Indian Economy on the Eve of Independence

Indian Economic Development on the Eve of Independence

Battle of Plassey

• British ruled India from June 23, 1757, to August 15, 1947.
• The Battle of Plassey involved Robert Clive.
• The primary goal of British colonial rule was to exploit India's resources for Britain's industrialization.

Types of Economy

• Colonial Rule involves a powerful country maintaining control over other countries to exploit resources for its own benefit.

Backward Economy

• Characterized by low living standards, poor health services, high death/birth rates, low per capita income, and dependence on agriculture for subsistence.

Developing Economy

• Characterized by a relatively low industrial base, reduced dependence on agriculture, rising per capita income, and transformation from agriculture to industrial/service sectors.
• Also referred to as a less developed economy.

Stagnant Economy

• Characterized by a slow or non-existent growth rate.

Vibrant Economy

• Undergoes dynamic changes with technology playing a significant role in production.
• Production is market-oriented and profit-driven.
• Businesses thrive, people have jobs, innovation occurs, trade is strong, and government supports growth.

Amputated Economy

• The British policy of divide and rule promoted discrimination based on religion, caste, language, and culture.

Semi-Feudal Economy

• The land settlement system created feudal relations.
• Landlords charged high tax rates and were cruel to cultivators.
• This included the Zamindari system.

Before British Rule

• India had a prosperous economy rich in food grains.

Prosperous Economy

• India was self-reliant and known as "The Golden Bird" (Sone ki Chideya).

Agrarian Economy

• 85% of the economy was based on agriculture.

Well-Known Handicraft Industry

• The Indian handicraft industry aided the economy's growth due to its variety and quality.

Textile Industry in Bengal

• Muslin, a fine cotton fabric originating in Bengal (now Bangladesh), was highly valued.
• The finest muslin, called malmal, was associated with royalty due to its quality to fit in a matchbox.

State of the Indian Economy in the Agricultural Sector

• Land settlement/Zamindari/Land revenue system was introduced by Lord Cornwallis in 1793.
• Zamindars collected taxes from farmers, giving a fixed amount to the British.

Commercialization of Agriculture

• The shift from growing food grains to cash crops like indigo, jute, and cotton enforced by the British.

Low Level of Productivity

• The main causes were outdated farming techniques, lack of irrigation, heavy taxation, and forced commercialization.

Scarcity of Investment

• It was a primary factor in economic stagnation.
• There was low investment in industries, agriculture, and infrastructure due to British policies, high taxes, neglect of industries, and lack of capital.

Infrastructure

• Unequal infrastructure, like railways, was built for British exploitation, not for India's growth.

Effects of these factors

• Decline in food production leading to famine, farmer exploitation/debt, dependence on British markets, growth in plantation economy, and weakening of the traditional economy.

Adverse Effects of Partition (1947)

• Agriculture production was further setback, with irrigated/fertile land going to Pakistan.
• Most of the jute-producing area became East Pakistan (now Bangladesh), causing the Indian jute industry to suffer from a lack of raw materials.

Industrial Sector

• Decline in the handicraft industry due to the Discriminatory Tariff Policy.
• This decline led to high unemployment and dependence on foreign goods,Lack of capital goods industries.
• Industrial sector contributed Low Contribution to GDP.
• Limited role of the public sector.

Discriminatory Tariff Policy

• High tariffs were imposed on Indian finished goods, making them more expensive than British machine-made goods.
• Export of raw materials to Britain had no tax, destroying the Indian handicraft industry.

Foreign Trade

• India was an exporter of primary products and an importer of finished goods.
• Monopoly control of India's foreign trade was due to the Suez Canal.
• 50% of total trade went to Britain.
• The drain of export surplus occurred during British rule due to, world war 2 import of invisible items and colonial staffs.

Demographic Condition

• India's demographic condition was very poor.
• 1921 was the "Year of Great Divide."
• India entered the second demographic transition after 1921, and the first official census was conducted in 1881.

High Birth/Death Rates

• Both were high, around 48 and 40 per thousand, respectively.

Literacy Rate

• Less than 16%, with the female literacy rate at 7%.

Low Life Expectancy

• Due to poor medical facilities, health conditions, and famines, life expectancy was about 32 years.

High Infant Mortality Rate

• It was 218 per thousand due to a lack of immunization.

Occupational Structure

• In 1951, it referred to the distribution of the working population across primary, secondary, and tertiary sectors.

Dependency on Agriculture

• Approximately 75% of the working population was engaged in agriculture.

Unbalanced Growth

• India had a predominance in the agriculture sector only, not balanced with all sectors of the economy.
• There was regional variation with some states declining in agriculture workforce and shifting to manufacturing/service sectors.

Infrastructure

• Basic systems/services needed for a country to function, including roads, airports, railways, energy, utilities, communication, education, healthcare, and social services.
• Main infrastructures developed by the British were railways and communication.

Railways

• Railways were introduced in 1850.
• The first train ran from Mumbai to Thane (33.8 km) in 57 minutes, 1853.

Communication

• Posts and telegraphs were the most popular means.
• Electric telegraph was used to maintain law and order.
• Postal services were used for public purposes.
• Railways helped break distance barriers, moved goods long distances, and expanded markets.

Positive Contributions of British Rule

• Self-sufficiency in food grain production due to the output of commercialization with agriculture.
• Better means of transportation led to growth.
• Shift to a monetary economy from barter.
• There was a check on famines
• Good transportation facilities supplied the affected areas.
• There was an effective administrative setup left which they left as a legacy.

All important data and events

• Before Colonial rule Agriculture sector dependency 85%
• Battle of Plassey (Robert Clive) 23 June,1757
• Zamindari system or Land revenue system or Permanent settlement system by lord Cornwallis in 1793
• Commercialisation of agriculture in 1813
• Introduction of Railways in India by the Britishers in 1850
• First Train run from Bombay to Thane 16, April,1853
• Starting of Made Suez Canal (By Egypt Government) in 1859
• Opening of Suez Canal (By Egypt Government) Connect Red sea and Mediterranean sea in 1869
• First official census (10 years) in 1881
• Setting up of TATA IRON AND STEEL COMPANY (TISCO) 1907
• Year of Great Divide (India entered in Second Demographic transition) in 1921
• V.K.R.V. Rao the economist whose Estimates on GDP)and per capita income during the British rule were considered very significant.
• Birth Race and Death Bate 48 and 40 per thousand
• Life Expectancy 32 Years
• Overall Literacy rate on the eve of independence is 16%
• Female Literacy rate is 7%
• Infant mortality rate was 218 per thousand
• Tata Airlines (Air India) founded in 1932 Mumbai
• First Railways Bridge linking Mumbai to Thane in 1854
• India's first Postal stamp was released in 1852 circular shape
• Bengal famine in 1943
• Population explosion according to 2nd stage of demographic transition theory from 1951 to 1981