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Economics Ncert XI • Chapter • 1 • Summary

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CHAPTER – 1 ‘INDIAN ECONOMY ON THE EVE OF INDEPENDENCE’

Victor Alexander Vruce was the Viceroy of British India in 1894.

Introduction

  • The sole purpose of the 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.

Low level of Economic Development under the Btitish Rule

  • India was particularly well-known for its handicraft industries in the fields of cotton and silk textiles, metal and precious stone works etc.
  • The economic policies pursued by the colonial government in India brought about a fundamental change in the structure of the Indian economy — transforming the country into supplier of raw materials and consumer of finished industrial products from Britain.
  • The colonial government never made any sincere attempt to estimate India’s national and per capita income. Some individual attempts which were made to measure such incomes yielded conflicting and inconsistent results. Among the notable estimators — Dadabhai Naoroji, William Digby, Findlay Shirras, V.K.R.V. Rao and R.C. Desai — it was Rao, whose estimates during the colonial period was considered very significant.
  • The country’s growth of aggregate real output during the first half of the twentieth century was less than two per cent coupled with a meagre half per cent growth in per capita output per year.

Textile Industry in Bengal

  • Muslin is a type of cotton textile which had its origin in Bengal, particularly, places in and around Dhaka (spelled during the pre-independence period as Dacca), now the capital city of Bangladesh.
  • ‘Daccai Muslin’ had gained worldwide fame as an exquisite type of cotton textile.
  • The finest variety of muslin was called malmal.
  • Sometimes, foreign travellers also used to refer to it as malmal shahi or malmal khas implying that it was worn by, or fit for, the royalty.

Agriculture Sector

  • India’s economy under the British colonial rule remained fundamentally agrarian.
  • About 85 per cent of the country’s population lived mostly in villages and derived livelihood directly or indirectly from agriculture.
  • Agricultural productivity became low.
  • This stagnation in the agricultural sector was caused mainly because of the various systems of land settlement that were introduced by the colonial government, particularly, under the zamindari system which was implemented in the then Bengal Presidency
  • The profit accruing out of the agriculture sector went to the zamindars instead of the cultivators.
  • The main interest of the zamindars was only to collect rent regardless of the economic condition of the cultivators.
  • The terms of the revenue settlement were also responsible for the zamindars adopting such an attitude; dates for depositing specified sums of revenue were fixed, failing which the zamindars were to lose their rights.
  • Besides this, low levels of technology, lack of irrigation facilities and negligible use of fertilisers, all added up to aggravate the plight of the farmers
  • There was, of course, some evidence of a relatively higher yield of cash crops in certain areas of the country due to commercialisation of agriculture.

Industrial Sector

  • India could not develop a sound industrial base under the colonial rule.
  • Handicraft industries declined, and no corresponding modern industrial base was allowed to come up. The primary motive of the colonial government behind this policy of systematically de-industrialising India was two-fold:
    • first, to reduce India to the status of a mere exporter of important raw materials for the upcoming modern industries in Britain.
    • second, to turn India into a sprawling market for the finished products of those industries
    • Second half of the nineteenth century, modern industry development was confined to the setting up of cotton and jute textile mills.
    • The cotton textile mills, mainly dominated by Indians, were located in the western parts of the country, namely, Maharashtra and Gujarat.
    • The jute mills dominated by the foreigners were mainly concentrated in Bengal.
    • The Tata Iron and Steel Company (TISCO) was incorporated in 1907.
    • There was hardly any capital goods industry to help promote further industrialisation in India. (Capital goods industry means industries which can produce machine tools which are, in turn, used for producing articles for current consumption.)

Foreign Trade

  • India became an exporter of primary products and an importer of finished consumer goods.
  • More than half of India’s foreign trade was restricted to Britain while the rest was allowed with a few other countries.
  • The opening of the Suez Canal further intensified British control over India’s foreign trade.

The most important characteristic of India’s foreign trade throughout the colonial period was the generation of a large export surplus. This export surplus did not result in any flow of gold or silver into India. This was used to make payments for the expenses incurred by an office set up by the colonial government in Britain, expenses on war, again fought by the British government, and the import of invisible items, all of which led to the drain of Indian wealth.

Trade through the Suez Canal

Trade through the Suez Canal: Route & Location
Trade through the Suez Canal: Route & Location
  1.  Suez Canal is an artificial waterway running from north to south across the Isthmus of Suez in north-eastern Egypt.
  2. It connects Port Said on the Mediterranean Sea with the Gulf of Suez, an arm of the Red Sea.
  3. The canal provides a direct trade route for ships operating between European or American ports and ports located in South Asia, East Africa and Oceania by doing away with the need to sail around Africa.
  4. Strategically and economically, it is one of the most important waterways in the world.
  5. Its opening in 1869 reduced the cost of transportation and made access to the Indian market easier.

Demographic Condition

  • Various details about the population of British India were first collected through a census in 1881. Since then, every ten years such census operations were carried out.
  • Before 1921, India was in the first stage of demographic transition. The second stage of transition began after 1921.
  • The overall literacy level was less than 16 per cent. Female literacy level was at a negligible low of about 7 per cent.
  • The overall mortality rate was very high. Infant mortality rate was quite alarming. Life expectancy was also very low.

Occupational Structure

  • The agricultural sector accounted for the largest share of workforce, which usually remained at a high of 70-75 per cent while the manufacturing and the services sectors accounted for only 10 and 15-20 per cent respectively.

Infrastructure

  • Under the colonial regime, basic infrastructure such as railways, ports, water transport, posts and telegraphs did develop. However, the real motive behind this development was not to provide basic amenities to the people but to subserve various colonial interests.
  • The roads that were built primarily served the purposes of mobilising the army within India and drawing out raw materials from the countryside to the nearest railway station or the port to send these to far away England.
  • The British introduced the railways in India in 1850 and it is considered as one of their most important contributions. The railways affected the structure of the Indian economy in two important ways:
    • On the one hand it enabled people to undertake long distance travel and thereby break geographical and cultural barriers.
    • On the other hand, it fostered commercialisation of Indian agriculture which adversely affected the self-sufficiency of the village economies in India.
    • The First Railway Bridge linked Bombay with Thane, 1854.
    • Tata Airlines, a division of Tata and Sons, was established in 1932 inaugurating the aviation sector in India.
    • The introduction of the expensive system of electric telegraph in India, similarly, served the purpose of maintaining law and order.

Conclusion

  • The agricultural sector was already saddled with surplus labour and extremely low productivity.
  • The industrial sector was crying for modernisation
  • Foreign trade was oriented to feed the Industrial Revolution in Britain.
  • Infrastructure facilities, including the famed railway network, needed upgradation, expansion and public orientation.
  • Prevalence of rampant poverty and unemployment
  • In a nutshell, the social and economic challenges before the country were enormous.

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