Indian Economic Development Class XII Textbook PDF

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2020

Central Board of Secondary Education

T.R. Jain, Dr. V.K. Ohri, and S.A. Jain

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Indian Economy Economic Development Economics Textbook CBSE Class 12

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This textbook, published by VK Global Publications, covers Indian economic development since independence. It includes topics like five-year plans, agriculture, industry, and foreign trade. The book also details economic reforms and current challenges facing the Indian economy, suitable for class 12 students.

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Indian Economic Development T.R. Jain Dr. V.K. Ohri Former Principal Associate Professor(Retd.) S.A. Jain College Shyam Lal College Ambala City (Delhi University),...

Indian Economic Development T.R. Jain Dr. V.K. Ohri Former Principal Associate Professor(Retd.) S.A. Jain College Shyam Lal College Ambala City (Delhi University), Delhi Class XII Global Publications Pvt. ltd. Printing History: Edition: 2020-21 Syllabus Covered: Central Board of Secondary Education, Delhi Medium: ENGLISH (Hindi medium is also available) Price: Three Hundred Sixty Rupees ( 360/-) ISBN: 978-93-89452-94-5 © Copyright Reserved by the Publishers All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without written permission from the publishers. Published By: VK Global Publications Pvt. Ltd. Regd. Office: 4323/3, Ansari Road, Darya Ganj, New Delhi-110002 Ph: 91-11-23250105, 23250106 Fax: 91-11-23250141 Corporate Office: 15/1, Main Mathura Road, Faridabad (NCR) Haryana-121003 Phone: 0129-7117719-48 lines, Fax: 0129-2250322 Email: [email protected] www.vkpublications.com Printed At: Rave Scans Pvt. Ltd. TrademarkAcknowledgements: All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks oftheir respective owners. VK Global Publications Pvt. Ltd. is not associated with any product or vendor mentioned in this book. Every effort has been made to avoid errors or omissions in this publication. In spite of this, some errors might have crept in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. It is notified that neither the publishers nor the author or seller will be responsible for any damage or loss of action to anyone, of any kind, in any manner, therefrom. For binding mistakes, misprints or for missing pages, etc. the publisher's liability is limited to replacement within one month of purchase by similar edition. All expenses in this connection are to be home by the purchaser. Contents Indian Economic Development 1. Indian Economy on the Eve of Independence..............3 2. Five Year Plans in India: Goals and Achievements..............................31 3. Features, Problems and Policies of Agriculture............59 4. Strategy of Industrial Growth (1947 -1990)...............83 5. India's Foreign Trade.................................99 6. Economic Reforms Since 1991 or New Economic Policy................................117 7. Poverty............................................145 8. Human Capital Formation in India....................171 9. Rural Development..................................195 10. Employment and Unemployment......................221 11. Infrastructure.......................................259 12. Environment and Sustainable Development.............289 13. Development Experience of India, Pakistan and China-A Comparative Study........................315 Project Work CBSE Sample Question Paper, 2020 (Solved) Syllabus Central Board of Secondary Education, Delhi Economics Class-XII Paper One 3 Hours Theory: 80 Marks Project: 20 Marks Units Periods Marks Part-A: Introductory Macroeconomics 1. National Income and Related Aggregates 28 10 2. Money and Banking 15 06 3. Determination of Income and Employment 27 12 4. Government Budget and the Economy 15 06 5. Balance of Payments 15 06 100 40 Part-B: Indian Economic Development 6. Development Experience (1947-90) and Economic Reforms since 1991 28 12 7. Current Challenges facing Indian Economy 60 22 8. Development Experience oflndia­ A Comparison with Neighbours 12 06 100 40 Part-C: Project Work 20 20 PART-A: INTRODUCTORY MACROECONOMICS Unit-1: National Income and Related Aggregates (28 Periods) What is Macroeconomics? Basic concepts in macroeconomics: consumption goods, capital goods, final goods, intermediate goods; stocks and flows; gross investment and depreciation. Circular flow of income (two sector model); Methods of calculating National Income-Value Added or Product method, Expenditure method, Income method. Aggregates related to National Income: Gross National Product (GNP), Net National Product (NNP), Gross and Net Domestic Product (GDP and NDP)-at market price, at factor cost; Real and Nominal GDP. GDP and Welfare. Unit-2: Money and Banking (15 Periods) Money-meaning and supply of money-Currency held by the public and net demand deposits held by commercial banks. Money creation by the commercial banking system. Central bank and its functions (example of the Reserve Bank of India): Bank of issue, Government Bank, Banker's Bank, Control of Credit through Bank Rate, CRR, SLR, Repo Rate and Reverse Repo Rate, Open Market Operations, Margin requirement. Unit-3: Determination oflncome and Employment (27 Periods) Aggregate demand and its components. Propensity to consume and propensity to save (average and marginal). Short-run equilibrium output; investment multiplier and its mechanism. Meaning of full employment and involuntary unemployment. Problems of excess demand and deficient demand; measures to correct them-changes in government spending, taxes and money supply. Unit-4: Government Budget and the Economy (15 Periods) Government budget-meaning, objectives and components. Classification of receipts-revenue receipts and capital receipts; classification of expenditure-revenue expenditure and capital expenditure. Measures of government deficit-revenue deficit, fiscal deficit, primary deficit-their meaning. Unit-5: Balance of Payments (15 Periods) Balance of payments account-meaning and components; balance of payments deficit-meaning. Foreign exchange rate-meaning of fixed and flexible rates and managed floating. Determination of exchange rate in a free market. PART-B: INDIAN ECONOMIC DEVELOPMENT Unit-6: Development Experience (1947-90) and Economic Reforms since 1991 (28 Periods) A brief introduction of the state oflndian economy on the eve of independence. Common goals of Five Year Plans. Main features, problems and policies of agriculture (institutional aspects and new agricultural strategy, etc.), industry (industrial licensing, etc.) and foreign trade. Economic Reforms since 1991: Features and appraisals of liberalisation, globalisation and privatisation (LPG policy); Concepts of demonetization and GST. Unit-7: Current Challenges facing Indian Economy (60 Periods) Poverty-absolute and relative; Main programmes for poverty alleviation: A critical assessment. Rural Development: Key issues-credit and marketing-role of cooperatives; agricultural diversification; alternative farming-organic farming. Human Capital Formation: How people become resource; Role of human capital in economic development; Growth ofEducation Sector in India. Employment: Formal and informal growth; problems and policies. Infrastructure: Meaning and Types: Case Studies: Energy and Health: Problems and Policies-A critical assessment. Sustainable Economic Development: Meaning, Effects of Economic Development on Resources and Environment, including global warming. Unit-8: Development Experience oflndia­ A Comparison with Neighbours (12 Periods) India and Pakistan India and China Issues: growth, population, sectoral development and other Human Development Indicators. Design of Question Paper Central Board of Secondary Education, Delhi Economics Class XII Theory: 80Marks Duration: 3 Hours Project: 20Marks s. Typology of Objective Short Short Long Marks No. Questions Type/MCQ Answer I Answer II Answer I Mark 3Marks 4Marks 6Marks 1. Remembering: Exhibit memory of previously learned material by recalling 5 1 2 1 22 facts, terms, basic concepts, and answers. 2. Understanding: Demonstrate understanding of facts and ideas by organizing, comparing, 5 1 2 1 22 translating, interpreting, giving descriptions, and stating main ideas. 