India had an independent economy before the British rule.

Agriculture was the main source of livelihood for majority of population, even though the country’s economy was characterised by various kinds of manufacturing activities.

India had great repute of its handicraft industries in the fields of cotton and silk textiles, metal and precious stone works etc. due to fine quality of material used and the high standards of craftsmanship.

The economic policies persuaded by the colonial government in India were concerned more with the protection and promotion of the economic interest of their home country than with the development of the Indian economy.

Such policies brought about a fundamental change in the structure of the Indian economy-transforming India into supplier of raw materials and consumer of finished industrial products from Britain.

The colonial government never made any sincere attempts to estimate India’s national and Per capita income.

Some notable estimators-Dadabhai Naoroji, William Digby, Findlay Shiras, V.K.R.V. Rao and R.C. Desai attempted to measure these income yielding inconsistent results.

Indian economy was an agrarian Economy- Since about 85 per cent of population residing in villages derived its livelihood directly or indirectly from agriculture sector.

Despite of this fact, India frequently faces acute shortage of food and faced Stagnancy in agriculture sector. Conditions of Farmers was miserable.

Although India was Agrarian economy, country faces continuous stagnancy in agricultural sector. Even though, in absolute terms the sector experienced some growth, but it was due to the expansion of the aggregate area under cultivation.

Features of Indian agrarian sector which leads for stagnancy and miserable condition of Farmers (Peasants):

• Unfair Land Revenue Systems; such as Zamindari, Ryotwari and Mahalwari.
• Forced Commercialisation of Agriculture in which food crop were replaced by cash crops like Indigo, cotton, tea and coffee.
• There was almost negligible use of technology, most of the farmers were using obsolete technology
• Lack of Irrigation facilities (Most farmer were depending on monsoon for irrigation)
• Negligible use of fertilisers.
• India’s agriculture was starved of investment in terracing, flood-control, drainage and desalinisation of soil.

Zamindari System

It’s a three tier relationship between British Government, Zamindars and Peasants.

British Government

Zamindars

Cultivators

Zamindars and Colonial Government did nothing to improve the condition of agriculture.

Farmers were like tenant on their own land, always in fear to lose their land. This discouraged them to make any investment to improve quality of land.

Immense social tension had been created between farmers and zamindars.

Impact of Commercialisation of crop on Indian Farmers:

This hardly helped farmers in improving their economic condition as, instead of producing food crops, now they were producing cash crops which were to be ultimately used by British industries back home. This cause acute shortage of food and rise in their prices in India and country faces frequent famine.

Forced Commercialisation of Crop.

Britishers forced Commercialisation of crop to Indian Farmers; to fulfill the need of British Industries requirement. For example , Farmers were forced to produce Indigo, which is used by textile industry of Britain for Dying.

Meaning of Commercialisation of crop.

It is process under which food crop is replaced by cash crop, it is said to be Commercialisation of crop.

Commercialisation of Indian Crop hardly helped farmers in improving their economic condition

Instead of producing food crops, now they were forced to produce cash crops like Cotton and Indigo which were to be ultimately used by British Textile industries back home.

Only a small section of farmers changed their cropping pattern from food crops to commercial crops and get economical benefits; as a large section of tenants, small farmers and sharecroppers neither had resources and technology nor had incentive to invest in agriculture.

Commercialisation of crop adversely affected self sufficiency of village economy and acted as major factor in bringing the declining state in rural economy.

It is seen that productivity of cash crop increases substantially and food crops fall, Country had to pay its cost by facing frequent famines.

Deindustrialisation in India

Britishers followed the policy of systematically de Industrialising India. The primary motive behind the deindustrialization by the British government was two-fold:�1. To get raw materials from India at cheap rate and thus to reduce India to a mere exporter of raw materials to the British industries.�2. To sell British manufactured goods in Indian Consumer Market which was now deprived of the supply of locally made goods.

Meaning of Deindustrialisation

It is the process of the reduction of production capacity and industrial activity in an economy or region.

Indian Industries are deprived of modern technologies for decades.

Colonial Government exported raw material to Britain, for meeting increased demand of British industries due to mass production revolution in Europe, this cause acute shortage and rise in price of raw material for indigenous handicraft industry.

Unfair Trade policy: Government increased export duty of finished goods causing rise in the price of Indian Finished goods in international market, hampers Indian handicraft industries.

Colonial government waived off Import duty on finished goods from British government. Due to which domestic handicraft industries had to compete with better quality and cheap machine-made products, and forced them to shut down in the absence of demand.

There was hardly any capital goods industry to help promote further industrialization in India.

