1. Indian Economy on the Eve of Independence

Introduction –

The primary objective of this book, Indian Economic Development, is to familiarize you with the basic features of the Indian economy, and its development, as it is today, in the aftermath of Independence. However, it is equally important to know something about the country’s economic past even as you learn about its present state and future prospects.

Low Level of Economic Development under the colonial Rule

• India had and independent economy before the advent of the British rule. Though agriculture was the main source of livelihood for most people, yet, the country’s economy was characterized by various kinds of manufacturing activities.
• India was particularly well known for its handicraft industries in the fields of cotton and silk textiles, metal and precious stone works etc.
• The economic policies pursued by the colonial government in India were concerned more with the protection and promotion of the economic interest 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 – transforming the country into supplier of raw materials and consumer of finished industrial products from Britain. Obviously, the colonial government never made any sincere attempt to estimate India’s national and per capita income.

Agricultural Sector

• India’s economy under the British colonial rule remained fundamentally agrarian – about 85 per cent of the country’s population lived mostly in villages and derived livelihood directly or indirectly from agriculture.
• Agricultural pro-ductivity become law though, in absolute terms, the sector experienced some growth due to the expansion of the aggregate area under cultivation. This stagnation in the agricultural sector was caused mainly because of the various systems of land settlement that were introduced by the colonial government. Particularly, under the Zamindari system which was implemented in the then Bengal Presidency comprising parts of India’s present-day eastern states, the profit accruing out of the agriculture sector went to the zamindars instead of the cultivators.
• Besides this, low levels of technology, lack of irrigation facilities and negligible use of fertilizers, all added up to aggravate the plight of the farmers and contributed to the dismal level of agricultural productivity. There was, of course, some evidence of a relatively higher yield of cash crops in certain areas of the country due to commercialization of agriculture.

Industrial Sector

• India could not develop a sound industrial base under the colonial rule. Even as the country’s world famous handicraft industries declined, no corresponding modern industrial base was allowed to come up to take pride of place so long enjoyed by the former.
• During the second half of the nineteenth century, modern industry began to take root in India but its progress remained very slow.
• There was hardly any capital goods industry to help promote further industrialization in India. Capital goods industry means industries which can produce machine tools which are, in turn, use for producing articles for current consumption.
• The growth rate of the new industrial sector and its contribution to the Gross Domestic Product (GDP) or Gross Value Added remained very small.

Foreign Trade – India become 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 woolen clothes and capital goods like light machinery produced in the factories of Britain. The most important characteristic of India’s 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 economy. Several essential commodities – food grains, clothes, kerosene etc. – were scarcely available in the domestic market.

Demographic Condition –

• Before 1921, India was in the first stage of demographic transition. The second stage of transition began after 1921. However, neither the total population of India nor the rate of population growth at this stage was very high. The various social development indicators were also not quite encouraging. The overall literacy level was less than 16 per cent. Out of this, the female literacy level was at a negligible low of about seven per cent.
• Public health facilities were either unavailable to large chunks of population or, when available, were highly inadequate.
• Consequently, water and air-borne deseases were rampant and took a huge toll on life. No wonder, the overall mortality rate was very high and in that, particularly, the infant mortality rate was quite alarming – about 218 per thousand in contrast to  the present infant mortality rate of 33 per thousand. Life expectancy was also very low – 32 years in contrast to the present 69 years.

Occupational Structure

• During the colonial period, the occupational structure of India, i.e. distribution of working persons across different industries and sectors, showed little sing of change. The agricultural sector accounted for the largest share of workforce, which usually remained at a high of 70-75 per cent while the manufacturing and the services sectors accounted for only 10 and 15-20 per cent respectively.
• Another striking aspect was the growing regional variation.
• Bombay and Bengal witnessed a decline in the dependence of the workforce on the agricultural sector with a commensurate increase in the manufacturing and the services sectors.

Infrastructure –

1. Under the colonial regime, basic infrastructure such as railways, ports, water transport, posts and telegraphs did develop. However, the real motive behind this development was not to provide basic amenities to the people but to subserve various colonial interests.
2. Roads constructed in India prior to the advent of the British rule were not fit for modern transport.
3. There always remained an acute shortage of all-weather roads to reach out to the rural areas during the rainy season.
4. The British introduced the railways in India in 1850 and it is considered as one of their most important contribution. The railways affected the structure of the India economy in two important ways. On the one hand it enabled people to undertake long distance travel and thereby break geographical and cultural barriers while, on the other hand, it fostered commercialization of Indian agriculture which adversely affected the self-sufficiency of the village economies in India.

Conclusion – By the time India won its independence, the impact of the two-century long British colonial rule was already showing on all aspects of the Indian showing on all aspects of the Indian economy. The agricultural sector was already saddled with surplus labour and extremely low productivity. The industrial sector was crying for modernization, diversification, capacity building and increased public investment. Foreign trade was oriented to feed the Industrial Revolution in Britain. Infrastructure facilities, including the famed railway network, needed Upgradation, expansion and public orientation.