Indian Economy 1947-1990 policies

• Unit I focuses on development policies and experiences from 1947-1990

• The unit will overview the Indian economy's state at independence and four decades of planned development.

• It will cover the government's steps, the establishment of the Planning Commission, and five-year plans.

• There will be a critical analysis of planned development's merits and limitations.

Indian Economy on the Eve of Independence

• It will familiarize with the Indian economy's state in 1947
• It aims to understand the factors that led to underdevelopment and stagnation.

Introduction

• The primary objective is to familiarize with Indian economy's basic features and development after independence.
• Understanding the country's economic past is vital for learning about its present and future.
• Pre-independence economic state and factors shaping post-independence development strategy is also important.
• India's present-day economy has roots in history, particularly during British rule.
• British colonial rule aimed to reduce India to a raw material supplier for Great Britain's industrial base.
• Understanding this exploitative relationship is essential for assessing India's development.

Low Level of Economic Development under the Colonial Rule

• India had an independent economy before British rule.
• Agriculture was the main livelihood but economy featured various manufacturing activities.
• India was known for handicraft industries like cotton and silk textiles, metal, and precious stone work.
• These products had a worldwide market due to fine quality and craftsmanship.

Textile Industry in Bengal

• Muslin, a cotton textile, originated in Bengal, especially around Dhaka.

• 'Daccai Muslin' gained worldwide fame as an exquisite cotton textile.

• The finest variety was called malmal, sometimes referred to as malmal shahi or malmal khas for royalty.

• British economic policies prioritized their home country's interests over India's development.

• Policies caused a fundamental change, turning India into a raw material supplier and consumer of finished British products.

• The colonial government did not attempt to estimate India's national and per capita income.

• Individual attempts to measure incomes yielded conflicting results.

• Estimators included Dadabhai Naoroji, William Digby, Findlay Shirras, V.K.R.V. Rao, and R.C. Desai; Rao's estimates were considered significant.

• Most studies found that during the first half of the twentieth century the country's growth of output was around two per cent coupled with a meagre half per cent growth in per capita output per year.

Agriculture During Pre-British India

• A French traveler described seventeenth-century Bengal as richer than Egypt.
• Bengal exported cottons, silks, rice, sugar, and butter.
• Produced ample wheat, vegetables, grains, fowls, ducks, and geese for local consumption.
• Possessed immense herds of pigs and flocks of sheep and goats, with profusion of fish.
• Abundant canals from rajmahal to the sea, created for navigation and irrigation.

Agricultural Sector

• India's economy remained fundamentally agrarian under British rule, with about 85% of the population living in villages.

• Despite a large population depending on it, agriculture experienced stagnation and deterioration.

• Agricultural productivity became low; the sector experienced some growth due to the expansion of cultivation.

• Stagnation was mainly due to land settlement systems introduced by the government.

• Under the zamindari system in the Bengal Presidency, profit went to zamindars instead of cultivators.

• Zamindars did little to improve agriculture, focusing on rent collection regardless of cultivators' economic condition, causing misery and social tension.

• Terms of revenue settlement also influenced zamindars; fixed dates for depositing revenue, leading to loss of rights.

• Low technology, lack of irrigation, and negligible fertilizer use worsened plight of farmers and productivity.

• Some evidence of relatively higher yields of cash crops in certain areas because of commercialisation of agriculture.

• Cash crop production didn't improve farmer conditions, benefiting British industries.

• Despite irrigation progress, agriculture lacked investment in terracing, flood control, drainage, and soil desalinization.

• Small number of farmers switched from food crops to commercial crops.

• Most tenants, small farmers, and sharecroppers lacked resources, technology, and incentives to invest.

