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Unit 1: Characteristics of Indian Economy on the Eve of Independence

in Indian agriculture a built-in-depressor. Thus, the new agrarian relations were disincentive- Notes
ridden and therefore, retarded the process of agricultural development.
(3) The impact of colonial rule : Colonialism also had a deep impact on the repeated occurrence of
famines in India. The destruction of the Indian handicrafts increased unemployment in the
rural areas. Whereas in England, surplus labour from rural areas was quickly absorbed in new
industries created in the process of industrialisation, nothing of this kind happened in India.
The industrialisation of the Indian economy would have deprived England of a ready market
for its goods and so the colonial interests were opposed to the development of industries in
India. Thus, labour thrown out of employment in traditional industries imposed additional
burden on a subsistence agriculture.
But the burden of colonialism was to be borne by agriculture. The cost of extravagant and
lavish British administration, the cost of imperial wars in Burma and Afghanistan, the
depreciation of the value of the Indian currency since 1873 and the growing burden of home
charges were to be paid by the Indian people. The major taxes were land revenue, excise, salt
tax, stamps and opium. Income tax which was levied in 1886 was withdrawn because its yield
was too poor. Apart from opium, all other taxes fell on the rural classes. Land revenue was the
chief fiscal engine and this increased the burden on the peasantry.
On account of these factors, India was forced to keep a favourable balance of trade with England.
But her principal exports were mainly food and agricultural raw materials. Thus, even in the
famine years exports of foodgrains had to be maintained in order to create an export surplus on
merchandise account. There is evidence that after 1870, foodgrains exports increased because the
railways became a convenient vehicle of mobilisation of the food surplus. Thus, the compulsions
of colonialism in maintaining an export surplus, burdening the peasantry with higher taxes and
the swelling up of an agricultural population led to the impoverishment of the rural classes.
1.5 Process of Industrial Transition in India

The process of industrial transition in the British period is broadly divided into industrial growth
during the 19th century and industrial progress during the 20th century. It was mainly the private
sector--whether indigenous or foreign-- that carried industrialisation forward. Only after the First
World War some protection was granted to Indian industries otherwise Indian industry had to weather
all storms and face world competition on its own strength. This explains the slow growth of
industrialisation.
(A) Private enterprise and industrial growth in the 19th century
The outstanding industrial events of the 19th century were the decline of indigenous industries
and the rise of large-scale modern industries. This change was brought about by private
enterprise. The rise of large-scale industries was slow in the beginning but by the close of the
19th century, the movement was more rapid.
The period 1850-55 saw the establishment of the first cotton mill, first jute mill and the first coal
mine. In the same period, the first railway line was laid in India. In a period of 25 years, that is,
by the last quarter of the 19th century, there were 51 cotton mills and 18 jute mills. During the
same period, India produced one million tonnes of coal per annum and the Indian railways
had a mileage of 8,000. By the end of the 19th century there were 194 cotton mills and 36 jute
mills, and coal production had risen to over 6 million tonnes per annum. In spite of the very
rapid increase in industrialisation and the fact that the foundations for the development of
modern industries for the utilisation of coal and iron resources were laid by the end of the 19th
century, India was being gradually converted into an agricultural colony of the British.
By 1900, India had become a great exporter of rice, wheat, cotton, jute, oilseeds, tea, etc. and an
importer of British manufactures. In this way India had become an appendage of the British
colonial system.
During the 19th century, it was but natural that British business should pioneer industrial
enterprise in India. The Britishers had experience of running industries at home. British enterprise
received maximum state-support. Besides, much of the business developed in India was related

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