During the second half of the nineteen, modern industry began to take root in India, Initially, this development was confined to the setting up of cotton and jute textile mills. The cotton textile mills, mainly dominated by Indians, were located in the western parts of the country, namely, Maharashtra and Gujarat, while the jute mills dominated by the foreigners were mainly concentrated in Bengal.

Some other modern industries namely (Cement, Paper, fertilizers and sugar) root up in India after II world war.

The growth rate of new industrial sector and its contribution to the GDP remained very small. Another significant drawback of the new industrial sector was the very limited area of operation of the public sector.

Capital goods industry means industries which can produce machine tools which are, in turn, used for producing articles for current consumption.

There was hardly any capital goods industry to help promote further industrialization in India.

• The iron and steel industries began coming up in the beginning of the twentieth century. The Tata Iron and Steel Company (TISCO) was incorporated in 1907.

There was no substitute to the near wholesale displacement of the country’s traditional handicraft industries. Furthermore, the growth rate of the new industrial sector and its contribution to the Gross Domestic Product (GDP) remained very small.

Another significant drawback of the new industrial sector was the very limited area of operation of the public sector. This sector remained confined only to the railways, power generation, communications, ports and some other departmental undertakings.

Capital goods industry means industries which can produce machine tools which are, in turn, used for producing articles for current consumption.

There was hardly any capital goods industry to help promote further industrialization in India.

• The iron and steel industries began coming up in the beginning of the twentieth century. The Tata Iron and Steel Company (TISCO) was incorporated in 1907.

There was no substitute to the near wholesale displacement of the country’s traditional handicraft industries. Furthermore, the growth rate of the new industrial sector and its contribution to the Gross Domestic Product (GDP) remained very small.

Another significant drawback of the new industrial sector was the very limited area of operation of the public sector. This sector remained confined only to the railways, power generation, communications, ports and some other departmental undertakings.

• These products enjoyed a worldwide market based on the reputation of the fine quality of material used and the high standards of craftsmanship seen in all imports from India.

India was well known for its handicraft industries in the fields of cotton and silk textiles, metal and precious stone works etc.

The most important characteristic of India’s foreign trade throughout the colonial period was the generation of a large export surplus

But this surplus came at a huge cost to the country’s economy. Several essential commodities—food grains, clothes, kerosene etc. — were scarcely available in the domestic market

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.

The most important characteristic of India’s foreign trade throughout the colonial period was the generation of a large export surplus (Situation when country's exports exceed import).

But this surplus came at a huge cost to the country’s economy. Several essential commodities—food grains, clothes, kerosene etc. — were scarcely available in the domestic market

Moreover, 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.

the population of British India were first collected through a census in 1881.

It revealed the unevenness in India’s population growth. India Witness very high birth rate and death rate during this period.

1921 is considered as the year of great divide because after 1921 India has experienced continuous growth in population due to improvement in health facilities.

The overall literacy level was less than 16 per cent. Out of this, the female literacy level was at a negligible low of about seven per cent.

Public health facilities were either unavailable to large chunks of population or, when available, were highly inadequate. Consequently, water and air-borne diseases were rampant and took a huge toll on life.

The infant mortality rate was quite alarming, about 218 per thousand in contrast to the present infant mortality rate of 40 per thousand.

Life expectancy was also very low—44 years in contrast to the present 68 years

The real motive behind this development was not to provide amenities to the Indians but to satisfy its own colonial interest.

The roads that were built primarily with a view to Mobilise within India and drawing out raw materials to railway stations and port to export them to England and other lucrative destinations to maximise their profit.

Electronic Telegraph services was introduced with the objective of serving the fast communication requirement for military, maintaining law and order.

It affected the Indian economy in two ways:

It enabled people to undertake long distance travel and break geographical and cultural barriers.

It fostered Commercialisation of Indian agriculture which adversely affected the self-sufficiency of the village economies in India.

The British introduced railways in India in 1850 and it is considered as one of its most important contributions.

The agricultural sector was directly engaged 70-75%  labour and despite it suffered extremely low productivity.

The industrial sector did not flourish, that is, it was not modernized and diversified under the British rule.

Foreign trade was oriented in such a way, that it feeds only British industries.

The infrastructure was developed with the motive of the development of the economy of their home country.

There were acute poverty and unemployment among the Indian people.

In the whole, the country was facing economic and social challenges.

There are few positives of British rule in India.

Britain introduced a modern, Western-style infrastructure to all aspects and levels of Indian affairs, which was far more efficient and sophisticated than the creaky, monolithic systems before British rule.

Britain also provided India with modern technology, such as the railway network, electricity and, later, air transport.

They commercialized Indian agriculture, which now helps us in competing with other economies.

They gave birth to communication services in India like postal service, electric telegraph, which further developed.