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INDIAN ECONOMY ON THE EVE OF INDEPENDENCE

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Indian economy on the eve of independence.

.

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Before the British rule

The Indian economy of the 18th century was primarily an agricultural economy.
India was famous for Handicraftindustries,
The prominent handicraft industries :

-Cotton and silk textile

-Metal industries

-Precious stone works

-Gold and Silver jewelry

- Perfumery etc.

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Conclusion�

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British rule
The foundation of British Empire in India was laid by Battle of plassey,fought in 1757.
Basic purpose of British rule was to use Indian economy as feeder economy for the development of British economy.
The sole purpose of British colonial rule in India was to reduce the country to being a raw material supplier for great Britain's own rapidly expanding modern industrial base
They exploited India's natural as well as human resources for the glory of their own country.
Finally after 200 years of British rule, India gained independence from them on the 15^th August,1947.

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Indian Economy during the British Rule

Own Economic interest:

- protect and promotion of Britain’s economic interests

Feeder economy:

-supplier of raw materials

- consumer of finished product of British industries

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Low level of economic development under colonial rule.

India had an independent economy before the advent of the British rule.
Agriculture was the main source of livelihood.
India was well-known for its handicraft industries,cotton,silk textiles, metals and precious stone works etc. India was particularly well known for its handicraft industries in the fields of cotton and silk textiles, metal and precious stone works etc.
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
The reputation of the fine quality of material used and the high standards of craftsman ship.

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Agricultural sector under the British Colonial Rule.
Low Agricultural productivity under the British colonial rule.

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AGRICULTURE SECTOR

About -85 % of the Countries population lived mostly in Agrarian Sector.
Agriculture sector was stagnant.
Agriculture productivity become low.
The stagnation in the agriculture sector was caused mainly because of the various systems of Land settlement that were introduced by the colonial government.

British forced the commercialization of agriculture -encouraged the production of cash crops instead of food crops
Due to shortage of food crops country had to suffered from frequent famines
Main reasons for stagnation in agricultural system:-

--- Land settlement system/Revenue settlement.

Commercialization of agriculture
Low level of Productivity
Lack of irrigation facilities
Scarcity of Investment.
Lack of resources.

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Land settlement system:-Zamindars exploit the cultivator by imposing lagan(tax) irrespective of their Poor economic condition

Zamidars took the land of farmers when they were not able to deposit the Lagan on fixed dates
Commercialization of agriculture: means production of crops for sale in the market rather than for self consumption.
Agriculture was commercialized to cater to the needs of the British industries for necessary raw materials.
Eg:cotton ,jute,groundnut,sugarcane,etc
Low levels of technology, Lack of irrigation facilities and negligible use of fertilizers resulted in low level of productivity
This fall in production of food crops was responsible for frequent famines in India during the British days.
Scarcity of investment:-in terracing, flood control and drainage.

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Collapse of India's world famous handicraft industries during the British rule.

Effects of decline of country's world famous indigenous handicraft industries:
1. It created massive unemployment in India
2. It also created a new demand in the Indian consumer market- the increasing imports of cheap manufactured goods from Britain.
Systematic policies pursued by the British-India government led to the collapse of India’s world famous handicraft industries without contributing, in any significant manner, to its replacement by a modern industrial base

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Before the British rule, the Indian handicrafts industry was prospering under the patronage of many local rulers and Nawabs. With the arrival of Britishers, there was de-industrialization, and many artisans lost their job. Also, the monopoly of British goods was one of the reasons for the decline of Indian crafts and industry.

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The two fold motive behind the systematic deindustrialization effected by the British
Collapse of India's world famous handicraft industries during the British rule.
Modern industrial sector during the second half of the nineteenth century.
Lack of capital goods

Short falls of the industrial policy pursued by the colonial administration.

Slow progress
Lack of capital goods industry
No substitute to the country's traditional handicraft industries.
Low growth rate
Limited area of operation of the public sector.

