Quick Revision Notes: Indian Economy on the Eve of Independence

Class 11 | Economics (MP Board)

1. Introduction

Objective: To understand the state of the Indian economy before independence (1947) and the structural changes brought by British colonial rule.
Core Motive of British Rule: To colonialize the Indian economy for the benefit of Britain (making India a supplier of raw materials and a consumer of finished British industrial goods).

Stagnation: The agricultural sector was completely stagnant and suffered from low productivity.
Causes of Backwardness:
- Land Settlement System (Zamindari System): Zamindars collected high rents (lagaan) but did nothing for agriculture's improvement.
- Commercialization of Agriculture: Farmers were forced to grow cash crops (indigo, cotton) instead of food crops, leading to food shortages.
- Lack of Technology: Absence of irrigation facilities, negligible use of fertilizers, and traditional tools.
- Small and Fragmented Landholdings.

Systematic De-industrialization: Britishers systematically destroyed India’s world-famous handicraft industries to promote British manufactured goods.
Adverse Effects:
- High unemployment.
- Reduced demand for Indian handicraft products in global and domestic markets.
Lack of Capital Goods Industries: There was a near-absence of capital goods industries (machines, factories making tools) that could promote further industrialization.
Limited Role of Public Sector: Confined only to railways, power generation, communication, and ports.

Exporter of Primary Products: India became an exporter of raw materials (raw silk, cotton, wool, sugar, indigo).
Importer of Finished Goods: India became an importer of finished consumer goods (cotton, silk, woolen clothes) from British industries.
Monopoly Control: More than half of India's foreign trade was restricted to Britain, with a small portion allowed to a few other countries like China, Ceylon (Sri Lanka), and Persia (Iran).
Drain of Indian Wealth: Export surplus was used to make payments for colonial war expenses and administrative expenses of the British government, rather than for Indian development.

High Birth Rate and Death Rate: Both were very high (around 40 and 48 per thousand respectively), indicating a backward and unhealthy society.
Low Life Expectancy: Extremely low at just 32 years.
High Infant Mortality Rate: Around 218 per thousand (deaths of children below one year of age).
Mass Illiteracy: The overall literacy rate was less than 16%, and the female literacy rate was a dismal 7%.
Widespread Poverty: Extreme poverty prevailed across the country.

Agriculture as Primary Source: Around 70-75% of the population was engaged in agriculture.
Industrial Sector: Only 10% of the workforce was engaged in the manufacturing/industrial sector.
Service Sector: Around 15-20% were in the service sector.
Regional Variation: Parts of the country (like Tamil Nadu, Andhra Pradesh, Kerala) saw a decline in agricultural dependence and a rise in manufacturing/services, while states like Odisha, Rajasthan, and Punjab saw an increase in agricultural dependence.

Positive Development (Mainly for Colonial Interests):
- Railways: Introduced in 1850, enabled commercialization of agriculture and long-distance travel, but caused heavy economic loss.
- Ports and Roads: Developed to transport raw materials to ports for export to Britain.
- Communication: Introduction of the expensive electric telegraph system to maintain law and order.
Lack of Basic Amenities: Roads were inadequate for rural areas, and modern health facilities were non-existent or inaccessible to the masses.

Year of Independence: 15th August 1947.
Year of First Official Census: 1881 (revealed unevenness in population growth).
Year of Demographic Transition ("Year of Great Divide"): 1921 (after which India's population growth became continuous and steady).
Drain of Wealth Theory: Propounded by Dadabhai Naoroji, highlighting how Britishers exploited Indian wealth.