Indian Economy on the Eve of Independence Class 12 | Sectors | Chapter 1 |


Indian Economy on the Eve of Independence Class 12 | Sectors | Chapter 1 |

Exploitation under Colonial Rule on Indian Economy

  1. Agriculture Sector: Agriculture was exploited by the zamindar system. Under this, zamindar was declared as the owner of the land and had to pay a fixed sum of revenue to the British government and could extract any sum of money from the tillers of the soil.

They charged a very high amount from tillers of the soil and paid a very less amount to the British government. The surplus amount was spent by zamindars on their luxuries.

  1. Industrial Sector: Before the British rule, India was known for its handicraft industries but it was soon destroyed by putting up heavy duty on export and duty-free-import for British material owing to which Indian product got expensive in international market which resulted in fall of demand.  
  2. Foreign Trade (Other Countries): The foreign trade was exploited by discriminatory tariff policies wherein export of Indian products and import of British products was made duty free to provide raw material for British mills, factories and to promote British product in Indian market at a cheap rate respectively.

NOTE: Dadabhai Naoraji, V.K.R.V Rao, R.C Desai are some name of notable economists who had estimated the national income and per capita income for the first time.

 Characteristics of the Indian Economy at the Time of Independence

  1. Depleted Economy: It refers to that economy in which no arrangements are made for the depreciation of physical assets on account of excessive use. In Indian economy, no such arrangement was made by the British government.
  2. Dependent Economy: It refers to that economy which is dependent on other economies. Although India was rich in foods but still it borrowed foods and money from other countries as the majority of portions of the production was exported to Britain.
  3. Under-Developed Economy: It is also known as backward economy wherein level of per capita income and level of living standard was very low. The per capita income of India at the time of independence was just ₹ 240 which shows that majority of population was very poor and didn’t even have enough to fulfill their basic necessities of life.
  4. Disintegrated Economy: It refers to that economy which was a single economy but now it is divided into two or more parts. The British rulers divided the country into two i.e. Indian and Pakistan, as a result the Indian economy became disintegrated economy.
  5. Semi-feudal Economy: A semi-feudal economy is one which is neither completely feudal (landlord- tenant relation) not completely capitalist (free). India was one of them as it was blend of both feudal as well as capitalist mode of production.
  6. Rampant Economy: Rampant Economy refers to that economy under which people can’t even fulfill their basic necessities like food, shelter, and house. India’s population was very poor as the employment opportunities were very fewer and illiteracy rate was very high.
  7. Backwardness in Agriculture and Industrial Growth: India’s bulk of population was dependent on agriculture but the level of productivity was very less due to which it could not contribute more in GDP and a major part of the production was also exported.

India depended on Britain for the capital goods as Indians were not allowed to produce capital goods and industries were asked to produce raw material for British industries by the British rulers.      

Different Sectors at the Time of Independence

  • Agriculture Sector: Agriculture was considered to be the main source of livelihood for Indians since around 85% of population was dependent on agriculture for their livelihood as most of them lived in villages and they were illiterate too. That sector was facing deterioration in production and many other such problems such as:
  1. Productivity: The production and productivity per hectare of land was very less because farmers did not have resources like fertilizers, pesticides etc. that time to protect the produced grains from insects  and the other reason was that the fertility of the soil was very bad as farmers were forced to cultivate Indigo to die the clothes in British industries.
  2. Relationship and Revenue System: The Zamindars were used to giving their land for their own profit maximization because of the Zamindar system in which they could charge any amount from tenant and in return of that, they had to pay a fix amount of money to government. The tenant of the soil hardly had harvested crop to sell in the market for profit purpose as he was only left with crop for subsistence.
  • Division of Economy: Partition of countries affected negatively as some areas which were rich in production, went in the area of Pakistan and India was left with less area of land as compare to the population of the country.
  1. Small and fragmented Lands: Small farmers had small as well as fragmented lands which means if a farmer had a piece of land at one place than the other part of that farmer was far away from the first land due to which farmer had to make more expenditures to cultivate crop on both lands as they had to bear the transfer cost also of all the inputs from one place to another.
  2. Uncertainty: In the period of Britishers, there was no permanent means of irrigations for agriculture which means that farmers had to depend on rainfall for the purpose of irrigation. Heavy or less level of rainfall affected the production of agriculture.
  • Industrial Sector: India was well-known for its production of textiles like cotton, silk along with some precious metals, stones and had a world-wide repute. But, with the arrival of Britishers, the industrial sector hit the bottom hard and hardly had investment for growth due the following reasons:
  1. Tariff Policies: The Britishers had changed all the policies of export and import along with the tariffs on them for India was the best source of raw material for their industries. The exports from India, in the form of raw material, was made tariff-free so that more material could be exported outside India whereas imports by India in the form of finished products was also made tariff-free to make them cheaper than the Indian product so that more of their product can be purchased.
  2. Machine-made Products: All the goods which were imported in India were machine-made but India lacked in machine made products and also pursuing old methods of products which resulted in the loss of both domestic as well as foreign demand since all the people wanted fine products then.
  • Railways Introduction: With the introduction of railways in India, the British-made product started moving faster and coud be made available at any corner of India. Besides, they were also cheaper in cost.
  1. Change in Demand: The arrival of Britishers had changed the pattern in demand as people started adopting British culture and western lifestyle due to which British-made products were demanded more than the Indian products due to which Indian companies started winding up.