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The economic policies pursued by the colonial government in India were concerned more with protection and promotion of the economic interests of their home country than with the development of the Indian economy.
The colonial government never made any sincere attempt to estimate India's National and percapita income.
Some individual attempts which were made to measure such incomes yielded conflicting and inconsistent results. Among the notable estimators –DadabhaiNaoroji,WilliamDigby,Findley shirras.V.K.R.V.Rao and R.C .Desai

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INDUSTRIAL SECTOR

Dominated by British Rule : Importer of finished and exporter of raw material
The primary motive of the colonial government behind this policy of systematically deindustrializing India was two-fold. The intention was, first, to reduce India to the status of a mere exporter of important raw materials for the upcoming modern industries in Britain and, second, to turn India into a sprawling market for the finished products of those industries so that their continued expansion could be ensured to the maximum advantage of their home country — Britain. In the unfolding economic scenario, the decline of the indigenous handicraft industries created not only massive unemployment in India but also a new demand in the Indian consumer market, which was now deprived of the supply of locally made goods. This demand was profitably met by the increasing imports of cheap manufactured goods from Britain.

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Modern industry began to take root in India but its progress remained very slow 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.
Subsequently, 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. A few other industries in the fields of sugar, cement, paper etc. came up after the Second World War.
Capital goods industry means industries which can produce machine tools which are, in turn, used for producing articles for current consumption. The establishment of a few manufacturing units here and 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

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INDUSTRIAL SECTOR ON THE EVE OF INDEPENDENCE

Systematic Decentralization
Decay of Handicrafts : Discriminatory Economic and Political polices
Discriminatory Tariff Policy of the State
Disappearance of Princely Courts

- Nawabs, Rajas, Princes and Emperors: used to patronize handicrafts

Competition from Machine Made Products: low cost

- Out-excelled Indian handicrafts in quality and precision/exactness

- Forced to shut down business

New Patterns of Demand: New class emerged: adopted western

culture

-changed demand in favor of British products

- Indian industry perished

Introduction of Railways in India: Increased size of market for British goods - increased size of market for Indian products

- Quicked process of decay of Indian handicrafts

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Conclusion

The poor state of Industrial sector during the British rule is illustrated in the following points:-

De-industrialisation.
Decline of handicraft industry.
Adverse effect of decline of handicraft industry.
Lack of capital goods industries
Low contribution to GDP
Limited role of public sector. The setting up of Cotton textile mill by Indians in Maharashtra and Gujarat,
Jute mills dominated by the foreigners in Bengal.
Tata Iron and Steel Company (TISCO) were incorporated in 1907.
Public Sector : restricted to the railways, power generation, communication, ports etc.
A few other industries in the fields of sugar,cement,paper,etc.came up after second world war
Decline in Indian handicraft industries leads to massive unemployment

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FOREIGN TRADE UNDER BRITISH RULE

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India's foreign trade during British period

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FOREIGN TRADE

India has been an important trading nation since ancient times.
Monopoly control of British rule. (the two fold motive)
Discriminatory Trade Policy of Britishers:

-Duty free export of Indian raw material

- Duty free import of finished goods from

Britain

Export surplus was used make to payments for expenses incurred on war fought by the British government
More than half of India’s foreign trade was restricted to Britain while the rest was allowed with few other countries like China, Ceylon (Srilanka) and Persia (Iran).

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Structure, volume and direction of India's foreign trade during the colonial period.

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FOREIGN TRADE UNDER BRITISH RULE

Net Exporter of Primary Products and Importer of Finished Goods

- R.M.: Raw Silk, Cotton, Wool, Jute, Indigo, Sugar etc.

