Ch-1, Indian Economy on the Eve of Independence, IED

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Class 12th; IED; Ch-1; Indian Economy on the Eve of Independence; Full Chapter in Notes-Flashcard Form

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65 Terms

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What was the Origin of British Rule in India and what was the Basic Purpose of British Rule?

The British rule over India changed the course of history in India. The foundation of the British Empire in India was laid by the Battle of Plassey, fought in 1757. The main purpose of the British rule in India was to use the Indian economy as a feeder economy for the development of the British economy. British colonial rule tampered with the Indian economy very badly. They exploited India's natural as well as human resources for the glory of their own country. Finally, after about 200 years of British rule, India gained independence from the British on 15th August, 1947.

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Explain the Low Level of Economic Development under Colonial Rule by comparing the Indian economy before and during British rule.

Before the advent of British rule, the Indian economy was characterised by the following features: 1. Prosperous Economy — India was an independent, self-reliant and prosperous economy. 2. Agrarian Economy — Agriculture was the main source of livelihood for most people and it engaged about two-third of the total population. 3. Well Known Handicraft Industries — India was also known for its handicraft industries in the fields of cotton and silk textiles, metal and precious stone works, etc. Handicraft products enjoyed a worldwide market due to their reputation for the fine quality of materials used and the high standards of craftsmanship. However, during British rule, the economic policies pursued by the Colonial Government (British Government) in India were concerned more with the protection and promotion of their own economic interests than with the development of the Indian economy. Their policies brought a fundamental change in the structure of the Indian economy. Their two-fold strategy, discussed later in the chapter under the heading De-industrialisation — Decline of Handicraft Industry, transformed the country into a supplier of raw materials and consumer of finished industrial products from Britain.

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Textile Industry in Bengal (Purple Box)

Muslin, a cotton fabric of plain weave, is a type of cotton textile which had its origin in Bengal, now Bangladesh, specially in places in and around Dhaka, spelled as 'Dacca' during the pre-independence period.
Daccai Muslin had gained worldwide fame as an exquisite type of cotton textile and was exported to Europe, Middle East and other markets in the 17th and 18th centuries.
The finest variety of muslin was called malmal. Foreign travellers also referred to it as malmal shahi or malmal khas, implying that it was worn by, or fit for, the royalty.

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Meaning of Colonialism (Purple Box)

Colonialism refers to a system of political and social relations between two countries, of which one is the ruler and the other is its colony.
The ruling country not only has political control over the colony, but it also determines the economic policies of the dominated country.
In the case of India, the unequal relationship between the colony, India, and the ruling country, Britain, resulted in the underdevelopment of India.

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Explain the Low Level of National Income and Per Capita Income during British rule.

The economic condition of a nation can be judged with the data of national income and per capita income. Per Capita Income = National Income / Total Population. However, no sincere attempt was made by the British Government to estimate India's national and per capita income. Some individual attempts were made by experts like Dadabhai Naoroji, William Digby, Findlay Shirras, V.K.R.V. Rao and R.C. Desai. But all these estimates produced conflicting and inconsistent results. However, Dr. Rao's estimates of national and per capita incomes were considered very significant. Most studies revealed that the country's growth of aggregate real output during the first half of the twentieth century was less than 2% and there was only 0.5% growth in per capita output per year.

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Explain the Agricultural Sector during the British colonial period.

During the pre-British period, the condition of Indian agriculture was not at all satisfactory. India's economy under British colonial rule was overwhelmingly rural and agricultural in character. Nearly 85% of the country's population lived mostly in villages and derived their livelihood, directly or indirectly, from agriculture. However, even with such a large proportion of the population engaged in agriculture, the country was not self-sufficient in food and raw materials for industry. The agricultural sector therefore remained backward and stagnant during British colonial rule. The main reasons for this stagnation were the Land Settlement System, Commercialisation of Agriculture, Low Level of Productivity and Scarcity of Investment.

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What were the Main Reasons for Stagnation/Backwardness in Agricultural/Primary Sector during British colonial rule?

