Chapter-10: Indian Economy at the time of Independence

the features of Indian economy as follows:

(i) Low per capita income India is known in the world as a country with low per capita income. Per capita income is defined as the ratio of national income over population. It gives the idea about the average earning of an Indian citizen in a year, even though this may not reflect the actual earning of each individual. India’s per capita income for the year 2012-2013 is estimated at ` 39,168. This comes to about ` 3,264 per month. If we compare India’s per capita income with other countries of the world then it can be seen that India is well behind many of them. For example, the per capita income of USA is 15 times more that of India while China’s per capita income is more than three times of India.


(ii) Heavy population pressure India is world’s second largest populated country after China. As per 2011 census India’s population stands at more than 121 crores. It increased at a rate of 1.03 percent during 1990-2001. The main cause of fast rise in India’s population is the sharp decline in death rate while the birth rate has not decreased as fast. Death rate is defined as the number of people died per thousand of population while birth rate is defined as the number of people taking birth per thousand of population. In 2010, the birth rate was 22.1 persons per one thousand population while the death rate was only 7.2 persons per one thousand population. Low death rate is not a problem. In fact it is a sign of development. Low death rate reflects better public health system. But high birth rate is a problem because it directly pushes the growth of population. After 1921, India’s population increased very fast because birth rate declined very slowly while death rate declined very fast. From 49 in 1921 the birth rate declined to 22.1 in 2010 while during the same time period, death rate declined from 49 to 7.2. Hence the population growth was very rapid in India. Heavy population pressure has become a major source of worry for India. It has put burden on the public exchequer to mobilize enough resources to provide public education, health care, infrastructure etc.


(iii) Dependence on Agriculture Majority of India’s working population depend on agricultural activities to pursue their livelihood. In 2011 about 58 percent of India’s working population wasengaged in agriculture. In spite of this, the contribution of agriculture to India’s gross domestic product is a little over 17 percent. A major concern of agriculture in India is that productivity in this sector is very less. There are many reasons for this. There is heavy population pressure on land to sustain huge number. Due to population pressure on land the per capita availability of land area is very low and not viable for extracting higher output. Two, since per capita land availability is less, a majority of people are forced to become agricultural labour working at low wages. Three, Indian agriculture suffers from lack of better technology and irrigation facilities. Four, mostly people, who are not educated or not trained properly, are engaged in agriculture. So it adds to low productivity in agriculture.


(iv) Poverty and inequality Another very disheartening thing about India is that it has world’s largest number of poor people. As per reports of government of India, in 2011-12 about 269.3 million people in India were poor. This was about 22 percent of India’s population. A person is termed poor if he/she is not able to consume the required amount of food to get a minimum calorie value of 2400 in rural area and 2100 in urban area. For this the person must earn the required amount of money as well to buy the food items. The government has also estimated that the required amount of money is ` 816 in rural area and ` 1000 in urban area per head per month. This comes to about ` 28 in rural area and ` 33 in urban area per head per day. This is called poverty line. This implies that 269.9 million people of India were not able to earn such little amount in 2011-12. Poverty goes with inequality in income and wealth distribution. Very few in India posses materials and wealth while majority have control over no or very little wealth in terms of land holding, house, fixed deposits, shares of companies, savings etc. Only top 5 percent of households control about 38 percent of total wealth in India while the bottom 60 percent of household has control over only 13 percent of the wealth. This indicates concentration of economic power in a very few hand. Another issue linked to poverty is the problem of unemployment. One of the most important reasons of poverty in India is that there is lack of job opportunities for all the persons who are in the labour force of the country. Labour force comprises of the adult persons who are willing to work. If adequate number of jobs are not created every year, the problem of unemployment will grow. In India every year large number of people are added to the labour force due to increase in population, increase in number of educated people, lack of expansion of industrial and service sector at the required speed etc.


  1. What was the condition of agriculture sector at the time of Independence?


Ans : 1) Low level of agricultural productivity :-

Agricultural productivity became very low and this stagnation in agriculture sector was mainly due to systems of land settlement that were introduced by the British Government. The Zamindari system, the profit accuring out of the agriculture sector went to Zamindaris instead of the cultivators. This lead to discouragement amongst the cultivators to produce less.


  1. High dependence on Monsoon :-

Agriculture sector was mainly dependent on monsoon. No effort was ever made under the British rule to develop permanent means of irrigation.


  1. Lack of Proper Input:-

Low level of technology, lack of irrigation facility and negligible use of fertilizers, added to aggravate the plight of the farmers and contributed to the dismal level of agricultural productivity.


 Q.2 What was the condition of Industrial sector at the time of Independence?


Ans :- 1) Discriminatory Tariff Policy :-

The British Government allowed tariff free export of raw materials from India and tariff free import of British industrial products into India. But a heavy duty on the export of Indian handicrafts products. It leads to decay of handicrafts industry in India.


(ii) Competition from machine :-

Industrial revolution in Britain gave a stiff competition to the handicraft industries in India. Due to low cost and better quality product produced by machine forced the Indian craftsmen to shut down the handicraft Industry in India.


(iii) New Patterns of Demand :-

Owing to British rule in India, a new class of people emerged in India. This changed the pattern of demand in India against the Indian products and in favour of British products. As a result, the Indian Industry tended to Perish


(iv) More market for British Goods :-

An introduction of railways facilitated the transportation of the British products to different parts of the country. As a result, the size of the market for the low cost British product expanded while it started shrinking for the high cost Indian products. This lead to decay of Industry in India.


Q3. What was the condition of foreign trade under the British rule ?


Ans 1) Due to discriminative tariff policy adopted by the British Government, India became net exporter of raw materials and primary products.

On the other hand, it became net importer of finished goods reproduced by the British Industry.


(ii) Composition of exports and imports showed the backwardness of Indian economy. Exports and imports were largely restricted to Britain only due to monopoly control of India’s foreign trade.


(iii) Surplus profit made and account of foreign trade during the British rule was distributed on administrative and as well as on war expenses. It was only used to increase the pursuits of the British Government.


Q 4 Mention the demographic profile during the British rule.


  1. High birth and High death rate implied low survival rate, which was nearly 8 per thousand per annum.
  2. Life expectancy was as low as 32 years which shows the lack of health care facilities, lack of awareness as well as lack of means for health care.
  3. Literacy rate was as low as 16 percent, which reflects the social and economic backwardness of the country.


 Q5. Mention the condition of occupation structure at the time Independence.


  1. Agriculture was the principal source of occupation and about 72.7 percent of working population was engaged in agriculture


  1. Only 10.1% of the working population were engaged in the manufacturing sector, which showed the backwardness of Indian Industry at the time of Independence.


  1. only 17.2 percent of the working population were engaged in the service sector, which also proved the slow growth of tertiary sector at the time of Independence.


  1. There was an unbalanced growth of Indian economy at the time of Independence


Q6 What was the condition of Infrastructure at the time of Independence.


  • There was some infrastructural development during the British in the area of transport and communication.
  • Introduction of railways, was a major break through followed by the development of some ports and the construction of some roads.


  • But the main motive of the British government was to foster the interest of the British Government rather than to accelerate the growth of Indian economy.


  • There was transition from barter system of exchange to monetary system of exchange, which facilitated division of labour & large scale production.

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