G)
lNDIAN ECONOMY ON TIIE EVI•, 01• INJ>EPENUEN('E
l l
Sequence of EYt'nts
lntl\H.~U~linn ol llw wih\,1}s in lndw h} the lirili~h
ll Op~nm~ nt the Sue, Canal
1850
1869
l
I
ll I \ arnn1~ tkl,Hls nhout the population of British India were first collected 1881
thrnugh ,1 census
l\ 1he raw lron and Steel Company Cl ISCO) was incorporated 1907
\' Second stage ol'dcmographic transition in India 1921
v, --
~ M ~ e.A\tl· °'
l ~1-
V\\ ~ t ~~ ~~ btw ui\)VV\~ ~~ lg~
The present structure ot'lndia's economy has its roots steeped in history, particularly in the
t period \\ hen lndia was under British rule which lasted for almost two centuries.
STATE OF THE INDIAN ECONOMY BEFORE THE ADVENT OF THE BRITISH
1. Prosperous and independent economy: India had an independent, self-reliance and
prosperous economy before the ~dvent of British rule.
2. Agrarian economy: Agriculture was the main source of livelihood for most people.
However, the country's economy was characterized by various kinds of manufacturing
activities.
3. W.ell established handicraft industries: India was particularly well known for its
handicraft industries in the field of cotton and silk textiles, metal and precious stone
works. These products enjoyed a worldwide market. '\~ 15\ ~ ¼
BASIC PURPOSE OF BRITISH RULE
• The s,gle purpose of the British colonial rule in India was to reduce the country to
being a raw mat~i;ial supplier for Britain's own rapidly expanding modern industrial
base.
• The economic policies pursued by the colonial government in India were concerned
more with protection and promotion of the economic interests of their home country
rather than with the development of Indian economy.
• Such policies brought about a fundamental change in the structure of the Indian
economy transforming the country into a supplier of raw material and a consumer of
finished industi'ial products from Britain.
LOW LEVEL OF ECONOMIC DEVELOPMENT UNDER BRITISH RULE
• The colonial government never made any sincere attempt to estimate India's national
and per capita income.
• Some notable estimators who made attempts to estimate India's national and per
capita income included Dadabhai Naoroji, William Digby, Findlay Shirras, VKRV
Rao and RC Desai.
~11.)~t ~ludit:~ t't'H'nkd tlmt l11diu\ µrcl\\lh of 11gp1cgu1c rc:nl
our rut duri11~ the firc;t h,tlf
•
1t prowlh in rcr capit,d
nfth~ .'0th l'\.'llllll ~ \\II ... k-...... th,111 rn,, \\itll II IIK(IVlt' 111111 p1..·rc..c1
\,ut put l'l'l ~ l':tr.
STATE OF A<;l~Jt'lJL l'llUAL Sl:C l'OR
was f'undamcn~all~
l. Agn11ia11 l'l'OIIO lll): lndin11 economy under the Brirish rule
Lion <lepcn denl directly or rndircctly
agrarian,, ith ah1.n1t 85°0 of the country's popula
.. lturc .
t)n a~ricu
occupation ~f such
1
Agrirulturnl ~tagnalion and low productivity: Despite being the
exper ienced Slagnation.
a large population. the agricultural sector under Dritish rule
The country was not .self'--suflicicnt in food grain production.
CAUSES OF STAGNATION IN AGRICULTURAL SECTOR
th
mainly because of e
I. Land Settlement S ·stcn : Agricultural stagnation was caused
Yarious systems of land settlement such as the zamindari system
colonial government. According to this system profits accruing
introduc~d by th e
ovt of agn~ultural
-
A
was only to ~ollect
sector went to the j_fillJiuda... The main interest of the zamindars
zamindars d~d .
rent regardless of the economic condition of the cultivators. The
{ ~~
nothing to improve the condition of agriculture. ( ~ o..0...-
2. Revenue Settlement: o a great extent the terms of the revenu
respons1 e for or the attitude of the zamindars. The zamindars
e_ system wer~ also .
had to deposit .
failing which th e
-
specified sums of money to the British government on fixed dates
zamindars were to lose their rights.
characterized by~
3. Low level of technology: Agriculture under British rule was
use of fertilizers. All
• level of technology, lack of irrigation facilities and neoli ible
t1v1ty.
this further contn ute to 1e 1sma eve of agricultural produc
lture means
4. Commercialisation of agriculture: commercialization of agricu
the market in place of food grains. Production of
production of cash crops for sale in
condition as these
cash crops did not help the farmers in improving their economic
cash crops were ultimately used by British industries.
in ten-acing, flood control.
5. Lack of investment: Indian agriculture lacked investment
r had the
drainage and desalinisation of soil. Most of the small farmers neithe
resources and technology nor the incentive to invest in agriculture.
STATE OF THE INDUSTRIAL SECTOR
h rule. The poor state of
India could not develop a sound industrial base under the Britis
ing points:
industrial sector during the British rule is highlighted in the follow
\ .
