CHAPTER-1: INDIAN ECONOMY ON THE EVE OF INDEPENDENCE

The condition of Indian Economy on the eve of Independence can be understood from the following subdivisions:

1.      Low level of economic development: 

a)    India had an independent economy prior to the British rule.

b)    Although agriculture was the main source of livelihood, several kinds of manufacturing activities were carried on.

c)     Indian Handicrafts were well known and had worldwide market due to superior quality and craftsmanship.

d)   The colonial government followed policies with a view to protect and promote the economic interests of the home country and not to develop the Indian economy.

e)    Such policies transformed the country into a supplier of raw materials and consumer of finished goods from Britain

f)      The colonial government never made any attempt to estimate India’s national and per capita income.

2.     Agricultural sector: 

a)    About 85% of the people depended on agriculture for their livelihood.

b)    But agriculture productivity became low.

c)     The stagnation in the agriculture was due to the various systems of land settlement.

d)   The main interest of the zamindar’s was to collect rent and did nothing to improve the condition of the farmers.

e)    Low levels of technology, lack of irrigation facilities and less use of fertilizers contributed to low agricultural productivity.

f)      Commercialization of agriculture resulted in relatively higher yield of cash crops which was used by the Industries in Britain.

g)    A large section of tenants and small farmers neither had resources, technology nor incentive to invest in agriculture.

3.     Industrial sector:

a)    India could not develop a sound industrial base under the colonial rule.

b)    Though the handicrafts industries declined, no modern industries were allowed to replace them.

c)     India was a mere exporter of raw materials to the industries in Britain and a market for the British made finished goods.

d)   The decline of handicrafts resulted in massive unemployment.

e)    During the second half of the nineteenth century, modern industry began to take root in India.

f)      Initially, cotton and jute textile mills were set up.

g)    Tata iron and steel company was established in 1907 and few other industries, such as sugar, cement, paper etc were set up after the Second World War.

h)   There were hardly any capital goods industries

i)      Public sector remained confined only to railways, power generation, communication, ports and some other departmental undertakings.