Class 11 Economics Notes Chapter 1 (Indian economy on the eve of independence) – Indian Econimoc Development Book

Detailed Notes with MCQs of Chapter 1: 'Indian Economy on the Eve of Independence'. This chapter is absolutely fundamental for understanding the trajectory of India's economic development post-1947. For your government exam preparation, you need a solid grasp of the state of the Indian economy before independence, shaped significantly by nearly 200 years of British colonial rule.

Here are the detailed notes covering the key aspects:

Chapter 1: Indian Economy on the Eve of Independence - Detailed Notes

1. Introduction: State of the Economy Prior to British Rule

• Before British rule, India had an independent economy.
• Agriculture was the main source of livelihood for most people.
• India was well-known for its handicraft industries, particularly in cotton and silk textiles, metalwork, and precious stone works. These products enjoyed a worldwide market based on reputation and quality.

2. Low Level of Economic Development Under Colonial Rule

• Primary Objective of British Rule: To reduce India to being a feeder economy for Great Britain's rapidly expanding modern industrial base. They aimed to make India a supplier of raw materials and a consumer of British manufactured goods.
• Impact: Colonial policies fundamentally changed the structure of the Indian economy, transforming it into a supplier of raw materials and a market for finished industrial products from Britain.
• Neglect of Indian Interests: The colonial government never made sincere attempts to estimate India's national and per capita income.
• Notable Estimators: Some individual attempts were made by figures like Dadabhai Naoroji, William Digby, Findlay Shirras, V.K.R.V. Rao, and R.C. Desai. Dr. V.K.R.V. Rao's estimates were considered particularly significant.
• Overall Outcome: Most studies found that India's economic growth during the first half of the 20th century was very slow – less than 2% growth in aggregate real output and only about 0.5% growth in per capita output per year. The economy was characterized by stagnation.

3. Agricultural Sector

• Dominance: About 85% of the country’s population lived in villages and derived livelihood directly or indirectly from agriculture.
• Stagnation: The agricultural sector experienced stagnation and, at times, deterioration despite its importance.
  • Causes of Stagnation:
    • Land Settlement Systems: The British introduced various systems like the Zamindari System (prevalent in Bengal Presidency). Zamindars were recognized as owners of the land and were responsible for collecting rent from cultivators (tenants), regardless of the economic condition of the cultivators. Their main aim was rent collection, with little focus on improving land productivity. This led to exploitation of cultivators. Other systems included Mahalwari and Ryotwari, which also had adverse effects.
    • Low Levels of Technology: Lack of irrigation facilities, negligible use of fertilizers, and outdated farming techniques hampered productivity.
    • Lack of Investment: Zamindars and the colonial government did little to invest in agricultural infrastructure like drainage, terracing, or flood control.
    • Commercialization of Agriculture: British policies forced the commercialization of agriculture. Farmers were pushed to produce cash crops (like cotton, jute, indigo) needed by British industries, instead of food crops. This often occurred at the expense of food security and did not significantly improve the farmers' economic condition due to market uncertainties and forced sales.
    • Partition Impact: India's partition in 1947 severely affected agriculture, as the highly irrigated and fertile lands (especially for jute production in East Bengal) went to Pakistan, while jute mills remained in India.

4. Industrial Sector

• De-industrialization: India could not develop a sound industrial base under colonial rule. The British systematically destroyed India's world-famous handicraft industries.
  • Motive: To reduce competition for British manufactured goods and create a market for them in India.
  • Methods: Discriminatory tariff policies (free export of raw materials from India, free import of British goods into India, heavy duty on export of Indian handicrafts).
• Slow Growth of Modern Industry (Second half of 19th Century):
  • Limited Scope: Industrial development was very slow and confined mainly to cotton textile mills (western India - Maharashtra, Gujarat) and jute mills (Bengal, dominated by foreigners).
  • Iron and Steel: Tata Iron and Steel Company (TISCO) was incorporated in 1907, marking a significant development. A few other industries (sugar, cement, paper) emerged later.
  • Lack of Capital Goods Industry: There was hardly any capital goods industry (industries producing machines, tools) to promote further industrialization.
  • Limited Role of Public Sector: The public sector's contribution was minimal and confined to areas like railways, power generation, communications, ports, etc., primarily to serve colonial interests.
  • Dominance of British Capital: Foreign capital, mainly British, dominated the industrial landscape.