British systematically
l. De-industrialisation-Decline of handicraft indushies: The
no corresponding
destroyed the world famous handicraft industries of India and
e of the British
modern industrial base was allowed to come up. The primary motiv
rule behind the de industrialisation of India was twofold:
• First gl't 1.t\\ mntl'riul r- d'
mm 1n 111 nt chl.!up rates lo he U\cu hy the upcoming modern
I\)
• i • • . .
1111. ustncs m Bntam.
•. .
• s~~ond tn sd I fin is• lied 1,1od Uc·tso 1.13 fll1sh . . .
• mdustrn:s 111 the Ind ran market al h1'ghcr
f)f'll'CS.
A<h ~rsc h~iµact of decline of handicraft industries:. The decline of the indigenous
.
• e un~mploymcnl m India.
hand. icratl 111du~t1 ies ere ated massiv
Indian marke t whicli <l • . .
• was now •cprivcd of the supply of locally made goods now
became depend \.:ll, 1 •
on nnport ol manufactured goods from Britain.
2 y in
• ~:~k of capital goods industries: There was hardly any capital goods industr
half of 19th
,a to help promote industrialisation of the country. During the second
11
but its progress remain ed very
century modern industry began to take root in India
located in the .
Slov,,_ The cotton textile mills, mainly dominated by Indians, were
Western parts of the countiy.
and its
3. Low contiibution to GDP: The growth rate of the industrial sector
contribution to GDP remained very small.
industrial sector
4. Limited role of public sector: Another significant drawback of the
The sector was confined only to
was the limited area of operation of the public sector.
ome other de artmental
railways, power generation,communicatio
un ert mgs.
Moden1 Industries operating during Independence:
to take root
• During the second half of the nineteenth century, modern industry began
in India, but its progress remained very slow.
and jute textile
• Initially. this development was confined to the setting up of cotton
mills.
the western
The cotton textile mills, mainly dominated by lndians, were located in
@· parts ofth~ country, name!y, Maharashtra a~d Gujara~ , while t~ jute mi~do minated
by the foreigners were marnly concentrated m Bengal.
up in the beginning of the
• Subsequently, the Iron and Steel industries began coming•
twentieth century.('t)
) was incorporated in 1907.
• The Tata Iron and Steel Company (TISCO t, paper etc. came up after the
• A few other industries in the fields of sygac, cemen cJ
Second World War.
FOREfGN TRADE
tive policies of the
India was an important trading nation in ancient tin1es. However the restric
volume oflndia's
British government adversity affected the structure, composition and
foreign trade.
Under the British
1. Exporter of primary products and importer of finjsbed goods:
rule India became an exporter of primary products such as raw silk, cotton, wool,
G 4 5 L.)
Slll.!ar.i11diuo 1•uh.' , • I • c,ilk mid
"'. c- . ~ 1( lllll 11111111p111ll'I o 1 111m,1ll'< 1lllll~tlll ll'r µrn,d li~c cottw1
l,lpll,II g_nod~ hh· m11cli111l'~.
2 1
• _hitbh ~101~1\po~, mrr tmtll' 1111111111 11wintu111l'<I n monopoly cont ml nvu
India\
l:\J~mh and tmporh . ~lnn.· thun hall ol l11di.1\ lc11cign trndc \va-;
r<..\tri<:tul to Brituin
"h,k thl' rest ,,n., rtlhmcd ,, ith a Ii.'\\ other cou11tricc_ like Chinn. Sri Lanka and
l~crs.ia. rhc opening of the Sue, canal further intcn~if icu Briti<;h control over India'<,
tn~ign trnJc.
J. Drain of "callh : the mo~l impottanl characteristic of India's foreign trade during
surpluc;
B_ritish rule \\~S the generation of a l:.irge export surplus. rfowcvcr. this expert
ts
dtd not r~sult many ilo\\ of gold or silver into India. fl was used to make pay~e~
for thc ~,pcnscs incurred b) an ollicc set up b, the colonia l gavc:o ~cllt in Bn~am
at1ci als(~ for_c,venses on wars fought by the Urilish governmentJ fhis
resulted m th e
dram of Indian wealth. ~~fb ~
Trade through the Suez Canal
the 1st~mus of
• Suez Canal is an a11ificial waterway running :from north to south across
w 1th the
Suez in north-eastern Egypt. It connects Port Said on the Mediterranean Sea
Gulf of Suez, an arm of the Red Sea.
an °~
• Tbc canal provides a direct trade route for ships operating between Eur~pe •t
and Oceania by doing
American ports and ports located in South Asia, East Africa
away with the need to sail around Africa.
in the
• Strategically and economically, it is one of the most important waterways
world.
the Indian
• Its opening in 1869 reduced the cost of transportation and made access to
market
-I
)
-I
')
DEMOGRAPHIC CONDITION It{~~( ' L.-1-- ~\t•H£( I
")
raphic condition
The first official c~nsus in India was conducted in the year 1881. The demog l
ofJndia during the colonial rule can be described in the following points: ')
~ H;_f" . .I
Before 1921 India was in the first stage of
1. - ~ birth rate and death rate:
demographic transition. The second stage of transition began after l 921. Howev
er 1 (
stage was
neither the total population of India nor the rate of population growth at this
very high.