-Import: Cotton , Silk and Woolen cloths , capital goods

Monopoly Control of India’s Foreign Trade

- More than 50% Foreign Trade directed towards Britain

Surplus Trade but only to benefit of Britain

- To cover up administration and war expenses

- Huge drain of wealth from India

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Importance of the Suez Canal to India

The construction of the Suez Canal reduced the distance between India and Europe significantly. Without the Suez Canal, Indian ships would have to go around the Cape of Good Hope - Southern tip of Africa and all the way up the west coast of Africa - a much longer and expensive route.
Increased Trade flows for India: Prior to the construction of the Suez Canal, India had to transport its goods to Europe using the Cape of Good Hope. This was a much longer route and was a major hindrance to the trade between Europe and India
Security Improvement. For India, one of the major benefits of using the Suez Canal in transporting goods is because it is a secure route. The canal experiences less piracy activities as compared to the other routes .

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The Suez Canal (Arabic: قَنَاةُ السُّوَيْسِ‎, Qanātu s-Suways) is an artificial sea-level waterway in Egypt, connecting the Mediterranean Sea to the Red Sea through the Isthmus of Suez and dividing Africa and Asia. The canal is part of the Silk Road that connects Europe with Asia.

In 1858, Ferdinand de Lesseps formed the Suez Canal Company for the express purpose of building the canal. Construction of the canal lasted from 1859 to 1869 and took place under the regional authority of the Ottoman Empire. The canal officially opened on 17 November 1869. It offers vessels a direct route between the North Atlantic and northern Indian oceans via the Mediterranean Sea and the Red Sea, avoiding the South Atlantic and southern Indian oceans and reducing the journey distance from the Arabian Sea to London by approximately 8,900 kilometres (5,500 mi), or 10 days at 20 knots (37 km/h; 23 mph) to 8 days at 24 knots (44 km/h; 28 mph).

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The Silk Route was and is a network of trade routes connecting the East and West, and was central to the economic, cultural, political, and religious interactions between these regions from the 2nd century BCE to the 18th century.

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DEMOGRAPHIC PROFILE DURING BRITISH RULE

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Various details about the population of British India were first collected through a census in 1881, it revealed the unevenness in India’s population growth.
Before 1921 India was in the first stage of demographic transition.
The second stage of transition began after 1921.

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THEORY OF DEMOGRAPHIC TRANSITION

STAGE-I : High Birth and Death Rate

- Birth Rate : Social beliefs and customs

- Death Rate: Lack of sanitation and medical facilities

STAGE-II: High Birth and Low Death Rate

- 1921: Stage of Population Explosion

STAGE-III: Low Birth and Low Death Rate

- Due to: -Economic change

- Change in Social attitude

- Family Planning Facilities

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DEMOGRAPHIC PROFILE DURING BRITISH RULE

Birth Rate and Death Rate

-BR: 48 per 1000

-DR: 40 per 1000

- Show massive poverty

Infant Mortality Rate (Death Rate below 1 Year)

- Then: 218 per 1000

- Now: 34 per 1000

- Show poor healthcare

Life Expectancy

- Then: 32 years

- Now : 68 years

Literacy Rate

-Overall: 16%

-Female: 7% only

- Show Social Backwardness

-Gender bias

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Reasons�

High Birth Rate and Death Rate
Extremely Low Literacy rate
Lack of adequate public health facilities
High infant mortality rate
Low life expectancy
Extensive poverty

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Occupational structure refers to distribution of working persons across different industries and sectors.
The state of occupational structure on the eve of Independence was as follows: (a) Pre-dominance of Agriculture Sector. The agricultural sector accounted for the largest share of work-force which was 72 per cent. The manufacturing and service sectors accounted for 10 per cent and 18 per cent respectively.
During the colonial period, occupational structure in India showed little sign of change. The state of occupational structure during the British rule can be summarized as under:
Predominance of primary occupation.
Regional variation.
The states of Tamilnadu, Andhra Pradesh, Kerala, Karnataka, Maharashtra and West Bengal witnessed a decline in dependence of workforce on the agricultural sector with a commensurate increase in the manufacturing and service sector.
However ,during the sametime,there had been an increase in the share of workforce in agriculture in states such as Orissa,Rajastan and Punjab.