5. Foreign Trade

• Restrictive Policies: India's foreign trade structure, composition, and volume were dictated by restrictive colonial policies.
• Composition: India became an exporter of primary products (raw silk, cotton, wool, sugar, indigo, jute, etc.) and an importer of finished consumer goods (cotton, silk, woollen clothes) and capital goods (light machinery) produced in Britain.
• Monopoly Control: Britain maintained monopoly control over India’s exports and imports. More than half of India's foreign trade was restricted to Britain; trade with other countries like China, Ceylon (Sri Lanka), and Persia (Iran) was allowed to a lesser extent.
• Suez Canal (Opened 1869): Significantly reduced the cost and time of transport between India and Britain, intensifying British control over India's foreign trade.
• Drain of Indian Wealth: A large export surplus was generated, but this did not benefit India. This surplus was used:
  • To make payments for expenses incurred by the colonial government ('home charges').
  • To meet expenses on war fought by the British government.
  • To import invisible items.
    This systematic transfer of resources from India to Britain is known as the drain of wealth.

6. Demographic Condition

• Census: First official census conducted in 1881. Subsequent censuses were held every ten years.
• High Birth Rate and Death Rate: Both were very high, keeping the rate of population growth low before 1921.
• Year of Great Divide (1921): After 1921, the death rate began to decline significantly while the birth rate remained high, leading to a marked acceleration in population growth. 1921 is thus known as the 'Year of Great Divide' marking the beginning of the second stage of demographic transition.
• Poor Health Facilities: Public health facilities were either unavailable or highly inadequate. Water and airborne diseases were rampant.
• High Infant Mortality Rate: Extremely high (around 218 per thousand births, compared to around 30-40 per thousand now).
• Low Life Expectancy: Very low (around 32-44 years, compared to over 69 years now).
• Low Literacy Rate: Overall literacy was less than 16%. Female literacy was negligible, at about 7%.

7. Occupational Structure

• Definition: Distribution of the working population across different industries and sectors (Primary, Secondary, Tertiary).
• Predominance of Agriculture: The vast majority of the workforce (around 70-75%) was engaged in the agricultural sector.
• Limited Manufacturing and Services: Manufacturing sector accounted for only about 10%, and the Services sector for about 15-20%.
• Regional Variation: There were regional differences. Parts of Madras Presidency (Tamil Nadu, Andhra Pradesh, Kerala, Karnataka), Bombay, and Bengal witnessed a decline in the dependence on agriculture and an increase in manufacturing and services. However, states like Orissa, Rajasthan, and Punjab saw an increase in the share of the agricultural workforce.
• Overall Picture: Showed economic backwardness, with heavy reliance on agriculture.

8. Infrastructure

• Development Motive: Infrastructure development (roads, railways, ports, water transport, posts & telegraphs) was undertaken, but the primary motive was to serve colonial interests, not to provide basic amenities to the people.
• Roads: Built primarily for mobilizing the army and transporting raw materials to ports. Roads connecting rural areas were largely neglected and remained unsuitable for modern transport.
• Railways: Introduced by the British in 1850 (first train ran in 1853 between Bombay and Thane).
  • Impact (Positive - though incidental): Enabled long-distance travel, fostered commercialization of agriculture (though benefits were uneven), broke geographical barriers.
  • Impact (Negative - primary motive): Facilitated colonial exploitation (transport of raw materials to ports, finished goods to interiors), huge economic drain (profits went to British investors), facilitated troop movement for administrative control.
• Water Transport: Inland waterways proved uneconomical compared to railways. Coastal shipping development was limited.
• Posts and Telegraphs: Developed primarily for maintaining law and order and administrative efficiency. Electric telegraph served imperial interests.
• Overall Assessment: Despite some development, infrastructure remained inadequate to meet the needs of the vast population and foster widespread economic growth.

