Chapter -1 : Indian Economy On The Eve of Independence
Colonial Rule and Economic Development
- India was supplying Raw Material to Britain
- Economic policies were protecting British Government and exploiting Indian Natural Resources.
- So Indian economy was characterized by supplier of Raw Material and Importer of finished goods from Britain.
- Majority of international business was with Britain.
- British Government never made an effort to find out National Income and other economic numbers.
- Dadabhai Naoroji, William Digby, Findlay Shirras, V.K.R.V Rao, and R C Desai carried out some estimation during colonial rule.
- 1900-1947 : Growth was around 2% per year, and ½ % increase of Per Capita output per year.
Agriculture Sector during British rule
- 85% of population was in village and deriving income directly or indirectly from agriculture. It is more of agrarian economy
- Though cultivation land size increased, the productivity was poor. The growth witnessed stagnation.
- This was due to the existence of Zamindari system. (Land Settlement)
- All the profit use to go to Zamindar’s and not to cultivators.
- Zamindar’s and colonial rulers were not taken any action to improve agriculture productivity.
- The main focus of Zamindar’s was to collect rent irrespective of production.
- Zamindar’s are tied up with Revenue settlement practice, where they have to declare revenue to colonial rulers else they were loosing the rights of Zamindari.
- Other reasons are – lack of irrigation facilities, negligible use of fertilisers, Investment, flood control, drainage, desalination of soil
- There was, of course, some evidence of a relatively higher yield of cash crops in certain areas of the country due to commercialisation of agriculture.
Industrial Sector during British rule
- Handicraft industry growth declined, no progress witnessed in modern industries.
- India turned into mere exporter of raw material and importer of finished goods.
- Britain witnessed high growth in industries.
- Decline in handicraft led to large scale unemployment.
- Demand for product was met by imported goods.
- During 1850 to 1900 – witnessed growth in cotton and jute textile mills. Mainly established in Maharashtra, Gujrat and Bengal.
- Subsequently Iron and Steel Industries started coming up – 1905, Tata Iron and steel Co (TISCO) was incorporated.
- Few industries in the field of sugar, cement, paper etc started coming up post second world war
- There were hardly and capital goods industry.
- Overall contribution from industries to GDP is very minimal.
- Limited areas of operation in public sector – Railways, Power generation, communication and port.
Foreign Trade during colonial rule
- India has been important trading nation since ancient time.
- Britain maintained control over India’s export and import.
- India use to export primary products like – raw silk, cotton, wool, sugar, indigo, jute etc and started importing silk and woolen cloths and capital goods.
- Half of the foreign trade was with Britain, rest was allowed with China, Ceylon(Srilanka), Persia (Iran)
- Opening of Suez canal, increased trade with Britain
- During colonial rule, it ended up with export surplus. But this surplus was not used to India’s development. It was used to Britain’s expenses on wars, Office maintenance in India, and the import of invisible items. All of which led to the drain of Indian wealth.
Demographic Condition under British rule
- Various details of population during the British rule first calculated through Census in 1881
- It revealed that unevenness in India’s population growth.
- Every 10 years Census was carried out
- Upto 1921 India was in first stage of Demographic Transition
- After 1921, India witnessed second stage of Demographic Transition.
- During this period total population and growth rate was not high.
- Overall literacy rate was less than 16% – Female literacy rate was less than 7%
- Public health facilities were not available to large chunk of public.
- Water and air-borne disease were rampant and took a huge toll on life.
- Overall mortality life rate was very high and infant mortality rate rate was quite high at 218 per 1000 (current infant mortality rate is 63 per thousand)
- Life expectancy was 44 years (compare to current 66 year)
- Extensive poverty prevailed during this period.
Occupational Structure under British rule
- During British rule, the occupational structure of India witnessed sign of change.
- 70-75% of population was working on Agriculture
- 10% in Industries
- 15-20% in Service sector
- Madras Presidency, Bombay and Bengal witnessed a decline in the dependence on agriculture sector
- Agriculture was predominant working sector in Punjab, Rajasthan and Orissa.
Infrastructure under British rule
- Basic Infrastructure such as Railways, Ports, Water Transport, Posts and Telegraph did develop.
- Real motive behind this development was to subserve the colonial interests.
- Roads constructed in India were not suitable for modern day transportation, they developed it to help the military mobility and transportation of material to nearest railway station or port.
- There was acute shortage of all season roads.
- British introduced railways in India in 1850
- Helped in long distance travel
- Commercialisation of agriculture
- India’s export expanded but, benefit is not transferred to Indians.
- Apart from roadways, Airways and waterways also witnessed some growth. Tata sons started Tata Airlines in 1932