CBSE Class 11 Economics Chapter 1 Indian Economy on the Eve of Independence

Class Notes of Chapter 1: Indian Economy on the Eve of  Independence

Class 11th Economics

Indian Economy on the Eve of Independence

      Topics:

• Points to Remember
• Conditions in the Indian Economy on the Eve of Independence
• Backward Agricultural Sector
• Less Developed Industrial Sector
• Foreign Trade Characteristic
• Adverse Demographic Condition
• Underdeveloped Infrastructure
• More Dependence on the Primary Sector
• Some Positive Side-Effects of the British Rule in India
• NCERT Solutions
• Important Questions

Points to Remember
The economy of a country includes all production, distribution or economic activities that relate with people and determines the standard of living. On the eve of independence Indian economy was in very bad shape due to the presence of British colonial rule.
The sole purpose of the British colonial rule in India was to reduce the country to being a feeder economy for Great Britain’s own rapidly expanding modern industrial base. Thus, in 1947, when the British transferred power back to India, we inherited a crippled economy.

Conditions in the Indian Economy on the Eve of Independence

Low level of economic development: The colonial govt., never made any sincere attempt to estimate India’s national and per capita income.
The estimates given by Dr. V.K.R.V. Rao suggested that the growth rate of GDP was about 2% per annum while the growth of per capita output was just 1/2 (0.5) percent per annum.

Backward Agricultural Sector

 Due to

• Land tenure system- Zamindari system, Mahalwari system, and Ryotwari system.
• The forced commercialization of Agriculture
• Partition of the country.

Less Developed Industrial Sector

• De-industrialization- Decline of Indian handicraft industry.
• Capital goods industries were lacking
• Limited operation of public sector
• Discriminatory tariff policy.
• Competition from Machine made products
• Introduction of Railways in India
• Lack of Heavy and Basic Industries

Foreign Trade Characteristic

• The net exporter of raw material and importer of the finished good.
• Britain had monopoly control over foreign trade.
• The drain of India’s wealth.

Adverse Demographic Condition

• High death and Birth rate-40 and 48 per thousand respectively.
• High infant mortality rate-218 per thousand.
• Mass Illiteracy-84% illiterate.
• Low life expectancy- 44 years
• Low standard of living- People used to spend 80% to 90% of their income on basic needs.
• Lack of public health facilities
• Female Literacy level was about 7%.

Underdeveloped Infrastructure

The absence of good roads, electricity generation, health, education, and communication. However, some efforts have been made to develop basic infrastructure like roads, railways, ports, water transport, post & telegraph by the British rulers. The main motive was not to provide basic amenities to the Indian people but for their colonial interest.

More Dependence on the Primary Sector

The largest share of the workforce which was 72% was engaged in agriculture.
10% in manufacturing while 18% workforce was engaged in the service sector.

Some Positive Side-Effects of the British Rule in India

• Provided transport facilities, largely in terms of the railway.
• Development of ports.
• Provision of post and telegraph services.
• British Govt. left a base of a strong and efficient administrative setup.
• Political and economic unification of the country.
• Evolution of banking and monetary system.

NCERT Solutions

Question 1: Name some notable economists who estimated India’s per capita income during the colonial period.

Answer: Some notable economists who estimated India’s per capita income during the colonial period are as follows:

• Dadabhai Naoroji
• William Digby
• Findlay Shirras
• V K R V Rao
• R C Desai

Question 2: What was the focus of the economic policies pursued by the colonial government in India? What were the impacts of these policies?

Answer: The colonial rulers were more interested in pursuing their own economic goals rather than that of India. They focused on making India a net supplier of raw materials so that the British industry could get plenty of raw materials. Moreover, they deliberately worked on destroying the local industry so that a huge market for British manufactured goods could be created in India. Some of the impacts of such policies are as follows:

The handicraft sector came to be in a terminal decline. This resulted in large-scale employment.

British manufactured goods flooded the Indian market and people lapped them up because they were cheaper.

The GDP of India reduced drastically during the colonial rule.

No local industry could grow during the colonial period.

Question 3: What were the main causes of India’s agricultural stagnation during the colonial period?

