to

cultivation for sale in the market

[True/False)

(True/False)

9. On the eve of independence, only heavy and basic industries were developed in the Indian
economy.

10. During British period, India was treated as a colony supplying raw material to the British
industries.

(True/False)

Answers 1 True

2 True

3 False

3. True
5 True

False

6. True

8 True

9.

Faise

11. True

D. Matching/Chronological 1. Identify the correct sequence of alternatives given in Column II by

matching them with respective

Items in Column 1:

Column

Column

(a) Zamindari system of land revenue

One in which per capita income is very low (1) The distribution of working population across different

(b) Stagnant economy

Sectors of the economy

(c) Backward economy..

(i) It worked through the system of middlemen

(d) Occupational structure

(iv) One which shows little or no growth in national income

Answers

(a)-(), (b)-(v), (c)-(i), (d)-(i)

Indian Economy on the Eve of independence

23pg

12. Choose the correct alternative showing chronological order of the following events: The Year of
Great Divide

00 Great Eanes of Bengal which claimed a large toll of lives (Mumbai) to Thane

On Fast Tram in from Bombay

(v) Opening of Suez.canal

Alternatives:
(c) (0.00) (0) (0)

(b) (0), (v). (1), (1)

Answer

E. Very Short Answer’ Objective Type Questions 1. What is a stagnant economy? Ans. A stagnant
economy is an economy in which there is little or no scope of GDP growth

2. Define land-productivity. Ans Land-productivity refers to output per hectare of land.

3. What is meant by subsistence agriculture? Ans. Subsetorice agriculture is a form of farming in

which only subsistence crops are grown to provid for the basic needs of the family.

4. What do you mean by commercialisation of agriculture? Ans. Commercialisation of agriculture

refers to a shift from cultivation for self-consumption to

Cultivation for the market 5. Define occupational structure.

Ans. Occupational structure refers to distribution of working population across primary, secondary and

Tertiary sectors of the economy

5. What is infant mortality rate?

Ans. Infant mortality rate is an estimate of the number of infant deaths for every 1,000 live births
(infants refer to children below the age of one year).

6. What is life expectancy? Ans. Life expectancy is defined as the average number of years that a
person can expect to live.
 7. Define literacy rate,

Ans. It refers to the percentage of people in a certain sample of population who can read and write 9.
What do you mean by Population Census?

Ans. Population census is a detailed estimation of population size along with a complete demographic

Profile of the country.

10. State two main indicators of backwardness and poverty of the masses. Ans Two main indicators of
backwardness and poverty are

(High mortality rate, and (i) Low life expectancy

24 Indian Economic Development

Pg24

2. Reason-based Questions (Comprehension of the Subject-matter)

Read the following statements carefully. Write True or False with a reason.

1. Low level of productivity was the principal characteristic of Indian agriculture on the eve
of

Independence.

Ans. True Reason Use of primitive technology and small-size holdings.

 2. Zamindari system of land revenue gave incentives to tillers of soil to increase their
productivity Ans. Fabe Under zamindari system, the Ullers locked ownership rights. As a
result they had no internat in improving the agriculture

3. Railways during the British rule in india promoted colonial exploitation of the indian
economy Ans. True Railways promoted colonial exploitation of the indian economy in
two ways as under Railways facilitated the movement of raw material from their source
of supply to the ports for

Further transportation to England Railways led to expansion of the market for the British products in
india 4. The year 1921 was the year of Great Divide with regard to the growth of population in India.

An True. The year 1921 was the year of Great Divide Because prior to 1921 population growth in India

Was not consistent it was only after 1921 that the population recorded a consistent rise

4. Zamindari system brought stability to cultivation during the British rule in india. Ans.
False. The zamindari system during the British rule did not bring stability instead, it
brought instability to indiary cultivation Because this system led to frequent ejection of
the tillers of the soll. They lost their permanent rights of cultivation and accordingly lost
permanent interest in cultivation

5. The tillers of the soil could not leave agriculture even when they were always exploited.
Ans. True The tillers of the soil could not leave our culture despite their continuous
exploitation. This was because of the lack of vocational avenues outs de agriculture

6. Under the British Raj, discriminatory tariff policy was pursued with a view to protecting
the Ans. False British pursued discriminatory tariff policy which alowed terift-free export
of raw material

Indian industry.
From India and tariff-free import of British industrial products in India. This enabled the industrial
products to capture the Indian markets.

British

7. Surplus generated in trade was used to meet administrative expenses by the British
government

In India. Ans. True Surplus generated in trade was used by British government to meet administrative
expenses in india which led to a huge drain of wealth.

