Reliable Education Group

INDIAN ECONOMY ON THE EVE OF INDEPENDENCE

Economy of a country includes all production, distribution or economic activities that relates with people and determines the standard of living. On the eve of independence Indian economy was in a very bad shape due to the presence of British colonial rule. The Britishers generally framed policies ‘that favoured England. The only purpose of Britishers was to unjustly enrich themselves at the cost of India’s economic development. Thus, in 1947, when British transferred power back to India, we inherited a crippled economy.

Ø  FEATURES OF INDIAN ECONOMY ON THE EVE OF INDEPENDENCE:

1.       STAGNANT ECONOMY: On the eve of independence, Indian economy was completely a stagnant economy. A stagnant economy is the one which shows little or no growth in income. Between 1860-1945, growth rate of per capita income was as low as 0.5% per annum and between 1925 and 1950 it was 0.1%. On account of this stagnation, bulk of Indian population lived in poverty; standard of living of the people remained miserably low.

2.       BACKWARD ECONOMY: At that time Indian economy was totally backward. Backward economy is the one which per capita is very low. In 1947-48, per capita in Indian was just rupees 230.

3.       INDUSTRIAL BACKWARDNESS: There was a virtual lack of the basic and heavy industries in the country. Production of machines was almost negligible. Small-scale and cottage industries were almost ruined.

4.       AGRICULTURAL BACKWARDNESS: Nearly 72% of the country’s working population was engaged in agriculture but its contribution to the GDP was only 50%. Productivity was extremely low, per hectare output of wheat was only 660 kg and of rice just 710 kg.

5.       RAMPANT POVERTY: Bulk of the population was very poor. People were not getting two square meals a day. They lacked shelter clothing.

6.       HEAVY DEPENDENCE ON IMPORTS: The country had to depend on imports for machinery and equipment’s of production. Armed forces of the country also depended heavily on foreign import for most of the defence equipments

Ø  AGRICULTURE SECTOR ON THE EVE OF INDEPENDENCE:

1.       LOW LEVEL OF PRODUCTION & PRODUCTIVITY: Production refers to total output, while productivity refers to output per hectare of land. Both were found to be extremely low on the eve of independence.

2.       SMALL AND FRAGMENTED HOLDINGS: Landholdings were both small as well as fragmented. Accordingly, most landholdings were uneconomic: yielding low output at high cost.

3.       HIGH DEGREE OF UNCERTAINTY: Agriculture was vulnerable to climatic factors and mostly affected by erratic rainfall. Poor rainfall generally led to a low level of output and also to crop failures. No effort was made by British Government to provide permanent source of irrigation facilities for the farmers.

4.       LAND REVENUE SYSTEM UNDER THE BRITISH RAJ: The British govt. in India introduced a unique system of land revenue. It set up a triangular relationship among the govt., the owner of the soil and the tiller of the soil. This was popularly known as ZAMINDARI SYSTEM OF LAND REVENUE. Features of this system were as these:                                                                                                 (i) the zamindars were recognized as permanent owner of the soil.                                                 (ii) the zamindars were to pay a fixed sum to the govt. as land revenue.                                          (iii) the zamindars were free to extract as much from the tillers of the soil as they could.  IMPLICATIONS:                                                                                                                                            (i) It led to unlimited exploitation of the tillers by the zamindars.                                                        (ii) Tillers were reduced to the status of landless labourers.                                                                 (iii) As landless labourers, the tillers merely got subsistence wage (in kind).                                       (iv) Rates of land revenue were frequently raised by the zamindars which led to frequent eviction of the tillers of the soil.

5.       DOMINANCE OF SUBSISTENCE FARMING: Farming was taken as means of subsistence. It is that kind of farming in which the crops are produced to provide for the basic needs of the family. There is little surplus left for sale in the market. Implying a lack of commercial outlook, consequently backwardness prevailed and poverty dominated.

6.       FORCED COMMERCIALIZATION OF AGRICULTURE: It refers to a shift from cultivation for self-consumption to cultivation for the market. Farmers were forced to shift to commercial crops (indigo) from the conventional subsistence crops (rice & wheat). Indigo was required by the textile industry in Britain for dyeing of textile.                                                                                  The farmers were either lured or forced to accept advance payments for the cultivation of indigo. It exposed the subsistence farmers to uncertainties of the market.                                 While earlier they would grow grain for their family consumption, now they needed cash to buy it from market.