Industrial Sector

• India did not developed a sound industrial base under colonial rule.
• Existing handicraft industries declined as no modern industrial base was allowed to emerge.
• Colonial government's policy of de-industrializing India was mainly for two reasons.
• The reasons was to reduce India to raw material exporter for Britain's modern industries.
• The other reason was to turn India into a market for the finished products of those industries.
• Decline of indigenous handicraft industries caused unemployment and created a new consumer demand of locally made goods.
• New opportunities were profitably met by cheap manufactured goods from Britain.
• Modern industry began in India during the second half of the nineteenth century but it was very slow.
• It was confined to cotton and jute textile mills, dominated by Indians and foreigners, respectively.
• Tata Iron and Steel Company (TISCO) began in the twentieth century in 1907.
• A few other industries in sugar, cement, paper etc. came up after Second World War.
• Hardly any capital goods industry promoted industrialisation in India.
• The establishment of a few manufacturing units was no substitute for the country's traditional handicrafts.
• The new industrial sector barely contributed to country's growth.
• Limited operation of the public sector, confined to railways, power generation, communications, ports, and some departments.

Foreign Trade

• India was an important trading nation.
• Colonial government's restrictive policies on commodity production, trade, and tariff adversely affected India's trade.
• India became an exporter of primary products and an importer of finished goods.
• Britain maintained a monopoly over India's exports and imports.
• More than half of India's foreign trade was restricted to Britain.
• The opening of the Suez Canal intensified British control over India's trade
• Colonial period India had a large export surplus.
• The surplus came at the cost of the country's economy.
• Essential commodities were scarcely available in the domestic market.
• This export surplus was used to pay expenses and war.
• All these factors led to the drain of Indian wealth.

Trade Through the Suez Canal

• Suez Canal is an artificial waterway running north to south across the Isthmus of Suez in Egypt.
• Connects Port Said on the Mediterranean Sea with the Gulf of Suez.
• Direct trade route for ships operating between European/American ports and ports in South Asia, East Africa and Oceania.
• Doing away the need to sail around Africa.
• Strategically and economically, it is one of the most important waterways in the world.
• 1869 opening reduced transportation cost and the Indian market easier to access.

Demographic Condition

• Population details of British India were first collected through a census in 1881.
• Census revealed the unevenness in India's population growth.
• Before 1921, India was in the first stage of demographic transition
• The second stage began after 1921.
• Population and growth rate were not very high.
• Social development indicators were not encouraging.
• Overall literacy was less than 16 per cent.
• Female literacy was at a negligible low of about seven per cent.
• Public health facilities were unavailable to large chunks of population and inadequate.
• The water- and air-borne diseases were rampant and took a huge toll on life.
• The overall mortality rate was very high, especially for children.
• Infant mortality rate was about 218 per thousand in contrast to present 33 per thousand.
• Life expectancy was also very low-32 years in contrast to the present 69 years.
• Extensive poverty that prevailed in India during the era contributed to the deteriorating profile of India's population.

Occupational Structure

• India witnessed little change in the occupational structure during the period.
• The agricultural sector accounted for largest share of workforce.
• The workforce share 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.
• Regional variations were another striking aspect.
• Parts of the then Madras Presidency, Bombay and Bengal, saw a decline in the workforce dependence on the agricultural sector with an increase in the areas for manufacturing.
• Share of workforce for agriculture increased in states such as Orissa, Rajasthan and Punjab.

Infrastructure

• Despite development of Railways, Ports, Water transport, and telegraphs; it was not to provide conveniences to people but to subserve various colonial interests.

• Pre-British roads in India were not fit for modern transport.

• The new roads primarily served for mobilisation.

• Acute shortage remained during rainy season.

• In 1850, the British introduced roadways in India which is considered as one of their contributions.

• Railways affected the structure of the Indian economy by enabling long distance travel and breaking geographical and cultural barriers and fostering commercialisation.

• But the commercialisation adversely affected self-sufficiency of the village economies.

• This volume of India exports got expanded but its benefits were rarely accrued the Indian people.

• Measures taken for inland trade and sea lanes were still not satisfactory.

• The inland waterways proved uneconomical as in the case of the Coast Canal on the Orissa.

• Electric telegraph systems served purpose of maintaining a good law and order.

• Cost to the government exchequer was high.

• Postal services remained inadequate.

Conclusion

• India got saddled with surplus labour, very low productivity.
• The Industrial Sector needed modernisatiion, diversification and capacity building.
• The foreign trade catered needs of British.
• Need to improve basic ammenities, infrastructure.
• Prevalence of poverty.
• Social and economic challenges were enormous.