Indian economy on the eve of independence in 1947

State of Indian economy on the eve of independence

As we are aware that India was called GOLDEN BIRD. The reason was the vast economy and wealth Indians possessed due to which they were not dependent on any other countries. The growth of the Indian economy was due to its agricultural means and foreign trade.

Indian economy on the eve of independence

But once India was colonized under British rule Indian economy faced many hardships in the economic field. Till independence Indian economy was hollow from the inside which was the main motive of the Britishers.

Indian economy on the eve of independence

On the eve of independence, the state of the Indian economy was not too good due to the following reasons:

1. Colonial Economy:

At the time of independence, the British colonial policy had a deep impact on India. Britishers export raw materials from India at cheap price and Britain made different products and sell it worldwide at high prices.

By supplying raw materials from India to facilitate the growth of British industry, British rulers drained a huge wealth of India. India has faced colonial exploitation for over 200 years under the rule of many foreign rulers and the Britishers. The Britishers also encouraged the commercialization of Indian agriculture to transform the Indian economy into a British colony.

2. Semi-feudal Economy:

By the end of British rule, there were new aspects of the Indian economy, i.e., the Introduction of the Feudal System. Introduction to Feudal System or land settlement system initiated feudal relations, i.e., landlord-tenant relations. The landlords were cruel to the cultivators and used to charge high Lagaan rates to them. The land is often concentrated in the hands of a few powerful individuals or families who extract rent. The feudal elite and landowners tend to accumulate wealth and power, while the lower classes may struggle with poverty and limited social mobility.

3. Stagnant Economy:

An economy that is growing at a very low rate is known as a stagnant economy. On the eve of independence, India’s growth of aggregate real output was less than 2% and its growth per capita output was only 0.5%. Due to a lack of expansion of economic factors like employment, investment, consumer spending, and business activity, economic growth dropped drastically.

4. Depleted Economy:

A depleted economy is one where there are no arrangements to replace the physical assets which are depreciated because of excessive use. The Indian economy at the time of independence was a depreciated economy due to the use of world war and a lot was used by Britishers for their personal use too. However, the Britishers did not make any arrangements for replacing the depleted assets, because of which the British rulers left a seriously depleted economy of India.

5. Backward Economy:

At the end of British rule, India was an underdeveloped and backward economy. The main reasons behind the Indian economy’s backwardness were Low Productivity Levels, Infrastructure Deficit, Limited Access to Education and Healthcare, Traditional Methods of Agriculture, High Birth rate, and High Death Rate.

6. Amputated Economy:

Britishers had a policy of divide and rule, which quickly gave rise to discrimination between different groups based on caste, culture, language, and religion. Because of this policy, at the time of independence, India was geographically divided into two different parts: India and Pakistan. This partition of the country into two parts virtually disrupted the Indian economy because of two main reasons.

Firstly, there was a shortage of raw materials for cotton and jute mills because most of the areas where cotton and jute used to grow went to Pakistan. Secondly, the partition gave rise to the problem of rehabilitation of a large number of refugees from Pakistan.

Reasons For Poor Indian economy on the eve of independence

Indian economy at the time of Independence was majorly affected by the following reasons. It formed following transformation in the Indian economy:

1. Colonial Exploitation: India was under British colonial rule for nearly two centuries, and the British Empire had heavily exploited Indian resources.  Colonial powers exploited the natural resources of colonized regions to meet the needs of their own industries and economies. This included the extraction of minerals, agricultural products, timber, and other valuable resources.

Colonies were often treated as resource reserves, with little regard for the long-term sustainability or development of local economies. The Indian economy served as a supplier of raw materials for British industries, and Indian markets were flooded with British manufactured goods, leading to the deindustrialization of many traditional Indian industries.

2. Agriculture Dominance: The economy was predominantly agrarian, with the majority of the population engaged in agriculture. However, agricultural practices were largely traditional and inefficient, leading to low productivity and widespread poverty.

Landownership was concentrated in the hands of a few zamindars (landlords) or the British colonial administration. Agriculture dominance is often more prevalent in rural areas, where land is primarily used for agricultural purposes. These areas tend to have a higher concentration of agricultural activities and a stronger reliance on agricultural income for livelihoods.

3. Limited Industrialization: Industrialization in India was minimal. Most industries were either owned by foreign companies or were small-scale enterprises. It often implied a lower level of industrial activity compared to other sectors such as agriculture or services.

Large-scale industries were mainly limited to sectors like jute, cotton textiles, and mining, and were predominantly concentrated in a few urban centers.

4. Infrastructure Deficit: India’s limited industrialization was also affected by inadequate infrastructure. The country had a significant deficit in infrastructure, including transportation, electricity, and communication networks. The lack of modern infrastructure hampered economic development and hindered the integration of regional markets.

5. Financial Dependency: India relied heavily on British financial institutions for capital and credit. The Indian economy was not self-sufficient in terms of finance, and there were limited indigenous banking and financial systems.

6. Trade Imbalance: The Indian economy had a trade imbalance, with exports primarily consisting of raw materials and agricultural produce, while imports were dominated by finished goods from Britain. This further hindered industrial development and perpetuated the economic dependence on colonial powers.

7. Poverty and Inequality: Poverty and income inequality were pervasive issues in pre-independence India. The majority of the population lived in poverty, and there were significant disparities in income and wealth distribution, with a small elite class enjoying most of the economic benefits.

After independence not only India was divided but the resources and the growth activity also got divided. People didn’t own many lands and property and there was a scarcity of food which made them very helpless.

Due to the British-imposed laws, none of India’s products or skills were recognized they were somewhere lost. As a result, the structure, composition, and amount of the country’s foreign commerce and income were negatively impacted and got drop down.