NCERT Textbook: Indian Economy on the Eve of Independence

 Page 1


DEVELOPMENT POLICIES AND EXPERIENCE
 (1947-90)
UNIT
III
UNIT
I
Reprint 2025-26
Page 2


DEVELOPMENT POLICIES AND EXPERIENCE
 (1947-90)
UNIT
III
UNIT
I
Reprint 2025-26
The two chapters in this unit give us an overview
of the state of the Indian economy as it was at the
eve of independence till after four decades of
planned development, which was a path that India
chose. This meant that the Government of India
had to take a series of steps such as the
establishment of the Planning Commission and
announcement of five year plans. An overview of
the goals of five year plans and a critical appraisal
of the merits and limitations of planned development
has been covered in this unit.
Reprint 2025-26
Page 3


DEVELOPMENT POLICIES AND EXPERIENCE
 (1947-90)
UNIT
III
UNIT
I
Reprint 2025-26
The two chapters in this unit give us an overview
of the state of the Indian economy as it was at the
eve of independence till after four decades of
planned development, which was a path that India
chose. This meant that the Government of India
had to take a series of steps such as the
establishment of the Planning Commission and
announcement of five year plans. An overview of
the goals of five year plans and a critical appraisal
of the merits and limitations of planned development
has been covered in this unit.
Reprint 2025-26
1
 After studying this chapter, the learners will
• become familiar with the state of the Indian economy in 1947, the
year of India’s Independence
• understand the factors that led to the underdevelopment and
stagnation of the Indian economy.
INDIAN ECONOMY
ON THE
EVE OF INDEPENDENCE
Reprint 2025-26
Page 4


DEVELOPMENT POLICIES AND EXPERIENCE
 (1947-90)
UNIT
III
UNIT
I
Reprint 2025-26
The two chapters in this unit give us an overview
of the state of the Indian economy as it was at the
eve of independence till after four decades of
planned development, which was a path that India
chose. This meant that the Government of India
had to take a series of steps such as the
establishment of the Planning Commission and
announcement of five year plans. An overview of
the goals of five year plans and a critical appraisal
of the merits and limitations of planned development
has been covered in this unit.
Reprint 2025-26
1
 After studying this chapter, the learners will
• become familiar with the state of the Indian economy in 1947, the
year of India’s Independence
• understand the factors that led to the underdevelopment and
stagnation of the Indian economy.
INDIAN ECONOMY
ON THE
EVE OF INDEPENDENCE
Reprint 2025-26
4 INDIAN ECONOMIC DEVELOPMENT
1.1 INTRODUCTION
The primary objective of this book,
Indian Economic Development, is to
familiarise you with the basic features
of the Indian economy, and its
development, as it is today, in the
aftermath of Independence. However, it
is equally important to know something
about the country’s economic past even
as you learn about its present state and
future prospects. So, let us first look at
the state of India’s economy prior to the
country’s independence and form an
idea of the various considerations that
shaped India’s  post-independence
development strategy.
The structure of India’s present-
day economy is not just of current
making; it has its roots steeped in
history, particularly in the period when
India was under British rule which
lasted for almost two centuries before
India finally won its independence on
15 August 1947. The sole purpose of
the British colonial rule in India was
to reduce the country to being a raw
material supplier for Great Britain’s
own rapidly expanding modern
industrial base. An understanding of
the exploitative nature of this
relationship is essential for any
assessment of the kind and level of
development which the Indian
economy has been able to attain over
the last seven and half decades. 1.2
1.2 LOW LEVEL OF ECONOMIC
DEVELOPMENT UNDER THE
COLONIAL RULE
India had an independent economy
before the advent of the British rule.
Though agriculture was the main
source of livelihood for most people,
yet, the country’s economy was
characterised by various kinds of
manufacturing activities. India was
particularly well known for its
handicraft industries in the fields of
cotton and silk textiles, metal and
precious stone works etc. These
products enjoyed a worldwide market
based on the reputation of the fine
quality of material used and the high
standards of craftsmanship seen in all
imports from India (See Box 1.1).
“India is the pivot of our Empire... If the Empire loses any other part of its
Dominion we can survive, but if we lose India, the sun of our Empire will have
set.”
Victor Alexander Vruce, the Viceroy of British India in 1894
Box 1.1: Textile Industry in Bengal
Muslin is a type of cotton textile which had its origin in Bengal, particularly,
places in and around Dhaka (spelled during the pre-independence period as
Dacca),  now the capital city of Bangladesh. ‘Daccai Muslin’ had gained worldwide
fame as an exquisite type of  cotton textile. The finest variety of muslin was
called malmal. 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.
Reprint 2025-26
Page 5