3. Applying: Solve problems to new situations by applying acquired 5 1 1 1 18 knowledge, facts, techniques and rules in a different way. 4. Analysing and Evaluating: Examine and break information into parts by identifying motives or causes. Make inferences and find evidence to support generalizations. Present and defend opinions by making judgments about 5 1 1 1 18 information, validity of ideas, or quality of work based on a set of criteria. Creating: Compile information together in a different way by combining elements in a new pattern or proposing alternative solutions. Total 20xl=20 4 X 3 = 12 6 X 4= 24 4x 6= 24 80 (34) Note: There will be Internal Choices in questions of I mark, 3 marks, 4 marks and 6 marks in both sections (A & B). In all, total 8 internal choices. / CHAPTER: 1 INDIAN ECONOMY ON THE EVE OF INDEPENDENCE Features of Indian Economy on the Eve of Independence Agricultural Sector on the Eve of Independence T ::::al Exploitation of the Indian Economy Under the British Rule Industrial Sector on the Eve of Independence Foreign Trade Under the British Rule Demographic Profile During the British Rule Occupational Structure on the Eve of Independence Infrastructure on the Eve of Independence I. COLONIAL EXPLOITATION OFTHE INDIAN ECONOMY UNDER THE BRITISH RULE Indian economy under the British rule was subjected to colonial exploitation. It implied a targeted exploitation of all sectors of the economy by the British Government. This is how it happened: (1) Colonial Exploitation of Agricultural Sector: Agriculture was exploited through zamindari system ofland revenue. Exploitation in Agriculture under the British Rule 3 Following observations highlight how this system led to exploitation of the Indian agriculture: Zamindari System of Zamindars were declared as owners of the soil. They were to Land Revenue pay a fixed sum to the government by way of land revenue, and A system of land revenue were free to extract as much as they wished (or as much as they that worked through middlemen called could) from the tillers of the soil (farmers). zamindars; an intermediary between the colonial The tillers of the soil (the actual cultivators) got bare minimum government and the peasants. for survival. They were left with no surplus for investment in agriculture. The zamindars, on the other hand, spent their revenue income on the luxuries of life. Little or no investment was made for the development of agriculture. (2) Colonial Exploitation of Industrial Sector: Prior to the British rule, industrial sector in India was well known for its handicrafts. Indian handicrafts (work produced by hand labour) enjoyed a world-wide reputation for their variety and quality. But these were destroyed by the British government in two ways: Foreign demand for the Indian handicrafts was destroyed by way of heavy duty on their exports. Domestic demand for the Indian handicrafts was destroyed by way of duty-free import of the British goods in the Indian markets. (3) Colonial Exploitation of International Trade: India's international trade was exploited through discriminatory tariff (a tax on imports) policy. It implied: + Duty-free export of Indian raw material to fulfil the industrial needs in Britain. + Duty-free import of British goods to expand demand for the British goods in the Indian markets. It was owing to discriminatory tariff policy that India became importer of finished goods from Britain, and exporter of raw material to Britain. Briefly, owing to its colonial exploitation, the Indian economy became both stagnant as well as backward. 4 Indian Economic Development 2. FEATURES OF INDIAN ECONOMY ON THE EVE OF INDEPENDENCE On the eve of independence, Indian economy had the following characteristics: (I) Stagnant Economy: On the eve of independence, Indian economy was completely a stagnant economy. A stagnant economy is the one which shows little or no growth in income. Between 1860-1925, growth rate of per capita income was as low as 0.5 per cent per annum and between 1925 and 1950 it was 0.1 per cent per annum. On account of this stagnation, bulk of Indian population lived in poverty. Standard of living of the people remained miserably low. Epidemics and Famines were a recurring phenomenon. (2) Backward Economy: Indian economy was a backward economy on the eve of independence. Backward economy is the one in which per capita income is very low. In 1947-48, per capita income in India was just 230. The bulk of the population was very poor, without sufficient food, clothing and shelter. Unemployment was rampant. (3) Agricultural Backwardness: It is highlighted by the following facts: + Nearly 72 per cent of the country's working population was engaged in agriculture. But, its contribution to GDP was only 50 per cent. + Productivity was extremely low. Thus, per hectare output of wheat was only 660 kilograms, and of rice just 665 kilograms. + Foodgrain production was barely enough for subsistence. In 1947-48, it was recorded to be just 527 lakh tonnes. (4) Industrial Backwardness: Here, following facts are of underlined significance: + There was a virtual lack of the basic and heavy industries in the country. + Production of machines was almost negligible. + Small-scale and cottage industries were almost ruined. + For the bulk of its capital-goods requirement, the Indian industry was dependent upon imports from Britain. Indian Economy on the Eve of Independence 5 (5) Rampant Poverty: Bulk of the population was very poor. People were not getting two square meals a day. They lacked shelter and clothing. This was largely owing to widespread unemployment (caused by the destruction of handicraft industries). (6) Poor Infrastructure: Infrastructural development (including means of communication and transport, generation of power/ energy) was extremely low. In 1948, power generation capacity was merely 2,100 MW, length of railway lines was 53,596 km, pucca roads had a coverage of 155 thousand km only. (7) Heavy Dependence on imports: The country had to depend on imports for machinery and other equipments of production. Armed forces of the country also depended heavily on foreign imports for most of the defence equipments. Besides, several consumer goods like sewing machines, medicines, kerosene oil, bicycles, etc. used to be imported from abroad. (8) Limited Urbanisation: At the time of independence, bulk of the population of India lived in villages. In 1948, only 14 per cent of population lived in urban areas while 86 per cent lived in rural areas. Rural population lacked opportunities outside agriculture. This compounded their poverty. (9) Semi-Feudal Economy: On the eve of independence, Indian economy was neither wholly feudal nor a capitalist economy. It was a mixed economy or a semi-feudal economy. Such an economy had the mixture of feudalistic and capitalist modes of production. Feudalistic mode of production leads to low productivity. Low productivity leads to backwardness. (10) Colonial Economy: Indian economy was a colony of British government. It implied exploitation of the Indian economy for the benefit of the British economy. Following observations highlight how Indian economy suffered at the hands of the British rulers: British government curbed domestic industry by imposing heavy taxes. This forced the Indians to buy the British goods. Indian economy was used as a source of raw material for the British industries. Exports of raw material were almost duty­free. Thus, natural resources in India were drained for the growth of the British industry. Atrocities were committed on the Indian artisans so as to force them to close their cottage industries. This led to destruction of the Indian handicrafts. 6 Indian Economic Development 3. AGRICULTURAL SECTOR ON THE EVE OF INDEPENDENCE On the eve of independence, Indian agricultural sector revealed the Notable Economists who Estimated India's National following characteristics: and Per Capita Income (I) Low Production and Productivity: Production refers to total Notable Economists who estimated India's output, while productivity refers to output per hectare of land. Both national and per capita (production as well as productivity) were found to be extremely low income were: Dadabhai Naoroji, William Digby, on the eve of independence. If arose on account of lack of means as Findlay Shirras, V.K.R.V. well as incentive on part of the cultivator (the peasants). Rao and R.C. Desai. Most of them find that Table 1 shows production and productivity levels in 1947 for wheat during the first-half of and rice, compared with their levels in 2018-19. the twentieth century, growth rate of national Table 1. Production and Productivity of Wheat and Rice- income and per capita A Comparison between the Levels in 1947 and 2018-19 income were less than 2 per cent and 0.5 per Productivity Production cent respectively. Crop (kg per hectare) (in lakh tonnes) 1947 2018-19 1947 2018-19 1. Wheat 660 3.408 64 991 2. Rice 665 2,665 220 1,156 [Source: (i) D. Bhattacharya: Economic History of India, Economic Survey 2018-19) Table 1 shows that productivity of wheat was nearly 5.2 times lower in 1947 compared with its level in 2018-19. Productivity of rice was nearly 4 times lower in 1947 compared with its level in 2018-19. Likewise, level of output of wheat was nearly 15.5 times lower, and that of rice was nearly 5.3 times lower in 1947 compared with their levels in 2018-19. (2) High Degree of Uncertainty: Agriculture showed a high degree of Owners of the Soil vs. Tillers of the Soil uncertainty (in terms of farm output). Because, it was excessively Owners of the soil were dependent upon rainfall. Good rainfall implied good output, while the zamindars and tillers of the soil were peasants and poor rainfall implied poor output. No effort was ever made under labourers who worked on the British rule to develop permanent means of irrigation (including the farms of zamindars. wells and canals). (3) Dominance of Subsistence Farming: Farming was taken mostly as a means of subsistence. Subsistence farming is a form of farming in which the crops are produced to provide for the basic needs of the family. There is little surplus left for sale in the market. Implying a lack of commercial outlook. Accordingly, backwardness prevailed and poverty dominated. Indian Economy on the Eve of Independence 7 (4) Gulf between Owners ofthe Soil and Tillers of the Soil: Agriculture, during the British Raj was characterised by a gulf between 'owners of the soil' on the one hand and 'tillers of the soil' on the other. While the owners shared the output, they seldom (hardly) shared the cost of production. They were merely interested in maximising their rental income (in terms of share of output). The tillers of the soil were merely given enough for subsistence. Indebtedness of the Tillers of the Soil and Conspicuous Consumption of the Owners of the Soil 0 During the British rule, while tillers of the soil confronted absolute poverty and accepted indebtedness as their way of life, the owners of the soil indulged in conspicuous consumption. 