Indian Economy on Eve of Independence Notes PDF

Chp.1 Indian Economy on the Eve of Independence Important Concepts: 1. Colonialism: Colonialism refers to a system of political and social relations between two countries, of which one is the ruler and the other is its colony. The ruling country not only has political control over t...

Chp.1 Indian Economy on the Eve of Independence Important Concepts: 1. Colonialism: Colonialism refers to a system of political and social relations between two countries, of which one is the ruler and the other is its colony. The ruling country not only has political control over the colony, but it also determines the economic policies of the dominated country. [In case of India, the unequal relationship between the colony (India) and the ruling country (Britain) resulted in underdevelopment of India]. 2. Agrarian economy: An economy in which about 85% of the country‘s population lived mostly in villages and earned their livelihood from agriculture (Either directly or indirectly). 3. National income : It is the total value of the final goods and services produced with in a country plus net factor income from abroad. 4. Drain of Indian wealth: 5. Agricultural stagnation: Slow rate of economic growth in the agricultural sector. 6. Export surplus : During the British regime, India exports exceeded its imports, which lead to a situation of ‘Export Surplus’. 7. Commercialization of agriculture: The production for sale rather than for self – consumption. 8. Demographic transition: It is a concept developed in 1945 to describe the typical pattern of falling death rate and birth rates in response to better living conditions associated with economic development. It consists of the following phases. a) Pre-industrial societies. b) Developing societies. c) Modern industrialized societies/Developed societies. 9. Infrastructure: It includes banking, means of transport and communication, Educational, health, housing facilities etc. 10. Life expectancy: It refers to the number of years that a person can expect to live calculated from his birth. 11. Occupational structure: It is the distribution of working persons as per their occupation a cross different industries and sectors of the economy. 12. Infant Mortality Rate(IMR) : It refers to the number of deaths of infants before reaching the age of one, in a particular year per 1,000 live births during that year. Question and answer 1. What was the focus of economic policies pursued by the Colonial Government in India? What were the impacts of these policies? OR Why was there low level of economic development under colonial rule? Page 1 of 13  i. The economic policies pursued by the Colonial government in India were concerned more with the promotion and protection of their own interest than the development of the Indian economy. ii. India remained an agricultural country throughout the British period and its agricultural sector remained totally backward. There was commercialization of agriculture, to serve the interests of Great Britain. iii. British rulers never tried to modernize the prevailing industrial structure of India. There was large-scale destruction of world famous handicrafts and cottage industries of the country. iv. By following the policy of discriminating protection, Britishers gained complete control over the entire Indian markets. v. British rulers gradually transformed the Indian economy into a primary producing country, exporting only agricultural products and raw materials necessary for industries in Britain and importing finished goods from Britain. vi. To promote foreign trade and to exploit natural resources of India to their advantage, British ruler built up economic infrastructure, which includes roads and railway network, ports and shipping, irrigation and electricity. vii. The British rulers thoroughly exploited the Indian economy through economic drain. The aforesaid nature of exploitative policies of the British rulers resulted in large-scale poverty, stagnation and backwardness of the Indian economy, alongwith a huge drain of economic resources of the country to Great Britain. 2. What were the main features of Indian economy before the advent of British rule? Main features of Indian economy before the advent of British rule were: i. Prosperous Economy: India was an independent, self-reliant and prosperous economy. ii. Agrarian Economy: Agriculture was a subsistence occupation. Farmers concentrated on production of food crops. Whatever little surplus of the produce was available with the farmers, it was sold to local traders. iii. Well known handicraft industries: India was also known for its handicraft industries in fields of cotton and silk textiles, metal and precious stone works, etc. Handicraft products enjoyed a worldwide market due to its reputation of fine quality of material used and high standards of craftsmanship. iv. Developed external trade & inflow of bullion. Gold and silver: Internal trade of the country was not well-developed but the external trade, on the other hand was developed. India was the leading exporter of manufactured goods. Indian textiles, handicrafts, silk fabrics were exported in substantial quantities. In exchange of these goods, large quantities of the bullion, gold and silver flowed into India from other countries. Page 2 of 13  v. A developed banking system: existed in India. Most of the big banks were located in urban areas. vi. The means of internal transport and communications were relatively underdeveloped. In most parts of the country, roads as such, did not exist. 