The stagnation in the agricultural sector was caused due to the following reasons: 1. Land Settlement System — The introduction of the Zamindari System was the most important reason for stagnation in the agricultural sector. The profits accruing from the agricultural sector went to the zamindars in the form of lagaan tax, while their main interest was only to collect lagaan regardless of the economic condition of the cultivator. 2. Commercialisation of Agriculture — Farmers were encouraged to produce cash crops for sale in the market rather than food crops for self-consumption, which promoted a shift from food crops to cash crops. 3. Low Level of Productivity — Low levels of technology, lack of irrigation facilities and negligible use of fertilisers resulted in a low level of productivity. 4. Scarcity of Investment — Agriculture faced scarcity of investment in terracing, flood-control and drainage, while many tenants, small farmers and sharecroppers lacked the resources, technology and incentives to invest in agriculture.

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Explain the Land Settlement System as a reason for stagnation in the agricultural sector.

The most important reason for stagnation in the agricultural sector was the introduction of the Zamindari System by the colonial government. Under this system, profits accruing out of the agricultural sector went to the zamindars in the form of lagaan tax. The main interest of the zamindars was only to collect lagaan, regardless of the economic condition of the cultivator. The dates for depositing specified sums of lagaan with the British Government were also fixed. If the zamindars failed to deposit the specified amount, they would lose their rights. Both the zamindars and colonial government did nothing to improve the condition of agriculture, which contributed to stagnation in the agricultural sector.

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What was the Zamindari System and how did it contribute to the stagnation of agriculture?

The Zamindari System, also known as the Permanent Settlement System, was introduced by Lord Cornwallis in 1793. Its basic aim was to increase the revenue of the Colonial Government. Under this Land Tenure System, zamindars merely collected rent from the actual tillers of the soil. Zamindars were recognised as owners of the land and were given the right to collect rent, or lagaan, from farmers. Thus, zamindars functioned as intermediaries between the cultivators and the British Government. The system was based on exploitation, as zamindars were allowed to extract as much rent or lagaan as they wished. They imposed exorbitant lagaan, and the rates were so high that farmers were not left with enough foodgrains to feed themselves. This made farmers economically and physically weak. The zamindars were only interested in pleasing the British Government and did nothing to improve the condition of agriculture.

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Define and explain Commercialisation of Agriculture.

Commercialisation of agriculture means the production of crops for sale in the market rather than for self-consumption.
During British rule, farmers were given higher prices for producing cash crops, such as cotton or jute. However, this did not improve the economic condition of farmers because instead of producing food crops, they were producing cash crops, which were ultimately used by British industries.
Thus, British rule promoted a shift from food crops to cash crops.

This commercialisation was mainly intended to cater to the needs of British industries for necessary raw materials.

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Commercialisation of Agriculture resulted in Famines (Purple Box)

During the British rule, agriculture was commercialised to cater to the needs of British industries for necessary raw materials.
British industrialists needed raw materials like cotton, jute, groundnut and sugarcane to keep their factories running. By offering high prices, they attracted Indian peasants to produce commercial crops instead of food crops.
India was also forced by British rulers to export food grains, which were in short supply in Britain.
This adversely affected the self-sufficiency of village economies. The fall in production of food crops was responsible for frequent famines in India during British rule.

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Explain Low Level of Productivity as a reason for stagnation in the agricultural sector.

Low levels of technology, lack of irrigation facilities and negligible use of fertilisers resulted in a low level of agricultural productivity. The cultivator had neither the means nor any incentive to invest in agriculture. The zamindar had no roots in the villages, while the British rule spent little on agricultural, technical or mass education. All this made it difficult to introduce modern technology, which caused a perpetually low level of productivity. Farmers basically depended upon rainfall to irrigate their crops.

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Explain Scarcity of Investment as a reason for stagnation in the agricultural sector.