0 The tillers of the soil viewed agriculture merely as a source of subsistence. The owners of the soil viewed it as a hereditary source of income without investment. (5) Small and Fragmented Holdings: Landholdings were both small as well as fragmented. [Fragmented holdings mean a piece here and a piece there]. Accordingly, most landholdings were uneconomic: yielding low output at high cost. (6) Land Revenue System under the British Raj: The British government in India introduced a unique system of land revenue. It set up a triangular relationship among the government, the owner of the soil and the tiller of the soil. This was popularly known as zamindari system of Land Revenue. The distinct features of this system were as these: Partition of the Country (i) The zamindars were recognised as permanent owners of the and its Impact soil. The partition of the country had a negative (ii) The zamindars were to pay a fixed sum to the government as impact on Indian agriculture. land revenue. India got 82 per cent of (iii) The zamindars were free to extract as much from the tillers of population and 65 per cent of food grain area. the soil as they could, Rich food producing The implications of the land revenue system were alarming for the areas of West Punjab and Sindh went to farmers and the farming. Most importantly: Pakistan. + It led to unlimited exploitation of the tillers of the soil by the This aggravated the food crisis in the country. zamindars. + Rates of land revenue were frequently raised by the zamindars which led to frequent eviction of the tillers of the soil. + Tillers were reduced to the status of landless labourers. 8 Indian Economic Development As landless labourers, the tillers merely got subsistence wage (in kind). Backwardness of tillers (as landless labourers) meant that they had no means and little interest in improving agriculture. The zamindars, on the other hand, led a lavish lifestyle and spent all their revenue income on luxuries of life. Improvement of agriculture was totally neglected. (7) Forced Commercialisation of Agriculture: Commercialisation of Famines in India During the British Rule agriculture refers to a shift from cultivation for self-consumption to Famines refers to a cultivation for the market. Following are some notable points in this severe shortage of food context: (as through crop failure) resulting in violent Mention need to be made of cash crops such as cotton, jute, hunger and starvation. sugarcane which had a high demand in the market were increasingly Throughout the period of British rule, most cultivated. Indians always lived on Farmers were forced to shift to commercial crops (indigo, in the verge of starvation. From 1760 till 1943, particular) from the conventional subsistence crops (like rice India was hit by terrible and wheat). Reason: Indigo was required by the textile industry famines on a regular basis. in Britain for dyeing/bleaching of the textile. The most significant The farmers were either lured or forced to accept advance amongst those was the great famine of payments for the cultivation of indigo. It exposed the subsistence Bengal of 1769-70, which farmers to uncertainties of the market. claimed a large toll of lives. While earlier they would grow grain for their family More than 85 million consumption, now they needed cash to buy it from the market. people died owing to repeated famines. But they would seldom have cash owing to their mounting In contrast, there indebtedness. Consequence: Perpetual indebtedness of the have been no famine farmers and perpetual stagnation of farming. related deaths since Briefly, on the eve of independence, Indian agriculture was both backward as well as stagnant (non-vibrant). Backward of agriculture is explained in terms of the following factors: (i) Low production and low productivity, (ii) High degree of uncertainty, owing to huge dependence on rainfall. (iii) Dominance of subsistence farming, and (iv) Small and fragmented holdings. Stagnation of agriculture is explained in terms of the following factors: (i) Gulf between the owners of the soil and the tillers of the soil, (ii) Land Revenue System under the British Raj, and (iii) Forced commercialisation of agriculture. Indian Economy on the Eve of Independence 9 Pre-British Period Agriculture 0 Backward, stagnant and non-vibrant agriculture during the British Raj sharply contrasted with the pre-British period agriculture. 0 Prior to the British Raj in India, rural India was described as a system of self-contained village communities. These village communities included farmers and the functionaries. 0 The farmers were engaged in crop farming or Prosperous Agriculture even without cattle farming while the functionaries would Mechanisation (Pre-British Period) render essential services like that of blacksmiths, goldsmiths, washermen and shoe-makers. 0 There were no intermediaries (like zamindars) between the state and the farmers; the farmers would pay land revenue directly to the king. 0 Prosperity and stability were the key characteristics of life in rural India. Thus, the French traveller, Bernier, described Bengal in 17th century as "richer than Egypt" producing amply for self- consumption and exporting in abundance. 4. INDUSTRIAL SECTOR ON THE EVE OF INDEPENDENCE Systematic de-industrialisation is the term that describes the status of industrial sector during the British rule. It implied two things: (i) Decay of world famous traditional handicraft industry owing to discriminatory policies of the British government, and (ii) Bleak growth of modern industry owing to lack of investment opportunities. Decay of Handicrafts Prior to the British rule, handicraft in India enjoyed the worldwide reputation of excellence and quality. But, the British Raj contributed to their decay. It was owing to discriminatory economic and political policies pursued by the British government. Following points may be noted in this regard: 10 Indian Economic Development ( 1) Discriminatory Tariff Policy of the State: The British rule in India coincided with industrial revolution in Britain. The British found India as the best source of raw material as well as the best market for their industrial products. Accordingly, a discriminatory tariff policy was pursued. It allowed: (i) tariff-free export of raw material from India, and (ii) tariff-free import of British industrial products into India. But, at the same time, heavy duty was placed on the export of Indian handicraft products which reduced their competitiveness in the international market. As a consequence, while the British products started gaining the Indian markets, the Indian handicraft products started losing their domestic as well as foreign market. Decay of handicrafts was the end-result. (2) Disappearance of Princely Courts: Prior to the British rule, nawabs, rajas, princes and emperors ruled different parts of the country. They used to patronise the handicrafts because of which the Indian handicraft industry had acquired international reputation. The beginning of British rule implied the end of princely courts. Consequently, the handicrafts started decaying. (3) Competition from Machine-made Products: Machine-made products from Britain were low cost products and gave a stiff competition to the handicraft products in India. Also, machine­ made products out-excelled Indian handicraft products in precision and quality. Competition forced the Indian craftsmen to shut-down their enterprises. (4) New Patterns of Demand: Owing to the impact of British culture, a new class emerged in India which was keen to adopt the western lifestyle. This changed the pattern of demand against the Indian products and in favour of the British products. In the process, the -----------.,,,....