INDIAN ECONOMY ON THE EVE OF INDEPENDENCE
Economy of a country includes all production, distribution or economic activities that relate with people and
determines the standard of living. On the eve of independence Indian economy was in very bad shape due to the
presence of British colonial rule. 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 since independence.
Low Level of Economic Development Under The Colonial Rule : 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. 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 that led
to transforming the country into a supplier of raw materials and consumer of finished industrial products
from Britain. The colonial govt., never made any sincere attempt to estimate India’s national and per capita income. The estimates given by Dr. V.K.R.V. Rao suggested that the growth rate of GDP was about 2% per annum while
the growth of per capita output was just 1/2(0.5) percent per annum.
Agricultural Sector : Agricultural productivity became very low and this stagnant agricultural sector was mainly due to systems of land settlement that were introduced by the British government. The zamindari system, the profit occurring out of the agricultural sector went to zamindars instead of the cultivators. This led to discouragement amongst the cultivators to produce less. To a very great extent, the terms of the revenue settlement were also responsible for the zamindars adopting such an attitude, dates for depositing specified sums of revenue were fixed, failing which the zamindars were to lose their rights. High dependence on monsoon and lack of proper inputs like low level of technology, negligible use of fertilizers etc. some evidence of a relatively higher yield of cash crops in certain areas of the country due to commercialization of agriculture (which was forced).
Industrial Sector : The policy of “Systematic de-industrializing” was two fold: To exploit India’s wealth of raw material and primary products. It was required to fulfill the emerging needs of industrial inputs in the wake of the industrial revolution in Britain. To exploit India as a potential market for the industrial products of Britain. Initially, the development was confined to the setting up of cotton ( western part) and jute textile mills(mainly in Bengal). Subsequently, the iron and steel industries began coming up in the beginning of the twentieth century. A few other industries in the fields of sugar, cement, paper etc. came up after the Second World War. The growth rate of the new industrial sector and its contribution to the Gross Domestic Product (GDP) remained very small. Significant drawback of the new industrial sector was: The very limited area of operation of the public sector. This sector remained confined only to railways, power generation, communications, ports, and some other departmental undertakings. Slow growth of modern industries. There was hardly any capital good industry to promote further industrialization in India.
Foreign Trade : India has been an important trading nation since ancient times. For all practical purposes, Britain maintained a monopoly control over India's exports and imports. As a result, more than half of India’s foreign trade was restricted to Britain while the rest was allowed with a few other countries like China, Ceylon (Sri Lanka) and Persia (Iran). The opening of the Suez Canal further intensified British control over India’s foreign trade. Several essential commodities- food grains, clothes, kerosene etc. were scarcely available in the domestic market.
Drain of wealth: Export surplus did not result in any flow of gold or silver into India. Rather, this was used to make payments for the expenses incurred by an office set up by the colonial government in Britain, expenses on war, again fought by the British government, and the import of invisible items, all of which led to the drain of wealth.
Demographic Condition: Demographic Condition details regarding the population of British India were primarily obtained through a census in 1881. Consequently, every ten years, such census procedures were conducted. Prior to 1921, India was in the initial step of demographic transformation. The second step of transformation started after 1921. Neither the cumulative population of India nor the rate of population increase at this step was high. The many social development signs were also not really encouraging. The comprehensive literacy level was less than 16%. Out of 16%, the female literacy level was at low of about 7%. Public health facilities were either unavailable to extensive parts of the population or when obtainable were highly lacking. The overall death rate was pretty high, and in that, unusually, the infant death rate was considerably frightening – about 218 per 1,000 in contradiction to the present infant death rate of 40 per 1,000. Life expectancy was quite low – 32 years in contradiction to the present 68 years. In such a poor demographic condition, water and air-borne diseases were widespread and took an enormous price on the lives of the people. Extensive poverty prevailed in India during the colonial period which contributed to the worsening profile of India's population of the time.
Occupational Structure: The occupational structure of a nation refers to the percentage of its workforce employed in various economic activities. During the colonial period, the occupational structure of India, i.e., the distribution of working people across various industries and sectors, explained small little change. The agricultural sector accounted for the highest share of the workforce, which normally prevailed at a high of 70 – 75 % while the manufacturing and the services sectors estimated for only 10 and 15-20 % respectively. Another striking aspect was the growing geographical variation. Parts of the then Madras Presidency, Bombay and Bengal observed a drop in the dependence of the workforce on the agricultural sector with a corresponding increase in the production and the services sectors. However, there was an increase in the share of the workforce in agriculture during the same time in states such as Rajasthan, Odisha and Punjab.
Infrastructure : Infrastructure refers to the elements of economic change as well as elements of social change which serve as a foundation for growth and development of a country. Development of infrastructure is a precondition to the economic and social development of a country. During the colonial period in India, the basic infrastructure such as water transport, railways, post & telegraph, and ports were developed, but to serve the colonial interest rather than serving the common people. Roads that are built primarily served the purpose of mobilizing the army within India and drawing raw materials from the countryside. Roads constructed were not fit for modern India, couldn’t connect rural areas, and shortage of well-constructed roads, especially in the rainy season, natural calamities and famines was the drawback. However, in the year 1850, the introduction of the railway was one of the most important contributions of the British. This initiative transformed the Indian economy in two ways. One it led people to travel a long distance and break the geographical barrier and Second, it commercialized Indian agriculture which adversely influenced the self-sufficiency of the village economies in India. With the development of railways and roads, the colonial regulation also took steps for improvement of the sea lanes and inland trade. The introduction of the expensive system of electric telegraph in India, similarly, served the purpose of maintaining law and order. The postal services, on the other hand, despite serving a useful public purpose, remained all through inadequate.
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