3. Discuss the land settlement system introduced under the British rule. OR How was the zamindari system of land settlement responsible for the stagnation of India agriculture? i. The stagnation of Indian agriculture was mainly caused because of the systems of land settlement that were introduced by the colonial government. ii. Under the Zamindari system, the zamindari were made the owners of large tracts of land, in return, they had to pay a fixed amount of land revenue to the government. The profit accruing out of the agriculture sector went to the zamindars instead of the cultivators. iii. Zamindars and the colonial government did nothing to improve the condition of agriculture. iv. The main interest of the zamindars was only to collect rent regardless of the economic condition of the cultivators this caused immense misery and social tension among the cultivators. v. The terms of the revenue settlement were also responsible for the zamindars adopting such an attitude; dates for depositing specified sums of revenue were fixed, failing which the zamindars were to lose their rights. vi. Low levels of technology, lack of irrigation facilities and negligible use of fertilizers contributed to the dismal low level of productivity. 4. How did commercialization of agriculture resulted in famines? Commercialization of Agriculture resulted in Famines. i. During the British rule, agriculture was commercialized to cater to the needs of the British industries for necessary raw materials. ii. The British industrialists were always in need of raw materials like cotton, jute, groundnut, sugarcane, etc. to keep their factories running. iii. By offering high prices, the Indian peasants were attracted to production of commercial crops instead of food crops. iv. The extent of commercial agriculture went so far as to make many peasants purchase their food requirements from shops in towns. Page 3 of 13  v. This fall in production of food crops was responsible for frequent famines in India during the British days. 5. Why was there low level of productivity in agriculture during the British rule? i. Low levels of technology, lack of irrigation facilities and negligible use of fertilizers resulted in low level of productivity. ii. The cultivator had neither the means nor any incentive to invest in agriculture. iii. The zamindar had no roots in the villages, while the British rule spent little on agricultural, technical or mass education. iv. All this made it difficult to introduce modern technology, which caused a perpetually low level of productivity. 6. Discuss the main reasons for India’s agricultural stagnation during the colonial period. OR What were the main causes of India’s agricultural stagnation during the colonial period? i. During the British Rule, India's economy was overwhelmingly rural and agricultural in character. There was stagnation in the agricultural sector caused due to the following reasons: ii. Land Settlement System: All the profits accruing out of agricultural sector went to the zamindars in the form of 'lagaan' and they did nothing to improve agricultural condition. This led to a wedge between owners of soil and tillers of the soil. iii. Forced Commercialization of Agriculture: Crops were produced for sale in the market rather than for self-consumption. Farmers were induced by higher price for producing cash crops so that they could be used as raw material for British Industries. iv. Low Level of Productivity: Low levels of technology, lack of irrigation facilities and negligible use of fertilizers resulted in low level of productivity. v. Scarcity of Investment: India's agriculture was facing scarcity of investment in terracing, flood- control and drainage. vi. Starvation in the field of agricultural sector: The extent of commercial agriculture went so far as to make many peasants purchase their food requirements from shops in towns. This fall in production of food crops was responsible for frequent famines in India during the British days. 7. Discuss the adverse effects of partition of the country on the agriculture sector. The partition of the country caused a severe setback to the Indian economy (agricultural sector); i. A major portion of India's highly fertile and irrigated land went to Pakistan. This negatively affected the agricultural output. ii. The loss of fertile areas after partition made India dependent on imports of food grains. Page 4 of 13  iii. The most important jute-producing areas now became part of East Pakistan (now Bangladesh). This caused a lack of raw material for India's jute industry which suffered a serious setback 8. “Decline of handicraft industry adversely affected the Indian economy”. Comment. OR The traditional handicraft industries were ruined by under the British rule. Do you agree with this view? Give reason for your answer. (ans will include only point i-iii) OR What was the effect of systematic deindustrialization policy followed by the British? (ans will include only points iv-vi) i. The main reason for decline of India's renowned handicraft industry was the introduction of 'Discriminatory Tariff Policy' by the colonial government. ii. This policy allowed free export of raw materials from India and free import of final goods of British industry to India. But, heavy duty was imposed on the export of Indian handicrafts. iii. As a result, Indian markets were full of finished goods from Britain which were low priced. It led to the decline of Indian handicrafts, both in the domestic market as well as the export market. iv. Decline of handicraft industries adversely affected the Indian economy in the following ways: a) High Level of Unemployment: The decline of Indian handicrafts resulted in unemployment on a mass scale. The displaced artisans were forced to take up agriculture for their livelihood. This increased the burden of population on villages and over-crowding in agriculture. b) Poverty: The decline these industries was a major cause of poverty of rural people who derived additional income from handicrafts. c) Import of Finished Goods: The Indian made goods could not withstand the foreign competition of machine made cheap goods. It encouraged the import of manufactured goods from Britain. 