-------... Indian industry started losing domestic market, and ultimately perished. (5) Introduction of Railways in India: With the introduction of railways, size of the market for the low-cost British products tended to expand while it started shrinking for the high-cost Indian products. This hastened/quickened the process of decay of the Indian handicrafts. Fi rst Tra in ru n from Bombay (Mumbai) to Thane (1 8 53) Indian Economy on the Eve of Independence 11 Briefly, the British government converted the Indian economy into a colonial market for the British industrial goods. Implying, exploitation of the Indian market as: (i) a source of raw material (for the British industry) and (ii) a destination of demand for the British products. In the process, the handicraft industry in India was finally eliminated. Bleak (Notional) Growth of Modern Industry Two-fold motive behind Under the 'British Raj', modern industry saw only a bleak growth. It was the Systematic only in second half of the 19th century that the modern industry showed De-industrialisation during the British Rule its emergence. in India Three observations need to be noted in this regard: (i) To exploit India's wealth of raw material and (i) Some industries were established by the private entrepreneurs. primary products (like cotton and jute). It These included: iron and steel (Tata Iron & Steel Company was was required to fulfil founded in 1907), sugar, cement and paper industries. the emerging needs of industrial inputs in These were established in the wake of worldwide scarcity of the wake of industrial revolution in Britain. industrial good because of World Wars I and IL (ii) To exploit India as a (ii) The state participation in the process of modern industrialisation potential market for the industrial products of was limited. It was confined to such strategic areas (like railways Britain. and means of communication) which helped expansion of the The twin motive resulted in twin consequence: Indian market for the British products. (a) destruction of (iii) There was no capital goods industry worth the name. Capital goods handicrafts in India. (b) impetus to the process industry produces goods like machines and industrial plants which of industrialisation in are used for further industrialisation. In the absence of this industry, Britain. industrialisation in India remained lopsided. Briefly, industrial sector on the eve of independence revealed four core characteristics, pointing to its backwardness and limited growth: (i) Handicraft industry was systematically destroyed by the British government. It was largely owing to the discriminatory tariff policy of the British government. (ii) Modern industry showed a bleak expansion. It was by and large restricted to the expansion of railways. It helped expansion of the Indian market for the British products. (iii) Capital goods industry (which is the core element of industrial growth) was almost non-existent. (iv) While the traditional Indian industry (handicrafts) were decaying, modern industry remained in an infant stage. This again pointed to the backwardness of the Indian economy with little or no evidence of dynamic change. 12 Indian Economic Development 5. FOREIGN TRA DE UNDER THE BRITISH RU LE India had acquired eminence in the area of foreign trade, since ancient Suez Canal and Access to times. The Romans used to call India, "the sink of world's bullion". But Indian Ma rkets Opening of Suez Canal the British rule in India brought an end to it. India was a well-known in 1 869 significantly exporter of finished goods (such as fine cotton, silk, textiles, iron goods, reduced the cost of transportation of goods wooden goods, ivory work and precious stones). But the British converted between Britain and India into a net exporter of raw material and importer of finished goods. India. It was all due to discriminatory policy of trade and tariff pursued by the Because, this canal served as a direct route British government. for the ships operating between India and State of lndia' s foreign trade at the time of independence can be described Britain avoiding the in terms of the following observations: African continent. A significant reduction in (1) Net Exporter of Primary Products and Importer of Finished transport cost promoted Goods: Owing to colonial exploitation of the Indian economy, monopoly control of India's foreign trade by India became net exporter of raw materials and primary products the British government. (like raw silk, cotton, wool, jute, indigo, sugar, etc.). On the other hand, it became net importer of finished goods produced by the British industry. Our imports included cotton, silk and woollen clothes, besides several types of capital goods produced in England. Composition of exports and imports reflected utter backwardness of the Indian economy. (2) Monopoly Control of India's Foreign Trade: During the British rule, exports and imports of the country came under monopoly control of the British government. In this context, two observations are of critical significance: More than 50 per cent of India's foreign trade was directed towards Great Britain. While exports of primary products (raw material) from India supplied inputs to the British industry, imports of finished goods from Britain provided a huge market to the British industry. 0 Colonial policy of the British government resulted in a monopoly control of India's foreign trade. 0 Exports and imports were largely restricted to be between India and Britain. c,J India's exports provided raw material to the British industry, while India's imports provided a huge market for the British industry These are typical characteristics of a backward economy Indian Economy on the Eve of Independence 13 Drain of India's Wealth (3) Surplus Trade but only to Benefit the British: Surprisingly, during Huge administrative the British regime, our exports exceeded our imports. It implied a expenses were incurred by the British surplus of balance of trade. But, note these points carefully: government to manage their colonial rule in This surplus was owing largely to the export of primary India. goods (not the industrial goods) which is a sign of economic Also, huge expenses were incurred by the backwardness. British Government to The trade surplus was not used for growth and development of fight wars in pursuit of their policy of the country. Instead, it was used to meet: imperialism. (i) administrative expenses of the British government in All these expenses were borne by the Indian India, and Exchequer. (ii) expenses of wars fought by the British government. This implied a drain of India's wealth. Administrative and war expenses led to a huge drain of wealth from India. It compounded the backwardness of the Indian economy. I ':J Surplus generated as balance of trade was only spent to meet administrative and war expenses by the British government in India. D These expenses led to a huge drain of wealth as it was not used for investment ':J Consequently, poverty and backwardness were elevated. 6. DEMOGRAPHIC PROFILE DURING THE BRITISH RU LE Demographic conditions during the British rule exhibited all features of a stagnant and backward economy. Here, we focus on the following parameters: (1) Birth Rate and Death Rate: Both birth rate (BR) and death rate (DR) were very high-nearly 48 and 40 per thousand respectively. High BR and High DR suggest a state of massive poverty in the country, (2) Infant Mortality Rate: Infant mortality rate (death rate of children below the age of one year per 1000 live births) was very high. It was about 218 per thousand, while at present, it is 32 per thousand. High infant mortality is a sign of poor healthcare associated with extreme poverty, (3) Life Expectancy: Life expectancy (average life of a person) was as low as 32 years, while presently it is 69.4 years, Low life expectancy reflects lack of healthcare facilities, lack of awareness as well as lack of means to avail them. 14 Indian Economic Development D High Mortality Rate and Low Life Expectancy are important social indicators of backwardness and poverty of the masses. D During the British rule, frequent famines and recurring epidemics were the prime causes behind a high mortality rate. D While famines occurred largely due to droughts, epidemics occurred due to the neglect of public health services. (4) Literacy Rate: Literacy rate (referring to those who can read and write) was nearly 16 per cent, reflecting social backwardness as a reflection of economic backwardness. Female literacy rate was still worse-only 7 per cent. This indicated gender-bias in the society. Demographic Transition Following are some notable points relating to demographic transition in Popu lation Census India: Population census in India is a detailed (i) In the history of demographic transition, 1921 is regarded as the estimation of population 'Year of Great Divide'. size, along with a complete demographic (ii) Prior to 1921, population growth in India was never consistent. profile of the country. Size of population kept fluctuating, increasing in one census and It was first conducted under the British rule decreasing in the other. in 1881. Since then it is (iii) After 1921, population in India recorded a consistent rise. conducted after every ten years. (iv) Thus, the census 1901 showed a decline of 0.04 crore in total population (from 23.87 crore in 1891 to 23.83 crore in 1901). (v) The census 1911 showed a rise of 1.38 crore (from 23.83 crore in 1901 to 25.21 crore in 1911). (vi) Again, the census of 1921 showed a decline of 0.07 crore (from 25.21 crore in 1911 to 25.14 crore in 1921). (vii) From the year 1921 onwards, total population in India never declined; it showed a consistent rise: the census 1931 recorded a rise of 2.76 crore; the census 1941 recorded a rise of 3.96 crore; the census 1951 showed a rise of 4.24 crore, and so on. (viii) A consistently rising population (on the eve of independence) led to excessive burden of maintenance investment. It is an expenditure which a country has to incur on the maintenance of the existing population. (ix) When the maintenance investment is high, growth-oriented investment remains low. A Consistent Rise in Population post 1 92 1 Indian Economy o n the Eve of Independence 15 (x) High maintenance and low growth-oriented investment on the eve of independence is another feature of the Indian economy pointing towards its backwardness and stagnation. I High maintenance investment (expenditure on the maintenance of existing population) and low investment for growth and development kept India in a state of perpetual backwardness. (xi) However, the underlying fact is that till 1951, the rise in India's population was never alarming; it ranged between mild to modest. (xii) It was only from 1951 onwards that the rise in population became explosive in nature, and the country started facing a serious challenge in terms of population explosion. 