16% and
2. Low literacy rate: The overall literacy rate for the country was less than
female literacy rate was extremely low at about 7%.
when
3. Poor h~lthJacilities: Public health facilities were either unavailable or
available were highly inadequate. As a result water and airborne disea·ses were
rampant.
very high
4. High infant mortality rate: The overall mortality rate in the country was
nd in
and in particular the infant mortality rate was alarming at about 218 per thousa
contrast to the present infant mortality rate of~ per thousand._ .
l
~2
' l 0\\ 1m, l'\}ll'\'lntl\.'~ I 1k l'\fll'l'lllllq ill llll' COlllllr\ \,\ll"C 111,o \rry low Ill ,r ycarli in
\.'l)l1tl .,,t h' l'l\'"\.'l\t hR \ \.'.11, •
<, \\ hl,'!\lH'(\Url po, et1J l'\t~nsiH' poH~rt1 prcvnili11g India during the colon in I. I he
\)\~r.,11 ,1,md:1n1 of'" ing of pen pie in Ind in wnc; very low.
OCCllPATlQN \L Sl RttCTUHE
Occup~11ional Stn1ct11re refers to the distlibution of working persons across different
indu~tries and sectors.
Thl' main features of India's occupational structure during colonial rule is as under:
1. Predominance of Agriculture: The agricultural sector accounted for the largest share
of\.\orkforcc which remained at a high of70 to 75%. The manufacturing sector
accounted for only l 0% of the working population and the services sector 1~ to 20%.
2. Regional variation: another striking aspect of the occupational structure was the
gro\,ing regional variation.
• Some states such as Tamil Nadu, Andhra Pradesh, Kerala, Karnataka,
Maharashtra and West Beng~I witnessed a decline in the dependence of
workforce on agriculture and increase in dependence on the manufacturing •
and service sectors.
• However during the same time, there was an increase in the share of
workforce in agriculture in states such as Orissa, Rajasthan and Punjab.
fNFRASTRUCTURE
The state of infrastructure on the British rule was as follows:
1. Roads
• The roads were built during colonial period primarily to serve the colonial
interest of mobilising the army and transporting raw materials.
• There was a s~ortage of all-weather roads to reach out to the rural areas during
the rainy season. •
2. Railways
The British introduced railways in India in 1850. It is regarded as one of the most
important contributions of the British.
Reasons for development of Railways by the British
• to have effective control and adrninistration over the country.
• to earn profit through foreign trade by linking railways to major po11s.
Impact of development of Railways:
• Railways enabled people to undertake •
long distance travel. It broke
'----..;._-,---,--
geographical and cultural barriers and promoted nationaf integration.
• Development of Railways fostered commercia!jzatjq.o_oflndian agriculture
which adversely affocted the self-sufficiency of the village economy in India.
J
• I
ly
o/ India's cxpo,ts hut the hcncfits rare
• It k·d to nn i11c1c·1sc in tht• \Olumc - - -.
came to the Indian people,
• I
~- Communication
a with
'rc system ol'dcctric telegraph in fndi
• The British intwduccu the cxpc11si r,
the purpose or maintaining la\.\. and orde ate,
uscftd for the people. remained inadequ
• The postal sen ices. despite being
rind sea lanes
4, Development of the inland trade
s. However,
developing the inland trade and sea lane
British GoYernmcnt tool measures for also proved
tory. The inland waterways, at times,
these measures were far from satisfac
st Canal on the Orissa coast. ...r
uneconomical as in the case of the Coa it failed to
cost to the government exchequer, yet,
Though the canal was built at a huge
compete with the railways, which soo
n traversed the region running parallel to the canal, and .
had to be ultimately abandoned.
ia:
d by the colonial government in Ind
Impacts of economic policies pursue
British colonial
ce, the impact of the two-century long
By the time India won its independen
cts of the Indian economy-
rule ~ as already showing on all aspe
low
led with surplus labour and extremely
• The aoricultural sector was already sadd interests of
ion of agriculture, to serve the
produ~tivity. There was commercializat
Great Britain. •
cation. capacity building and·
indu strial sector lacked modernisation, diversifi
• The
public investment.
the Industrial Revolution in Britain.
• Foreign trade was oriented to feed
radation.
Infrastructu re facilities, includin g the famed railway network, needed upg
•
expansion and public orientation.
ion of
Prevale nce of ram pan t pov erty and unemployment required welfare orientat
•
public economic policy.
before the country were enormous.
The social and economic challenges _1