India's agriculture was facing a scarcity of investment in terracing, flood-control and drainage. Although some farmers changed their cropping patterns from food crops to commercial crops, a large section of tenants, small farmers and sharecroppers neither had the resources and technology nor had incentives to invest in agriculture. As a result, the lack of investment further contributed to the stagnation and backwardness of the agricultural sector.

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Define Sharecropping.

Sharecropping is a form of agriculture in which a landowner allows a tenant to use the land in return for a share of the crops produced on their portion of land.

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Adverse Effects of Partition (Purple Box)

India's agricultural production received a further setback due to the country's partition at the time of independence.
A sizeable portion of the undivided country's highly irrigated and fertile land went to Pakistan.
Almost the whole of the jute-producing area became part of East Pakistan, now Bangladesh.
As a result, India's jute goods industry, which had enjoyed a world monopoly so far, suffered heavily due to the lack of raw material.

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Foreign Trade

India has been an important trading nation since ancient times. However, the restrictive policies adopted by the colonial government adversely affected the structure, composition and volume of India's foreign trade. The state of India's foreign trade during British rule is discussed as under: 1. Exporter of Primary Products and Importer of Finished Goods 2. Monopoly Control of British Rule 3. Drain of Indian wealth during British rule

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Foreign Trade: 1. Exporter of Primary Products and Importer of Finished Goods

India became an exporter of primary products such as raw silk, cotton, wool, sugar, indigo, jute, etc. and an importer of finished consumer goods like cotton, silk and woollen clothes and capital goods like light machinery, produced in the British Industries.

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Foreign Trade: 2. Monopoly Control of British Rule

The British Government maintained a monopoly control over India's exports and imports. • More than 2/3 of India's foreign trade was restricted to Britain, while the rest was allowed with a few other countries like China, Ceylon (Sri Lanka) and Persia (Iran). • The opening of the Suez Canal in 1869 served as a direct route for the ships operating between India and Britain.

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Foreign Trade: 3. Drain of Indian wealth during British rule

Under British rule, India became an exporter of primary products (raw material) and an importer of finished goods. There was a huge export surplus due to excess exports. However, the export surplus was used: 1. To make payments for expenses incurred by an office set up by the colonial government in Britain. 2. To meet expenses on war fought by the British government. 3. To import invisible items.

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Foreign Trade: Trade through the Suez Canal

Suez Canal is an artificial waterway running from north to south across the Isthmus of Suez in north-eastern Egypt.
• The opening of the Suez Canal in 1869 reduced the cost of transportation and made access to the Indian market easier.
• The canal provided a direct trade route for ships operating between Britain and India and avoided the need to sail around Africa.
• Strategically and economically, it is one of the most important waterways in the world.

In 1869, the Suez Canal was opened, greatly reducing the distance between Britain and India by some 5,100 miles, as ships no longer needed to travel around southern Africa.

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Demographic Condition

Demographic conditions during the British Rule exhibited all features of a stagnant and backward Indian economy.

1st Official Census: The first official census was conducted in the year 1881. Though suffering from certain limitations, the census revealed unevenness in India's population growth. From 1881 onwards, census operations were carried out after every ten years.

1921: Before 1921, India was in the first stage of demographic transition. The second stage of transition began after 1921. So, the year 1921 is described as the 'Year of the Great Divide'.

The demographic condition during the Colonial rule is described in the following points:
1. High Birth Rate and Death Rate
2. Extremely Low Literacy rate
3. Poor Health facilities
4. High Infant Mortality Rate
5. Low Life Expectancy
6. Widespread Poverty

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Why is 1921 called the 'Year of Great Divide'?

• Before 1921, India was in the first stage of demographic transition with very high birth and high death rates. The death rate fluctuated from year to year, and as a consequence, the size of population remained almost stationary.
• With the beginning of decline in death rates, the population of the country entered the 2nd stage of transition. The second stage of transition began after 1921. From the year 1921 onwards, India's population never declined and recorded a consistent rise. Due to this reason, 1921 is called 'Year of Great Divide'.