Ø  INDUSTRIAL SECTOR ON THE EVE OF INDEPENDENCE:  In the pre-British period, 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.
But the Britishers followed a policy of systematic de-industrialisation by creating circumstances conducive to the decay of handicraft industry and not taking any steps to promote modern industry and reduced India to a mere exporter of raw material and importer of finished goods.

1.Decay of Handicraft: The traditional handicraft industry in India enjoyed worldwide reputation, but the British misrule in India led to the decline of Indian handicraft industry. The Britishers adopted the following policies to systematically destroy the handicraft industry.                                                                                                                                    (i) Discriminatory Tariff Policy of the State: The Britishers followed a discriminatory tariff policy by allowing tariff free exports of raw material from India (to provide for the requirements of their industries in Britain) and tariff free import of British Industrial products (to promote British goods in India), but placed a heavy duty on the export of handicraft products. So, Indian handicraft products started losing their domestic as well as foreign markets.                                                                                                                                       (ii) Competition from Machine-made Products: Machine-made products from Britain were cheap and better in quality than the handicraft products. This competition forced many a handicrafts to shut down their business.                                                                     (iii) Introduction of Railways in India: The Britishers introduced Railways in India, to expand the market of its low priced industrial products. Consequently, the demand of high-priced handicraft products started to fall, thus leading to the downfall of handicraft industry.                                                                                                                                                   (Iv) New patterns of demand: Due to impact of British culture, anew class emerged in India which was keen to adopt the western lifestyle. This changed the pattern of demand in favour of British product, consequently Indian industry tended to finish.

2. SLOW GROWTH OF MODERN INDUSTRY: Under second half of 19th. Century, modern industry showed slow growth. This development was confined to the setting up of cotton and jute textile mills. Subsequently, the iron and steel industries began coming up in the beginning of the 20th century. In this context, the Tata Iron and Steel Company (TISCO) were incorporated in August, 1907 in India. It established its first plant in Jamshedpur [Bihar, at present Jharkhand]. But, these industries were the result of private endeavour. The state participation in the process of modem industrialisation was very limited, as is evident from the following points:                                                                  (i) Limited Growth of Public Sector Enterprises: The public sector enterprises such as railways, power, post and telegraph were confined to areas which would enlarge the size of market for British products in India.                                                                               (ii) Lopsided Industrial Structure: The industrial growth was lopsided, in the sense that consumer goods industry was not adequately supported by the capital goods industry.      (iii) Lack of Basic and Heavy Industries: No priority was given for the development of basic and heavy industries. Tata Iron and Steel Mills was the only basic industry in India.

Textile Industry in Bengal Muslin is a type of cotton textile which had its origin in Bengal, particularly, places in and around Dhaka (now the capital city of Bangladesh). Daccai Muslin had gained worldwide fame as an exquisite type of cotton textile. The finest variety of muslin was called malmal. Foreign travellers also used to refer to it as malmal shahi or malmal khas meaning that it was worn by or fit for, the royalty.

Ø  FOREIGN TRADE UNDER THE BRITISH RULE: India has been an important trading nation since ancient times. But when the restrictive policies of commodity production, trade and tariff were imposed by the colonial government, it adversely affected the structure, composition and volume of India’s foreign trade.                                                                             1. Exporter of Primary Products and Importer of Finished Goods: Under the colonial rule, India became an exporter of primary products such as raw silk, cotton, wool, sugar, indigo, jute, etc. and an importer of finished consumer goods like cotton, silk and woollen clothes and capital goods like light machinery produced in the factories of Britain.

2. Britain’s Monopoly Control: Britain maintained a monopoly control over India’s exports and imports. Due to this, 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 Suez Canal in 1869 further intensified British control over India’s foreign trade.                                                                                                                                       3. Drain of India’s Wealth: An important characteristic of foreign trade throughout the colonial period was the generation of a large export surplus. But this surplus came at a huge cost to the country’s several essential commodities like food grains, kerosene, were scarcely available in the domestic market. Also, this surplus was not used in and developmental activity of India. Rather, it was used to maintain the administrative set-up of the Britishers or bear the expenses of war taught by Britain. All of this, led to the drain of Indian wealth.

