Chapterl Indian economy

on the eve of
independence
Colonial Rule: -It refers to the a system between 2countries under with one country
being the ruler and another being the colony and the ruling country determines the
economic policies of the colony.
In India, the colonial rule stays for around 200 years (1757-1947) under which the
Britishers exploited the Indian country and form the economicpolicies in India.
Stagnant economy:-Stagnant economy refers to the economy which is stuck or very low
at its path of development.

Features of Indian economy before colonial rule:

Agriculture was the main source of employment and livelihood for the people of our
country Around 85% economy derived their livelihood directly or indirectly from
agriculture
The farmer raised only those crops which he needed for his own
use and shared the
same with the village artisan who supplied him with simple
for his domestic consumption. manufacture that he needed
India enjoyed extensive trade both within the country and with
other countries of asia
and Europe.
" Indiawas famous for its handicraft industries all over the
globe
" Indian was an independent,self-reliant and
prosperous economy.
: Did you know :
Before colonization India was known as golden bird (popularly
known as 'Sone ki chidia"
It was a reference to the wealth and economic prosperity of India

Agricultural sector at the eve of independence

The characteristics of agricultural sector at the eve of independence was as follows
1. Zamindari system (land tenuresystem)
Under this system, ownership right of the land was transferred from farmers to zamindars.
i.e.
zamindars were the nominal head of the
farmers (in the form of lagaan) and land who collects the
The zamindar deposit it to the colonial revenue from
cultivator.
collects lagan from the farmers governnment.
regardless to the economic condition ofthe
The zamindar and the
the condition of colonial government took no
agriculture. initiative to improve or to strengthen
2.
Commerci
It refersto thealization of
Agriculture:
production
of crops for sale rather than for self
production of cash cropsconsumption
Farmers were given higher prices for
that they can use them as raw (like cotton, jute, indigo ) so
High level of prices forced the
material for British industries
3. farmers to produce cash crops rather than
Lowlevel productivity :
of food crops.
Productivityrefers to the output per hectare of land.
During colonial period the
Reasonsof which are
productivityof Indian agriculture was very
low
as follows:
Lack of irrigation facility
Low levelof technology
Negligible use offertilizes
4. High degree of uncertainty:
During colonial period, the main source of irrigation was rainfallwhich
of uncertainty. i.e.good rainfall implied good output results in high level
levelof output
whereas poor rainfall willresults in low

Industrialsector on the eve of independence

1. Decline of handicraft industries:
During colonial rule, the Britishers systematically destroyed the Indian handicraft industries
and forced the people to indulge into agriculture sector. The basic motive of british rule
behind thisde-industrialization was 2-fold
1) Toconvert India into asupplier of raw material for the industries of Britain
S
2) Todevelop India as amarket of British manufactured goods
IN
2. Discriminatorytariff policy:
The British Indian government followed
1)Free trade or unrestricted entry of British goods
2) Tariff free export of raw material from india to
Britain
3) Heavy duty was placed on the export of Indian
handicraft products, due to which the
Indian handicraft industry start losing its pride
3. Competition from machine made
andplace.
products:
The pride of Indian handicraft industries stated to
decline
from machine made products. As they are of low cost and when it faced the competition
easily available.
Indian craftsmen are far behind the speed of machines and
hence the only alternative
available forthem is to shut down their enterprises
Lack of capital goods industries:
Capital goods industry refers to those industries which are
tools.
capable of producing machine
During colonial period there was no capital goods industry worth
the name, moreover
Britishers don't pay any attention in promoting orsupporting these industries as they want
Indiato be asupplier of raw materials only.
5. Change in pattern of demand:
The impact of British culture started to arise in the public, as a results a
new class emerged
inIndia which was keen to adopt the western lifestyle. This changed the
pattern of demand
against theIndian products.
6. Negative effects of Railways:
Although introductionof Railways was one of the positive impact of colonial period but at
that time, Railways provesto be a terror for Indian industries.
Britishers use railways for their benefits only as a result, Size of market of low-cost British
product startedto expand whereas high-cost handmade products began toshrink.

Foreign trade
Since ancient period, India has been an important trading nation. India was well known
exporter of finished goods like silk, fine cotton, textiles, ivory work, handicrafts, precious
stones etc. But the discriminatory trade and tariff policies of Britishers brought it to an end
The condition of foreign trade is explained below
1. Exporter of primary products and importer of finished goods
During colonial rule, India became the exporter of raw materials (such as raw silk, cotton
indigo, jute etc) which are of low cost. And became the importer of finished goods (such s
capital goods, woolen clothes, silk clothes and other machine made products) which are of
high cost.
Due to this the economic condition of our economy started to decline.
2. Monopoly control on trade by britishers:
During colonial periodthe British government maintained a monopoly control over Indian
trade policies.
Majority of tradewas restricted to Britain(more than )while the rest was allowed with
some other countries only(such as china, Srilanka( Ceylon) and Iran( Persia)
Opening of Suez Canal in 1869 provides a direct trade route for ships operating between
Britain and India

Suez Canal ASIA

It is an artificial waterway running from north to south across the
Isthmus of Suez in north - eastern Egypt. Suer
Cana!
The opening of canal reduced the transportation cost as now EGYT
there is no need tosail around Africa. |AFRICA