7. OCCU PATIONAL STRUCTURE ON THE EVE OF INDEPENDENCE Occupational structure refers to distribution of working population across primary, secondary and tertiary sectors of the economy. Table 2 shows occupational structure of Indian economy at the time of independence. The data relates to the 1951, because reliable statistics for the year 1947 are not available. Pie-Chart Table 2. Occupational Distribution of India - at the Time of Independence Occupation 1 951 (in %) Pri m a ry Sector 72.7% 1. Primary Sector 72.7 Secondary Sector 1 0. 1 % (i) Agriculture 50.0 Tertiary Sector 1 7.2% (ii) Agricultural Labour 1 9.7 (iii) Forestry, Fisheries, Animal Husbandry, Plantation 2.4 (iv) Mining 0.6 2. Secondary Sector 1 0.1 (v) Small and Large Scale I ndustries 9.0 (vi) Building Construction 1.1 3. Tertiary Sector 1 7.2 (vii) Trade and Com merce 5.2 (viii) Transport, Storage and Communication 1.4 (ix) Oth er Services l 0.6 1 00.00 [Source: Census of India 201 1 ) 16 Indian Economic Development Table 2 offers the following observations: (1) Agriculture-The Principal Source of Occupation: On the eve Agriculture as a of independence, about 72.7 per cent of working population was Means of Subsistence engaged in agriculture. Greater dependence on agriculture Percentage of population dependent on agriculture is much less (as suggested by occupational in advanced countries of the world. For instance, in England and structure on the eve of America 2 per cent, in Japan 12 per cent and in Germany 4 per cent independence) implied lesser availability of land of the population depend on agriculture. per head of the farming This establishes backwardness of the Indian economy at the time of population. Accordingly, agriculture independence. was taken largely as a (2) Industry-An insignificant Source of Occupation: On the eve means of subsistence, and less as an of independence, barely 9.0 per cent of the working population in occupation for profit. India was engaged in manufacturing industries, mining, etc. As against it, 32 per cent in the USA, 42 per cent in England and 39 per cent in Japan are engaged in these activities. It further proves how backward the Indian economy was at the time of independence. (3) Unbalanced Growth: The table shows unbalanced growth of the Indian economy. Growth is said to be balanced when all sectors of the economy are equally developed. However, in case of lndia, secondary and tertiary sectors were in their infant stage of growth. Hence, the conclusion that Indian economy at the time of independence was lopsided and therefore, backward. ::J Assessed in terms of occupational distribution of the working population in India at the time of Independence, we get a disappointing picture of the Indian econom y !..l Since bulk of the working population was engaged in agricultural sector (along with the fact that agriculture was merely a means of subsistence), Indian economy was in a state of extreme backwardness. 0 The masses led their life in extreme poverty. 8. INFRASTRUCTURE ON THE EVE OF INDEPENDENCE Infrastructure refers to the elements of (i) economic change (like means of transport, communication, banking, power/energy), and the elements of (ii) social change (like growth of educational, health and housing facilities), which serve as a foundation for growth and development of a country. Indian Economy on the Eve of Independence 17 The state of India's infrastructure on the eve of independence can be described in terms of the following observations: (i) Railways were developed to transport finished goods from Britain to the interiors of the colonial India (with a view to widening the size of the market). It aimed at widening the size of the market for the British products in India. (ii) Ports were developed to handle export of raw material to Britain and import of finished goods from Britain. (iii) Post and telegraphs were developed to enhance administrative efficiency. (iv) Roads were developed to facilitate transportation of raw material from different parts of the country to the ports. Briefly, some modest infrastructural change in the economy during the British Raj is not denied. But, the motive behind this change was not the growth and development of the Indian economy; rather it was the growth and development of the British economy through colonial exploitation of the Indian economy. Consequently, Indian economy remained to be backward. IMPACT OF RAI LWAYS I N I N D I A Positive I m pact (i) Ra i l ways fac i l itated expa n s i o n o f t h e domest i c ma rket. Accord i n g l y, ex ports a n d i m ports o f the cou ntry showed a s i g n ificant r i se. (ii) R a i l ways fa c i l itated com merci a l isation of a g ricu l t u re, as goods cou l d then be moved to d ista nt p l a ces. This i m p l ied a modest c h a n g e i n the outlook o f t h e farmers. They sta rted viewi ng fa r m i ng a s a business, rather t h a n merely as a Railways in the British Rule sou rce of su bsisten ce (i i i) R a i l ways e n a b led peo ple to b rea k the barriers of d ista nce and u nderta ke jou rneys to fa r off p l a ces. This promoted cu ltural a ffi nity a mong the countrymen. (iv) Faster movement of food grain a c ross d iffe rent pa rts of the cou ntry (ow i n g to Ra i l ways) hel ped control the sp read of fa m i nes. Food s u p p l ies cou ld rea ch the people before they were d r i ven to starvatio n. Negative Impact (i) R a i l ways contrib uted to col o n i a l ex pl oitation of the I n d i a n economy. Beca use, p r i m a ry goods (raw material) could then be easily tra n s ported from the fie lds a n d fa rms to the ports fo r the p u rpose of ex ports to the British econ omy. ( i i) F i n i s hed goods co m i ng as i m ports to the I n d i a n economy could be easi l y trans po rted to the i nteriors of the cou ntry fo r pu rpose of sale. (i i i) Th us, the spread of ra i lways led to the spread of the domestic market for the British p roducts. 18 Indian Economic Development Was there any Positive I m pact of the British Rule in I ndia? Certainly not, if the impact of the British rule is studied with reference to 'motive' of the British government in India. The motive was clear and focused: it was colonial exploitation of the Indian economy. However, the means to achieve the end yielded some positive side-effects. These are as under: (I) Commercial Outlook of the Farmers: Forced commercialisation of agriculture under the British rule exposed the subsistence farmers to uncertainties of the market. True, but it also led to a gradual change in outlook of the farmers. The farmers started considering market price of the produce as an important determinant of their production decisions. (2) New Opportunities of Employment: Spread of railways and roadways opened up new opportunities of economic and social growth. (3) Control of Famines: Rapid means of transport facilitated rapid movement of food grain to the famine-affected areas. Accordingly, famines were controlled. (4) Monetary System of Exchange: There was a transition from barter system of exchange to monetary system of exchange. Growth of monetary system of exchange facilitated division of labour, specialisation, and large-scale production. (5) Efficient System of Administration: The British government in India left a legacy of an efficient system of administration. This served as a ready-reference for our politicians and planners. Indian Economy on the Eve of Independence 19 Power Poi nts & Revision Wi ndow ------------ Colonial Exploitation of the Indian Economy u nder the British Rule: Col o n i a l exp loitation of the I n d i a n eco n o my was a c h i eved t h rough : ( i ) Co l o n i a l exploitation o f agricu ltura l sector, ( i i ) Colo n i a l exp l o itatio n o f i n d ust ri a l sector, ( i i i ) Colo n i a l exploitation o f i nternati o n a l tra d e. Features o f Indian Economy on t h e Eve o f Independence: ( i ) Stagna nt eco n o my, ( i i ) Backwa rd eco n o my, ( i i i ) Agricultura l backwa rd ness, ( iv) I n d ustri a l backwa rd n ess, (v) Ra m p a nt poverty, (vi) Poor i nfrastruct u re, (vi