CHAPTER-1

INDIAN ECONOMY ON THE EVE OF INDEPENDENCE

NCERT ANSWERS(2023-24)

Q1. What was the focus of the economic policies pursued by the colonial government in India?
What were the impacts of these policies?

Ans) The economic policies pursued by the colonial government in India were concerned more
with the protection and promotion of the economic interests of their home country than with the
development of the Indian economy. The British changed the structure of Indian economy in 2
ways:
a) Reduce India to an exporter of important raw materials for the upcoming modern British
Industries
b) Turn India into a sprawling market for British manufactured goods so that the British
Industries could expand further.

Impact of these policies: The impact of these policies was low economic growth which was
evident from the following features:
i) India’s agricultural sector remained backward due to low agricultural productivity and
commercialisation of agriculture. The cash crops were grown for British Industries and this led
to a further shortage of food grains in India.
ii) The country’s world famous handicraft industries declined as a result of British Policies which
created widespread unemployment and led to introduction of new demand of imported cheap
Britain manufactured goods in the Indian consumer market as they were deprived of the supply
of the locally made goods.
iii) No corresponding modern industries were allowed to come up in the place of handicraft
industries.
iii) There was a generation of export surplus which did not benefit India because of the scarcity
of essential commodities like food, clothes, kerosene etc. in the domestic market. The export
surplus was used by the Britishers for their own interests which led to ‘Drain of India’s wealth’.
iv) Under British Rule, the state of infrastructure improved. However, their real motive was not
to provide basic amenities to the people but to subserve their own interest.

2. Name some notable economists who estimated India’s per capita income during the colonial
period.
Ans) At the end of the 19th century and the beginning of the 20th century, attempts were made to
estimate the per capita income and national income by Dada Bhai Naoroji, V.K.R.V. Rao (His
estimates were very significant), William Digby, Findlay Shirras and R.C. Desai

3. What were the main causes of India’s agricultural stagnation during the colonial period?
Ans) The agricultural sector was stagnant due to the following reasons:
1.Land settlement system : The most important reason for stagnation in the agricultural sector
was the introduction of the ‘Zamindari system’ by the colonial government. It was implemented
in the then Bengal presidency(present day eastern states)
a) Under this system, the profits accruing out of the agricultural sector went to the zamindars
instead of the cultivators. Neither the Zamindars nor the colonial government did anything to
improve the condition of agriculture.
b) The main interest of the zamindars was only to collect rent from the cultivators regardless of
their economic condition. This caused immense misery and social tension among the cultivators.
c) The terms of the revenue settlement forced the zamindars to adopt such an attitude as the
Zamindars were bound to deposit the revenue by a fixed date, otherwise they lost their right over
the land.
2. Low agricultural productivity: Agricultural production became low though, in absolute terms,
the sector experienced some growth due to the expansion of the aggregate area under cultivation.
Agricultural productivity was low due to the following factors:
a)Low level of technology
b)Negligible use of fertilisers
c) Lack of irrigation facilities
d) Lack of investment in terracing, flood control, drainage and desalinisation of soil.
While a small section of farmers changed their cropping pattern from food crops to commercial
crops, a large section of tenants, small farmers and sharecroppers, neither had resources and
technology nor had incentive to invest in agriculture.
3.Commercialisation of Agriculture: It means production of crops for sale in the market
instead of self consumption. The British encouraged the production of cash crops against food
crops. These cash crops were made for British Industries and this led to a further shortage of
food grains in India.
Note: Zamindari system was introduced by Lord Cornwallis in Bengal in 1793
Commercial crops like indigo were required by British industries for dye textiles.

4. Name some modern industries which were in operation in our country at the time of
independence.
Ans) TISCO -1907, TATA Airlines 1932, sugar, cement, paper etc came up after the 2nd world
war.

5. What was the two-fold motive behind the systematic deindustrialisation affected by the British
in pre-independent India?
Ans) The primary motive behind systematic deindustrialisation was two-fold:
a) To reduce India to an exporter of important raw materials for the upcoming
modern British Industries
b) To turn India into a sprawling market for British manufactured goods so that
British Industries could expand further.

6. The traditional handicrafts industries were ruined under British rule. Do you agree with this
view? Give reasons in support of your answer.
Ans) Yes, I agree. The country’s world famous handicraft industries which dealt in cotton & silk
textiles, metals and precious stone works etc. enjoyed a worldwide market because of fine
quality raw material and high standards of craftsmanship. These industries were declined as a
result of British Policies, no corresponding modern industries were allowed to come up in their
place. The primary motive behind this was two-fold:
 a) To reduce India to an exporter of important raw materials for the upcoming
modern British Industries
b) To turn India into a sprawling market for British manufactured goods so that
British Industries could expand further.
This policy had 2 adverse effects:
a) It created widespread unemployment due to the displacement of labourers from
the local handicrafts industries.
b) It led to introduction of new demand of imported cheap Britain manufactured
goods in the Indian consumer market as they were deprived of the supply of the
locally made goods.