Answer: Following are the main causes of India’s agricultural stagnation during the colonial period:

• Various land settlement systems which were introduced by the British from time to time were faulty. The system ensured that zamindars only focused on collecting revenue but paid no attention to land development.
• The British rulers paid no attention to develop an irrigation system and hence agriculture was highly dependent on monsoon.
• No up gradation in technology could take place during this period and as a result, farming remained at the level of subsistence farming.

Question 4: Name some modern industries which were in operation in our country at the time of independence.

Answer: Following are some of the modern industries which were in operation on our country at the time of independence:

• Textiles Industry
• Iron and Steel Industry
• Sugar Industry
• Cement Industry
• 
  

Question 5: What was the two-fold motive behind the systematic deindustrialization effected by the British in pre-independent India?

Answer: The two-fold motive behind the systematic deindustrialization effected by the British in pre-independence India is as follows:

• To make India are the net supplier of raw materials
• To make a huge market for British manufactured goods in India

Question 6: The traditional handicrafts industries were ruined under British rule. Do you agree with this view? Give reasons in support of your answer.

Answer: This is a correct statement that the traditional handicrafts industries were ruined under British rule. This is evident from the fact that by the fag end of the colonial rule in India, most of the workers in the handloom and handicraft sector were unemployed. This is also evident from the fact that more and more people were preferring clothes from Manchester over the clothes made by the local weavers. Similarly, most of the goods consumed by people were made in Britain as Indian made goods could not compete with them.

Question 7: What objectives did the British intend to achieve through their policies of infrastructure development in India?

Answer: It is beyond doubt that the British developed a lot of infrastructure in India; like railways, roads and postal and telegraph services. But while doing so, their goal was never to serve the people of India. They built infrastructure to serve their own interests. Roads were developed so that the armed forces could be mobilized and raw materials could be transported to the nearest railway station. The rail network was developed so that raw materials and finished goods could be easily transported across the country. Telegraph services were developed for security purposes.

Question 8: Critically appraise some of the shortfalls of the industrial policy pursued by the British colonial administration.

Answer: The industrial policy pursued by the British colonial administration was having many shortfalls. Their policy never promoted the development of indigenous industry. This led to a continuous decline of the Indian industry. Some new industries; like cotton textiles and iron and steel began to come up at the beginning of the 20th century, but it was not because of any friendly British policy. Most of the industries came up through private capital which was invested the Indian entrepreneurs. However, the jute textiles industry was mainly dominated by British entrepreneurs. The Second World War created a good demand for Indian manufactured goods in Britain and this led to some development of industries in India. But the British rulers never tried to develop any public sector enterprise; except the railways. Nevertheless, railways helped a lot in developing various industries in India.

Question 9: What do you understand by the drain of Indian wealth during the colonial period?

Answer: Throughout the colonial rule, India became a net exporter of raw materials and a net importer of finished goods. Foreign trade from India was mainly restricted to Britain and to some other countries; like China, Ceylon and Iran. During the colonial period, India was an export surplus country, but this did not mean any foreign exchange earnings or inflow of gold or silver to India. Whatever wealth came to India; in the form of bullion was utilized by the British rulers to maintain their offices in India. Thus, in spite of surplus exports, Indian did not get any benefit from the inflow of bullion or foreign exchange. This resulted in a huge drain of Indian wealth during the colonial period.

Question 10: Which is regarded as the defining year to mark the demographic transition from its first to the second decisive stage?

Answer: The year 1921 is regarded as the defining year to mark the demographic transition from its first to the second decisive stage.

Question 11: Give a quantitative appraisal of India’s demographic profile during the colonial period.

Answer: Following is the quantitative appraisal of India’s demographic profile during the colonial period:

• Overall literacy level was less than 16% and female literacy was less than 7%.
• Infant mortality was very high at 218 per 1000 live births.
• Life expectancy was 44 years.

Question 12: Highlight the salient features of India’s pre-independence occupational structure.

Answer: The agricultural sector employed the largest portion of the workforce; at the level of 70 to 75%. The manufacturing sector employed about 10% of the workforce. The services sector employed about 15 to 20% of the workforce.