i ) H eavy d e p e n d e n ce o n i m po rts, (vi i i ) Li m ited u rb a n isati o n , ( ix) Sem i -fe u d a l eco n o my, (x) Colo n i a l eco n o my. State of Agriculture u nder the British Rule: I nd i a n agri c u ltu re u n d e r t h e British ru l e sh owed th ese c h a racteristics : Low p rod u ction a n d p rod u ctivity. H igh degree of u n ce rta i nty: good h a rvest w h e n it ra i ns good a n d bad ha rvest when it ra i n s ba d. Dom i n a nce o f su bsistence fa rm i n g : ti l l e rs of t h e soil too k t o agric u l t u re m e rely a s a sou rce of s u bsi ste n ce, n ever as a sou rce of p rofit. W i d e n i n g gu lf betwe e n own e rs of the soi l (zamindars) a n d ti l l e rs of the soi l. Wastage o f l a n d reven u e i ncom e o n conspicuous consu m pti o n. I m plying 'low o r n o' i nvestment fo r t h e g rowth of agricu l t u re. N et con seq u e n ce : backwa rd n ess of fa r m e rs a s we l l a s fa rmi ng. State of Industry u nder the British Rule: I n d i a n i n d ustry (as d o m i nated by h a n d i c rafts) which at one time e nj oyed global re putati on, s uffe red a systematic d estructi o n d u ri n g the British ru l e. It was l a rgely owi n g to d i scri m i n atory pol icy of the British gove r n m e nt. W h i l e cheaper i n d u stri a l goods were a l lowed ta riff-free a ccess to the I n d i a n m a rkets, h a n d icraft products fro m I nd i a we re s u bjected to h e avy expo rt­ d uty. H a n d icrafts i n I n d i a l ost both d o m estic as we l l as i nternati o n a l m a r ket. G rowth of t h e modern i n d ustry was ta rdy. It l a c ked state-i n itiative. Ca pita l goods i n d ustry was a l m ost non-existe nt. P rocess of i n d ustri a l i sati o n re m a i ned lop-sided. State of Foreign Trade u nder the British Rule : Foreign tra d e of I n d i a too k a h it i n two ways : Com position of tra d e sh owed a shift from the expo rt of fi n ished goods to the export of raw materia l a n d fro m t h e i m port of b u l l i o n (gold a n d si lve r) to t h e i m port of fi n ished i n d u st ri a l p rod u cts, l a rgely fro m Brita i n , a n d It was m o nopol ised by t h e Briti s h gove rn m e nt, e n d i ng m u l ti n atio n a l exports fro m I n d i a. Demographic Profile under the British Rule: I nd ia's d e m ogra p h i c p rofi le sh owed h ig h b i rth rate, high death rate, high i nfa nt morta l i ty rate, low expecta ncy of l ife a n d low rate of l ite racy. These c h a racte ristics point to eco n o m i c a n d soc i a l backwa rd ness of the cou nt ry. Occupational Structure u nder the British Rule: M o re t h a n 70 per cent of worki n g popu lati o n was e ngaged i n agric u l t u re. I n d u stry offe red e m ployment m e rely to 9 per cent of the worki ng pop u l ati o n. This is yet a noth e r poi nter t o eco n o m i c a n d soci a l b a c kwa rd n ess o f a cou ntry. Infrastructure on the Eve of I ndependence: I nfrastructu re-eco n o m i c as we l l as soc i a l - co nti n u ed to be h i g h ly d eficient. Th e re was a mod est c h a nge, but o n ly to fac i l i tate colon i a l exp loitation of the I n d i a n eco n o my. Some Positive Side-effects of the British Rule i n India: With a view to e n l a rging size of the m a rket for British goods i n I ndia, the British government n eeded to provide some i nfrastruct u ra l facilities i n I nd i a. These i n c l uded : ( i ) Tra nsport fac i l ities, l a rgely i n terms o f ra ilways, ( i i ) Development o f ports, ( i i i ) Provision of post and telegra p h services. Besid es, the Britis h gove rn m ent left a l egacy of a stron g and efficient a d m i n istrative set- u p. 20 Indian Economic Development fEX E RC I S Ej 1. O bjective Type Questions (Re m e m bering & U ndersta n d i n g based Questions) A. M u ltiple Choice Questions Choose the correct option: 1. The I nd i a n economy on the eve of the independence was: (a) developed (b) u nderdeveloped (c) stag n a nt (d) both (b) a nd (c) 2. La ndholdings at the time of i ndependence were: (a) fragmented (b) l a rge (c) small (d) both (a) a nd (c) 3. Fa rming which focuses on basic needs of the fa mi ly is ca lled : (a) stag n a nt fa rming (b) su bsistence fa rming (c) commerc i a l fa rming (d) none of these 4. Decay of handicrafts was ca used by: (a) British tariff pol icy (b) com petition from machi ne-made prod ucts (c) change in the patterns of demand (d) all of these 5. Suez Ca nal was opened i n : (a) 1 867 (b) 1 868 (c) 1 869 (d) 1 870 6. On the eve of i ndependence, I ndi a was net exporter of: (a) pri m a ry prod ucts (b) ind ustrial prod ucts (c) ca pita l goods (d) a l l of these 7. H i g h i nfa nt morta l ity is a sign of: (a) extreme poverty (b) poor hea lthca re (c) both (a) a n d (b) (d) none of these 8. Gender- bias in the society on eve of i n dependence was i n d icated by: (a) morta l ity rate (b) l iteracy rate (c) death rate (d) l ife expecta ncy 9. During colonial period, I n d ia's demogra p h ic profi le showed : (a) hi g h birth rate (b) h igh death rate (c) hi g h i nfa nt morta l ity (d) a l l of these 1 0. On the eve of i ndependence, b u l k of the popu lation was engaged i n : (a) ag ricu lture sector (b) trade a n d commerce (c) m i n i ng sector (d) ind ustrial sector Indian Economy on the Eve of Independence 21 1 1. Which sector was the major contri butor to GD P of the cou ntry as wel l as the biggest employer o n the eve of i n dependence? (a) Ag riculture (b) I nd ustry (c) Services (d) M a n ufacturing 12. Rai lways were i ntrod uced in I ndi a in the yea r: (a) 1 854 (b) 1 853 (c) 1 855 (d) 1 850 13. Which ind ustry of I ndi a got severely affected u nder the colonial ru le? (a) Sugar ind ustry (b) I ron & Steel industry (c) H a nd icraft industry (d) Paper industry 14. On the eve of i n dependence, the proportion of popu lation engaged in a g ricu ltural sector was: (a) approx. 40% (b) approx. 60% (c) approx. 65% (d) approx. 70% 15. Stag na nt economy is the one which shows: (a) l ittle g rowth i n i ncome (b) h igh g rowth in income (c) low level of prod uctivity (d) both (a) a nd (c) Answers 1. (d) 2. (d) 3. (b) 4. (d) 5. (c) 6. (a) 7. (c) 8. (b) 9. (d) 1 0. (a) 1 1. (a) 12. (b) 1 3. (c) 14. (d) 1 5. (d) B. Fill in the Bla n ks Choose appropriate word and fill in the blank: 1. On the eve of i ndependence, I nd i a n economy was a (feuda l economy/semi-feudal economy) 2. Za m i ndari system of land revenue worked throu g h the system of midd lemen ca l led (ja g i rda rs/za m i ndars) 3. An economy made to serve the i nterests of its colonial ru lers is ca l led a (colonial economy/feudal econo my) 4. is a form of fa rming i n which crops a re prod uced to provide for the basic needs of the fa m i ly. (Com mercial fa rming/Su bsistence fa rming) 5. i nfrastructu re includes ed ucational, health a n d housing facil ities. (Economic/Social) 6. During the colonial ru le, I ndi a was a of fi n ished prod ucts from/to Brita i n. (net exporter/net i m porter) 7. The yea r is rega rded as the ' Yea r of Great Divide' i n the h istory of demogra phic tra nsition of I nd i a. (1 921/1 931) 8. Occu pational structu re refers to the d istribution of across primary, secondary a n d tertiary sectors of the economy. (population/working popu lation) 9. as a production activity, belongs to primary sector of the economy. (An i m a l h usband ry/Storage) 22 Indian Economic Development 1 0. At the time of i n dependence, secondary a n d sectors were i n their i nfa nt stage of g rowt h. (prima ry/tertia ry) Answers 1. semi-feudal economy 2. za m i n d a rs 3. colon i a l economy 4. Su bsistence fa rming 5. Social 6. net i m porter 7. 1 921 8. working popu lation 9. A n i m a l h usba ndry 1 0. tertiary C. True or Fa lse State whether the following statements are True or False: 1. La ndholdings o n the eve of independence were fra g mented. (Tru e/F a l se) 2. It wa s owi ng to the d iscri m i natory tariff pol icy of the colonia l govern ment that handicraft i n du stry i n I ndi a got destroyed. (Tru e/F a l se) 3. Per ca pita i ncome refers to the i ncome per head of the tota l work force of the cou ntry. (True/Fa lse) 4. Rai lways were developed by the colonia l govern ment to promote the ma rket for British goods i n I nd i a. (True/Fa l se) 5. From the yea r 1 921 , tota l popu lation i n I ndi a never dec l i ned. (True/Fa l se) 6. I nfa nt morta l ity rate refers to the death rate of c h i l d ren below the age of 2 yea r per 1 000 live b i rths. (True/Fa l se) 7. M u s l i n is a type of cotton textile which had its origin i n Benga l. (True/Fa l se) 8. Com mercia l isation of a g ricu ltu re refers to a sh ift from cu ltivation for self-consu m ption to cu ltivation for sa le i n the ma rket. (True/Fa lse) 9. On the eve of i ndependence, only heavy and basic ind ustries were developed in the I nd i a n economy. (True/Fa l se) 1 0. D u r i n g British period, I ndi a w a s treated a s a colony supplying raw materia l to the British i n d u stries. (True/Fa l se) Answers 1. True 2. True 3. Fa lse 4. True 5. True 6. Fa lse 7. True 8. True 9. Fa lse 1 0. True D. Matchi ng/C h ronological I. Identify the correct sequence of alternatives given in Column II by matching them with respective items in Column I : Column I Column I I (a) Zamindari system of land reven u e ( i ) One i n w h i c h p e r capita income is very low ( b ) Stagnant economy (ii) The d i stribution of worki ng population across different sectors of the economy (c) Backward economy (iii) It worked t h rough the system of middlemen (d) Occupational struct u re (iv) One which shows l ittle or no growth i n national i ncome Answers (a) - (iii), (b) - (iv), (c) - (i), (d) - (ii) Indian Economy on the Eve of Independence 23 II. Choose the correct alternative showing chronologi cal order of the following events: (i) The Yea r of Great Divide (ii) Great fa m i nes of Benga l which c l a i med a l a rge tol l of l ives (iii) Fi rst Tra i n ru n from Bom bay ( M u m bai) to Thane (iv) Open ing of Suez ca n a l Alternatives: (a) (iv), (i i), (i), (iii) (b) (i), (iv), (ii i), (ii) (c) (ii), (ii i), (iv), (i) (d) (ii i), { i), (iv), (ii) Answer (c) - (ii), (ii i), (iv), (i) E. 