9. What do you mean by capital goods industry? Discuss the status of such industry during the British rule. i. Capital goods industry refers to those industries which can produce machine tools, which are, in turn, used for producing articles for current consumption. ii. During the British rule, there was hardly any capital goods industry to promote further industrialization in India. iii. British rulers did not pay any attention for their promotion as they always wanted Indians to be dependent on Britain, for the supply of capital goods and heavy equipments. Page 5 of 13 10. “British rule adversely hampered the Industrial sector of India.” Do you agree with this view? Give reason in support of your answer. OR Critically appraise some of the shortfalls of the industrial policy pursued by the British colonial administration. OR What was the two-fold motive behind the systematic deindustrialization by the British in pre- independent India? (ans will include only point iii) The industrial policy pursued by the British colonial administration suffered from the following shortfalls: i. De-industrialization - Decline of Handicraft Industry: British Government systematically destroyed Indian handicraft industries. ii. No modern industrial base was allowed to come up. iii. The primary motive of British rule behind the de-industrialization was two-fold: (a) To get raw materials from India at cheap rates to be used by upcoming modern industries in Britain; (b) To sell finished products of British industries in Indian market at higher prices. iv. Adverse effects of decline of Handicraft Industry: Decline of handicraft industries adversely affected the Indian economy in the following ways: (a) It resulted in unemployment on a mass scale (b) It encouraged import of manufactured goods from Britain as Indian made goods could not withstand foreign competition of machine made cheap goods. v. Lack of Capital Goods Industries: During the British rule, there was hardly any capital goods industry to promote further industrialization in India. vi. Limited role of Public Sector: The limited area of operation of the public sector was also a significant reason for drawback of the industrial sector. The Public sector remained confined only to the railways power generation, communications, ports and some other departmental undertakings. 11. Write a short note on drain of India’s wealth during the British rule. i. ‘Drain of Wealth' refers to the economic policies of the British in India which were primarily directed towards deriving maximum benefit from Indian trade. ii. The expanding industries in Britain needed raw materials and a market for their finished goods. Thus, they set upon the task of pressurizing Indians to sell crops as raw materials or cash crops. iii. Indians were forced to buy Britain's finished goods by a systematic destruction of the local industries. Page 6 of 13  iv. Later, the British made investments in Indian industries and infrastructure and the process of drain of wealth started through profits and export surplus. v. In addition, India was forced to pay the costs of British administration, in the form of home charges which included the cost of running offices in their home country. vi. Export surplus was used not just to make payments for running British offices in Britain but also to meet expenses on war fought by the British government and to import invisible items. 12. Mention two (Describe) important features of India’s occupational structure during British period. OR Highlight the salient features of India’s pre-independence occupational structure. i. Occupational structure in pre-independent India showed the stagnant and underdeveloped character of the Indian economy. ii. Predominance of agricultural sector: Indian occupational structure was unbalanced and static with over 70 per cent of the work force engaged in agricultural activities. iii. The agricultural sector accounted for the largest share of the workforce which remained at a high of 70 - 75 per cent of the workforce. iv. The manufacturing and services sectors accounted for only 10 and 15 – 20 per cent respectively. v. Regional Variation: There existed a growing regional disparity with few states such as Orissa, Rajasthan and Punjab witnessed an increase in agricultural workforce while the states which were then parts of Madras Presidency witnessed a decline in the same and an increase in the manufacturing and service sector. 13. Briefly discuss the state of roads and railways during the British rule. OR How did the construction of railways affect the structure of the Indian economy? (ans from point iv-vi) i. Roads: The colonial administration could not accomplish much on construction of roads due to scarcity of funds. ii. The roads that were built, primarily served the interests of mobilizing the army within India and shifting raw materials from the countryside to the nearest railway station or port to send these far away England or other lucrative foreign destinations. iii. There always remained an acute shortage of all-weather roads to reach out to rural areas during the rainy season. As a result, people living in these areas suffered badly during natural calamities and famines. iv. Railways: The most important contribution of the British rule was to introduce railways in India in 1850. The railways affected the structure of the Indian economy in two Page 7 of 13  important ways: Railways enabled people to undertake long distance travel. It broke geographical and cultural barriers and promoted national integration. v. Secondly, it enhanced commercialization of Indian agriculture, which adversely affected the comparative self- sufficiency of the village economies in India. vi. Railways also promoted the foreign trade but it benefited the Britishers more than the Indians. The construction of railways led to huge economic losses to the Indian economy. 14. State three reasons for development of railways in India. i. To promote commercialization of Indian agriculture, this adversely affected the comparative self- sufficiency of the village economies in India. ii. Railways were introduced to protect and promote the British economic interests of transforming India into supplier of raw materials and consumer of finished industrial products from Britain. iii. Railways were developed to earn profits through foreign trade by linking railways with major ports. 