Indian Economy on the Eve of Independence Notes Class 12

This chapter gives us an introduction to our Indian economy after it gained independence from the Britishers. Here are the Indian economy on the eve of independence notes class 12.

Exploitation of Indian Economy under the British Rule

Indian economy under British rule is subjected to colonial exploitation by the British Government. Colonial Exploitation was mainly under the agricultural, industrial, and international trade sectors.

Colonial Exploitation of the Agricultural Sector

Agriculture was exploited through the Zamindari system of Land revenue. Under this system:

• Zamindars were declared as the owners of the soil and they had to pay a fixed sum to the government by way of land revenue and they were free to extract as much as they wished from the tillers of the soil.
• The tiller of the soil got the bare minimum for survival and nothing was left with them as surplus for further investment in agriculture.
• On the other hand, the zamindar spent their revenue income on the luxury of life.
• Little or no investment was made in the development of agriculture.

Colonial Exploitation of Industrial Sector

Before British rule, the Industrial Sector in India was well known for its handicrafts. Indian handicrafts enjoyed a worldwide reputation for their variety of quality.

But these were destroyed by the British government in two ways:

1. The foreign demand for Indian handicrafts was destroyed by ways of heavy export duty.
2. Domestic demand for Indian handicrafts was destroyed by way of duty for the import of British goods into Indian markets.

Colonial Exploitation of International Trade

India’s international trade was exploited through a discriminatory tariff policy. Due to tariff policy, India became an importer of finished goods from Britain and an exporter of raw materials to Britain which implies:

1. Duty-free export of Indian raw materials to fulfill industrial needs in Britain.
2. Duty-free import of British goods to expand demand for British goods in the Indian market.

Features of Indian Agriculture on the Eve of Independence

1) Stagnant Economy

On the eve of Independence, Indian Economy was completely a stagnant economy. A stagnant economy shows little or no growth in income.

2) Agricultural Backwardness

In India, 72% of the country’s working population was engaged in agriculture but its contribution to GDP was only 50%.

3) Rampant Poverty

The bulk of the Indian population was very poor. People were not getting even two square meals a day.

4) Industrial Backwardness

There was a lack of basic and heavy industries in the country. Production of machines was almost negligible. Small-scale and cottage industries were almost ruined. Capital goods requirements were dependent upon imports from Britain.

5) Backward Economy

On the eve of Independence, the Indian Economy was a backward economy which implies low per capita income. In 1947-48, per capita income in India was Rs. 250.

6) Poor Infrastructure

Infrastructure development was also very low at the time of Independence. Infrastructural development includes social as well as economic infrastructure like communication, transport, etc.

Agricultural Sector on the Eve of Independence

1) Low Production & Productivity

Production refers to total output while productivity refers to output per hectare of land.

2) High Degree of Uncertainty

Agriculture being excessively dependent on rainfall showed a high degree of uncertainty. No efforts were made under British rule to develop permanent means of irrigation.

3) Small & Fragmented holdings

Landholdings were both small as well as fragmented. Fragmented holding means a piece here and a piece there.

4) Dominance of Subsistence Farming

Farming was taken mostly as a means of subsistence. Subsistence farming is a form of farming in which crops are produced to provide for the basic needs of the family.

5) Gulf between owners of the soil & tillers of the soil

Agriculture during British Rule was characterized by a gulf between owners of the soil on one hand and tillers of the soil on the other hand.

While the owners shared the output, they hardly shared the cost of production. They were only interested in maximizing their render income & the tillers were only given just enough for subsistence.

6) Land Revenue System under the British Rule

The British government in India introduced a unique system of land revenue. It set up a triangular relationship among the government, the owner, and the tillers of the soil. The system was popularly known as the Zamindari system.

According to this system;

1. Zamindars were considered permanent owners of the soil and they had to pay a fixed sum to the government as land revenue.
2. The Zamindars were free to extract as much as they could from the tillers of the soil.
3. The implications of the system were very alarming for the farmers. It led to unlimited exploitation of the tillers of the soil by the zamindars.
4. The rates of land revenue were frequently raised by the Zamindars which led to frequent eviction of the tillers of the soil. As a result, tillers were reduced to the status of landless laborers getting subsistence wages.

Introduction to Macroeconomics Class 12 Notes

Industrial Sector on the Eve of Independence

During British rule, a systematic de-industrialization take place in India. It implied two things;

• Decay of world-famous traditional Handicraft Industries because of discriminatory policies of the British government.
• Bleak growth of modern industry because of a lack of investment opportunities.

Decay of Handicraft Industry

Before British rule, Indian handicrafts enjoyed a worldwide reputation of excellent quality but the British Raj contributed to their decay.