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Demographic Condition: 1. High Birth Rate and Death Rate

Birth Rate refers to the number of children born per thousand in a year.
Death rate refers to the number of people dying per thousand persons in a year.

Both birth rate and death rate were very high at nearly 48 per thousand respectively.

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Demographic Condition: 2. Extremely Low Literacy rate

Literacy rate refers to the total number of literate persons, expressed as a percentage of the total population.

The overall literacy level was less than 16%. Out of this, the female literacy level was at a negligible low of about 7%.

Poverty, malnutrition and poor health facilities led to high death rate during British Rule.

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Demographic Condition: 3. Poor Health facilities

Public health facilities were either unavailable to large mass of population or, when available, were highly inadequate. As a result, water and air-borne diseases were widespread and took a huge toll on life.

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Demographic Condition: 4. High Infant Mortality Rate

Infant mortality rate refers to the number of infants dying before reaching one year of age per 1,000 live births in a year.

The infant mortality rate was quite alarming — about 218 per thousand, in contrast to the infant mortality rate of 33 per thousand in 2017, 32 per thousand in 2018 and 25 (approx.) per thousand in 2025.

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Demographic Condition: 5. Low Life Expectancy

Life Expectancy refers to the average number of years for which people are expected to live.

Life expectancy was also very low — 32 years, in contrast to the present 67 years.

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Demographic Condition: 6. Widespread Poverty

There was no reliable data about the extent of poverty. But, there is no doubt that extensive poverty prevailed in India during the colonial period. The overall standard of living of common people in India was very low and there was widespread poverty in the country.

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Demographic Condition — Conclusion

It can be concluded that British rule was the main reason to worsen the profile of India's population.

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Occupational Structure

Occupational structure refers to distribution of working persons across primary, secondary and tertiary (service) sectors of the economy.

So, all the production units of an economy are grouped into three broad sectors:

Primary Sector: It includes production units exploiting natural resources like land, water, subsoil assets, etc. For example, farming, fishing, mining, animal husbandry, forestry, etc.

Secondary Sector: It includes production units which are engaged in transforming one good into another good. These units convert raw materials into finished goods. For example, firms engaged in converting sugarcane into sugar, construction companies, power generation, etc. It is called secondary because it depends on the primary sector for raw materials.

Tertiary Sector: It includes production units engaged in providing services. For example, transport, education, finance, government administration, etc. This sector finds third place because its growth is primarily dependent on primary and secondary sectors.

During the colonial period, the occupational structure of India showed little sign of change. The state of occupational structure during the British rule can be summarized as under:
1. Predominance of Primary Occupation
2. Regional Variation

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Occupational Structure: 1. Predominance of Primary Occupation

The agricultural sector accounted for the largest share of the workforce with 70–75%. The manufacturing and service sectors accounted for 10% and 15–20% respectively.

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Occupational Structure: 2. Regional Variation

Another striking aspect was the growing regional variation. • The states of Tamil Nadu, Andhra Pradesh, Kerala, Karnataka, Maharashtra and West Bengal witnessed a decline in the dependence of the workforce on the agricultural sector with a commensurate increase in the manufacturing and service sectors. • However, during the same time, there had been an increase in the share of the workforce in agriculture in states such as Orissa, Rajasthan and Punjab.

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Occupational Structure: Regional Variation — Madras Presidency

Madras Presidency until 1937 included most of southern India, including all of present-day Andhra Pradesh, almost all of Tamil Nadu and parts of Kerala, Karnataka, Odisha and Telangana in the modern day.

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Infrastructure

Infrastructure refers to all such activities, services and facilities, which are needed to provide different kinds of services in an economy. It includes infrastructure associated with means of transport, communication, energy and banking (i.e. Economic Infrastructure) and infrastructure associated with facilities of health, education and housing (i.e. Social Infrastructure).

