Chapter: Indian Economy on the Eve of Independence
Introduction
This chapter provides an overview of the state of India’s economy in 1947, the year of Independence.
The British colonial government pursued economic policies aimed at promoting Britain’s interests rather than India's development.
India’s economy, prior to the colonial rule, was well-known for its agricultural productivity and handicraft industries. However, British exploitation significantly affected the structure of India’s economy.
Low Level of Economic Development under the Colonial Rule
2.1 Stagnation and Decline
India’s economy suffered from stagnation and underdevelopment under British rule. Before the British arrived, India had a flourishing economy, but colonial policies focused on making India a supplier of raw materials for Britain.
Industrialization was neglected, and no significant efforts were made to modernize India’s manufacturing capabilities. India was transformed into a market for British goods while its own industries, especially handicrafts, declined.
2.2 Estimation of National Income
The colonial government never made serious attempts to measure India's national income or per capita income.
Some individual efforts were made by economists like Dadabhai Naoroji, V.K.R.V. Rao, and R.C. Desai. Their findings indicated that India's growth in aggregate output was less than 2% per year, and per capita income grew by only 0.5% annually.
The Agricultural Sector
3.1 Agrarian Economy
India was predominantly an agrarian society, with over 85% of the population depending on agriculture for their livelihood.
Despite this, agriculture suffered from low productivity due to various factors such as outdated methods, lack of investment, and poor infrastructure.
3.2 Impact of Colonial Policies on Agriculture
The colonial government introduced exploitative land revenue systems like the zamindari system, where the zamindars collected rent from the peasants and passed it on to the British.
The zamindars showed little interest in improving agricultural productivity, and the burden of high taxes led to the misery of farmers.
Other issues such as lack of technology, limited irrigation facilities, and the absence of fertilizers further deteriorated the condition of agriculture.
3.3 Commercialization of Agriculture
During British rule, there was a shift towards the cultivation of cash crops like cotton, indigo, and tea, which were used in British industries.
Although irrigation facilities improved slightly, the emphasis on cash crops deprived India of essential food grains, making the country vulnerable to famines and food shortages.
The Industrial Sector
4.1 Deindustrialization
India's once-thriving handicraft industry, particularly in cotton and silk textiles, metalwork, and precious stone crafts, was systematically destroyed by British policies.
The British sought to make India a supplier of raw materials for their industries and a market for finished goods from Britain. This led to massive unemployment in India as local industries could not compete with British imports.
4.2 Slow Industrial Growth
Modern industries such as cotton textile mills in Maharashtra and Gujarat, and jute mills in Bengal, began to emerge in the second half of the 19th century. However, their growth was slow.
The Tata Iron and Steel Company (TISCO) was founded in 1907, marking the beginning of India's steel industry. Other industries, like sugar and cement, also started in the early 20th century.
Despite these developments, India lacked a capital goods industry—industries that produce machinery and tools needed to manufacture goods.
Foreign Trade
5.1 British Control of Trade
British policies severely restricted India's foreign trade. India became an exporter of raw materials like cotton, silk, and jute, and an importer of finished goods like textiles and machinery from Britain.
The Suez Canal opened in 1869, reducing transportation costs and further tightening British control over India's trade. More than half of India's foreign trade was conducted with Britain, limiting India’s access to other global markets.
5.2 Export Surplus and Wealth Drain
India consistently ran an export surplus during the colonial period, but the surplus did not benefit the country. Instead, the revenue was used to pay for Britain's administrative expenses in India, wars, and invisible imports.
This led to a severe drain of wealth from India, which weakened the domestic economy and contributed to widespread poverty.
Demographic Condition
6.1 High Mortality and Low Life Expectancy
India's population was unevenly distributed, with high mortality rates and low life expectancy due to poor healthcare, frequent famines, and a lack of clean water.
Life expectancy was just 32 years in 1947, and the infant mortality rate was alarmingly high, at around 218 deaths per 1,000 live births.
The literacy rate was abysmally low, with less than 16% of the population being literate, and female literacy was only about 7%.
Occupational Structure
7.1 Predominance of Agriculture
India’s occupational structure showed that 70-75% of the workforce was engaged in agriculture, while manufacturing and services sectors employed only 10-15%.
There were regional variations, with states like Bengal, Maharashtra, and Tamil Nadu seeing more workforce diversification into industries, while other areas like Orissa and Punjab remained agriculturally dependent.
Infrastructure
8.1 Colonial Infrastructure Developments
The British introduced some infrastructure developments, such as railways, ports, and telegraphs, but these were primarily aimed at serving British economic interests.
Roads were built to connect agricultural areas to ports for raw material extraction. The railway network, introduced in 1850, helped commercialize agriculture and move goods to British markets.
8.2 Limited Social Benefits
While the introduction of railways did facilitate long-distance travel and cultural exchange, the primary benefits accrued to the colonial economy rather than to the Indian people.
Public infrastructure, like roads and waterways, was poorly maintained, and rural areas, especially during the rainy season, suffered from natural calamities like floods and famines due to inadequate infrastructure.
Conclusion
By the time of independence in 1947, India's economy was severely weakened by two centuries of colonial rule.
The country faced numerous challenges, including low agricultural productivity, lack of modern industries, poor infrastructure, and rampant poverty.
Post-independence India had to undertake major reforms to modernize its economy and build a strong foundation for future growth.