'Very Short Answer' Objective Type Questions 1. What is a sta g n a nt economy? Ans. A stagnant economy is a n economy i n which there is l ittle or no scope of G D P g rowth. 2. Defi ne l a n d - p roductivity. Ans. La nd-prod uctivity refers to output per hecta re of l a n d. 3. W h a t is mea nt b y su bsistence ag ricu ltu re? Ans. Su bsistence agriculture is a form of fa rming in which only su bsistence crops a re g rown to provide for the basic needs of the fa m i ly. 4. What do you mea n by com mercia l isation of a g ricu ltu re? Ans. Commercial isation of a g ricu ltu re refers to a sh ift from cu ltivation for self-consu m ption to cu ltivation for the ma rket. 5. Defi ne occu pationa l struct u re. Ans. Occu pationa l structu re refers to d istri bution of working popu lation across prima ry, secondary a nd tertia ry sectors of the economy. 6. What is i nfa nt morta l ity rate? Ans. I nfa nt morta l ity rate is an esti mate of the n u m ber of i nfa nt deaths for every 1,000 l ive births (i nfa nts refer to c h i l d ren below the age of one yea r). 7. What is l ife expecta ncy? Ans. Life expecta ncy is defi ned as the average n u m ber of yea rs that a person can expect to l ive. 8. Defi ne l iteracy rate. Ans. It refers to the percentage of people i n a certa i n sa mple of population who can read and write. 9. What d o you mea n by Population Census? Ans. Population census is a deta i l ed esti mation of population size, a long with a complete demogra phic profile of the country. 1 0. State two m a i n i n d icators of backwa rd ness a n d poverty of the masses. Ans. Two m a i n indicators of backwa rd ness and poverty a re: (i) High morta l ity rate, a nd (ii) Low l ife expectancy. 24 Indian Economic Development 2. Reason - based Questions (Comprehension of the S u bject-matte r) Read th e fol l ow i n g statem ents carefu l l y. Write Tru e or Fa lse with a reaso n. 1. Low level of p rod uctivity was the principal cha racteristic of I nd i a n a g ricultu re on the eve of i ndependence. Ans. True. Reaso n : Use of pri m itive tech nology and s m a l l -size holdi ngs. 2. Zamindari system of land revenue gave i ncentives to t i l l ers of soi l to increase their prod uctivity. Ans. Fa lse. U nder za m i n d a ri system, the t i l l e rs lacked owners h i p rig hts. As a resu lt, they had no i nterest in i m proving the a g riculture. 3. Rai lways d u ri n g the British rule i n I ndia promoted colonial exploitation of the I n d i a n economy. Ans. True. Rai lways promoted colon i a l exploitation of the I nd i a n economy i n two ways, as u nder: (i) Railways facil itated the movement of raw materia l from thei r sou rce of supply to the ports for further tra nsportation to England. (ii) Railways led to expa nsion of the market for the B ritish prod ucts i n I ndia. 4. The yea r 1 921 w as the yea r o f G reat Divide w i th rega rd to the g rowth of popu lation i n I nd i a. A n s. True. T h e yea r 1 921 w a s t h e yea r o f Great Divide. Beca use, p r i o r t o 1 921, population g rowth i n I ndia was not consistent. It was only after 1 921 that the population recorded a consistent rise. 5. Zamindari system broug ht sta b i l ity to cu ltivation d u ri n g the British rule i n I n d i a. A n s. Fa lse. T h e za m i ndari system d u ring the British rule did n o t b r i n g sta bil ity. I nstead, i t brought i nsta bil ity to I n d i a n cu ltivation. Beca use, this system led to freq uent ejection of the til l e rs of the soi l. They lost their perma nent rig hts of cu ltivation, a nd accordin gl y, lost permanent i nterest in cu ltivation. 6. The t i l l ers of the soi l cou ld not leave a g ricu ltu re even when they were a l ways exploited. Ans. True. The ti l lers of the soi l cou l d not leave a g ricu ltu re despite their conti n uous exploitation. This was beca use of the lack of vocationa l aven ues outside agriculture. 7. U nder the B ritish Raj, d iscri m i natory ta riff pol icy was pu rsued with a view to protecting the I nd i a n ind ustry. Ans. Fa lse. British p u rsued d iscri m i natory ta riff policy which a l l owed tariff-free export of raw materi a l from I ndia a nd tariff-free i m port o f B ritish ind ustri a l prod ucts i n I nd i a. T h i s enabled the British ind ustri a l prod ucts to ca pt u re the I n d i a n markets. 8. Surp lus generated in trade was used to meet a d m i n istrative expenses by the British govern ment i n I nd i a. A n s. True. S u r p l u s generated i n trade w a s used b y B ritish government t o meet a d m i n istrative expenses in I ndia which led to a huge d ra i n of wea lth. 9. Pa rtition of the cou ntry had a negative i m pact on I n d i a n a g ricu ltu re. Ans. True. I ndia got 82 per cent of population a nd 65 per cent of food g ra i n a rea. Fertile a reas of West Punjab a nd S i n d h went to Pakista n which led to food crisis in the country. 3. H OTS & A p p l i cations 1. How Rai lways moderated the i m pact o f fa m i nes d u ri n g the colonial period? Ans. Rai lways facil itated the movement of food g ra i ns from the surplus zones or from the govern ment wa rehouses (Godowns) to the a reas afflicted with fa m i nes. Accord i ng ly, the i m pact of fa m i nes was moderated. Indian Economy on the Eve of Independence 25 2. How wou ld you s u p po rt the view that the destruction of handicraft i n I ndia coi ncided with the i n d ustria l revol ution i n G reat Brita i n ? A n s. T h e d estruction o f t h e I n d i a n handicrafts w a s systematica l l y p l a n ned b y t h e B ritish government to coincide with the ind ustri a l revol ution i n G reat B rita i n. The success of ind ustrial revol ution depended on (i) g rowth of I n d i a n market for the B ritish prod ucts, and (ii) export of raw material from I nd i a to B rita i n. Achievement of both these objectives ( l a rgely t h ro u g h d iscri m i natory trade pol icy) led to the destru ction of I nd i a n ha nd i c rafts. 3. The pol icy of colo n i a l exploitation of the I nd i a n economy d u ri n g the B ritish Raj had some positive side-effects for the I nd i a n economy. Do you a g ree? Ans. It is true, that the po l i cy of co l o n i a l exploitation d u ri n g the B ritish Raj had some positive side­ effects for the I nd i a n econo my. Sta rt of R a i l ways, d eve l o p ment of po rts, i m p rovement of the mea ns of com m u n i cation a nd a good system of a d m i n istration we re some c ritica l e l e m e nts of the policy of colo n i a l ex ploitatio n. But all these i m p l ied a g rowth-oriented c h a nge i n the I nd i a n economy. 4. How d i d d iscri m i natory trade pol icy contri bute to the success of i n d u strial revol ution in G reat Brita i n? Ans. Discri m i natory trade pol icy contri buted to the success of i n d ustri a l revol ution i n G reat B rita i n i n two ways: (i) Low d uty on the i m port of B ritish ind ustri a l goods i nto I nd i a led to the g rowth of domestic demand for these goods, a n d (ii) Low d uty on the export o f raw materi a l from I nd i a ensu red ava i l a b i l ity o f low-cost i n puts for the British i n d ustry. 4. Analysis & Evaluation 1. Lega l ly, Zamindari System of La nd Revenue has been a bol ished i n i ndependent I nd i a. Yet I nd i a n a g ricu ltu re contin ues to be in a state of backwa rd ness. What in you r o p i n ion is the principal reason for this situation? Ans. Despite a bol ition of zamindari system, poverty conti nues to be pervasive i n I n d i a n a g ricu ltu re owi ng to two reasons: (i) The b u l k of the I nd i a n fa rmers a re sma l l and m a rg i n a l holders. S m a l l and m a rg i n a l hold ings a re not co nducive to the adoption of i n n ovative tec h n i q ues of fa rming, a n d (ii) The del ivery mechanism related t o f i n a n c i a l h e l p b y the state is g rossly i nefficient a n d i neffective. 2. M N Cs ( Mu ltinatio n al Corporations) a re d omi nating the I nd i a n ind ustrial sector and a re offering stiff com petition to the sma l l sca le i n du stry. How do you com pa re this situation with the one u nder the B ritish rule when the I nd i a n hand icrafts were exposed to stiff com petition from the machi ne- made prod ucts of B rita in? Ans. Com petition promotes the adoption of i n n ovative tech nology a n d is therefore, expected to open new vistas of g rowth for the sma l l sca le enterprises. But the adoption of new tech nology needs a level playing field. Do the sma l l enterprises i n I nd i a have it? 