Tariff free import andexport between India and Britain whereas heavy duty was placed
on the export of Indian handicraft products (which increase their price in the market)

3. Economic exploitation:
Due to the exporter of raw material, India has a huge export surplus. But the amount f
export surplus does not give any pushto Indian economyas, the amount of surplus is used
by the government in non developing activities, such as
To meet expenses of war fought by the British government
To make payment of office setup of colonialgovernment
To make trade of invisible items (services)
 DemographicCondition:
Demographic refers to the study of various aspects of population, such as age, sex,
education level, income level, marital status, birth rate,death rate etc.
1. High birth rate anddeath rate:
Birth rate refers to the number of children born perthousand inayear
Death rate refers to the number of people dying per thousand persons in ayear
During colonialperiod both birthrate and death rate are very high (nearly 48 and 40)
Which means India was at the First stage of demographic transition (before
1921)
Year 1921, is regarded as the year of Great divide as thereon India has
the secondstage started its entry into
ofdemographictransition
Stages of demographic transition
First stage - High Birth rate and high death rate
(stagnant
Secondstage - High Birth rate and low death rate (initial stage ofeconomy)
Third stage - lowBirth rate and low death rate development)
(developing developed economy)
or
2. Lowliteracy rate:
Literacy rate refers to the number of persons who is 7 or above, who has the
write and understand and one language. During colonial ability to read,
the economy was less than 16 percent. Moreover the
period the overall literacy rate of
female literacy rate was about7
percent
3. High Infant mortality rate:
Infant mortality rate refers to the number of infants dying
before the age of 1
thousand live births annually The IMR during colonialperiod was about 218 per year per
(before 1921)
thousand
4. Poor Health facilities :
Public health facilities were either unavailable or when available, were higher
inadequate.
Due to which,Water and air-borne diseases were widespread and took a huge toll on life.
5. Low life expectancy :
It refers the average number of years for which a person is expected to live. Due to poor health
facilities, the life expectancy during colonial rule was as low as 32 years, whereas as per the
latest WHO datapublished in 2018, the current overall life expectancy of India is 68,.8 vears
6. High level of poverty:
condition of extensive poverty,
During colonial period, India faced the per capital
consumption was very low. The overall standard of living of ommon people of India wae was
very low.
Occupational Structure
It refers tothe distribution of working persons across different industries andsectore
1. Predominance of Agriculture
As colonialgovernment aims at making India as an exporter of raw material, as aresuk
about 72.7% of working population wasengaged in agriculture
As the income generation rate of agriculture sector is very low, this predominance reflects
backwardness of the economy
Unbalanced growth:
Growth of an economy is said to be balanced when all the 3 sectors are equally developed
But in case of Indian economy, only primary sector is the main source of employment.
whereas secondary and tertiary sector were in their infant stage of growth.
Infrastructure
It refers tothe basic physical and organizational structure and facilities (Buildings, roads,
power supplies etc) needed for theoperation of aneconomy.
The state of infrastructure was very poor during colonial period, although some ero
were taken by the British government to improve the condition of infrastructure in the
economy (railways, ports, post and telegrams, roads etc) so that it can serve econon
benefits to them.
The condition of infrastructure was explained
here:
1. Railways :
One of the biggest contributions of colonial rule was the introduction of railwaysin Indiain
1850. It helps to remove geographical and cultural barriers in the Althoughthe
economy. butitalso
benefits of railways was mostly restricted to ing colonial perio
helps in developing the Indian Britishers during
economy post colonial period.
2. Roads:
offunds
The construction of roads during (due to scarcity
colonial
The roads that were built, primarily rule was very limited 'andshiftin
served the interests ofimobilizingthe army and
of raw materials so that they can be transported to Britain via ports.
3. Air and water transport :
The colonial government took various measures for developing the ports and air transport.
But the development was far from satisfactory measure of development
4. Communication:
During colonial period, Posts and telegraphs were the most popular means of
communication. The system ofelectric telegraph was introduced at ahigh cost to serve the
purpose of maintaining law andorder.
Despite serving a useful public purpose, the postal service remained all through inadequate

Positive contributions of British rule

As every coin has 2sides, similarly the colonial rule had some leads some positive impacts
on our economy which are as follows
1. Introduction of railways -
The first and the most efficient contribution was the introduction of railways in India.
Britishers introduced railways so that they can transport their products and the raw
materials easily from one place to another but in post colonial period railways turned out to
bethe key factor for the economy
2. Commercialization of agriculture:
Under pre- colonialperiod, farmers grow crops just to sustain themselves and other people
of the village. But forced commercialization of agriculture under colonial rule brings nev
opportunities for farmers in the market
3. Monetary system of exchange:
Barter system of exchange was no longer effective in the economy. Britishers brings a new
system of exchange popularly known as monetary system of exchange (Introduction of
money)
4. Effective system of administration:
The colonial government in India left a legacy of an efficient system of administration, which
serve to be areadymade reference for our economic and political planners
:: Did you know :
"The first official census of India was conducted in 1881
"1921, is the year of great divide, as the first stage of demographic transition has ended
and India has entered into itssecond stage of demographic transition