1) Discriminatory Tariff Policy

The British found India as the best source of raw materials as well as the best market for their industrial product. As a result, a discriminatory tariff policy was pursued. It includes;

• Tariff-free export of raw material from India.
• Tariff-free import of British industrial products into India.

2) Competition from Machine Made Products

The competition forced the Indian craftsmen to shut down their enterprises. The machine-made products from Britain were low-cost products & gave stiff competition to Indian handicrafts.

Also, machine-made products excelled the Indian handicraft products in precision & quality.

3) New Pattern of Demand

Because of the impact of British culture, a new class emerged in India which was keen to adopt the Western style.

It changed the pattern of demand in favor of British products & against Indian products. As a result, Indian industries tended to Perish.

4) Introduction of Railways in India

The introduction of railways expanded the size of the market for low-cost British products and started shrinking for high-cost Indian products. This quickened the process of decay of Indian handicrafts.

Bleak Growth of Modern Industries

Under the British Raj, Modern Industry saw only a bleak growth.

• Some industries were established by private entrepreneurs which include iron & steel, sugar, cement & paper industry.
• The state’s participation in the process of modern industrialization was very limited. It confined only to those areas which would enlarge the size of the market for British products.
• These include Railways, Power generation, ports, and means of communication.
• There was no capital good industry. These industries produce goods like machines & industrial plants.

Foreign Trade Under British Rule

India had acquired eminence in the area of foreign trade since ancient times. India was a well-known exporter of finished goods like fine cotton, silk, textiles, iron goods, wooden goods & precious stones, etc.

1) Net Exporter of Primary Products & Exporter of Finish goods

Due to the Colonial Exploitation, India became a net exporter of raw materials and primary products like raw silk, cotton, wool, jute, indigo, sugar, etc.

On the other hand, it became a net importer of finished goods produced by the British industry including woolen cloths, silk, etc.

2) Monopoly Control of India’s Foreign Trade

During the British Rule, more than 50% of India’s foreign trade was directed towards Britain. Other than Britain, exports were made to Ceylon, Persia, and China.

3) Surplus Trade but only to benefit the British

Surplus trade was not used for the growth and development of the country instead, it was used to meet the administrative expenses of the British government in India and the expenses of war fought by the British government.

Demographic Profile during the British Rule

The following parameters explain the demographic condition during the British rule;

• Birth Rate and Death Rate: Both birth rate and death rate were high, nearly 48 & 40 per thousand respectively.
• Infant Mortality Rate: It is the death rate of children below the age of 1 year which was 218 per thousand but now it is 34 per thousand.
• Life Expectancy: Life expectancy was as low as 32 years which is 68 years now.
• Literacy Rate: Literacy rate refers to the rate of those who can read and write. It was nearly 16% for males and 7% for females.

Occupational Structure on the Eve of Independence

Occupational Structure refers to the distribution of the working population across primary, secondary & tertiary sectors of the economy.

1) Agriculture – The Principal source of Occupation

On the eve of independence, about 72.7% of the working population was engaged in agriculture.

In developed countries like the USA, it was very low around 2%, Japan had 12%, Germany had 4%.

2) Industry – Insignificant source of Occupation

On the eve of independence, only 10.1% of the working population of India was engaged in industries whereas in the USA it was 32%, in England 42% & in Japan 39%.

3) Tertiary – Unbalanced Growth

In the Tertiary sector, 17.2% of the population was engaged. Growth is said to be balanced when all the sectors of the economy are equally developed.

Infrastructure on the Eve of Independence

1) Railways

Railways were developed only to transport finished goods from Britain to the interiors of colonial India.

2) Ports

Ports were developed to handle exports of raw materials to Britain & import of finished goods from Britain.

3) Post & Telegraph

Post and telegraphs were developed to enhance administrative efficiency.

4) Roads

Roads were developed to facilitate the transportation of raw materials from different parts of the country to the ports.

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Positives of British Rule in India

1) Commercial outlook of the farmers

Forced commercialization of Indian agriculture under British rule led to a gradual change in the outlook of the farmers.

2) Opportunities of Employment

The Spread of railways & roadways opened new opportunities for economic and social growth.

3) Control of Famines

Rapid means of transport facilitated the rapid movement of food grains to the famine-affected areas.

4) Monetary System of Exchange

There was the transition from the barter to the monetary system of exchange.

5) Efficient System of Administration

The British government in India left a legacy of an efficient administration system. This served as a readymade reference for our politicians and planners.

So, these are the notes for the Indian Economy on the Eve of Independence. If you have any doubts, you can ask that in the comment section, and I will find the solution to that doubt.