15. Discuss the state of India’s foreign trade during the colonial rule. OR What was the nature of India’s foreign trade under the British rule? OR Explain the position of foreign trade at the time of independence. OR Indicate the volume and direction of trade at the time of independence. (ans will include only points i-iii) i. The restrictive policies of commodity production, trade and tariff pursued by the colonial government adversely affected the structure, composition and volume of India's foreign trade. ii. India became an exporter of primary products and an importer of finished consumer goods and capital goods: India became an exporter of primary products such as raw silk, cotton, wool, sugar, indigo, jute etc. and an importer of finished consumer goods like cotton, silk and woollen clothes and capital goods like light machinery produced in the factories of Britain. iii. Monopoly control of British rule: Britain maintained a monopoly control over India's exports and imports. As a result, more than half of India's foreign trade was restricted to Britain while the rest was allowed with a few other countries like China, Ceylon (SriLanka) and Persia (Iran). iv. Trade through Suez Canal: The opening of the Suez Canal further intensified British control over India's foreign trade. Page 8 of 13  v. Drain of Indian wealth during the British rule: There was a huge export surplus due to excess exports. Several essential commodities-food grains, clothes, kerosene etc. – were scarcely available in the domestic market. vi. Furthermore, this export surplus did not result in any flow of gold or silver into India. Rather, this was used to make payments for the expenses incurred by an office set up by the colonial government in Britain, expenses on war, again fought by the British government, and the import of invisible items, all of which led to the drain of Indian wealth. 16. “The demographic condition during the British rule exhibited all features of a backward Indian economy.” Do you agree? Give reasons in support of your answer. OR Give a quantitative appraisal of India’s demographic profile during the colonial period. OR What was the infant mortality rate during the colonial rule? Why was it so high? (ans will include points iii&iv) First population census was in 1881. It revealed unevenness in India’s population growth. Before 1921 India was in first stage of demographic transition and second stage began after 1921. The year 1921 is describes as the ‘Year of Great Divide’. The demographic condition during the British rule is as follows: i. High Birth Rate and Death Rate: Both birth rate and death rate were very high at nearly 48 and 40 respectively per thousand. ii. Extremely Low Literacy rate: The overall literacy level was less than 16 per cent. Out of this, the female literacy level was at a negligible low of about 7 per cent. iii. High Infant Mortality Rate: The infant mortality rate was quite alarming - about 218 per thousand, in contrast to the infant mortality rate of 44 per thousand in 2011. This was mainly because of the poor state of public health. iv. Poor Health facilities: Public health facilities were either unavailable to large mass of population or, when available, were highly inadequate. As a result, water and air-borne diseases were widespread and took a huge toll on life; overall mortality rate was high. v. Low Life Expectancy: Life expectancy was also very low - 44 years, in contrast to the present 68 years. vi. Widespread Poverty: There was no reliable data about the extent of poverty. But, there is no doubt that extensive poverty prevailed in India during the colonial period. The overall standard of living of common people in India was very low and there was widespread poverty in the country. 17. Briefly discuss the state of infrastructural facilities during the British period. i. Roads: The colonial administration could not accomplish much on construction of roads due to scarcity of funds. The roads that were built, primarily served the interests of Page 9 of 13  mobilizing the army within India and shifting raw materials from the countryside to the nearest railway station or port to send these far away England or other lucrative foreign destinations. There always remained an acute shortage of all-weather roads to reach out to rural areas during the rainy season. As a result, people living in these areas suffered badly during natural calamities and famines. ii. Railways: The most important contribution of the British rule was to introduce railways in India in 1850. The railways affected the structure of the Indian economy in two important ways: Railways enabled people to undertake long distance travel. It broke geographical and cultural barriers and promoted national integration. Secondly, it enhanced commercialization of Indian agriculture, which adversely affected the comparative self- sufficiency of the village economies in India. Railways also promoted the foreign trade but it benefited the Britishers more than the Indians. The construction of railways led to huge economic losses to the Indian economy. iii. Air and Water Transport: British Government took measures for developing the water and air transport. However, their development was far from satisfactory. Inland waterways proved to be uneconomical, as in the case of the Coast Canal on the Orissa coast. This canal was built at a huge cost, but it failed to compete with the railways, and finally, canal had to be abandoned. iv. Communication: Posts and telegraphs were the most popular means of communication. The introduction of the expensive system of electric telegraph in India served the purpose of maintaining law and order. The postal services, despite serving a useful public purpose, remained all through inadequate. 