'No' is the a nswer. Sma l l enterprises in I nd i a do not g et enough funds at a low rate of i nterest as the M NCs ca n manage. Acco rd ing ly, they often fa i l to u p g rade thei r tech nology to m a ke it com petitive. Also, they fa i l to spend as m u c h on advertisement a n d publ icity as the M N Cs ca n do to ca pt u re the ma rket. Th us, su rviva l of sma l l enterprises i n the face of stiff com petition from the M N Cs seems to be d o u btfu l. This 26 Indian Economic Development situation is defi n itely compara ble with the one when the I nd i a n handicrafts were exposed to the stiff com petition from machi ne-made prod ucts of Brita i n d u ring the B ritish rule i n I nd i a. However, the d ifference is that whereas d u ring the B ritish rule, destruction of sma l l enterprises cou l d be ta ken as a conseq uence of the colon i a l exploitation by the foreign govern ment in I ndia, no such situation exists i n I ndia now. It is all a matter of com petition in the wa ke of N EP (new economic pol icy) promoting l i bera l isation, privatisation a nd g loba l isation of the ind ustrial sector. 5. NCERT Questions (With H ints to Answers) 1. What was the focus of the economic pol icies pu rsued by the colonial govern ment in I ndia? What were the i m pacts of these pol icies? [Hint: The focus of the economic pol icies p u rsued by the British govern ment was to exploit the I nd i a n economy as much as they cou ld do to foster the g rowth process of the B ritish economy. The colonial pol icies cha nged the natu re and struct u re of the I nd i a n economy. It was rendered as a supplier of raw materials and net i m porter of fin ished ind ustrial prod ucts from Brita in. ] 2. Name s om e nota ble economists who esti mated I n d ia's per ca pita i ncome d u ri n g the colonial period. [Hint: Dadabhai Naoroj i, Wi l l i a m Dig by, Find lay S h i rras, V. K.R.V. Rao and R.C. Desa i.] 3. What were the m a i n ca uses of I nd ia's ag ricu ltu ra l stag nation d u ri n g the colonia l period? [Hint: Fol l owing were the principa l ca uses of I ndia's agricultura l stag nation d u ring the colonial period : (i) Ti l lers of the soi l were not the owners of the soi l. (ii) La nd Revenue System u nder t h e B ritish Raj focused on exploitation o f t h e fa rmer. (iii) Forced commercialisation of agriculture which led to u n certa i nty of fa rm i ncome.] 4. Name some modern i n d u stries which were i n operation i n our country at the time of i ndependence. [Hint: (i) Cotton Texti l e I ndustries, (ii) J ute Texti l e I nd ustries, (iii) I ron and Steel I ndustries, (iv) Sugar I ndustries, (v) Cement I ndustries, (vi) Paper I ndustries, etc.] 5. What was the two-fold motive beh ind the systematic deind ustria l isation effected by the B ritish i n p re- i ndependent I n d ia? [Hint: (i) To exploit I nd ia's wea lth of raw material and pri mary prod ucts l i ke cotton and j ute. (ii) To exploit I ndia as a potentia l ma rket for the ind ustrial prod ucts of Brita i n. ] 6. The traditional handicrafts ind ustries were rui ned u nder the B ritish rule. Do y o u a g ree w i t h t h i s view? Give reasons i n s u p po rt o f you r a n swer. [Hint: Yes, the traditiona l handicraft ind ustries were rui ned u nder the B ritish rule. The reasons a re as fol l ow: (i) Discri m i natory ta riff pol i cy of the state. (ii) Disa ppea ra nce of princely cou rts. Indian Economy on the Eve of Independence 27 (iii) Com petition from machi ne-made prod ucts. (iv) New patterns of demand (favouring machi ne-made goods). (v) I ntrod uction of ra i l ways i n I nd i a which led to the spread of I nd i a n market for the B ritish ind ustri a l goods.] 7. What objectives did the British i ntend to ach ieve through their pol icies of i nfrastructu re develop ment in I n d ia? [Hint: The B ritish i ntends to achieve the fol lowi ng objectives th rough their pol i cies of i nfrastructu re development i n I nd i a : (i) Expa nsion o f the I nd i a n ma rket for the B ritish prod ucts th rough the expa nsion of ra il ways. (ii) To handle export of raw materi a l to B rita i n and i m port of finished goods from Brita i n through the development of ports. (iii) To enha nce a d m i nistrative efficiency th rough the development of post a nd teleg ra phs. (iv) To fac i l itate tra nsportation of raw materi a l from different pa rts of the country to the ports through the development of roads.] 8. Critica l l y a p p ra ise some of the shortfa l ls of the i n dustrial pol icy p u rsued by the British colonial a d m i n istration. [ H i nt: I nd ustria l pol i cy pu rsued by the B ritish colonial a d m i n istration was to foster the process of ind ustri a l g rowth in B rita i n. In I ndia, ca pita l goods industry was developed only to the extent that it aided the development of ind ustry in B rita i n. The contribution of the ind ustrial sector was i nsig nificant. The public sector recorded a very dismal g rowth.] 9. What d o you u n dersta nd by the d ra i n of I nd i a n wea lth d u ri n g the colonia l period? [Hint: H uge a d m i nistrative expenses were incu rred by the British govern ment to ma nage thei r colon i a l rule i n I nd i a. Also, huge expenses were incu rred by the B ritish govern ment to fight wa rs i n pursuit o f t h e i r pol i cy o f i m peria lism. A l l these expenses were borne b y t h e I nd i a n Exchequer. This i m p l ied a d ra i n of I nd ia's wea lth.] 10. Which is rega rded as the defi n i n g yea r to ma rk the demog ra p h ic transition from its fi rst to the second decisive stage? [ H i nt: The yea r 1 921 is reg a rded as the defi n i ng yea r to mark the demogra phic tra nsition from its fi rst to the second decisive stage. 1 921 is a lso known as the yea r of g reat d ivide.] 1 1. Give a qu a ntitative a p p raisal of I nd ia's demog ra phic profi le d u ri n g the colonial period. [Hint: I ndia's demog ra phic profi le showed the fol lowi ng features: (i) H i g h birth rate a nd death rate. (ii) H i g h i nfa nt morta l ity rate. (iii) Low l ife expectancy. (iv) Low fem a l e l iteracy rate ind icating h i g h degree of gender-bias in the society.] 12. H i g h l ig ht the sa lient featu res of I n d ia's pre- independence occu pation a l structu re. [ H i nt: The ag ricultu ra l sector accou nted for the l a rgest share of workforce (70-75%). The m a n ufacturing and the services sectors accou nted for only 1 0% a nd 1 5-20% share, respectively.] 13. U nderscore some of I nd ia's most crucial economic cha l lenges at the time of independence. [Hint: (i) Ag ricultural sector of the economy was backwa rd, sta g n a nt and non-vi brant. It was a crucia l economic c h a l lenge. 28 Indian Economic Development (ii) There was a n u rgent need of modern isation, d iversification, capacity b u i l d i ng a n d increased public i nvestment in industri a l sector. (iii) I nfrastructu re fac i l ities, i n c l u d i ng the fa med ra i l way network needed u p- gradation a nd expa nsion. (iv) Preva lence of ra m pa nt poverty a nd u nem ployment req u i red welfa re-orientation of the economic pol i cies.] 14. When was I n d ia's fi rst officia l census operation u n derta ken? [Hint: 1 881.] 15. Were there a n y positive contributions made by the British i n I ndia? Discuss. [Hint: Fol lowi ng poi nts h i g h l ig ht positive contributions made by the B ritish i n I nd i a : (i) Commercial outlook o f t h e fa rmers sta rted replacing su bsistence- based prod uction decisions of the fa rmers. (ii) Opportu n ities of employment were generated through i nfrastructural g rowth. (iii) Fa m i nes were effectively control led th rough the development of ra pid means of transport. (iv) There was a sig n ificant s h ift from ba rte r system of exchange to moneta ry syste m of excha nge. (v) Efficient system of a d m i n istration emerged as a sine-qua-non of g rowth.] 6. Miscellaneous Questions and Reference to the Text for Answers 1. What was the state of a g ricu ltu re sector of the I nd i a n economy on the eve of independence? [Page 7-9] 2. What was the state of i n d ustrial sector of the I nd i a n economy on the eve of independence? [Page 10-12] 3. Comment on the state of exports a nd i m ports of the I nd i a n economy on the eve of i ndependence. [Page 13] 4. Comment on the economic conditions of the ti l lers of the soil at the time of i ndependence. [Page 7-9] 5. Briefly describe the occu pational structu re of I n d i a n economy on the eve of i ndependence. [Page 16, 1 7] 6. Write a few words on i nfrastructu re in the I n d i a n economy at the time of i ndependence. [Page 1 7, 18] 7. State th ree m a i n featu res of I nd i a n economy at the time of i n dependence. [Page 5, 6] Indian Economy on the Eve of Independence 29 Reversal of Growth Process under the British Raj Prior to the Co l o n i a l R u l e i n I nd i a, I n d i a n economy was a vibrant economy. Doubtl ess, the agricultural sector was the m a i n source of l i vel i hood. But th ere was a n all rou n d prospe

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