8. Partition of the country had a negative impact on Indian agriculture. Ans. True India got
82 per cent of population and 65 per cent of food grain area Fertile

Punjab and Sindh went to Pakistan which led to food crisis in the country

4. HOTS & Applications

1. How Railways moderated the impact of famines during the colonial period? Ans.
Railways facilitated the movement of food grains from the surplus zones or from the
government warehouses (Godowns) to the areas afflicted with famines, Accordingly, the
impact of famines was

Moderated

Indian Economy on the Eve of Independence

Pg25

Areas of West

2 How would you support the view that the destruction of handicraft in India coincided with the c of the
Indian handicrafts was witornatally planned by the Britofgovemme industrial revolution in Great Britain?
Ans. The c node with the indust revolution in Great Botain The success of industrial depended on (if
growth of indian itat for the British products, and (i) export of time from India to bean Achievement of
both these objectives (largely through discriminatory trade

The policy of colonial exploitation of the Indian economy during the British Raj had some positive side
effects for the Indian economy. Do you agree? Anse that the policy of colonial exploitation during the
British Raj had some positive side efects for the indian economy Start of Railways development of ports,
improvement of the ms of communication and a good system of administration were some critical
elements of the policy of colonial exploitation But all these4mplied a growth-oriented change in the ind

Bosce) led to the depletion of indian handicrafts

5. How did discriminatory trade policy contribute to the success of industrial revolution in Great

Britain?

Ana. Domotory trade policy contributed to the success of industrial revolution in Great Britain in

Low duty on the import of British Industrial goods into India led to the growth of domes demed for
these goodic and Low duty on the sport of raw material from indle ensured availability of low-cost
inputs for

The British industry

4. Analysis & Evaluation

1. Legally, Zamindari System of Land Revenue has been abolished in independent India. Yet Indian
agriculture continues to be in a state of backwardness. What in your opinion is the

Principal reason for this situation?

Ans. Despite abolition of zamindari system, poverty continues to be pervasive in Indian agriculture
Owing to two seasons

The bulk of the Indian farmers are small and marginal holders Small and marginal holdings are not
conducive to the adoption of innovative techniques of farming, and

The delivery mechanism related to financial help by the state is grossly inefficient and neffective 2.
MNCS (Multinational Corporations) are dominating the Indian industrial sector and are offering

Stiff competition to the small scale industry. How do you compare this situation with the one under the
British rule when the indian handicrafts were exposed to stiff competition from the machine-made
products of Britain?

Ans Competition promotes the adoption of innovative technology and is therefore, expected to open
hew was of growth for the small scale enterprises. But the adoption of new technology needs avel
playing field Do the small enterprises in India have t? ‘No’ is the answer. Small enterprises ninda do not
get enough funds at a low rate interest as the MNCs can manage. Accordingly. They often fail to upgrade
their technology to make it competitive. Also, they fail to spend as much on advertisement and publicity
as the MNCs can do to capture the market. Thus, of small enterprises in the face of stiff competition
from the MNCs seems to be doubtful. This

pg26

Indian Eco Development

Situation is definitely comparable with the one when the Indian Handicrafts were exposed to the stiff
competition from machine-made products of Britain cluring the British rule in india. However, the
difference is that whereas during the British rule, destruction of small enterprises could be taken as a
consequence of the colonial exploitation by the foreign govemment in India, no such situation exists in
India now, it is all a matter of competition in the wake of NEP (new economic policy) promoting
liberalisation, privatisation and globalisation of the industrial sector

6. NGERT Questions (With Hints to Answers)

1. What was the focus of the economic policies pursued by the colonial government in India?
What were the impacts of these policies? [Hint The focus of the economic policies pursued by the British
government was to exploit the Indian economy as much as they could do to foster the growth process of
the British economy. The colonial policies changed the nature and structure of the Indian economy. It
was rendered as

A supplier of raw materials and not importer of finished Industrial products from Britain.J 2. Name some
notable economists who estimated India’s per capita income during the colonial

Period. (Hint Dadabhal Neoroji, William Digby, Findlay Shirras V.KRV Rao and RC. Desai

2. What were the main causes of India’s agricultural stagnation during the colonial period? [Hint:
Following were the principal causes of India’s agricultural stagnation during the colonial

Period (Tillers of the soil were not the owners of the soil

(Land Revenue System under the British Raj focused on exploitation of the farmer. (i) Forced
commercialisation of agriculture which led to uncertainty of farm income:]

3. Name some modern Industries which were in operation in our country at the time of

Independence.

[Hint: (i) Cotton Textile Industries

(1) Jute Textile Industries.

(H) Iron and Steel Industries.

(iii) Sugar Industries

 (iv) Cement Industries,

(v) Paper Industries, etc.]

4. What was the two-fold motive behind the systematic deindustrialisation effected by the British

In pre-independent India?

Hint (1) To exploit India’s wealth of raw material and primary products like cotton and jute.

(i) To exploit India as a potential market for the industrial products of

Britain:]

7. The traditional handicrafts industries were ruined under the British rule. Do you agree with this
view? Give reasons in support of your answer. [Hint: Yes, the traditional handicraft industries
were ruined under the British rule. The reasons are as follow:

() Discriminatory tariff policy of the state

00 Disappearance of princely courts

Indian Economy on the Eve of independence

27pg

0 Competition from machine-made products v) New patterns of demand flavouring machine made
goods) India which led to the spread of Indian market for the Brati

Introduction of raways in industrial goods 7 What objectives did the British intend to achieve through
their policies of infrastructure development in India? Hot The Dorah intends to achieve the following
objectives through their policies of infrastructure
Development in India

( Expansion of the Indian marker for the British products through the expansion of railways.

