Indian Economy on the Eve of Independence

The colonial government’s economic policies were focused on protecting and promoting British economic interests, not on developing India. India was made a supplier of raw materials and a market for finished British goods.

Impacts:
- India’s independent economy was transformed into a colonial economy.
- Handicraft industries declined and were replaced by cheap imports from Britain.
- Agriculture stagnated and productivity remained low.
- There was little industrial growth and very limited capital goods production.
- Foreign trade was controlled by Britain, leading to a drain of Indian wealth.
- Poverty, unemployment, poor health, and low literacy remained widespread.

Some notable economists who estimated India’s per capita income during the colonial period were Dadabhai Naoroji, William Digby, Findlay Shirras, V.K.R.V. Rao, and R.C. Desai. The chapter notes that V.K.R.V. Rao’s estimates were especially significant.

India’s agricultural stagnation during colonial rule was caused by several factors:
- The land settlement systems, especially the zamindari system, diverted profits to zamindars rather than cultivators.
- Zamindars were mainly interested in rent collection, not agricultural improvement.
- The revenue settlement forced zamindars to deposit fixed sums on time, creating pressure but not incentives for development.
- There was low technology, lack of irrigation, and negligible use of fertilisers.
- Agriculture suffered from insufficient investment in terracing, flood control, drainage, and soil improvement.
- Many small farmers and tenants lacked resources, technology, and incentive.
- Some shift to cash crops for British industry reduced food-crop production and did not improve farmers’ conditions.

Modern industries operating in India at the time of independence included cotton textile mills and jute mills first, followed by iron and steel industries. Other industries that had come up after the Second World War were sugar, cement, and paper industries.

The British pursued systematic de-industrialisation for a two-fold purpose:
1. To reduce India to the status of a mere exporter of raw materials for British industries.
2. To turn India into a large market for British manufactured goods so that British industries could continue to expand.

These policies destroyed indigenous handicrafts and boosted imports from Britain.

Yes, the view is correct. The traditional handicraft industries were ruined under British rule because:
- British policy encouraged the decline of indigenous handicrafts.
- India was flooded with cheap manufactured goods from Britain.
- Indigenous producers could not compete with machine-made imports.
- The country was turned into a raw-material supplier and a market for British goods.
- This caused massive unemployment among artisans and craftsmen.

So, the collapse of handicrafts was a direct result of colonial economic policy, and no modern industrial base was created to replace them.

The British developed infrastructure in India mainly to serve colonial interests, not Indian welfare. Their objectives were:
- to help the movement of the army within India,
- to carry raw materials from the countryside to ports and railways,
- to export these materials to Britain,
- to maintain law and order and colonial control,
- and to support British trade and administration.

Thus, railways, roads, telegraphs, ports, and postal services were built primarily for the convenience of the colonial government.

The industrial policy of the British colonial administration had several shortfalls:
- It destroyed the old handicraft industries without replacing them adequately.
- It did not allow India to develop a sound modern industrial base.
- Industrial growth was very slow and limited mainly to cotton and jute textiles, with some iron and steel later.
- There was almost no capital goods industry, so further industrialisation was blocked.
- The public sector was extremely limited and confined to railways, power, communications, ports and a few departmental undertakings.
- The contribution of industry to GDP remained very small.

So, British industrial policy was narrow, exploitative, and inadequate for India’s development.