Ø  DEMOGRAPHIC PROFILE DURING THE BRITISH RAJ: Various details about the population of British India were first collected through a census in 1881. Before 1921, India was in the first stage of demographic transition. The second stage began after 1921. However neither the total population of India nor the rate of population growth at this stage was very high. Though suffering from certain limitations, it revealed the Unevenness in India’s population growth. Here we focus on the following parameters:

1.       Birth Rate and Death Rate: Both were very high –nearly 48 and 40 per thousand respectively. It shows massive poverty in the country.

2.       Infant Mortality Rate: It was very high. It was about 218 per thousand while at present it is 34 per thousand. High infant mortality rate shows poor heathcare associated with extreme poverty.

3.       Life Expectancy: Life expectancy (average life of person) was as low as 32 years while at present it is 68 years.

4.       Literacy Rate: Literacy rate was nearly 16%, reflecting social backwardness as a reflection of economic backwardness. Female literacy rate was still worse only 7%.

Ø  OCCUPATIONAL STRUCTURE ON THE EVE OF INDEPENDENCE: During the colonial period, the occupational structure of India exhibited its backwardness.

1.       Agriculture: The Indian economy under colonial rule became primarily agrarian. The workforce was diverted towards tea, indigo and coffee plantations. People left with no other option after the downfall of industrial sector either flocked to these plantations or were forced by the colonials to do so. Evidently, the agricultural sector accounted for the largest share of the workforce which was around 70-75%

2.       Industry: The manufacturing sector accounted for only 9%.Against it 32% in the USA, 42% in ENGLAND and 39% in JAPAN are engaged in this activity.

3.       Services: The service sector accounted for only 15-20%. But in other countries the percentage of people who were engaged in this sector was much higher than India.

Ø  INFRASTRUCTURE ON THE EVE OF INDEPENDENCE: Infrastructure comprises of such industries which help in the growth of other industries. Under the colonial period, basic infrastructure such as railways, port per transport, posts and telegraphs developed. However, the real motive behind this development was not to provide basic amenities to the people but to sub serve various colonial interests.

1.       Roads: Roads constructed before independence were not fit for modern transport. It was very difficult to reach rural areas during rainy season.
The roads were built only to serve the purpose of mobilising the army within India and transporting raw materials from the countryside to the nearest railway station or the port for exporting it.

2.       Railways: British rulers introduced railways in India in 1850 and it began its operation in 1853. It is considered as one of the important contribution of Britishers.
The railways affected the structure of the Indian economy in the following two ways
(i) It enabled people to undertake long distance travel and thereby break geographical and cultural barriers.
(ii) It fostered commercialisation of Indian agriculture which adversely affected the self-sufficiency of the village economies in India.
So, the social .benefits provided by the Railways was outweighed by the country’s huge economic loss.

3.        Water and Air Transport: The colonial rulers took measures for the development of water transport. The inland waterways, at times, also proved uneconomical as in the case of the coast canal on the Orissa coast. The main purpose behind their development was to serve Britain’s colonial interest. The colonial government also showed way to the air transport in 1932 by establishing Tata Airlines. Thus, in this way it inaugurated the aviation sector in India.

4.       Communication: Modern postal system started in India in 1837. The first telegraphy line was opened in 1857. The introduction of the expensive system of electric telegraph in India served the purpose of maintaining law and order.

Ø  SOME POSITIVE IMPACT OF BRITISH RULE IN INDIA: Certainly not, if the impact of the rule is studied with reference to motive of the British govt. in India. The motive was exploitation of Indian economy. However, the means to achieve the end yielded some positive side-effects. These are as under:

1.       Commercial Outlook Of The Farmers: forced commercialization of the agriculture under the british raj exposed the subsistence farmers to uncertainties of the market. But it also led to gradual change in outlook of the farmers.

2.       New Opportunities Of Employment: Spread of railways and roadways opened up new opportunities of economic and social growth.

3.       Control Of Famines: Rapid means of transport facilitated rapid movement of food grain to the famine-affected areas. Accordingly famines controlled.

4.       Efficient System Of Administration: The britisg govt. in india left a legacy of an efficient system of administration. This served as a ready reference for our politicians and planners.

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