60 To handle export of raw material to Britain and import of finished goods from Britain through the
development of ports fillTo enhance administrative efficiency through the development of post and
telegraphs.

DV) To factate transportation of raw material from different parts of the country to the ports through
the development of roads] 8. Critically appraise some of the shortfalls of the industrial policy pursued by
the British colonial

Administration

Tint Industrial policy pursued by the British colonial administration was to foster the process of
industrial growth in Britain in indo, capital goods industry was developed only to the extent that it aided
the development of industry in Britain The contribution of the industrial sector was insignificant. The
public sector recorded a very dismal growth)

8. What do you understand by the drain of Indian wealth during the colonial period?

Hn Hupe administrative expenses were incurred by the British government to manage their

Colonial rule in India. Also huge expenses were incurred by the British government to fight wars in

Pursuit of their policy of imperialism. All these expenses were borne by the Indian Exchequer. This
implied a drain of India’s wealth/ 10. Which is regarded as the defining year to mark the demographic
transition from its first to the second decisive stage? Het The year 1921 is regarded as the defining year
to mark the demographic transition from its
First to the second decisive stage 1921 is also known as the year of great divide] 11. Give a quantitative
appraisal of India’s demographic profile during the colonial period. [Hint India’s demographic profile
showed the following features:

0) High birth rate and death rate GO High infant mortality rate

Lowlife expectancy.

v) Low female literacy rate indicating high degree of gender-bias in the society.]

13. Highlight the salient features of India’s pre-independence occupational structure. [Hint The
sgricultural sector accounted for the largest share of workforce (70-75%). The manufacturing
and the services sectors accounted for only 10% and 15-20% share, respectively:]

14. Underscore some of india’s most crucial economic challenges at the time of independence. Hint
0) Agricultural sector of the economy was backward, stagnant and non-vibrant. It was a crucial
economic challenge

Pg28

Indian Economic Development

01). There was an urgent need of modemisation diversification, capacity building and incred public
investment in industrial sector rfisstructure facilities including the famed raway network needed up-
gradation and

Expansion

Prevalence of rampant poverty and unemployment requred welfare orientation of the

Economic polic 14. When was India’s first official census operation undertaken?
[H: 1881]

15. Were there any positive contributions made by the British in india? Discuss nt Following points
highlight positive contributions made by the British in India (Commercial outlook of the farmers
started replacing subsistence-based production decisions of the farmers

Bo Opportunities of employment were generated through infrastructural growth (l) Famines were
effectively controlled through the development of rapid means of transport (iv) There was a significant
shift from barter system of exchange to monetary system of

Exchange. (V) Efficient system of administration emerged as a sina que non of growth

5. Miscellaneous Questions and Reference to the Text for Answers

1. What was the state of agriculture sector of the Indian economy on the eve of independence?

[Page 7-9]

2. What was the state of industrial sector of the Indian economy on the eve of independence?

[Page 10-12]

3. Comment on the state of exports and imports of the Indian economy on the eve of

Independence.

[Page 13]

4. Comment on the economic conditions of the tillers of the soil at the time of independence.
[Page 7-9]

5. Briefly describe the occupational structure of Indian economy on the eve of independence.

[Page 16, 17]

6. Write a few words on infrastructure in the Indian economy at the time of independence.

[Page 17, 18] 7. State three main features of Indian economy at the time of independence. [Page 5, 6]

Indian Economy on the Eve of Independence

Pg29

ABILITY ZONE

Reversal of Growth Process under the British Raj

Prior to the Colonial Rule in India, Indian economy was a vibrant economy. Doubtless the agricultural
sector was the main source of livelihood. But there was an all round prosperity across all sectors of the
economy. Agriculture was subsistence based, but the cultivators enjoyed the ownership rights and were
to pay a reasonable amount of land revenue directly to the king. There were no middlemen, and
therefore, no exploitation.

Industry was dominated by handicrafts, but it enjoyed worldwide reputation of

Producing quality products like ‘Dacca Musline Exports consisted largely of finished products. Imports
were largely of bullion (gold and silver).

Colonial policies of the British government almost reversed the composition, or structure of output, as
well as the composition of exports and imports. Also, the pace of growth was severely hit. No systematic
official attempts were ever made of estimating per capita income
(indicating per head availability of goods and services in the economy).

However, some individuals made some modest attempts to measure per capita

Income during the British period. These included V.K.R.V. Rao, Dadabhai Naoroji.

Findlay Shirras William Digby and R.C. Desai. Rao’s study was most comprehensive

And systematic. He found that during the 1st half of the 20th century, while national

Income showed a modest growth of about 2 per cent, per capita income showed a

Dismal growth of about 0.5 per cent.

30 pm

Pg 30