SVPrecis_11th_Eco_Chapter -1_Indian Economy on the eve of Independence

Before independence, India was under the colonial rule of the British. Colonialism means a system of relations between two countries of which one is ruler and other is its colony. The ruler has control over the political and economic life of its colony. The sole purpose of British colonial rule was to reduce India into a feeder economy for Britains rapidly expanding industrial sector. State of Indian economy at the time of independence Agriculture sector 1. Low level of Productivity: productivity (output per hectare of land) was extremely low in agricultural sector. This lead to low level of output. 2. High degree of vulnerability: agriculture was dependent upon rainfall during the British rule. Good rainfall implied good output while poor rainfall implied poor output. British government never made an attempt to spread the means of irrigation (wells. Canals. Tractors etc) 3. Huge gap between owners of soil and landless workers: the owners were only interested in maximizing the output. For this, they exploit the workers to a large extent. Workers had to suffer even for their subsistence (fulfillment of basic needs- food, clothing and shelter) Factor that significantly contributed towards the backwardness and stagnation of Indian agriculture 1. Introduction of new land revenue system: Britishers introduced zamindari system of land revenue under this system (i) zamindars were considered as permanent owners of soil (ii) they were to pay a fixed sum to the Govt. as land revenue. The implication of this system was exploitation of workers to the maximum possible extent. 2. Commercialization of agriculture: farmers were forced to shift from the production of subsistence crops like rice and wheat (crops which are grown of self consumption) to production of commercial crops like indigo so as to use them as raw material for British industries. This had a very adverse effect on the farmers because now they have to purchase grains from the market for which they do not have money. Industrial Sector Britishers did not pay attention to handicrafts industries and no modern industrial base was allowed to come up. Their primary motive was a) to get raw material from India at cheap rate and thus to reduce India to a mere exporter of raw material to british industries b) to sell british manufactured goods in Indian market at higher prices. Decline of the handicrafts industries created large scale unemployment. Causes of decay of handicrafts industries

1. Discriminatory Tariff Policy: Britishers found India as the best source of raw material as well as the best market for their industrial product. Therefore, they allowed tariff free export of raw material from India and tariff free import of British industrial products into India but placed a heavy duty on the export of Indian handicraft products. 2. Competition from machine made products: machine made products were low cost products and they gave competition to handicrafts products in India. 3. Introduction of railways in India: British govt. introduced railways in India to facilitate transportation of British products across different parts of the country. As a result, the size of the market for low cost British products expanded while the market for high cost Indian products started shrinking. 4. Slow Growth of Modern Industry: During the second half of 19th century, modern industry started showing its presence but its progress remained very slow. Initially, this development was confused to setting up of cotton and jute textile mills. In the beginning of 20th century iron and steel industrial began coming up (Tata iron and steel company was founded in 1907). Industries in the field of paper, cement, sugar also came up.) There was no capital goods industry. These industries produces good like machines which are in turn used for producing articles for current consumption. The growth rate of industrial sector was very small. During the briitish rule, the role of public sector was limited to railways, power generation, and development of parts Foreign Trade India had occupied a very prominent place in foreign trade. It was well known exports of finished goods (silk textiles, iron goods, wooden goods). But the British rule in India converted India into exporter of raw material and importer of finished goods.

With the emergence of British role, export and imports of country (India) became the monopoly of British government more than 50% of India exports and imports were restricted to be between Britain and India. During the british rule, Indias exports exceeds the imports, resulting surplus balance of trade (x-m). But this surplus was on account of export of primary goods and not industrial goods. And also this surplus was not used for growth and development of the country, instead it was used to meet the administrative expenses of the British Govt. and to meet the expenses on war fought by the British Govt. thus, this export surplus resulted in drain of Indias wealth.

Demographic conditions The first census was conducted in 1881. The year 1921 is regarded as the Year of Great Divide. India was in the first stage of demographic transition till 1921. It means that there was high birth rate and high death rate till 1921. As a result, the rate of growth of population remained very slow and this was because of the following: a. Infant mortality rate (referring to death rate of children below the age of one year) was very high. b. Life expectancy (referring to average life of a person) was as low as 32 years, while at present it is about 63 years. c. Literacy rate (referring to those who could read and write) was nearly 16%. d. Poverty, malnutrition (insufficient feeding), epidemics (infectious disease prevalent over large area at same time) and poor health facilities. After 1921, India entered the second stage of demographic transition. It means that total population in India never declined, it showed a consistent rise. Occupational Structure It refers to distribution of working population across primary, secondary and tertiary sectors of the economy. As a result of decline of handicraft industries during british rule, the burden of population on agriculture increased. The growth of non. Agricultural sector was small and limited. There was unbalanced growth of Indian economy. Balanced growth means all sectors of economy (primary, secondary and tertiary) are developing equally. In case of India, secondary and tertiary sectors were not equally developed. Economist are of the view that 70 to 75 percent of Indias working population were engaged in agriculture while 10% in manufacturing sectors and 15 to 20 percent were engaged in service sector. During the British rule, there was regional variation in occupational structure. The state of Orissa, Rajasthan and Punjab showed increasing dependence on primary sector but states like Maharashtra and West Bengal showed increasing dependence on secondary and tertiary sector. Infrastructure It refers to elements of economic change (transport, communication, power etc) as well as elements of social change (like educational, health and housing facilities) which serve as a foundation for growth and development of a country.

Under the British rule, there was some infrastructural development in the areas of transport and communication. But the main motive of British rulers regarding this development was not to provide basic amenities to Indian people but to faster their colonial interest. Railways were developed to transport finished goods from Britain to the interiors of Indian. It also enabled people to undertake long distance travel and there by break geographical and cultural barrier. Roads were developed to facilitate transportation of raw material from different parts of the country to the parts. Main motives of British rulers behind the introduction of railways were:a. Expansion of the market for the finished goods imported from Britain b. Earning of profits by selling the finished goods in Indian market at higher price Positive impact of British rule in India a. Commercialization of agriculture b. Spread of Railways and Roadways c. Spread of Means of transport: - in case of drought, flood etc. food supplied could be rushed to affected areas. d. Transformation from barter system of exchange to monetary system of exchange. Conclusion: Indian economy was backward in every respect on the eve of independence. In agriculture sector, there was exploitation of labour. Handicrafts which enjoyed worldwide fame were destroyed. Industrialization was limited. Foreign trade was serving the colonial interest. Means of transport, communication, educational and health facilities were inadequate. Thus, it can be said that there were major social and economic challenges before the country on the eve of independence.