An Overview of Indian Economy: Indian Economy Before, During and After British Rule

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  • Every country has certain resources. These resources should be used in an optimum manner to get most out of them. Economics is the study of scarce resources and their optimum utilization for the consumption. Economics will come out with theories and economy is the application of those theories.

  • The economy is defined as a social domain that emphasizes the practices, discourses, and material expressions associated with the production, use, and management of resources.

  • India is a big country with many natural resources. To understand the present scenario of Indian Economy we need to understand the condition of Indian economy in three phases.

  • Indian Economy before British Rule

  • Indian Economy during British Rule

  • Indian Economy after British Rule

Indian Economy Before British Rule

Before British rule India had an independent economy. The economy was gifted with many natural resources like quality spices, fertile land, jewels and textiles etc. The economy is mostly dependent on agriculture and allied sector activities. Most valuable and sophisticated handcrafts were made by people. Before British rule, ruling was done by kings. They used to take care of their people.

Indian Economy During British Rule

British People entered India for business, as East India Company. In 1757, Robert Clive won the battle of Plassey and started British Rule in India. This was continued till 1947. The British were never interested in the development of India or its citizens. Their aim was to exploit the resources of India and take away as much as possible to England.

Notable economics Features during British Rule:

Decline of Handicraft Industry

No importance was given to local artisans, carpenters, artists and weavers etc. who were good at making beautiful handicrafts. Industrialization took place and machines replaced the men. British Rule made policies to encourage production activities in favor of British people.

Importance to Production of Cash Crops

In order to make textiles raw cotton was needed. Indian people encouraged to cultivate cotton, jute and sugarcane crops instead of food grains. England imported raw cotton and made textiles in order to export to other nations, including India.

Famines and Shortage of Food

Famine is a situation wherein many people do not get food to eat and die from hunger and diseases. Famines were frequent in during British rule. The most dangerous famine was the Bengal famine, occurred in 1943. More than 1.5 million people died due to lack of food. There were many reasons for famines—

  • Bad rainfall and more dependent on monsoons.

  • Production of food grains decreased due to production of cash crops.

  • Exports of food grains to England were increased.

Involvement of Intermediaries in Agriculture

  • The British introduced intermediaries (Zamindar in eastern India, Mahal Wari in Western India and Ryotwari in South India) to collect revenue in the form of taxes, rent etc. They used to collect money mercilessly and out of the total revenue collected some portion was kept with them.

  • No British economist attempted to measure the per capita income and national income of India.

Development of Transportation System

  • The British laid down railways for the purpose of exporting resources from India. Then after, first passenger train ran for 34km between Bori Bunder (Mumbai) and Thane on 16th April 1853. This is the positive contribution by British Rule.

  • The British government also established textile mills, telecommunication, telegraph, post offices etc. in the country.

Indian Economy After British Rule

  • Independence was given on 15th Aug 1947. Then the government of India came into picture. The main aim of the government of India was to take India towards the higher levels of development and achieve welfare for all its citizens.

  • Economy of a country could be in any of the three forms.

    • Capitalistic Economy - Market-based economic system where individuals own all resources.

    • Socialistic or State economy - Absolute power to state in running the economy.

    • Mixed economy – Combines the features of both capitalistic economy and state economy.

  • After Independence, India became a developing mixed economy. This is the world’s sixth-largest economy by nominal GDP (Gross Domestic Product) and the third largest by PPP (Purchasing Power Parity).

  • British Rule left country by leaving many challenges. The economic condition of the country is not good. These challenges are-

  • Slow growth and Low level of per capita income: Per capita income is calculated by dividing national income by population. Per capita Income describes the standard of living. Indian economists Dadabhai Naoroji, V.K.R.V Rao and others attempted to measure National Income.

Formula Per Capita Income
Formula per capita income

Per capita Income = National Income/ Total Population

  • India’s GDP per capita income (nominal) is estimated to be around $2,134 per year, by 2018. It was $1670 per year in 2016.

  • Even though, many economic developing activities are being done the growth rate of per capita income is low. The reasons for slow growth are increasing wants and increasing prices of goods and services.

  • Problem of heavy population: India is the 2nd most populous country. According to 2011 census, India’s population stands at 1.21 billion, and the population is growing at a faster rate. India is going to overtake China in population. And more than 50% of Indian population is between 0 to 25 yrs. In fact, the total of India’s population is more than the combined population of developed countries like USA and Japan etc.

  • More population results more expenditure on food, clothes, education, health services and infrastructure development. Available land area is not enough to feed the entire population. This results more poverty and unemployment.

  • Existence of Poverty: As there is more population there will be more poverty. India is having nearly one third of world’s poor. According to the United Nation’s Millennium Development Goals (MDG) more than 270 million of people (21.9% of 1.21 billion) lived below poverty line in 2011-12. As per World Bank revised poverty line as $1.9 per day.

  • Among various states of India, Uttar Pradesh is having more people below the poverty line. Percentage wise Chhattisgarh is the poorest state.

  • Reasons behind poverty:

    • Due to unemployment and low wages for work

    • People subjected to exploitation on grounds of caste and religion.

    • Lack of property i.e. land to cultivate.

    • The efforts of the government have not been effective. Corruption and slow pace of decision-making regarding implementation of poverty eradication.

  • Dependence on Agriculture: Indian economy has been traditionally based on agriculture. In 1951, at the beginning of first plan, more than 70 percent of the population were engaged in agriculture and related activities. Even though the dependence on agriculture come down, most of the labour is associated with agriculture and allied sector activities.

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