Indian Economy On The Eve of Independence

Indian Economy on the Eve of Independence: Challenges
The structure of India’s current economy is not a recent creation, it has deep historical roots,
particularly during the period when India was under British colonial rule, which endured for
nearly two centuries before India ultimately achieved independence on August 15, 1947. The
primary objective of British colonial rule in India was to transform the nation into a supplier
of raw materials for the rapidly expanding modern industrial base of Great Britain and to reduce
economic challenges. It is crucial to comprehend the exploitative nature of this colonial rule to
evaluate the level of development managed by the Indian economy on the eve of independence
in the past seven and a half decades.
Low Level of Economic Development During Colonial Rule: Assessing the Indian
Economy on Eve of Independence:
 A Self-Sustaining Agrarian Economy:
 Before the advent of British colonial rule, India boasted a self-sustaining
economy, with agriculture as the primary livelihood source for the majority.
 The economic fabric was also rich with diverse manufacturing activities,
particularly flourishing in the handicraft industries.
 India’s Global Artisanal Excellence:
 The country was globally recognized for its exquisite cotton and silk textiles,
metalwork, and precious stone craftsmanship.
 These high-quality goods were finding markets worldwide due to their
exceptional craftsmanship, contributing to the resilience of the Indian economy
on the eve of independence
Textile Industry in Bengal:

1) Muslin is a type of cotton textile that had its origin in Bengal, particularly, places in and
around Dhaka, now the capital city of Bangladesh.
2) ‘Daccai Muslin’ had gained worldwide fame as an exquisite type of cotton textile.
The finest variety of muslin was called malmal. {In the Bollywood song Teri Malmal ki Kurti
gulabi ho geyi, Blam Pichkari…you must be heard}
3) Sometimes, foreign travellers also used to refer to it as malmal shahi or malmal khas
implying that it was worn by, or fit for, the royalty.
Colonial Economic Policies in the Context of the Indian Economy on the Eve of
Independence:
 Prioritizing Imperial Interests: The economic policies of the British administration
were primarily aimed at bolstering the economic interests of Britain, rather than
nurturing the growth of the Indian economy.
 Colonial Trade Imbalance: It transformed India into a supplier of raw materials while
becoming a consumer of finished industrial products from Britain. This skewed trade
dynamic continued to influence the Indian economy on the eve of independence,
emphasizing the enduring impact of colonial economic policies.
The Neglected Assessment of Income during Colonial Rule:
 The Neglect of Income Assessment in Colonial India: One glaring oversight of the
colonial government was its lack of genuine effort to evaluate India’s national or per
capita income, which remained largely unassessed.
During British colonial rule, India experienced a significant decline in its economic and human
development indicators, resulting in the country transitioning from having 25% of global trade
to less than 1%.
Understanding the Contradiction of Agricultural Productivity in Colonial India:
 Definition: Agricultural productivity is the ratio of agricultural outputs to inputs.
 Paradox of Expansion: Agricultural productivity witnessed a decline in colonial India,
even though there was some expansion in the total cultivated land area.
 Agricultural Stagnation: This stagnation was chiefly attributed to the various land
settlement systems introduced by the colonial government.
Zamindari System and its Detrimental Impact on the Indian Economy on the eve of
Independence:
 The Zamindari System: This system granted large tracts of land to intermediaries
known as zamindars, and they used to collect land revenue from the peasants who were
working in those land tracts.
 Diversion of Agricultural Profits: This system was implemented in the Bengal
Presidency (encompassing parts of present-day eastern states), and channelled
agricultural profits away from the cultivators and towards the zamindars.
 Zamindars’ Apathy: A significant number of zamindars, akin to the colonial
government, showed little interest in enhancing agricultural conditions.
 Rent Over Prosperity: Their primary focus remained on rent collection, unmindful of
the economic challenges endured by the cultivators, shaping the landscape of the Indian
economy on the eve of independence.
Agricultural Challenges: Examining Technological and Infrastructural Shortcomings:
 Resource Deficiency and Technological Lag: The agricultural sector was further
marred by low technological advancement, inadequate irrigation facilities, and minimal
use of fertilizers.
Misguided Commercialization and Economic Impacts on the Indian Economy on the eve
of Independence:
 Commercialization Challenges: The commercialization of agriculture, especially the
emphasis on cash crops, did little to ameliorate the economic challenges of farmers.
Instead of cultivating food crops, the focus shifted to cash crops destined for British
industries.
 Gaps in Colonial Agricultural Infrastructure: Despite some advancements in
irrigation, investments in vital agricultural aspects like terracing, flood control,
drainage, and soil desalinization were conspicuously absent.
 Disparities in Agricultural Adaptation: A minority of farmers adapted their cropping
patterns to prioritize commercial crops. A significant portion of tenants, small-scale
farmers, and sharecroppers lacked the resources, technology, and incentives to invest
in agriculture, further deepening the agricultural crisis.
Various Economic Policies of the British
1. Land Revenue Policies

