Indian economy on the

Eve of Independence
This chapter aims at making the students :
1. Study the state of the economy prior to
independence.
2. Appreciate the current economic status of India.
3. Understand the factors that led to
backwardness and stagnation of the Indian
economy.

State of Agriculture Sector

Indian economy was majorly rural.
Nearly 85% of the population lived in
villages and derived its livelihood directly or
indirectly from agriculture.
In spite of being mainly agrarian, the
country was not self sufficient in food and
raw material.

More features of agro sector

Low level of productivity- due to lack of
technology, irrigation facilities and
fertilizers.
Adverse effect of partition- this resulted in a
sizable part of highly fertile and irrigated
land going to Pakistan.
The jute and wheat producing fields went to
Pakistan and India was left with just the
processing industries.

Main reasons for agricultural

stagnation and Backwardness
Land settlement system- where the major
part of the profit went as payment of revenue
to the zamindars who never cared for the
farmers conditions.
Commercialization of agriculture- the British
forced the farmers to grow cash crops like
jute, cotton, indigo which were used as raw
material for industries in England. These
crops were useless for Indians farmers, did
not fetch them much money and made the
land infertile.

State of Industrial Sector

Decline of handicraft industries.
No modern industries were allowed to be
set up.
THE BASIC REASON WAS TWO FOLD:
1. To get raw material at cheaper rates for
upcoming industries in Britain.
2. To sell finished goods of British industries
in Indian markets at higher prices.

Effects of the Industrial

Exploitation
1. High level of unemployment prevailed
because of decline of handicraft and
cottage industries.
Heavy dependence on import of finished
goods.
3. Lack of infrastructure development as
heavy and capital goods industries were
discouraged.
Stagnation in GDP growth.

State of Foreign Trade

India became an exporter/ feeder of raw
material which was sold at a very low rate.
It also became heavy importer of finished
goods which drained our revenue.
Monopoly of trade with the British as more
then of our trade was with them.
The opening of Suez canal served as a
direct route between India and Britain.

Drain of Indian Wealth- Causes

Adverse balance of trade .

Payment for expenses incurred by the

offices set up by the British in India

To meet expenses on war fought by the

British.
To import invisible items

Demographic Condition

First official census was conducted in 1881.

High birth and death rates 48 and 40/1000

respectively, with 1921 as the year of Great
Divide.
Extremely low literacy rate: Over all 16%.
Females- 7%.
High infant mortality rate: 218/1000.
Low life expectancy : 32 years.

Causes
Wide spread poverty led to very low
standard of living.
Poor health facilities resulted in frequent
outbreak of water and air borne diseases.

Task for students:

Define all the terms, and compare with the

status at present.

Students work
Analyze the following and answer:
1.Though agriculture was the primary
occupation, there was a lot of regional
variation.

2. The British rule led to the development of

infrastructure like Railways, roads, air and
water transport and communication.

Conclusion

As a result of exploitation for almost 200

years the Indian economy turned into :

Stagnant economy:
Growth of GDP was less than 2% and that od
Per Capita Income ws only 0.5% !
Backward economy:
Mass illiteracy
Traditional methods of farming.
Low productivity in agriculture and industries
High birth and death rates

CONCLUSION

Amputated economy:

Colonial economy