18. When was the Suez Canal opened? How did it affect Indian economy? i. The Suez Canal was opened in 1869. ii. Suez Canal is an artificial waterway running from north to south across the Isthmus of Suez in north-eastern Egypt. iii. The canal provided a direct trade route for ships operating between Britain and India and avoided the need to sail around Africa iv. Strategically and economically it is one of the most important waterways in the world. v. The opening of Suez Canal reduced the cost of transportation and made access to the Indian market easier. 19. Briefly discuss the various reasons for development of infrastructure by the British Government. OR What objectives did the British intend to achieve through the policies of infrastructure development in India? Page 10 of 13  i. The basic objective of British Government to develop infrastructure was not to provide basic amenities to the people, but to serve their own colonial interest and have effective control and administration over the vast Indian Territory. ii. The roads that were built, primarily served the interests of mobilizing the army within India and shifting raw materials from the countryside to the nearest railway station or port to send these far away England or other lucrative foreign destinations. iii. Railways were introduced to protect and promote the British economic interests of transforming India into supplier of raw materials and consumer of finished industrial products from Britain. iv. Railways were developed to earn profits through foreign trade by linking railways with major ports. v. Waterways were to be used to send raw materials to far off places like Britain. vi. The system of Electric Telegraph was introduced at a high cost to serve the purpose of maintaining law and order. 20. Discuss the state of Indian Economy on the Eve of Independence. OR Underscore some of India’s most crucial economic challenges at the time of independence. During the British rule, the Britishers transformed the Indian economy into a colonial, backward, semi-feudal, stagnant, backward, depleted and amputated economy. i. Colonial Economy: In India, colonial exploitation is a long history, spread over nearly 200 years. a) British rule resulted in huge drain of wealth from India, in order to facilitate growing British industry with the supply of raw materials from India. b) They also encouraged commercialization of Indian agriculture to transform Indian economy into a British colony. c) The impact of the British colonial policy was deep on India, even at the time of Independence. ii. Semi-feudal Economy: By the close of the British period, there were two aspects of the Indian economy. a) Introduction of Feudal System: The land settlement system gave birth to feudal relations (landlord-tenant relations). The landlords used to charge very high rate of lagaan and were very cruel to the cultivators. b) Introduction of Capitalist System: The establishment of modern industries led to creation of two classes - capitalist and labourers. S0, India inherited the features of both feudal and capitalist system in the Indian economy Page 11 of 13  iii. Stagnant Economy: A stagnant economy is one which is growing at a very low rate. On the eve of independence, Indian economy was a stagnant economy as country's growth of aggregate real output during the first half of 20th century was less than 2% and growth in per capita output was only 0.5%. iv. Backward Economy: At the end of British rule, Indian economy was backward and underdeveloped. The main reasons for the backwardness of Indian economy were: a) Low level of productivity b) Low per capita income c) Traditional methods of agriculture d) High birth and death rate e) Mass illiteracy f) Vicious cycle of poverty g) Unemployment and underemployment v. Depleted (or Depreciated) Economy: a) Depleted Economy refers to an economy, where no arrangements have been made to replace the physical assets, depreciated due to excessive use. b) During the 2nd World War, Indian industries had to work beyond their capacities to meet the increased demand of plant, machinery, equipments, etc. for the war and no arrangements were made to replace the depreciated physical assets. vi. Amputated Economy: a) The Britishers policy of 'divide and rule' always promoted discrimination between various groups on the basis of religion, caste, language and culture. b) On the eve of Independence, country was geographically divided into two parts: India and Pakistan. c) As a result problem of rehabilitation of large number of refugees from Pakistan and shortage of raw material for jute and cotton mills was faced as most of the cotton and jute growing areas went Pakistan. 21. Were there any positive contributions made by the British in India? Discuss. OR Highlight the positive contributions made by the British in India. i. Self-sufficiency in food grain production: Commercialization of agriculture initiated by British Government resulted in self-sufficiency in food grain production. ii. Better means of transportation: Development of roads and railways provided cheap and rapid transport system and opened up new opportunities of economic and social growth. Railways enabled people to undertake long distance travel. It broke geographical and cultural barriers and promoted national integration. Page 12 of 13 iii. Check on Famines: Roads and railways worked as a great check on the occurrence and impact of famines as food supplies could be transported to the affected areas in case of droughts. iv. Shift to Monetary Economy: British rule helped Indian economy to shift from barter system of exchange (exchange of goods for goods) to monetary system of exchange. v. Effective administrative setup: The British Government had an efficient administration system, which served as a ready reckoner for Indian politicians. vi. Modern postal system: The introduction of the expensive system of electric telegraph in India served the purpose of maintaining law and order. The postal services served a useful public purpose. Page 13 of 13