Indian Economy at the Eve of Independence


India had an independent economy before the advent of British rule. Though agriculture was the main source of livelihood for most of the people. India was well known for its handicraft industries in the field of cotton textile mills, precious and semi- precious stones which gained a worldwide market because of high craftsmanship skill involved and good quality of raw material used.
laborers working under british
The economic policies pursued by the colonial government were more concerned with their own interest rather than the development of Indian economy. This brought a fundamental change making Indian producer of good quality raw material which is later exported to Britain and consumer of cheap quality finished products imported from Britain.
The colonial government never made any sincere attempt to estimate or enumerate the per capita income of the country. But there were some individuals who came forward to do so which includes- Dadabhai Naoroji, VKRV Rao, RS Desai. It was Rao whose estimates were considered more significant as they were more accurate and reliable. Some studies did find that the country's per capita income during the first half of the 20th century was less than 2% coupled with the meagre half percent growth in per capita output per year.

Agricultural Sector 

India's economy under the British rule remained agrarian as about 85% of the population lived mostly in villages. But the agricultural sector faced further stagnation because of the following reasons-
Agriculture1. Zamindari system
Zamindars were employed by the colonial government to collect taxes from the farmers regardless of their profit earning capacity. Zamindars were given fixed dates for depositing specified sums of money and if they fail, they will lose their rights.
2. Low productivity
Farmers were highly dependent on rain for water as there was low level of technology, lack of irrigation facilities and negligible use of fertilizer contributed to low productivity.
3. Commercialisation
Instead of producing food crops, farmers were forced to produce cash crops as they would further be exported to their home country. Hence the production of cash crops made the land unfertile.
4. Partition
Partition further gave a final blow to the economy as most of the fertile and went to Pakistan and Bangladesh. Further Indian were unemployment as most of the land went to adjoining countries.

Industrial sector

India could not emerge as a sound industry base under colonial rule. The twin motive policy adopted by British led to decline of the most famous handicraft industry.The following reasons led to decline of handicraft industry-
Cotton textile mills in gujarat
1.Indigenous handicraft industry not only created massive unemployment but also a new demand in Indian market which was met by the cheap industrial finished goods imported from Britain.
2.The development of industries was confined to setting up of cotton and jute textile mills.The cotton textile mills located in Maharashtra and Gujarat were dominated by Indians whereas jute mills in west Bengal were dominated by foreigners.Later in 1907,the Tata Iron and steel company(TISCO) came into existence. Other industries like sugar, cement, paper also came into existence during this time.
3.However, there was a lack of capital good industry. Capital good industry are industries which produce machines, tools etc which helps in further production of other goods.
4.The growth of new industrial sector and its contribution to the GDP remained very small.
5.New industrial sector gave limited role to public sector. This sector remained confined only to the railway, communications, ports etc

Foreign trade

Import and export
More than half of the foreign trade was restricted to only Britain while the rest was allowed with few other countries like China,Sri Lanka, Iran etc. The opening of Suez canal further intensified British control over India's foreign trade.Indian's could not export any thing as there were restrictive policies and imported duties which was not their when the same was done by the British.India became exporter of primary products like raw silk,wool sugar indigo jute etc and importer of finished goods like woollen cloths,light machinery etc.The Indian exports were used to meet the war expenses fought by the British government.

Demographic condition of India

Study of the structure of human population is known as demographic condition.
Various details of the population under the British rule was collected by the first census in 1881.India faced the first demographic transition in 1921.The following were the conditions-
Demographic condition of Indian population
1.During this time the birth rate was very high as well as the death rate was also high.
2.The overall literacy rate was less then 16%.the male literacy rate was 25% whereas female literacy rate was considerable low to 7%.
3.Public health facilities were unavailable to large chunks of people and if available were highly inadequate.
4. The infant mortality rate was quite alarming about 218 per thousand in contrast with the present 63 per thousand.The life expectancy of the people was very low to 44 years in contrast with the present 66 years.

Occupational structure

The distribution of working people across different industries is known as occupational structure.
1.There was a condition of predominance in agricultural sector.Largest share of 70-75% of the workforce was engaged in agriculture whereas manufacturing and the service sector accounted only 10 and 15-20% respectively.
Occupational structure india2.There was a very big regional variation. In the states like Tamil Nadu, Andhra Pradesh, Kerala, Karnataka ,Bombay and Bengal etc there was a decline in the dependence on agriculture and a increase in the workforce of manufacturing and service sector however there had been an increase in the share of workforce in agriculture during the same time in states like Orissa, Rajasthan and Punjab.


railway development
Infrastructure means services the support the other economic activities. Basic infrastructure such as railways ports water transport did develop but the main motive behind this was to serve the interest if British. Roads constructed were used to mobilize the army and drawing out raw material to the nearest railway station. British introduced the railways in India in 1850.the railways affected the structure of Indian economy in two important ways-
1.It enabled people to travel long distances.
2.It fostered commercialisation of Indian agriculture.
The inland waterways also developed. The introduction of the expensive system of electric telegraph in India served the purpose of maintaining law and order.


If we see from the resources point of view, the British looted our valuable resources.They did help to develop a strong infrastructure but these efforts were spiced with selfish motives.however the independent Indian government had to built a strong base through planning.

Indian Economy at the Eve of Independence Indian Economy at the Eve of Independence Reviewed by Saurabh Jadhav on April 29, 2017 Rating: 5
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