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Indian Economic Policy

Notes (v) The first census of India's foreign liabilities and assets of the Reserve of India was published
in
(a) 1948 (b) 1957
(c) 1965 (d) 1991
1.8 Summary

• The Indian economy in the pre-British period consisted of isolated and self-sustaining villages
on the one hand, and towns, which were the seats of administration, pilgrimage, commerce
and handicrafts, on the other. Means of transport and communication were highly
underdeveloped and so the size of the market was very small. To understand pre-British India,
it is essential to study the structure of the village community, the character of towns, the character
of internal and foreign trade, the state of the means of transport and communications.
• India had been conquered before the British too but the invaders settled in India. The difference
of the British conquest lies in the fact that it led to the emergence of a new political and economic
system whose interests were rooted in a foreign soil and whose policies were guided solely by
those interests. Whereas the early invaders Indianized themselves, the British tried to keep a
distance between them and the Indian people and thus created the distinction erstwhile not
known to Indian history--the foreign rulers and the Indian subjects.
• The process of commercial agriculture necessitated by the Industria Revolution was intensified
by the development of an elaborate network of railway in India after 1850.
• The new land system and commercialisation of Indian agriculture produced very adverse
economic consequences on the Indian economy. These influences retarded, nay halted, the
process of industrialisation the Indian economy, created “built-in depressors” in agriculture
and were responsible for the occurrence of famines 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.
• 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.
• Over 70 cotton mills and nearly 30 jute mills were set up in the country. Coal production was
more than doubled. Extension of railways continued at the rate of about 800 miles per annum.
The foundation of iron and steel industry was Finally laid during this period.
• The major form through which the exploitation of India was done was trade. Later, the British
started making investments in Indian industries and the process of economic drain started
through investment income in the form of dividends and profits. In addition to this, India had
to pay the costs of British administration, in the form of home charges. They included salaries
of British officers (both civil and military), payment of pensions, furloughs and other benefits,
as also interest payments on sterling debt.
• Trade policies were used against India by the East India Company and later by the British
Government to drain away wealth from India to feed the expanding British industry with raw
materials and also to encourage the trend towards commercialisation of agriculture so that the
Indian economy could be transformed as an appendage of the British colonial system.
• In the early phase of colonialism, the chief instrument of exploitation was trade but later the
British thought of encouraging investment in India. There were three principal purposes of
these investments. Firstly after the first war of Indian Independence (1857), which, the British
described, as the Mutiny, it was realised by the Government that for the effective control and
administration of the country, it was essential that an efficient system of transport and
communication should be developed.

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