Chapter 1: Indian Economy on the Eve of Independence

The economic policies developed by the British government in India were aimed at merely making India a supplier to Britain’s growing industries. The policies were targeted towards the development of Britain and boosting its economic status. India and its growth were completely ignored. Due to such policies, India became a supplier of raw materials and a market for finished goods from Britain. The impact of such a policy in India is as follows:

1. The Indian economy witnessed very low economic growth. Studies reveal that the economy was growing at a speed of two per cent during the period 1900-1950. The British government was more interested in maintaining and developing the economy of Britain. British rule ruined the agriculture sector and handicrafts and transformed India into a supplier of raw materials.

2. The Indian agriculture system was not developed before independence, it followed old techniques, and it was majorly affected by colonial rule when the farmers were instructed to grow commercial crops instead of food grains. These commercial crops, like cotton and indigo, were used in industries in Britain for manufacturing textiles. The peasants did not get any monetary benefit from growing these crops, and hence no economic development happened.

3. The British programmed systematic deindustrialization leading to the downfall of the handicraft industry, and with the lack of investment, other industries also failed to develop. Imposing heavy export tariffs on Indian-made goods led to a decrease in demand in the international market, ultimately leading to the collapse of the handicraft industry.

4. The money that Indian goods earned from foreign trade were not invested in the Indian economy; it was used for managing the British army and expanding their colonial reach across Asia.

The following economists estimated India’s per capita income during the colonial period:

1. Dadabhai Naoroji

2. R.C Desai

3. V.K.R.V. Rao

4. William Digby

5. Findlay Shirras

The reasons for the stagnation of Indian agriculture during the colonial period are as follows:

1. The British introduced the Land Revenue system in 1793. As per this system, zamindars (landowners) needed to pay a high amount of revenue to the British Government, and the source of revenue collection was the peasants. The zamindars did not focus on improving land productivity, which resulted in low agricultural growth and subsequently made the life of peasants worse.

2. Indian farmers grew food crops like rice and wheat for consumption. The British Government was forcing Indian farmers to grow commercial crops like indigo for British Industries, which led to agriculture turning commercial and caused a shortage of food grains.

3. Lack of irrigation facilities and other important factors like the unavailability of fertilizers also impacted the agriculture industry and made it more vulnerable.

India witnessed the growth of some industries before independence, the most prominent of which is Tata Iron and Steel Company (TISCO). India was also witnessing a growth of textile mills and ancillary products. Maharashtra, Gujarat, and Bengal were areas where cotton and jute industries were set up. Apart from these industries, some other industries that started operating are sugar, paper and cement.

The two-fold motives behind de-industrialisation by the British were as follows:

1. Obtaining raw materials from India at rock-bottom prices and reducing the status of India as a supplier of raw materials for feeding its industries back in Britain.

2. Selling the finished goods in India and thereby making India a market for selling items produced by British industries.

Yes, the traditional handicraft industry was ruined under British rule. The following points are in agreement with this statement:

1. The British had introduced a discriminatory tariff policy. This led to a high export tariff on Indian-made goods, which made the price of products high in international markets, leading to less demand for Indian-made goods. Consequently, this ended up ruining the handicraft industry.

2. As Britain began importing duty-free goods from Britain to India, the demand for locally made goods started decreasing as the mechanically produced goods were much cheaper. This resulted in ruining the market for handicrafts.

3. The princely states of India used to provide patronage to local art and handicraft, but during British rule, the princely states were ruined by the East India Company, which thus resulted in a decrease in demand for Indian-made goods. Indian handicrafts gradually lost their market and diminished.

During British rule over India, there were a lot of infrastructural changes in the country. But all these changes were only done to serve the cause of the British Empire. Development was seen in transport and communication. Roads helped in facilitating the transportation of raw materials from different parts of the country to ports where they would be shipped for industries in Britain. In a similar way, railways were developed for transporting finished goods from Britain to different parts of the country. The railways helped in widening the reach of goods across India. Posts and Telegraph were developed to increase the effectiveness and reach of the British administration in India. So, it can be said that although there was growth in infrastructure, it was only for the British Empire and not for India.

The aim of British rule was to make India a source of raw materials to feed the industries back in Britain and present India as a virgin market for the finished goods from Britain. The policies created by them were for the development of industries in Britain. The industrial policy had the following shortfalls:

1. British neglected the developed handicraft industries to deprive India of revenue from exports. Indian handicrafts had high demand all over the world, but due to the high export tariffs imposed on goods exported from India, the price of products raised exponentially, which impacted its demand and led to the collapse of the handicraft industry.

2. Indian industries suffered from a lack of investment in machinery, and the British government was not at all interested in assisting the growth of industries. Therefore, growth significantly decreased.

The economic policies of the British Government were primarily aimed at amassing wealth from India. India had extensive resources, which the British found highly useful for fulfilling the industrial requirements of Britain. Britain also utilized India’s manpower to increase its industrial operations and expand bases outside of India. All these expenses were borne by the Indian exchequer. Therefore, it can be said that British rule drained wealth from India during the 19th Century (colonial period).

The year 1921 is regarded as the defining year. It is also known as the year of the Great Divide, as population growth was scarce before that time. After 1921, India’s population growth was consistent.