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

adventure, which is an essential condition for dynamic entrepreneurship. Dr. Bipan Chandra who Notes
has examined the impact of colonial rule in modernizing India rejects both these arguments for absence
of modernization as mere shibboleths. He writes : “It is a historical fallacy to assume that India under
British rule did not undergo a fundamental transformation, or that it remained basically traditional.”
But the modernization of India was brought within the political parameters of a colonial economy.
Thus, the colonial links between India and Britain resulted in the progress of the Industrial Revolution
in Britain while it meant the modernization of those sectors of the Indian economy which strengthened
the process of integration of the Indian economy with British capitalism. “It was, therefore, not an
accident nor was it historically exceptional that India was integrated into world capitalism without
enjoying any of the benefits of capitalism, without taking part in the industrial revolution. It was
modernized and underdeveloped at the same time.”
It is also not correct to argue that British capital showed a spirit of adventure. The British developed
the railways in India under the Guarantee System which assured a minimum return on whatever
capital they invested. Similarly, the development of tea and coffee plantations or investment in jute
industry was undertaken only when the British investor felt attracted by high profits available in
these areas. Not only that, the entire policy of protection was aimed at protecting British industrial
and commercial interests. The introduction of the clause of most favoured nation treatment’ further
made it clear that along with profit maximization, the British used the arm of the state to obtain
security maximization. There is, therefore, no basis for the assertion that British capital was more
adventurous than Indian capital.

In 1905, the Swadeshi movement was started. It stimulated Indian industries and
there was a slow but steady growth in the field of existing industries as well as the
establishment of new industries between 1890 and the outbreak of the war of 1914.

The British rule was a long story of the systematic exploitation by an imperialistic government of a
people whom they had enslaved by their policy of divide and rule. The benefits of British rule were
only incidental, if any. The main motive of all British policies was to serve the interests of England.
Thus, in 1947 when the British transferred power to India, we inherited a crippled economy with a
stagnant agriculture and a peasantry steeped in poverty. As Jawaharlal Nehru put it : “India was
under an industrial capitalist regime, but here economy was largely that of the procapitalist period,
minus many of the wealth-producing elements of that pre-capitalist economy. She became a passive
agent of modern industrial capitalism suffering all its ills and with hardly any of its advantages.”
Self-Assessment

1. Choose the correct option:
(i) The Great Depression happened during
(a) 1929-34 (b) 1914-18
(c) 1939-45 (d) None of these
(ii) The Suez Canel was opened in
(a) 1890 (b) 1862
(c) 1869 (d) None of these
(iii) The commercialization in Indian agriculture was spread during
(a) 1850-1947 (b) 1857 -1919
(c) 1891-1951 (d) None of these
(iv) During the 18th century, the East India Company wanted to benefit from the export of
Indian cotton, the company made use of these agents called
(a) East India Company (b) Company agents
(c) Gomastas (d) None of these

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