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OCCUPATIONAL STRUCTURE ON THE EVE OF INDEPENDENCE

Agriculture: The Principal Source of Occupation

-India : 72% population

- US: 2%

- Japan: 12%

-Germany: 4%

Industry : An Insignificant Source of Occupation

- Only 9% population

Unbalanced Growth

-Balanced: When all sectors grow equally

- Economy: Infant stage of growth

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Infrastructure meaning
Infrastructure can be referred to as the basic physical operations of a nation or a business such as communication, transportation, water, sewage, etc. This operation can be a highly expensive investment and an important aspect of the economic development of a country.
Infrastructure in India
During the colonial period in India, the basic infrastructure such as water transport, railways, posts and telegraphs, and ports were developed, but to serve the colonial interest rather than serving the common people. Roads constructed were not fit for modern India, could not connect rural areas, and the shortage of well-constructed roads, especially in the rainy season, was the drawback.

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However, in the year 1850, the introduction of the railways was one of the most important contributions by the British. This initiative transformed the Indian economy in two ways. One, it led people to travel long distances and break the geographical barrier, and second, it commercialized Indian agriculture that adversely influenced the self-sufficiency of the village economies in India.

With the development of railways and roads, the colonial regulation also took steps for the improvement of the sea lanes and inland trade. However, for the postal services, though it was useful assistance for the society, it remained insufficient.

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INFRASTRUCTURE ON THE EVE OF INDEPENDENCE

Infrastructure development in India

Construction of all weather roads by the British.
Introduction of Railways in India
Development of the Inland trade and sea lanes.

Railways

- To transport British goods from Britain

Ports

- Export of raw material to Britain

- Import of finished goods from Britain

Post and Telegraph

- Enhance administrative efficiency

Roads

- Facilitate transportation of raw material from different parts

to ports

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India’s first railway line was laid between Roorkee to Piran Collier during the British period. The first steam engine was used on this railway line. The British had their meaning behind this, but they laid the railway line. There was a severe drought in the northwestern province of British India between 1837–1838.
Why were British Railways introduced in India?
1844, the then-governor general of the country, Lord Hardinge, encouraged private organizations to start the railway system in the country. Under his guidance, the East India Company created two rail companies, which pulled investors from the Victorian United Kingdom to India.

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How fast was the railway in India in 1900?
There was no looking back after that. Railway lines snaked across all over India at incredible speed and by 1900, undivided India had a whopping 24,000 km of Railway Track and more than 50 scheduled services. The British Government and princely states pitched in with their own networks.
Which is the first passenger train in India?
India’s first passenger train traveled from Mumbai to Tana, carrying a total of 400 passengers and 1.6 kilometers. From there, Indian Railways has developed into a superpower industry. Today India is synonymous with transportation, but budget-friendly and the common man is “Indian Railways”, where on the one hand we have ordinary railways.

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Indian Railways is the fourth largest railway system in the world. The system was established in the 19th century and serves thousands of tourists and locals every day. India’s first passenger train traveled from Mumbai to Tana, carrying a total of 400 passengers and 1.6 kilometers. From there, Indian Railways has developed into a superpower industry.
Today India is synonymous with transportation, but budget-friendly and the common man is “Indian Railways”, where on the one hand we have ordinary railways. Every day, the railway sector in India is making new progress and has many high-speed and luxury trains in India. Now we have moved from simple trains to bullet train.
Today, the Indian Railways manages the track more than 120,000 km of the country. The changing face of Indian Railways is preparing for the future with the much more initiative. The current Rail Minister “Piyush Goyal” of Indian Railways said in May the free WiFi services would be provided at more than 7,000 stations in 2019.

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Why did the British build ports in India?
Ports were developed to export raw materials and import finished goods from Britain. 4. Communication Post and telegraphs were developed for the purpose of maintaining law and order. The expensive system of the electric telegraph in India was developed to enhance administrative efficiency.
What was the development of India during British rule?
During the British rule, there was some infrastructural development in areas such as railways, ports, water transport, posts, and telegraphs. But the motive behind this development was simply to foster the colonial interest of the British government. They were never interested in the growth of Indian economy.
What is the most important port in India?
Muziris, the ancient port city located in today’s Indian state of Kerala, was one of the most important trading ports in the world almost 2,000 years ago.

