Indian Economy on the Eve of Independence

India became politically free in 1947, but it also had a big problem: it had to rebuild an economy that had been decimated and drained by almost 200 years of British rule. At the time of independence, India's economy was not a growing industrial powerhouse or a thriving agricultural state. It was poor, stuck and dependent. You need to know what India's economy was like in 1947 to comprehend how the country's leaders came up with the early development strategy and why self-reliance became such a significant deal in the years that followed.

This blog discusses the main important sectors of India's economy when it got independent, how colonial policies affected it, and the state of agriculture, industry, infrastructure, and trade with other countries.

1. A Stagnant Economy

India's economy in 1947 had low national income, a lot of poverty, and not many industries. The GDP per person was quite low, and the economy didn't really grow at all. The main goal of British economic policy was to get raw materials out of India and turn it into a market for British-made goods. This was bad for Indian firms.

About 85% of the inhabitants worked in agriculture, which was stuck in land arrangements that were semi-feudal and didn't produce much. There wasn't much expansion in industry, and the country's basic infrastructure, including roads, power, and schools, wasn't well built and wasn't evenly shared across.

2. Colonial Exploitation and the Loss of Wealth

Dadabhai Naoroji made the phrase "Drain of Wealth" famous. It was one of the worst things that transpired because of colonial rule. Britain took a lot of India's money and wealth without paying anything back.

Some key ways this exodus occurred were:

• Home charges are payments that the British government gets for things like running the country.
• Interest on Britain's public debt rose.
• Companies in Britain sent their profits back to England.
• India was exporting too many raw resources and not putting enough money into its own economy.

Because of this steady outflow of money from the country, the Indian economy didn't have enough cash. This made it tougher for the country to put money into education, infrastructure, or industry.

3. The Status of Agriculture: Low Production and Exploitation

The economy was in horrible shape because farming was its main source of income. Land revenue systems like Zamindari (land tenure) and Ryotwari took advantage of poor people and put profits ahead of their well-being.

• There wasn't enough water, the tools were substandard, and the procedures were archaic, which made things less productive.
• There were a lot of famines, including the Bengal Famine of 1943, since the amount of food grains farmed barely covered the needs of the people.
• There was more focus on cash crops like indigo, cotton, and jute that could be sold abroad than on food crops that could be eaten at home.

As a result, the economy was weak, most Indians were poor, in debt, and particularly vulnerable to natural disasters.

4. The Industrial Sector

India's industrialization was sluggish and dependent on colonial rule. The British destroyed native industries like textiles and handicrafts on purpose to increase their exports.

• The modern era's minor sector was largely made up of cotton, jute, and steel industries.
• Indian business owners like Jamshedji Tata had to follow strict colonial rules and compete with British goods that were heavily subsidized.
• Industries had a hard time growing since they didn't have enough money, technology, or trained labor.
• Britishers introduced machine made goods which were cheaper compared to the handmade goods that the Indian market produced, which brought a sense of competition and led to the downfall of the Indian economy. 

When India became independent, just a small number of people worked in organized industry, and industry didn't add much to the country's GDP.

5. Infrastructure: Built to Control, Not Grow

The British did create railroads, telegraphs, and ports, but they were mostly for the benefit of the colonies, not for growth.

• Railroads were used to move troops and raw materials, not to connect markets within the country.
• The roads and streams that went inland weren't built well or cared for.
• There weren't many programs to bring power or water to farms. Most of the time, they were only for British-owned farms or rich individuals in cities.

When the country became independent, a lot of people couldn't read or write and there weren't many competent professionals because there weren't many schools.

Did you know? In 1947, more than 80% of India's people resided in rural areas, and more than 90% of them depended on farming. Farming, on the other hand, only made up less than 50% of the country's GDP, which meant that a lot of people were not working and were not very productive.

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Frequently Asked Questions (FAQs)

What was India's biggest economic issue in 1947?

A lot of people were destitute and there wasn't enough infrastructure, which was the major difficulty. A lot of money needs to go into farming, manufacturing, education, and health for the economy to work. The most important thing was to develop an economy that could stand on its own after years of being taken advantage of.

Did India have any enterprises before the British came?

Yes. India's textile, metal, and handicraft industries were doing well before they were taken over by Europeans. British regulations that favored British-made goods and charged hefty taxes on Indian exports systematically shut down factories in these locations.

When the country became independent, how many people could read and write?

In 1947, less than 20% of people in India could read and write. Women were far less likely to be able to read and write. The British spent a lot of money on administrative education, but not on public education or vocational training. This meant that there weren't enough skilled people in the country.

 

The Indian economy was a sad paradox on the eve of independence: it had a lot of potential but not many excellent results. Centuries of colonial rule have turned a once-thriving commercial nation into a poor farming economy. On the other side, this state of deprivation was also the start of intensive economic planning, land reform, and the vision of a fair and self-sufficient economy.

Knowing what life was like in 1947 helps us see how far India has progressed since then and why some decisions were made in the early years of independence, like land reforms, investments in the public sector, and five-year plans.