Indian Economy before Independence

The main objective of the colonial rule in India was to transform India into a country that could provide raw materials without any hindrance to the modern industries of Britain that were growing during the British rule. Dadabhai Naoroji, William Digby, Findlay Shirras, V.K.R.V Rao, and R.C Desai were the prominent economists who conducted studies on determining the national income and per capita income of India before independence. According to the conclusion of such economic studies conducted before independence, the country's Aggregate Real Output growth rate was less than 2% and the Per-capita Output growth rate was just less than half a percent until the first half of the twentieth century.

1. Agricultural Sector

During the colonial period, the Indian economy was mainly dependent on agriculture. During the colonial period, 85% of the Indian population directly or indirectly depended on agriculture for their livelihood. Low Agricultural Productivity was the main cause of stuttering during the colonial period. The main reason for low agricultural productivity was the land tenure system implemented by the British government. The commercialization of agriculture attracted farmers from food crops to cash crops.

Zamindari System - The Zamindari System was a land tenure system implemented by the British government in the province of Bengal. The profits from agriculture went to the middlemen, not the farmers. However, neither the Zamindar nor the colonial government did anything for the development of the agricultural sector. The Zamindar focused only on collecting huge rent from the farmers. The increased rent burden made the life of the farmers difficult. According to this system, the Zamindar had to pay taxes to the British government on time. Otherwise, the Zamindar would lose his rights over the land. The Zamindar never considered the economic condition of the farmers. The lack of new technologies, lack of irrigation facilities, and low use of chemical fertilizers became the cause of stagnation of the agricultural sector.

2. Industrial Sector

The main objectives of Britain's industrial policies, which contributed to the decline of Indian industries, were

- To make India an exporter of raw materials required for the modern industries that grew up in Britain.

- To make India a large market for industrial products produced in Britain.

The decline of handicraft industries exacerbated unemployment in India and eliminated the availability of local products in the consumer market. The colonial administration skillfully utilized the increase in demand by importing cheap goods produced in Britain. Modern industries took root in India from the second half of the 19th century. The cotton industries under the control of the Indians mainly started in Gujarat and Maharashtra. The jute industries under the control of the British were concentrated in Bengal. The iron and steel industry started operating in India at the beginning of the 20th century. TISCO Tata Iron and Steel Company was established in 1907. After World War II, industries like sugar, cement, and paper started in India. Capital Goods Industry refers to industries that manufacture machinery needed for production.

3. Foreign Trade

The policies implemented by the colonial administration in the areas of production, trade and customs adversely affected the structure, components and volume of Indian foreign trade. Raw materials such as silk, cotton, wool, sugar, indigo and jute were exported from India during colonial rule. Machinery manufactured in British factories, cotton, silk and woolen clothes were imported to India during colonial rule. Britain maintained a monopoly over India's imports and exports with vested interests and as a result, more than half of India's foreign trade was forced to be conducted with Britain and the remaining part with countries such as China, Ceylon (Sri Lanka) and Persia (Iran). With the opening of the Suez Canal, Britain began to tighten control over Indian foreign trade. The specific objective of foreign trade during British rule was to create a high export surplus. This trade surplus did not increase the flow of gold and silver to India. But these were used to finance the British's administrative and war expenses, as well as the import of various services. All this facilitated the flow of Indian wealth to Britain.

4. Demographics

The first official census was conducted in India in 1881. Censuses are conducted every 10 years. The period before 1921 is known as the first phase of India's demographic transition. The period after 1921, is known as the second phase of India's demographic transition. The literacy rate of India during colonial rule was less than 16%. The female literacy rate of India during colonial rule was less than 7%. The reason for the high overall mortality rate of India during colonial rule was - Public health facilities were not available to a large section of the population. The existing ones were completely inadequate. Therefore, air and water-borne diseases became widespread and many people died due to these. The lack of public health facilities, frequent natural disasters, and famines were the reasons for the bankruptcy of the Indian population and the high mortality rate of Indians.