But the occupational structure was full of regional variations. For example; in Madras Presidency, Bombay and Bengal; dependence on agriculture had significantly reduced. Development of various industries in these regions can be attributed to such variations. In these regions, more and more people were joining the manufacturing and services sector.

Question 13: Underscore some of India’s most crucial economic challenges at the time of independence.

Answer: Some of the most crucial economic challenges at the time of independence were as follows:

• Development and public orientation of railways and roadways.
• Development of basic industries; like iron and steel.
• Improvement of private capital.
• Increasing employment opportunities.
• Increasing various aspects of human development index; like literacy, child mortality, life expectancy, etc.
• Technology up gradation in agriculture and land reforms.

Question 14: When was India’s first official census operation undertaken?

Answer: India’s first official census operation was undertaken in 1881.

Question 15: Indicate the volume and direction of trade at the time of independence.

Answer: At the time of independence, India was an exporter of primary products; like raw silk, cotton, wool, sugar, indigo, etc. Additionally, India was a net importer of finished goods from Britain. Britain was the main trading partner of India. However, trade also continued with China, Sri Lanka, and Iran.

Question 16: Were there any positive contributions made by the British in India? Discuss.

Answer: While we discuss all the negatives associated with the British rule in India, we often tend to forget many positives which came to India due to colonial rule. The biggest contribution by the British was the construction of the railways. Railways connected almost the whole country which facilitated inland trade and cross-cultural exchange. The British also introduced postal and telegraph services which helped in communication and thus supported business activities. The British also made fundamental changes in the laws of the land which further helped in enhancing the business environment in India.

Important Questions

Q.What was the focus of the economic policies pursued by the colonial government in India? What were the impacts of these policies?

A. The main focus of the economic policies pursued by the colonial government was to make India a mere supplier of Britain’s own flourishing industrial base. The policies were concerned mainly with the fortification and advancement for their home country. The interests of the Indian economy were completely ignored. Such policies brought structural changes in the Indian economy by transforming it into a supplier of raw materials and consumer of finished products from Britain. The

impacts of these policies are discussed as follows in detail:

• Low Economic Development: Throughout the British rule, the Indian economy experienced very low level of economic development. As per some researches, the Indian economy grew at even less than two percent during 1900-50. The reason for such a low level of development was that the British government was more concerned with the promotion of economic interests of their home country. Consequently, the colonial rule transformed India’s agriculture sector to a mere supplier of raw materials for the British industries. This not only affected the production of the agricultural sector but also ruined the small manufacturing units like handicrafts and cotton industries. These manufacturing units faced a stiff competition from the British machine-made textiles and handlooms.

• The Backwardness of Indian Agriculture: Backwardness of Indian Agriculture Under the colonial rule, India was basically an agrarian economy employing nearly 85% of its population. Nevertheless, the growth of the agriculture sector was meager. This was due to the prevalence of various systems of Land Settlement, particularly the Zamindari system. Under this system, the zamindars (owners of land) were required to pay very high revenue (Lagaan) to the British government, which they used to collect from the peasants (landless laborers, who were actually cultivating). The zamindars were mainly concerned with extracting high revenues from the peasants but never took any steps to improve the productivity of the land. Moreover, in order to feed British industries with cheap raw materials, the Indian peasants were forced to grow cash crops (such as indigo, cotton, etc.) instead of food crops (such as rice and wheat). This commercialization of agriculture not only increased the burden of high revenues on the poor peasants but also led India to face the shortage of food grains. Therefore, Indian agriculture remained backward and primitive.

• The Deindustrialization of Indian Economy: India failed to develop a sound and strong industrial base during the colonial rule. The status of the industrial sector during British rule can be well defined by the term ‘systematic deindustrialization’. The cause of deindustrialization can be attributed to the downfall of India’s handicraft industry and the cause of the bleak growth of modern industry was the lack of investment. On one hand, the British government imposed heavy tariffs on the export of Indian handicraft products and on the other hand, allowed free exports of Indian raw materials to Britain and free imports of British products to India. As a result of the heavy tariffs, the Indian exports became costlier and its demand in the international market fell drastically that led to the collapse of Indian handicrafts industries. Simultaneously, the demand for the handicrafts products also fell in the domestic markets due to stiff competition from the machine made textiles of Britain. As a result, the domestic industries lacked investment and growth initiatives.

