Chapter 1-Indian Economy on the Eve of

Independence

Question 1:
What was the focus of the economic policies pursued by the colonial government in
India? What were the impacts of these policies?
ANSWER:

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.

i. Low Economic Development

Throughout the British rule, Indian economy experienced very low level of economic
development. As per some researches, real aggregate output grew at even less
than two percent during 1900-50 because 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.

ii. Backwardness of Indian Agriculture

At the advent of colonial government, India was basically an agrarian economy

employing nearly 85% of its population. But, the growth of the agriculture sector was
meager because of Zamindari system, forced commercialisation and lack of
investment in agriculture.

iii. Deindustrialisation of Indian Economy

India failed to develop a sound and strong industrial base during the colonial rule.
Systematic deindustrialisation leads to the downfall of India’s handicraft industry.
Another cause of bleak growth of modern industry was the lack of capital goods
industries and limited role of public sector.

iv. Regression in Foreign Trade

During the colonial rule, the British government owned the monopoly power over
India’s foreign trade to serve the interests of their home country. The exports and
imports transactions were restricted mainly to Britain to benefit British industries.
Foreign trade during British rule was also characterized by drain of wealth.
Question 2:
Name some notable economists who estimated India’s per capita income during the
colonial period.
ANSWER:

The following are some of the notable economists who were engaged in estimation
of national income and per capita income:

i. Dadabhai Naroji

ii. William Digbay

iii.Findlay Shirras

iv. V.K.R.V Rao

v. R.C. Desai

Out of these, V.K.R.V Rao's estimates are considered to be significant.

Question 3:

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

The following are the causes explaining stagnancy in Indian agriculture sector during
the colonial rule:

1. Introduction of Land Revenue System

Under the Zamindari 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 labourers, 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.

2. Forceful Commercialisation
Initially before the British rule, the farmers used to grow crops like rice and wheat for
their own consumption. But afterwards, in order to feed British industries with cheap
raw materials, the Indian farmers were forced to grow commercial crops (like indigo).
This led to the commercialisation of Indian agriculture. This increased the burden of
high revenues on the poor farmers but also led India to face shortage of food grains,
resources, technology and investment.

3. Lack of Irrigation Facilities and Resources

Besides the above factors, Indian agricultural sector also faced lack of irrigation
facilities, insignificant use of fertilisers, lack of investment, frequent famines and
other natural calamities, etc. that further deteoriated the agricultural performance
and made it more vulnerable.

Question 4:

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

The second half of the nineteenth century witnessed the emergence of modern
industries. like :

1. Cotton and jute textile mills in western parts of the country like Maharashtra
and Gujarat
2. Jute industries mainly concentrated in Bengal
3. Iron and steel industries (TISCO incorporated in 1907)
4. Some other industries that were operating at a smaller scale like sugar
industry, cement industry and paper industry.

Question 5:

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

The following are the two-fold motives behind the systematic deindustrialization
affected by the British:
1. 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.

2. Making India a Market for Finished Goods: Another important objective of the
British government was to use India as a sprawling market to sell the finished goods
produced by the British industries.

Question 6:

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

Yes, we do agree with the above statement that the traditional handicrafts industries
were ruined under the British times. The following are the reasons in favour of the
statement.

1. Reason for deindustrialization: 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 finished products of
those industries.
2. Effect of deindustrialization : The decline of indigenous handicraft created :
• massive unemployment in India
• Also a new demand in the Indian consumer market arise , 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.

Question 7:

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

The motive of the British behind the infrastructure development was only to serve
their own colonial interests. There was infrastructural development in the following
fields :
Roads: The roads served the purpose of facilitating transportation of raw materials
from different parts of the country to ports, and ports were developed for easy and
fast exports to and imports from Britain.

Railways: Railways were introduced and developed for the transportation of finished
goods of British industries to the interiors of India. Railways assisted British
industries to widen the market for their finished products.

Post and telegraph: Post and telegraphs were developed to enhance the efficiency
and effectiveness of the British administration.

Hence, the aim of infrastructural development was not the growth and development
of the Indian economy but to serve their own interest.

Question 8:

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

The focus of the industrial policies pursued by the colonial government was
concerned mainly with the advancement for their own country. The industrial policy
pursued by the British colonial administration has the following shortfalls:

1. Systematic Deindustrialisation : the British Government systematically

destroyed Indian handicraft industries to satisfy two motives-
A) To get raw materials from India at cheap rates to be used by upcoming
modern industries in Britain and;
B) To sell finished products of British industries in Indian market at higher
prices
2. Lack of Investment in Indian Industries: During the British Rule, there was
hardly any capital goods industry and British rulers did not pay much attention
for their promotion.
3. Limited role of Public Sector: Public Sector remained confined only to
railways, power generation, communications, ports and some other
departmental undertakings.

Question 9:

What do you understand by the drain of Indian wealth during the colonial period?
ANSWER:
Under the British rule, India became an exporter of raw materials and an importer of
finished goods. There was huge export surplus due to excess exports but it came at
a huge cost to the country’s economy as:-

1. Massive exports lead to shortage of several essential commodities like food

grains, clothes, kerosene,etc.
2. Furthermore, this export surplus did not result in any flow of gold or silver into
India. Rather, it was used :
• To make payments for expenses incurred by an office set up by the colonial
government in Britain.
• To meet expenses on war fought by the British Government.
• To import invisible items.

Thus, this led to the drain of Indian wealth.

