Indian Economy on the eve of independence:
1. Low level of income and economic development during the British rule
(a) Before British rule India had following features
- Prosperous Economy: India was self reliant and prosperous.
- Agrarian Economy: Agriculture was main sources of livelihood and 2/3rd Population was engaged in it.
- Well known handicraft industries: India is known for its handicraft in the field of cotton and silk industries, metal and precious stone works etc are enjoyed widely due to its fine quality of material and high standards of craftsmanship.
(b) During British Rule: Economics policies pursued by colonial government in India with concern with more with protection and promotion of their own economic interest and brought fundamental change in the structure of economy.
(c) Low level of National income and per Capita Income: No attempt was made by British Government to estimate India’s national and per Capita income some attempts made by Dadabhai Naoroji, William Dig by, V.K.R. V. Rao and R.C. Desai. But they were conflicting and inconsistent results.
Studies reveal that countries growth of aggregate real output (G.D.P.) during the first half of 21th century was less than 2% and 0.5% growth in per capita income per year.
2. Agriculture Sector
- Under permanent settlement, Zamindars were recognized as owners of Land. The amount of revenue they had to pay was fixed. Zamindars were free to fix the rent. Under permanent settlement they lost their administrative and judicial function. And were performed by company now.
- Under The Ryotwari system direct settlement was made between government and ryot /cultivator. The revenue was fixed for a period of 20 to 40 years and on basis of quality of soil.
- Mahalwari system was introduced under William Bentinck. Under this basic unit of revenue settlement was Mahal or Village. The village land belonged jointly to the village community and they were responsible for payment of revenue.
- In order to provide British Industries with cheap raw materials, the Indian farmers were forced to grow cash crops (like Indigo and cotton)instead of food crops like rice and wheat. This lead to commercialization in India.
- Level of productivity (output per hectare of land was extremely low despite large areas under cultivation. Use of technology was negligible and rare use of fertilizers was main cause.
3. Industrial Sector
Discriminatory Trade Policy
- Britishers followed discriminatory tariff policy.
- It allowed free export of raw materials which were bought from India but placed heavy duty on export of Handicrafts.
- In this way Indian markets were full of manufactures goods from Britain which were low priced.
(a) Decay of Handicraft Industry (Domestic Products)
- Ignorance of Indian Handicraft Industry was main cause for its decline
- The British followed the policy of De -industrialization to ruin Indian handicraft industries
- Heavy duty was imposed on export of Indian Handicrafts resulting into gradual decay of Handicraft Industries.
(b) Competition from Machine made products
(Handicraft goods: high cost/more labour/ more time consuming
Machine made products: less cost/less labour /less time)
- The demand for handicraft products experienced a downward trend in domestic market as well.
- The goods produced mechanically in Britain were comparatively lower in price and superior quality than Indian handicrafts.
- This narrowed the market for Indian manmade products
(c) New pattern of demand
- New class started developing in India. People started adapting western culture.
- Due to change in taste and fashion demand of Indian products started reducing compared to British products.
- This way British products flourished in Indian markets.
(d) Negative impact of Railways
- Britishers introduced railways in India but for their own betterment.
- The main purpose was transporting Indian raw materials to their country via railways.
- This way introduction of railways was no where advantageous to India.
4. Foreign Trade
(a) Before colonial rule India has monopoly on export of Handicrafts and primary products (Raw silk, jute, cotton, etc.)
(b) Restrictive Trade Policies
- Adversely affected the structure, composition and volume of Trade.
- India became exporter of primary goods and importer of finished goods.
(c) Complete Control Of Britain
- Britain had a monopoly control over India’s exports and imports.
- More than half of India’s Foreign trade was restricted to Britain.
- Rest was allowed with countries like China Ceylon (Srilanka) and Persia (Iran).
(d) Opening Of Suez Canal
- Its an artificial sea level waterway in Egypt constructed by Suez canal company between 1859 and 1869.
- Its opening reduced the cost of transportation and mad access to Indian market easier.
- This way Britishers controlled cost of transportation.
(e) Economic Exploitation. (use of trade surplus in non developing activities)
- Large export surplus generated during colonial period.
- Supply of essential goods decreased in domestic market.
(f) Drain Of India’s Wealth
- Export surplus did not give any financial benefit to India.
- This amount was used to make payment for the expenses incurred by administration of government in Britain, expenses on war, etc.
5. Demographic Condition
First official census – 1881
The year of Great Divide – 1921
- India was in the first stage of demographic transition till 1921. The first stage implies that there was high birth rate and high death rate in pre 1921 India. Infant mortality rate was alarming. Since in this stage both birth rate and death rate were high, the growth of population remained slow.
- The main reason for the slow rate of growth of population during the British rule were poverty, malnutrition, famines, epidemics and poor health facilities.
- Low Life Expectancy, refers to average no of year for which people are expected to live. (48 years in contrast to present 68 years).
- After 1921, India entered the second stage of demographic transaction. The average literacy rate was 16 % and woman literacy rate was only 7%. Infant mortality rate was as high as 218 and life expectancy was as low as 32 years.
6. Occupational Structure
It refers to the distribution of working person across different industries and sectors.
(a) Pre dominance of Primary Occupation
- The agriculture sector accounted for the largest share of work force with approximately 75% and remaining workforce 25%in a service sector.
(b) Regional Variation
- The state of Tamilnadu, Andhra Pradesh, Kerala, Karnataka, Maharashtra & West Bengal witness a desire independent & workforce on the agricultural sector with a increase in the manufacturing in a service sector.
- However during the same time, there had been an increase in the share of work force in agriculture in state such as Orissa, Rajasthan & Punjab.
It refers to the basic physical and organizational structure and facilities required for the operation of an economy.
Introduced in 1850
- The positive effect of railways was cheap and rapid movement of people from one place to another.
- It increased commercialization of Indian Agriculture.
- Volume of export and import also expanded substantially.
(b) Colonial motives behind Railways
- To have effective control and administration over vast Indian territories.
- To earn more profits through foreign trade.
- To create opportunities for profitable investment of British funds in India.
- Primary motive was to mobilize Army.
- Carrying raw materials to the nearest port.
- Due to acute shortage of metal roads, rural people suffered during natural calamities.
(d) Water Transport/Road Transport
- Measures were taken by Britishers but development was far from satisfaction.
- Indian shipping companies faced severe competition for foreign companies.
- Main purpose was to serve colonial interest.
- Modern postal system started in 1837.
- Telecommunications services were introduced.
- First Telegraph started in 1857.