9. Conclusion: Legacy of Colonial Rule

• By 1947, the Indian economy inherited from the British was:
  • Stagnant and Backward: Low per capita income, slow growth.
  • Agriculturally Dependent: With low productivity.
  • Weak Industrial Base: Lacking capital goods industries.
  • Rampant Poverty and Unemployment.
  • Poor Infrastructure.
  • Depleted: Due to the drain of wealth.
• While the British introduced elements like railways, the postal system, and a framework of administration, these were geared towards colonial exploitation rather than genuine development for the Indian people. The overall impact was the underdevelopment and crippling of the Indian economy.

Multiple Choice Questions (MCQs) for Practice:

1. What was the primary objective of British economic policies in India?
   a) To develop India's industrial base.
   b) To improve the standard of living of Indians.
   c) To make India a feeder economy for Britain's industries.
   d) To promote free trade between India and other nations.
   Answer: c)

2. Whose estimates of national income and per capita income during the colonial period were considered particularly significant?
   a) Dadabhai Naoroji
   b) William Digby
   c) V.K.R.V. Rao
   d) R.C. Desai
   Answer: c)

3. The Zamindari system, introduced by the British, primarily led to:
   a) Increased investment in agriculture by Zamindars.
   b) Significant improvement in the condition of cultivators.
   c) Stagnation in the agricultural sector due to exploitation of cultivators.
   d) Rapid technological advancement in farming.
   Answer: c)

4. The term 'De-industrialization' in the context of colonial India refers to:
   a) The rapid growth of modern industries.
   b) The decline of India's traditional handicraft industries.
   c) The shift of workforce from agriculture to industry.
   d) The establishment of large public sector enterprises.
   Answer: b)

5. Which of the following was a major characteristic of India's foreign trade during the colonial period?
   a) Export of finished goods and import of raw materials.
   b) Trade surplus used for India's development.
   c) Diversified trade with numerous countries globally.
   d) Export of primary products and import of finished goods, mainly with Britain.
   Answer: d)

6. The opening of the Suez Canal in 1869 led to:
   a) Reduced British control over India's foreign trade.
   b) Increased cost of transportation between India and Britain.
   c) Intensified British monopoly control over India's foreign trade.
   d) A shift in India's trade from Britain to America.
   Answer: c)

7. The 'Year of Great Divide' in India's demographic history is:
   a) 1881
   b) 1907
   c) 1921
   d) 1947
   Answer: c)

8. What was the approximate share of the workforce engaged in agriculture on the eve of independence?
   a) 40-45%
   b) 50-55%
   c) 60-65%
   d) 70-75%
   Answer: d)

9. The introduction of railways in India by the British primarily aimed at:
   a) Providing comfortable travel for the Indian population.
   b) Facilitating the transport of raw materials and British goods for colonial interests.
   c) Promoting balanced regional development within India.
   d) Creating employment opportunities for Indians in railway construction.
   Answer: b)

10. The concept of 'Drain of Wealth' during the colonial period, famously highlighted by Dadabhai Naoroji, refers to:
    a) The outflow of India's agricultural produce as exports.
    b) The large salaries paid to British officials in India.
    c) The one-way transfer of India's resources and wealth to Britain for which India received no adequate economic or material return.
    d) The investment made by British capitalists in Indian industries.
    Answer: c)

Make sure you revise these points thoroughly. Understanding the state of the economy before independence is crucial to appreciating the challenges faced and the policies adopted by independent India. Good luck with your preparation!