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 or the ‘Year of Great Divide’ because
before 1921, India was in the first stage of demographic transition. The second
stage of transition began after 1921. However, neither the total population of India
nor the rate of population growth at this stage was very high.

Question 11:

Give a quantitative appraisal of India’s demographic profile during the colonial

period.
ANSWER:

➢ India’s Demographic conditions during the British rule depict our economy as
stagnant and backward.
➢ Both the birth rate and death rate were as high. Due to high birth rate and
high death rate the population growth was stagnant.
➢ The Infant Mortality Rate was also very high of about 218 per thousand.
➢ The Life Expectancy Rate was as low as 44 years.
➢ The literacy rate was less than 16 percent and female literacy rate was 6
percent which denotes social backwardness and gender bias in the economy.
 ➢ We can infer from the above figures that India was featured with massive
poverty, low standard and quality of living and low survival rate in the country.
➢ The lack of health care facilities and lack of health awareness were the main
causes behind such demographic conditions of India.

Question 12:

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

ANSWER:

The occupational structure that refers to the distribution of population engaged in

different occupations, showed no variation throughout the British rule. The following
are the salient features of India’s pre-independence occupational structure:

1. Agriculture- The Prime Occupation: Under the colonial rule, India was basically
an agrarian economy, employing nearly 85% of its population. Nearly 10% of the
total workforce was engaged in manufacturing and industrial sector and 15 to 20
percent in services . While the agricultural sector was relatively developed, whereas,
the other two sectors were at their infant stage.

3. Unbalanced Growth: In addition, there was regional variation in the

occupational structure of India. While on the one hand, states like Tamil Nadu,
Andhra Pradesh and Bombay experienced a fall in the agricultural work force on the
other hand states like Orissa, Rajasthan and Punjab experienced a rise in the
agricultural workforce.

Question 13:

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

The following are some of the economic challenges faced by the Indian economy
due to exploitative colonial rule of the British:

1. Low Level of Agricultural Productivity: At the advent of colonial government,

India was basically an agrarian economy employing nearly 85% of its population.
But, the growth of the agriculture sector was meager because of Zamindari system ,
forced commercialisation and lack of investment in agriculture.
2. Infant Industrial Sector: British adopted the policy of systematic
deindustrialization . India failed to develop a sound industrial base during the
colonial rule because of lack of huge capital, investments, infrastructure, human
skills, technical knowhow and modern technology. Further, due to stiff competition
from the British industries, India’s domestic industries failed to sustain..

3. Lack in Infrastructure: The significant change in the infrastructural development

in the country was not sufficient to improve the performance of agricultural and
industrial sector. Also, there was a need to upgrade the existing infrastructure and to
modernise the infrastructure to enhance its efficiency and effectiveness.

4. Low Economic Development

Throughout the British rule, Indian economy experienced very low level of economic
development. As per some researches, real aggregate output grew at even less
than two percent during 1900-50 because British government was more concerned
with the promotion of economic interests of their home country.

5. Regression in Foreign Trade

During the colonial rule, the British government owned the monopoly power over
India’s foreign trade to serve the interests of their home country. The exports and
imports transactions were restricted mainly to Britain to benefit British industries.
Foreign trade during British rule was also charactercised by drain of wealth.

Question 14:

When was India’s first official census operation undertaken?

ANSWER:

India’s first official census operation was undertaken in the year 1881.

Question 15:

Indicate the volume and direction of trade at the time of independence.

ANSWER:

During the colonial rule, the British followed a discriminatory tariff policy under which
they imposed heavy tariffs (export duties) on India’s export of handicraft products,
while allowing free export of India’s raw material to Britain and free import of British
products to India. This made Indian exports costlier and its international demand fell
drastically.

Volume and composition :

➢ India’s export basket during the colonial rule comprised mainly of primary
products like sugar, jute, silk, etc.
➢ imports comprised of finished consumer goods like cotton, woolen clothes,
etc, from Britain.

Direction:

➢ As the monopoly power of India’s export and import rested with Britain, so,
more than half of India’s trade was restricted to Britain. The opening up of
Suez Canal further intensified the monopoly power of the British over India’s
foreign trade.
➢ The remaining imports were directed towards China, Persia (Iran), and
Srilanka.
➢ The surplus generated from India’s foreign trade was not invested in Indian
economy; rather it was used for administrative and war purposes. This led to
the drain of Indian wealth to Britain.

Question 16:

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

Yes, following are the positive contributions made by the British:

1. Introduction of Railways: The introduction of railways opened up the cultural

and geographical barriers and facilitated commercialisation of Indian agriculture.

2. Introduction of Commercialisation of Agriculture: But with the

commercialisation of agriculture, the agricultural production was carried out as per
the market requirements. It was due to this factor that today India can aim at
attaining self-sufficiency in food grains production.

3. Introduced Free Trade to India: British forced India to follow free trade pattern
.The free trade provided domestic industry with a platform to compete with the
Britain industries. The introduction of free trade led to an increase in the volume of
India’s export rapidly.
4. Development of Infrastructure: The infrastructure developed in India by the
British proved as useful tool to check the spread of famines. The telegram and
postal services served Indian public.

6. Shift to Monetary Economy

British rule helped Indian economy to shift from barter system of exchange
(exchange of goods for goods) to monetary system of exchange.

7. Effective administrative setup

The British government had an efficient administration system, which served as a

ready reckoner for Indian politicians.

Fill in the blanks :

1. Most of these studies revealed that Indian economy grew at even less than
two percent during 1900-50 with half per cent growth in per capita output per
year.