DEVELOPMENT POLICIES AND EXPERIENCE (1947–90)

INDIAN ECONOMY ON THE EVE OF INDEPENDENCE

INTRODUCTION

1. India remained under British colonial rule for nearly 200 years.
2. During this period, the Indian economy was shaped mainly to serve British economic interests.
3. The policies followed by the British government destroyed India’s traditional economic structure.
4. At the time of independence in 1947, India was:
   • Poor
   • Underdeveloped
   • Backward
   • Dependent on agriculture
5. The economy lacked:
   • Industrial growth
   • Modern infrastructure
   • Skilled human resources
6. The purpose of studying this chapter is:
   • To understand the economic condition of India at independence
   • To analyze the problems inherited by independent India
7. This background helps us understand why India adopted planned economic development after 1947.

LOW LEVEL OF ECONOMIC DEVELOPMENT UNDER COLONIAL RULE

1. India’s economic development during British rule was very slow and unequal.
2. The British followed policies that promoted:
   • Export of raw materials from India
   • Import of finished goods from Britain
3. Indian resources were used for:
   • Financing British wars
   • Supporting British industries
4. There was no concern for India’s welfare.
5. The British government did not invest in:
   • Education
   • Health
   • Industrialization
6. Indian industries were deliberately discouraged.
7. As a result:
   • Per capita income remained extremely low
   • Poverty became widespread
8. India became a supplier of raw materials and a market for British goods.
9. The economy became dependent and stagnant.
10. Economic growth benefited Britain, not India.

AGRICULTURAL SECTOR

Importance of Agriculture

1. Agriculture was the main source of livelihood.
2. About 70–75% of the population depended on agriculture.
3. Despite this, agriculture was:
   • Backward
   • Unproductive
   • Unorganized

Land Revenue Systems

1. British introduced different land revenue systems:
   • Zamindari System
   • Ryotwari System
   • Mahalwari System
2. Zamindari system was the most harmful.

Zamindari System

1. Zamindars were declared owners of land.
2. Farmers became tenants.
3. Zamindars collected high rent from peasants.
4. They had no interest in improving land productivity.
5. Farmers were exploited and remained poor.

Problems of Agriculture

1. Low productivity due to:
   • Use of primitive tools
   • Dependence on monsoon
2. Lack of irrigation facilities
3. Frequent famines
4. No modern technology
5. Fragmentation of landholdings
6. Indebtedness of farmers
7. Commercialization of agriculture:
   • Farmers were forced to grow cash crops like indigo, cotton, tea
   • Food crops were neglected
8. British encouraged export crops to benefit their industries.

Impact

1. Agriculture failed to support industrial growth.
2. Rural poverty increased.
3. India became food-deficient in many years.

INDUSTRIAL SECTOR

Decline of Traditional Industries

1. India had a rich tradition of handicrafts and cottage industries.
2. British policies led to:
   • Decline of handloom industry
   • Destruction of artisans’ livelihoods
3. Cheap machine-made goods from Britain flooded Indian markets.
4. Indian artisans could not compete.
5. This process is known as deindustrialization.

Development of Modern Industries

1. Modern industries were introduced only in a limited manner.
2. Industries developed mainly included:
   • Cotton textiles
   • Jute textiles
   • Iron and steel
3. These industries served British interests.
4. Industrial growth was:
   • Limited
   • Uneven
   • Region-specific

Lack of Capital Goods Industry

1. No development of:
   • Heavy machinery
   • Engineering goods
2. India depended on Britain for capital goods.
3. This prevented self-sustained industrial growth.

Other Problems

1. Lack of:
   • Skilled labor
   • Technical education
2. No government support for Indian industries.
3. Industries were concentrated in few cities like:
   • Bombay
   • Calcutta
   • Madras

FOREIGN TRADE

Nature of Foreign Trade

1. India’s foreign trade was controlled by British.
2. Exported mainly:
   • Raw materials (cotton, jute, tea, spices)
3. Imported mainly:
   • Finished goods
   • Machinery
   • Consumer goods

Unfavorable Trade Pattern

1. India had export surplus.
2. However, benefits did not go to India.
3. Export earnings were used to:
   • Pay for British administration
   • Meet home charges
4. This caused drain of wealth from India to Britain.

Trading Partners

1. Britain was India’s main trading partner.
2. Other countries had little role.
3. Trade relations were not diversified.

Impact

1. India remained dependent.
2. Domestic industries suffered.
3. Economic exploitation increased.

DEMOGRAPHIC CONDITION

Population Size and Growth

1. India had a large population.
2. Growth rate was low but population pressure was high.
3. Death rate was high due to:
   • Famines
   • Diseases
   • Poor healthcare

Literacy Rate

1. Literacy rate was very low (around 16%).
2. Female literacy was extremely poor.
3. Education was limited to upper classes.

Health Conditions

1. Poor sanitation
2. Lack of hospitals
3. Spread of diseases like:
   • Malaria
   • Cholera
   • Plague
4. Life expectancy was very low (around 32 years).

Poverty

1. Widespread poverty existed.
2. Low income and poor living conditions were common.

OCCUPATIONAL STRUCTURE

1. Majority of population depended on primary sector.
2. Distribution:
   • Primary sector: ~75%
   • Secondary sector: ~10%
   • Tertiary sector: ~15%
3. This showed lack of industrial development.
4. Workforce was unskilled.
5. Disguised unemployment was common in agriculture.
6. Very limited job opportunities outside agriculture.

INFRASTRUCTURE

Transport

1. Roads were poorly developed.
2. Railways were introduced mainly for:
   • Transporting raw materials
   • Military movement
3. Railways did not promote balanced development.

Communication

1. Telegraph and postal services existed.
2. They were used for administrative control.

Power and Energy

1. Very limited electricity generation.
2. Rural areas had no access to power.

Water and Sanitation

1. No proper drinking water facilities.
2. Poor sanitation caused health issues.

Purpose of Infrastructure

1. Infrastructure served British interests.
2. It did not aim at economic development of India.

CONCLUSION

1. At the time of independence, India inherited:
   • A backward economy
   • Mass poverty
   • Illiteracy
   • Poor health
2. Colonial rule drained India’s wealth.
3. Agriculture was stagnant and unproductive.
4. Industry was underdeveloped and dependent.
5. Infrastructure existed but was not growth-oriented.
6. Foreign trade was exploitative.
7. Occupational structure showed lack of diversification.
8. These problems made economic planning necessary.
9. Independent India adopted:
   • Five Year Plans
   • Public sector development
   • Industrialization strategy
10. Understanding this background explains India’s post-independence economic policies.