• Regression in Foreign Trade: During the colonial rule, the British government owned the monopoly power over India’s foreign trade. The British government used the trade policy according to the interests of their home country. The exports and imports transactions were restricted only to India and Britain. On one hand, the exports from India provided cheap raw materials to the British industries and on the other hand, India's imports from Britain provided a virgin market for Britain’s products. In either way, British industries were benefitted. Moreover, the surplus generated from t foreign trade was not invested in the Indian economy; instead, it was used in administrative and war purposes by Britain to spread their colonial power.

Q. Name some notable economists who estimated India’s per capita income during the colonial period.

A. As the British government was never interested in the upliftment of our country, so they never took any initiative to measure India’s national and per capita income. Though some of the economists tried to estimate India’s national income and per capita income during the colonial rule, the results are mixed and conflicting. The following are some of the notable economists who were engaged in the estimation of national income and per capita income:

• Dadabhai Naroji
• William Digby
• Findlay Shirras
• V.K.R.V Rao
• R.C. Desai

Out of these, V.K.R.V Rao's estimates are considered to be significant. Most of these studies revealed that the Indian economy grew at even less than two percent during 1900-50 with half percent growth in per capita output per year.

Q.  What were the main causes of India’s agricultural stagnation during the colonial period?

A. Under the colonial rule, India was basically an agrarian economy, employing nearly 85% of its population. Nevertheless, the growth of the agriculture sector was meager. The following are the causes explaining stagnancy in Indian agriculture sector during the colonial rule:

• Introduction of Land Revenue System: This was due to the prevalence of various systems of Land Settlement, particularly Zamindari system. This system was introduced by Lord Cornwallis in Bengal in 1793. Under this system, the zamindars(owners of land) were required to pay very high revenue (Lagaan) to the British government, which they used to collect from the peasants (landless laborers, who were actually cultivating). The zamindars were mainly concerned with extracting high revenues from the peasants but never took any steps to improve the productivity of the land. This resulted in low agricultural productivity and worsened the peasants economically.
• Forceful Commercialisation: Initially before the British rule, the farmers were practicing conventional subsistence farming. They used to grow crops like rice and wheat for their own consumption. But afterward, in order to feed British industries with cheap raw materials, the Indian farmers were forced to grow the commercial crop (like indigo required by British industries to dye textiles) instead of food crops (like rice and wheat). This led to the commercialization of Indian agriculture. This commercialization of Indian agriculture not only increased the burden of high revenues on the poor farmers but also led India to face the shortage of food grains, resources, technology, and investment. Therefore, Indian agriculture remained backward and primitive.
• Lack of Irrigation Facilities and Resources: Besides the above factors, Indian agricultural sector also faced lack of irrigation facilities, insignificant use of fertilizers, lack of investment, frequent famines and other natural calamities, etc.that further exaggerated the agricultural performance and made it more vulnerable.

Q. Name some modern industries which were in operation in our country at the time of independence.

 A. The second half of the nineteenth century witnessed the emergence of modern industries. At the initial stage, development was confined to setting up of cotton and jute textile mills. The western parts of the country Maharashtra and Gujarat was the hub for cotton textile mills which were mainly dominated by the Indians whereas the jute industries were mainly concentrated in Bengal and were dominated by the British. At the beginning of the 20thcentury, Iron and steel industries also started emerging gradually. It was incorporated in 1907. Some other industries that were operating at a smaller scale during the British era were sugar industry, cement industry, and paper industry.

Q. What was the two-fold motive behind the systematic deindustrialization affected by the British in pre-independent India? 

A. The following are the two-fold motives behind the systematic deindustrialization affected by the British:

• Making India a Supplier of Raw Materials: The main motive of the British government was to make India a mere supplier of cheap raw materials to feed its own flourishing industrial base. 
• Making India a Market for Finished Goods: Another important objective of the British government was to use India as a virgin market to sell the finished goods produced by the British industries.