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Transportation
The English took upon the projects for finding cheap and easy means of transport both on land and in water. Steps were taken to improve the condition of the existing roads. Some of the important cities, ports and, markets were connected by roads. But Lord William Bethink first initiated the project to connect Calcutta (Kolkata) with the frontier provinces of India. By that time Kolkata was the capital of the British Empire.

Works on this project started in 1839 to connect Kolkata with Delhi and it known as the Grand Trunk Road. Later this road was extended up to Lahore and Peshawar. To supervise and coordinate the construction works of roads, bridges, canals etc. Lord Dalhousie set upon the Public Works Department under a Chief Engineer.

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Water Ways:
Water ways were more important for commercial purposes. Navigation canals were dug. Steamships and steam boats were introduced in the rivers, this means of transport proved cheaper and easier both for the merchants and people.
Railways:
However, introduction of railways was the milestone in the Indian transport system. The English observed the benefits of railways as the best means for distribution of finished goods and supply of raw materials.
The English realized that only a railway net work could meet their colonial needs. Therefore, some Englishmen thought of introducing railways in India. It was Rowland Macdonald Stephenson who argued that railways would be the easy and cheap means of transport for British industrial goods to the markets of interior India and for the raw materials to the sea-ports.

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How did the British introduce modern communication to India?
Modern communication networks which were introduced by the British include posts and telegraphs. Prior to the British Rule, the means of communication and transport which had existed in India were relatively backward.
What was the transportation like before British rule in India?
Prior to the British Rule, the means of communication and transport which had existed in India were relatively backward. There were no modern rail or road networks which connected important industrial and commercial centres located far apart.
Why did the British need a communication system?
Fourth, the British also felt the need of communication system in order to establish links between far off places and the administrative headquarters. Since the company maintained vast empire in India, it was an administrative need to connect all parts of India with centers of administration.

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Postal System:
No less important was the modernization of postal system in India by the British. Indian postal system was in deplorable condition. Posts were sent by horses and by postmen. This system used to take very long time to carry letters or news from one place to another. In addition, there was delay for various other reasons.
Government letters were sent by its machinery. Even rich persons made their own arrangements for sending messages. But common people faced lot of difficulties. Existing system of cash payment before posting a letter put the common people under hardship. Cost of postage depended on the distance to be covered by the letter. It was very costly affair at times.

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Telegraph:
Dalhousie decided to introduce the electric telegraph in India as quick and better communication media.
He had the benefits of this by system in minds as found in Europe and North America. Partly he was prompted by the administrative need of establishing direct communication links between the Central Government at Kolkata and the provincial capitals. Further, as an imperialist, partly he felt the need of quick and constant touch with the military headquarters.

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Results:
Means of transport and communication had tremendous effect both on the Government of India and on the people. It benefited all in many ways. Opening of cheap and easy transport system profited the British merchants and capitalists the most.
It accelerated the pace of colonialism and economic exploitation of India. Within a short period, India was converted into a market for the British machine-products and a source of raw materials for the British industries.
Economy of Britain flourished at the cost of Indian economy. The Government of India succeeded in suppressing all internal resistances and in defending the empire against all external aggressions. It added efficiency and greater mobility to the army and military operations, hereafter, became easier and successful. It brought safety and stability for the British Empire in India.

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However, these reforms proved a boon for the Indians. Railways and roads established greater contact among the people of various parts of India. It also opened greater opportunity for inter-action among the people.

It changed the attitude of the people and broadened the outlook of Indians. Gradually it developed the feeling of oneness and commitment towards the motherland. Historians hold the view that it was the beginning of patriotism and so to say nationalism.

With the change in economic system, pattern of agriculture changed. Previously emphasis was given for production of food-crops. Presently importance was given for production of cash-crops like cotton, jute, tea etc. Thus, process of commercialization of agriculture started.

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