In second half of 19th century, modern industries showed a bleak (slow) growth as the state participation in the setting up of industries was very less, and private investors were establishing private entrepreneurs like for iron and steel Industries like Tata Iron and Steel Company which was incorporated in august 1907.

The capital goods industries were very fewer and were only worth for name like machines or plants which resulted in the lop.

 Trade with Other Country

Since ancient times, India has been a leading trading nation in the whole world but the restrictive trade and tariff policies by the colonial government affected adversely in the trade with another countries due to the following reasons:

  1. Exporter and Importer of Primary and Finished Product: Before the colonial rule, India used to export silk, cotton, wood and many other things to many countries but Britishers changed it by only exporting primary product to England and Importing finished products in India as India had a great number of consumers and by this they could have bulk of production with them to transfer to other countries also for profit motive.
  2. Drain of Indian Wealth: The exports quantity of goods were very much but are of very less price as those are merely a primary product and all the amount which was collected as tariff were utilized to meet the expenses of wars fought by colonial government whereas the import quantity was very less but the price paid was very much as those are finished products which created an imbalance in the Balance of Trade.
  3. Monopoly on Foreign Trade: Policies which were framed by the colonial government resulted in the monopoly for the Britishers in terms of Indian foreign trade. A large portion of export and import was only between Britain and India which was more than 50% in which supply of Indian product acted as a raw material whereas huge markets provided huge demand for the finished products by British industries.

Domestic Conditions

The demographic condition of India was very poor as India lacks in facilities. The demographic transition of India took place in two stages which were first stage which took place before 1921 and the second stage was after 1921 as 1921 is regarded as Year of Great Divide after which the population of India started increasing at a very high rate though suffering from some limitations.

Demographic Conditions on the eve of Independence is as follows:

  1. The literacy rate was as low as 16% in which female literacy rate was at a negligible rate that was less than 7%.
  2. The Birth Rate (BR) and Death Rate both were very high at 48 and 40 per thousand of persons respectively.
  3. Unviability of public health facilities to a greater chunk.
  4. Life expectancy was only 44 years.
  5. Poor Infant Mortality rate as low as 218 per thousand births.

Occupational Structure State

The occupational structure of India was in backwardness as agriculture was the principal source of occupation with about 70-75% of population engaged in agriculture but do not contribute more in GDP of India whereas industrial and service sector had only 9% and 15-20% of population. With more dependence on agriculture leads to less availability of land per person from farming population.   


Infrastructure refers to such industries which helps in the growth of other industries. Under colonial period basic infrastructure were built to fulfill the colonial interest which are as follows:

  1. Roads were constructed so that the movement of goods could be made easy from country side to railway stations and for the perfect mobilization of army.
  2. Ports were made so that import and export of goods can be made easy
  • Telegrams and posts were developed for the transfer of official administrative messages.
  1. Railways were developed to transfer British goods from one place to another.

Benefits of British Rule

Although Britishers had impacted negatively on Indian economy but still there were some of the things which impacted in positive way and are as follows:

  1. Commercialization of Crops helped to earn some livelihood for the farmers by selling their surplus crops in the market in place of sustaining them for personal purpose.
  2. Greater Opportunities of Employment were made for social as well as economic growth.
  3. A monetary System of exchange was given by them in place of barter system which leads to large scale of production.
  4. Railways worked to transfer Persons as well as goods from one pace to another at a very cheap rate.
  5. Efficiency in Administration was also left by the Britishers to make Political as well as other plans efficiently.

You May Also Read Indian Economy on The Eve of Independence,  Economic Planning, Agriculture Sector, Strategy of Industrial Growth, India’s Foreign Trade, Economic Reforms Since 1991, Poverty, Human Capital Formation, Rural Development, Unemployment, Environment, India China Pakistan Comparative Study for better understanding of the chapters and scoring higher in upcoming exams.

Do share this post if you liked the notes of Indian Economy. For more updates, keep logging on BrainyLads

How useful was this post?

Click on a star to rate it!

Average rating 5 / 5. Vote count: 3

No votes so far! Be the first to rate this post.

Add a Comment

Your email address will not be published. Required fields are marked *

error: Content is protected !!

For Regular Updates

Join Us on Telegram

Click Here to Join