Q. Q. What are the good and bad impacts of the British government on the Indian economy?

A. Good Effects

• Commercial agriculture started showing green shoots. It implied a good breakthrough as it started changing the outlook of farmers and methods of farming. Farming gradually came to be accepted as a profitable venture rather than merely a means of subsistence.
• The spread of railways, roadways, and communications opened up new opportunities for economic and social growth. It also implied greater cultural affinity across different parts of the country.
• Expanding the means of transportation and communication served as a support system to combat the spread of famines. Food supplies could be rushed to the drought-hit areas.
• The British rule in India left a legacy of an efficient system of administration. This served as a ready reckoner for our politicians and planners.
• There was a significant transition from a barter system of exchange facilitated specialization of labor, large-scale production and spread of market.

Bad Effects

• The commercialization of Agriculture. The British pursued a trade policy which encourages the export of raw materials and import of manufactured goods.
• New Land Revenue System. This system proved suicidal for the agricultural sector in India. The land improvement was ignored by both owners (the absentee landlords) and the tenant cultivators.
• The decline of handicraft. Prior to Industrial Revolution in Britain, the East India Company concentrated on the export of Indian spices and other manufactured goods, like textiles.however, the start of industrial revolution reversed the character of India’s foreign trade.due to policies of British rulers, India became an exporter of raw material and importer of finished goods.

Q.  Explain infrastructure on the eve of independence. 

A. The infrastructure comprises of such industries which help in the growth of other industries. Example: transport, electricity, communication etc. during the British rule, some basic infrastructure was developed in the form of railways, water transport, ports, post, and telegraph, etc. however, the real intention behind these developments was to serve their own colonial interest. It is clear from the following points.

• Railways:  British rulers introduced railways in India in 1850 and Indian Railways began their operations in 1853. It was considered one of the most important contributions of British rulers in India. 

1. There was a cheap and rapid movement of people from one place to another place. It broke geographical and cultural barriers. It promoted national unity. 
2. It increased commercialization of Indian agriculture. This favorably affected the self-sufficiency of the Indian village economy.
3. The volume of India’s export trade expanded substantially although, its benefits did not accrue much to the Indian people.
4. India’s Industrial development (e.g., cotton textile industries in Bombay, jute industry in Calcutta, tea plantation in Assam and Bengal) was due to the development and expansion of railways.

• Roads: The roads were built primarily to mobilize army within India and carrying out raw materials to the nearest railway station or to the port to sent it to Britain. There was an acute shortage of all-weather metal roads in the village side. Because if this, rural people suffered during natural calamities, famines, etc. 
• Water Transport and Air Transport Britishers took measures for developing water transport and air transport. Their development was far from satisfaction. Indian shipping companies had to face severe competition from foreign shipping companies. The main purpose behind their development was to serve Britain's colonial interest.
• Communication Modern postal system started in India in 1837. The telecommunication services were introduced in India. The first telegraph line was opened in 1857.

Q. State foreign trade on the eve of independence.

A. The state of India’s foreign trade on the eve of independence was as follows:

• Net Exporter of Raw Material and Importer of Finished Goods. India became an exporter of primary products such as silk, cotton, wool, sugar, jute etc. and an importer of finished consumer goods like cotton, silk and woolen clothes and capital goods like light machinery produced in the factories of Britain. The UK was the chief supplier to India contributing to over 31 percent of total imports at the time of independence. The principal item of import was food grains and by 1947 food grain imports had touched the level of 3 million tonnes.
• Britain Had Monopoly control in Foreign Trade. The opening of the Suez Canal in 1869 served as a direct route for the ships operating between India and Britain. The canal connected Port Said on the Mediterranean Sea with the Gulf of Suez. It provided a direct trade route for ships operating European or American ports and ports located in South Asia, East African and Oceania.
• The Drain of India’s Wealth. The drain of wealth means that economic policies of the British in India were primarily motivated to snatch maximum benefits from India’s trade. India’s foreign trade generated a large export surplus. This export surplus did not result in any flow of silver or gold into India. There was the drain of India’s wealth into Britain. It is clear from the following:

1. The surplus was used to make payments for the expenses incurred by the office set up by the colonial government in Britain.
2. The surplus was used to pay expenses on the war fought by the British government.
3. A surplus was used to pay for the import of invisible items.