7. What objectives did the British intend to achieve through their policies of infrastructure
development in India?
Ans) Under British Rule, the state of infrastructure improved. However, their real motive was
not to provide basic amenities to the people but to subserve their own interest.
1. Prior to the advent of British rule, roads were not fit for modern transport. Roads that
were built mobilised the army within India and transported the raw materials from the
countryside to the nearest Railway Station or the port for further being sent to England or
other lucrative foreign destinations. Thus, there always remained an acute shortage of
all-weather roads to reach out to the rural areas during the rainy season and people of
rural areas suffered during natural calamities and famines.
2. The Railways were introduced in 1850 but its social benefits to the Indians were
outweighed by the country’s huge economic loss.
3. The British Govt took steps to develop the inland trade and sea lanes but these measures
were far from satisfactory. The Inland waterways proved uneconomical as in the case of
the coast canal on the Orissa Coast. Though the canal was built at a huge cost yet it had to
be ultimately abandoned as it failed to compete with the railways.
4. The introduction of an expensive system of electric telegraph served the purpose of
maintaining law and order in the country.
5. The postal services remained all through inadequate.

8. Critically appraise some of the shortfalls of the industrial policy pursued by the British
colonial administration.
Ans) India could not develop a sound industrial base as the British were not interested in
industrializing India. It is evident from the following features:
1) Systematic deindustrialization of India: The country’s world famous handicraft industries
were declined as a result of British Policies, no corresponding modern industries were allowed to
come up in their place. The primary motive behind this was two-fold:
a) To reduce India to an exporter of important raw materials for the upcoming
modern British Industries
b) To turn India into a sprawling market for British manufactured goods so that
British Industries could expand further.
2) Adverse Effects of decline of Handicraft Industry: This policy had 2 adverse effects:
a) It created widespread unemployment due to the displacement of labourers from
the local handicrafts industries.
 b) It led to introduction of new demand of imported cheap Britain manufactured
goods in the Indian consumer market as they were deprived of the supply of the
locally made goods.
3) Lop-sided industrial development: During the second half of the 19th century, several modern
industries came up but its progress remained very slow.
a) Cotton Textiles Mills, mainly dominated by Indians, came up in Maharashtra and
Gujarat.
b) Jute Mills, dominated by the foreigners, came up in Bengal.
c) The Tata Iron and Steel Company (TISCO) came up in 1907.
d) A few other industries like sugar, cement, paper etc came up after the 2nd world war.
4)Lack of Capital goods industries: Capital Goods Industries are those industries which can
produce machine tools, which are in turn used for producing articles for current consumption.
There were hardly any capital goods industries to help promote further industrialisation in India.
5)Low growth rate of Industrial sector: A few manufacturing industries did come up but they
were not enough to compensate for the wholesale displacement of the country’s traditional
handicraft industry. Hence, the growth rate of the new Industrial sector and its contribution to
GDP remained very small.
6)Limited role of the Public Sector: The area of operation of the public sector was very limited.
It is confined to railways, power generation, ports, communication and some other departmental
undertakings.

9. What do you understand about the drain of Indian wealth during the colonial period?
Ans) The most important characteristic of India’s foreign trade throughout the colonial period
was the generation of a large export surplus. (Export surplus is the excess of exports over
imports which leads to inflow of foreign exchange). However, the generation of export surplus
did not benefit India because:
a)The scarcity of essential commodities like food, clothes, kerosene etc. were found in the
domestic market.
b)The export surplus did not result in any flow of gold or silver into India. Rather, this was used
to make payments for the expenses incurred by the offices set up by the colonial government in
Britain, expenses on war fought by the British Govt, to pay for imports of invisible items. Thus,
there was a one way transfer of wealth from India to Britain which is called ‘Drain of India’s
wealth’.

10. Which is regarded as the defining year to mark the demographic transition from its first to the
second decisive stage?
Ans) 1921. Before 1921, India was in the first stage of demographic transition. The second stage
of transition began after 1921. However, neither the total population nor its rate of growth at that
time was very high.

11. Give a quantitative appraisal of India’s demographic profile during the colonial period.
Ans) The various social development indicators also were not very encouraging as shown by the
following:
● The average literacy rate (ability to read and write for 7 years and above) was less than
16% and female literacy rate was 7%.
 ● Public facilities were either unavailable or highly inadequate. Consequently, water and air
–borne diseases were rampant and took a huge toll on life.
● The overall mortality rate was very high and particularly, the infant mortality rate was as
high as 218 per thousand in contrast to the present rate of 33 per thousand.
● Life expectancy was as low as 32 years in contrast to the present 69 years.
● Extensive poverty prevailed in India during the colonial period which contributed to the
worsening profile of India’s population.

