Indian Economy During the British Rule

Indian Economy during the British Rule

India possessed a self-governing economy prior to the arrival of British authority. Even though the majority of people relied on agriculture for their primary source of income, the nation’s economy was distinguished by a variety of manufacturing industries.

India was renowned for its handicraft industry, which included textiles made of cotton and silk, metal crafts, precious stone work and more.

The superb grade of material utilised and the high standards of craftsmanship evident in all imports from India gave these products a global market.

The colonial government of India prioritised the preservation and advancement of their native nation’s economic interests over the advancement of the Indian economy in its economic policies.

These measures resulted in a significant shift in the economic structure of India, turning it into a supplier of raw resources and a buyer of British-made industrial goods.

Agricultural Sector

During the British colonial era, India’s economy remained predominantly based on agriculture, with over 85% of the population living in villages and earning a living via it either directly or indirectly.

Nevertheless, even though so many people worked in it, the agricultural industry was still plagued by periods of extraordinary decline and stagnation.

Despite some growth in the sector in absolute terms, agricultural productivity declined as a result of the expansion of the total area under cultivation.

The colonial government’s numerous land settlement schemes were mostly to blame for this stagnation in the agriculture sector.

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 and contributed to the dismal level of agricultural productivity.

Of course, there was some indication that the commercialization of agriculture had led to a comparatively larger production of cash crops in some parts of the nation.

India’s agriculture was deprived of funding for terracing, flood control, drainage, and soil desalination, notwithstanding some advancements in irrigation.

A significant portion of tenants, small farmers, and sharecroppers lacked the resources, technology and motivation to engage in agriculture, whereas a tiny percentage of farmers shifted from growing food crops to commercial crops.

Industrial Sector

Similar to the situation with agriculture, India was unable to establish a strong industrial foundation while under colonial control.

During the collapse of the nation’s renowned handicraft industries, no contemporary industrial foundation was permitted to emerge to replace the former’s position of prominence.

The colonial authority had two main goals in mind when it implemented its policy of methodically deindustrializing India.

Initially, the goal was to downgrade India to the role of a supplier of vital raw materials for Britain’s emerging modern industries.

Secondly, to establish India as a vast marketplace for the final goods produced by those sectors so that their continuous growth could be guaranteed to the fullest benefit of their native Britain.

As the economy developed, the collapse of the country’s native handicraft industries led to both widespread unemployment in India and a new demand in the country’s consumer market because there was no longer a supply of locally produced goods. Profitably, Britain’s imports of low-cost manufactured goods increased to meet this need.

During the second half of the nineteenth century, modern industry began to take root in India but its progress remained very slow.

At first, this progress was limited to the establishment of textile mills for cotton and jute.

The majority of Indian-owned cotton textile mills were situated in Maharashtra and Gujarat in the west of the nation, whilst foreign-owned jute mills were primarily centred in Bengal.

But there wasn’t much of a capital goods sector to support India’s continued industrialization.

Moreover, the rate of expansion of the recently established industrial sector and its share of the GDP or GDPV stayed relatively low.

The public sector’s extremely constrained operational area was yet another major disadvantage of the emerging industrial sector.

This industry was limited to the railroads, electricity generation, communications, ports, and certain other departmental projects.

Foreign Trade

India has historically played a significant role in international trade. However, the structure, makeup, and amount of India’s foreign commerce were negatively impacted by the colonial government’s restrictive regulations regarding commodities production, trade and tariffs.

As a result, India started exporting basic items like raw silk, cotton, wool, sugar, indigo, jute and so on while importing capital goods like light machinery made in British factories as well as finished consumer goods like cotton, silk and woollen clothing.

In all actuality, Britain continued to have monopolistic control over India’s imports and exports.

This led to the restriction of over half of India’s foreign trade to Britain, with the remaining portion being permitted with a select group of nations like China, Persia (Iran), and Ceylon (Sri Lanka).

The creation of a significant export surplus was the key feature of India’s international commerce throughout the colonial era.

Moreover, there was no inflow of gold or silver into India as a result of this export surplus. Instead, money was utilised to cover costs associated with an office that the British colonial government established, military expenditures that were once more carried out by the British government and the import of undetectable goods, all of which depleted Indian income.

Demographic Condition

A census was conducted in 1881 to gather the first set of demographic data for British India.

India was in the initial stage of its demographic shift prior to 1921. Following 1921, the second phase of change started. But at this point, neither India’s overall population nor its pace of population growth was very high.

The other social development metrics were also not very promising. Less than 16 percent of people were literate overall.

Public health facilities were either unavailable to large chunks of population or, when available, were highly inadequate.

Consequently, water and air-borne diseases were rampant and took a huge toll on life.

No wonder, the overall mortality rate was very high and in that, particularly, the infant mortality rate was quite alarming about 218 per thousand in contrast to the present infant mortality rate of 33 per thousand.

Occupational Structure

There was minimal indication of a shift in India’s occupational structure the way people were employed in various industries and sectors during the colonial era.

At a peak of 70–75 percent, the agriculture sector employed the greatest number of people, while the manufacturing and service sectors employed just 10-15 and 15-20 percent of the workforce, respectively.

Another striking aspect was the growing regional variation. Parts of the then Madras Presidency, Bombay and Bengal witnessed a decline in the dependence of the workforce on the agricultural sector with a commensurate increase in the manufacturing and the services sectors. However, there had been an increase in the share of the workforce in agriculture during the same time in states such as Orissa, Rajasthan and Punjab.

Indian Economy after Independence

On 15 August 1947, India woke to a new dawn of freedom. Among other things, the founders of independent India had to choose the kind of economic structure most suited for our country—one that would advance the well-being of the majority rather than just a select few. The most appealing thing to Jawaharlal Nehru was socialism. He did not, however, support the type of socialism that had been instituted in the former Soviet Union, where the government owned all of the nation’s farms and enterprises and private property did not exist. Private property did not exist. Essentially, he sympathised with the socialist perspective and believed that an economic system that included the finest aspects of socialism with none of its negatives was the solution. According to this theory, India would be a socialist country with a robust public sector, private property, and democracy. The government would organise the economy and promote participation from the private sector. This perspective was reflected in the 1948 “Industrial Policy Resolution” and the Indian Constitution’s Directive Principles. The Prime Minister chaired the Planning Commission when it was established in 1950. Five-year plans became the new norm.