 The Industrial Revolution of England forced the Britishers to collect revenue for
trade, projects and maintaining the country’s administration. In 1793, the Britishers
introduced the Permanent Settlement in the provinces of Bihar and Bengal; in 1822,
the Mahalwari System was introduced in Punjab, Ganga Valley and Northwestern
India; and in 1820, the Ryotwari system was introduced in southern India.
 The Permanent settlement system gave East India Company a fixed sum of money
and made zamindars the hereditary owners of the land. This revenue generated
income for the EIC at the cost of the peasants. These land revenue policies
generated revenue for the government at the cost of the peasants.
 Due to the very high taxes, farmers grew cash crops instead of food crops and this
led to food insecurity and starvation. Taxes on agricultural produce were moderate
during pre-British times, and the British made it very high.
 Insistence on cash payment of revenue led to more indebtedness among farmers,
and moneylenders became landowners in due course. Bonded labour arose because
loans were given to farmers/labourers who could not pay it back.
2. Railways
 The railways were a powerful auxiliary in the development of industries. In 1853,
Lord Dalhousie proposed a railway network for the whole country.
 The British were not interested in developing the Indian Industry, and they pursued
railway policy for different purposes. Lord Hardinge in 1844 supported railway
development for the efficient prosecution of the war and the empire’s security.
 The works of the railways were mainly designed in the interests of Britain. The rates
were manipulated to favour the import of British manufactured goods and export of
Indian raw materials.
 The Railways powerfully aided in the growth of national consciousness and led to
the development of external and internal trade.
3. Commercialization of Agriculture
 It emerged in the latter half of the 19th century and was one of the consequences
of introducing new land relations and the revenue system. In this form, the
production for village uses had been replaced by production for the market.
 Agriculture began to be influenced by commercial considerations. The peasants
produced only for the market to realize maximum cash for mainly paying the land
revenue and meeting the moneylenders’ money.
 The farmers cultivated specialized crops for sale in the national and international
borders. The lands in groups of villages came to be solely used to cultivate a single
crop depending upon the particular suitability.
 The commercialization of agriculture had a significant impact on society. The
peasants became subjects to all the ills of the national and international markets and
were forced to depend on the middleman to sell their products.
 The peasants who lacked economic reserves had to sell their products to the
middleman at harvest time. Indian agriculture started to be influenced by fluctuating
world prices, and the farmers hardly fared better from the commercialization of
agriculture.
4. Deindustrialization
 During the first half of the 19th century, India suffered an industrial decline due to
British colonial rule. India was deeply deprived of the gains of the industrial
revolution.
 It was held mainly agrarian by the Britishers to secure cheap raw materials for
British industries and to use the ready market in India for industrially produced
goods of Britain. The entire process has been described as deindustrialization.
 There was the disappearance of Indigenous courts that patronized handicrafts and
employed the craftsmen regularly.
 Deindustrialization had a significant impact on the Indian handicraft industries.
Ruins of handicrafts led to industries’ decline, which led the country to
unemployment and acute poverty.
5. The drain of wealth:
 The British exported to Britain part of India’s wealth and resources for which India
got no adequate economic or material return. This ‘economic drain' was peculiar
to British rule. Britishers spent a large part of the taxes and income not in India
but in Britain.
 The direct organization of the drain of wealth started in 1765 with the acquisition
of Diwani of Bengal. The salaries and the other incomes of the English officials
and the trading fortunes of English merchants found their way into England.
 The drain of wealth checked and retarded the capital accumulation in India, thereby
retarding the industrialization of India. The Indian products and treasure drained to
England without adequate return.
 Dadabhai Naoroji referred to this as moral drainage as it excluded Indians from the
post of trust and responsibility. This theory highlighted the exploitative character of
British rule.

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Indian Economy on the Eve of Independence: Challenges

Textile Industry in Bengal:

Various Economic Policies of the British

1. Land Revenue Policies

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