12. Highlight the salient features of India’s pre-independence occupational structure.

Ans) Under British rule occupational structure showed little signs of change:
1. Predominance of agriculture which accounted for 70-75% of the workforce. This showed
a backward economy. Manufacturing sector accounted for 10% and the service sector
accounted for 15 to 20%.
2. The regional variation was growing rapidly i.e. dependence of workforce on the
agricultural sector declined and increased in the manufacturing and service sectors in the
then Madras Presidency(Tamil Nadu, AP, Kerala, Karnataka), Bombay and Bengal.
However, the share of the workforce in agriculture increased in states like Punjab, Orissa
and Rajasthan.

13. Underscore some of India’s most crucial economic challenges at the time of independence.
Ans) 1) The agricultural sector was already saddled with surplus labour and extremely low
productivity due to the following factors:
a)Low level of technology
b)Negligible use of fertilisers
c) Lack of irrigation facilities
d) Lack of investment in terracing, flood control, drainage and desalinisation of soil.
2) The industrial sector was crying for modernisation, diversification, capacity building and
increased public investment. The country’s world famous handicraft industries declined which
created widespread unemployment and new demand for imported cheap Britain products
emerged. No corresponding modern industries were allowed to come up in place of handicraft
industries.
3) Foreign trade was oriented to feed the Industrial Revolution in Britain. The export surplus was
used to serve the interests of the Britishers and one way transfer of wealth from India to Britain
led to Drain of India’s wealth.
4) Infrastructure facilities, including the famed railway network, needed upgradation, expansion
and public orientation. Its social benefits to the Indians were outweighed by the country’s huge
economic loss.
5)Prevalence of rampant poverty and unemployment required welfare orientation of public
economic policy.
6) The various social development indicators also were not very encouraging. The average
literacy rate was less than 16% and female literacy rate was 7%. Public facilities were either
unavailable or highly inadequate. Consequently, water and air –borne diseases were rampant and
took a huge toll on life. The overall mortality rate was very high and particularly, the infant
mortality rate was as high as 218 per thousand in contrast to the present rate of 33 per thousand.
Life expectancy was as low as 32 years in contrast to the present 69 years. The social and
economic indicators challenges before the country were enormous.

14. When was India’s first official census operation undertaken?

Ans) 1881

15. Indicate the volume and direction of trade at the time of independence.
Ans) Direction of Foreign Trade: More than 50% of India’s foreign trade was carried out with
Britain and the rest was allowed with China, Ceylon (Sri Lanka) and Persia (Iran). With the
opening of Suez Canal, the access to Indian markets became easier as the transportation cost was
reduced. This further intensified Britain’s control over our foreign trade.

Volume of Foreign Trade: The most important characteristic of India’s foreign trade throughout
the colonial period was the generation of a large export surplus. (Export surplus is the excess of
exports over imports which leads to inflow of foreign exchange). However, the generation of
export surplus did not benefit India because:
a)The scarcity of essential commodities like food, clothes, kerosene etc. were found in the
domestic market.
b)The export surplus did not result in any flow of gold or silver into India. Rather, this was used
to make payments for the expenses incurred by the offices set up by the colonial government in
Britain, expenses on war fought by the British Govt, to pay for imports of invisible items. Thus,
there was a one way transfer of wealth from India to Britain which is called ‘Drain of India’s
wealth’.

16. Were there any positive contributions made by the British in India? Discuss.
Ans)
Under British Rule, the state of infrastructure improved. However, their real motive was
not to provide basic amenities to the people but to subserve their own interest.
1. Prior to the advent of British rule, roads were not fit for modern transport. Roads that
were built mobilised the army within India and transported the raw materials from the
countryside to the nearest Railway Station or the port for further being sent to England or
other lucrative foreign destinations.
2. The Railways were introduced in 1850. It affected the economy in many ways.
a) It enabled people to undertake long distance travel and thereby broke
geographical and cultural barriers.
b) It fostered (encouraged) commercialisation of Indian agriculture though it
adversely affected the self sufficiency of the village economies in India.
c) The volume of India’s exports undoubtedly expanded but its benefits rarely
accrued to the Indian people.
d) The social benefits to the Indians were outweighed by the country’s huge
economic loss.
3. The British Govt took steps to develop the inland trade and sea lanes but these
measures were far from satisfactory.
4. The introduction of expensive system of electric telegraph served the purpose of
maintaining law and order in the country.