DEVELOPMENT POLICIES AND EXPERIENCE
 (1947-90)
UNIT
III
UNIT
I
Reprint 2025-26
The two chapters in this unit give us an overview
of the state of the Indian economy as it was at the
eve of independence till after four decades of
planned development, which was a path that India
chose. This meant that the Government of India
had to take a series of steps such as the
establishment of the Planning Commission and
announcement of five year plans. An overview of
the goals of five year plans and a critical appraisal
of the merits and limitations of planned development
has been covered in this unit.
Reprint 2025-26
1
 After studying this chapter, the learners will
• become familiar with the state of the Indian economy in 1947, the
year of India’s Independence
• understand the factors that led to the underdevelopment and
stagnation of the Indian economy.
INDIAN ECONOMY
ON THE
EVE OF INDEPENDENCE
Reprint 2025-26
4 INDIAN ECONOMIC DEVELOPMENT
1.1 INTRODUCTION
The primary objective of this book,
Indian Economic Development, is to
familiarise you with the basic features
of the Indian economy, and its
development, as it is today, in the
aftermath of Independence. However, it
is equally important to know something
about the country’s economic past even
as you learn about its present state and
future prospects. So, let us first look at
the state of India’s economy prior to the
country’s independence and form an
idea of the various considerations that
shaped India’s  post-independence
development strategy.
The structure of India’s present-
day economy is not just of current
making; it has its roots steeped in
history, particularly in the period when
India was under British rule which
lasted for almost two centuries before
India finally won its independence on
15 August 1947. The sole purpose of
the British colonial rule in India was
to reduce the country to being a raw
material supplier for Great Britain’s
own rapidly expanding modern
industrial base. An understanding of
the exploitative nature of this
relationship is essential for any
assessment of the kind and level of
development which the Indian
economy has been able to attain over
the last seven and half decades. 1.2
1.2 LOW LEVEL OF ECONOMIC
DEVELOPMENT UNDER THE
COLONIAL RULE
India had an independent economy
before the advent of the British rule.
Though agriculture was the main
source of livelihood for most people,
yet, the country’s economy was
characterised by various kinds of
manufacturing activities. India was
particularly well known for its
handicraft industries in the fields of
cotton and silk textiles, metal and
precious stone works etc. These
products enjoyed a worldwide market
based on the reputation of the fine
quality of material used and the high
standards of craftsmanship seen in all
imports from India (See Box 1.1).
“India is the pivot of our Empire... If the Empire loses any other part of its
Dominion we can survive, but if we lose India, the sun of our Empire will have
set.”
Victor Alexander Vruce, the Viceroy of British India in 1894
Box 1.1: Textile Industry in Bengal
Muslin is a type of cotton textile which had its origin in Bengal, particularly,
places in and around Dhaka (spelled during the pre-independence period as
Dacca),  now the capital city of Bangladesh. ‘Daccai Muslin’ had gained worldwide
fame as an exquisite type of  cotton textile. The finest variety of muslin was
called malmal. 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.
Reprint 2025-26
5 INDIAN ECONOMY ON THE EVE OF INDEPENDENCE
The economic policies pursued by
the colonial government in India were
concerned more with the protection
and promotion of the economic
interests of their home country than
with the development of the Indian
economy. Such policies brought about
a fundamental change in the structure
of the Indian economy — transforming
the country into supplier of raw
materials and consumer of finished
industrial products from Britain.
Obviously, the colonial govern-
ment never made any sincere
attempt to estimate India’s national
and per capita income. Some
individual attempts which were
made to measure such incomes
yielded conflicting and inconsistent
results. Among the notable estimators
— 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.
However, most studies did find that
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 meagre half
per cent growth in per capita output
per year.
1.3 AGRICULTURAL SECTOR
India’s economy under the British
colonial rule remained fundamentally
agrarian — about 85 per cent
of the country’s population lived
mostly in villages and derived
livelihood directly or indirectly from
agriculture (See Box 1.2). However,
despite being the occupation of such
a large population, the agricultural
Fig. 1.1 India’s agricultural stagnation
under the British colonial rule
Box 1.2: Agriculture During
Pre-British India
The French traveller, Bernier, described
seventeenth century Bengal in the
following way: “The knowledge I have
acquired of Bengal in two visits inclines
me to believe that it is richer than Egypt.
It exports, in abundance, cottons and
silks, rice, sugar and butter. It produces
amply — for its own consumption —
wheat, vegetables, grains, fowls, ducks
and geese. It has immense herds of pigs
and flocks of sheep and goats. Fish of
every kind it has in profusion. From
rajmahal to the sea is an endless
number of canals, cut in bygone ages
from the Ganges by immense labour for
navigation and irrigation.”
Ø Take note of the agricultural prosperity in our country in the seventeenth century. Contrast it
with agricultural stagnation around the time when the British left India, around 200 years later.
Reprint 2025-26