The infrastructure facilities during British rule were very poor. Some efforts were made to develop basic infrastructure like roads, railways, ports, water transport, posts and telegraphs. But, the main motive behind such infrastructural development was to serve various colonial interests. The state of infrastructure as inherited from the British rule is discussed below:
1. Roads
2. Railways
3. Air and Water Transport
4. Communication

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Infrastructure: 1. Roads

The colonial administration could not accomplish much on construction of roads due to scarcity of funds. • The roads that were built primarily served the interests of mobilising the army and shifting raw materials. • There was an acute shortage of all-weather roads to reach rural areas during the rainy season. As a result, people living in these areas suffered badly during natural calamities and famines.

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Infrastructure: 2. Railways

The most important contribution of British rule was to introduce railways in India in 1850. The railways affected the structure of the Indian economy in two important ways: (i) Railways enabled people to undertake long-distance travel. It broke geographical and cultural barriers and promoted national integration. (ii) It enhanced commercialisation of Indian agriculture, which adversely affected the comparative self-sufficiency of village economies in India. Railways also promoted foreign trade but benefited the Britishers more than the Indians. The construction of railways led to huge economic losses to the Indian economy.

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Infrastructure: 3. Air and Water Transport

The British Government took measures to develop water and air transport. However, their development was far from satisfactory. Inland waterways proved to be uneconomical, as in the case of the Coast Canal on the Orissa coast. This canal was built at a huge cost, but it failed to compete with the railways, and finally, the canal had to be abandoned.

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Infrastructure: 4. Communication

Posts and telegraphs were the most popular means of communication.
• The introduction of the expensive system of electric telegraph in India served the purpose of maintaining law and order.
• The postal services, despite serving a useful public purpose, remained all through inadequate.

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Reasons for Infrastructural Development

The basic objective of British Government to develop infrastructure was not to provide basic amenities to the people, but to serve its own colonial interests. 1. Roads: The roads were built to mobilize the army within India and for drawing out raw materials from the countryside to the nearest railway station or port and sending them to England or other lucrative foreign destinations. 2. Railways: Railways were developed by the Britishers mainly for three reasons: (i) To have effective control and administration over the vast Indian territory. (ii) To earn profits through foreign trade by linking railways with major ports. (iii) To make profitable investment of British funds in India. 3. Electric Telegraph: The system of electric telegraph was introduced at a high cost to serve the purpose of maintaining law and order.

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Infrastructure - Conclusion

By the time India won its independence in 1947, the impact of 200 years of British colonial rule was already showing on all aspects of the Indian economy. The following points are clear proofs of economic underdevelopment during the British period: 1. The constant per capita income over a long period. 2. Increasing dependence of population on agriculture. 3. The Zamindari System. 4. Traditional methods of cultivation. 5. High frequency of Famines. 6. Destruction of Indian Handicrafts. 7. Inadequate industrialisation. The hostile policy of the British Government led to the complete ruin of the Indian economy.

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India's First Passenger Train

India's First Passenger Train ran from Bombay to Thane, a distance of 34 km, on 16th April, 1853.

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Pioneer of Indian Aviation

J.R.D. Tata was a pioneer of Indian aviation in 1932.

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India's First Postal Stamp

India's First Postal Stamp was released in 1852 in circular shape.

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Infrastructure: British Rule - Systematic Exploitation of India

British rulers systematically exploited the Indian economy by: 1. Keeping agriculture backward and promoting commercialisation to serve British interests. 2. Destroying handicrafts and cottage industries and gaining control over the Indian market through discriminating protection. 3. Transforming India into a primary producing country that exported raw materials and imported finished goods from Britain. 4. Developing economic infrastructure such as roads, railways, ports, shipping, irrigation and electricity to promote foreign trade and exploit Indian resources. 5. Causing an economic drain, resulting in widespread poverty, stagnation and backwardness of the Indian economy.

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Positive Contributions of British Rule

British Rule also had some positive effects on the Indian economy. They are discussed as under: 1. Growth in Agricultural Sector 2. Better means of transportation 3. Check on Famines 4. Uniformity in Monetary System 5. Effective administrative setup

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Positive Contributions of British Rule: 1. Growth in Agricultural Sector

Although agricultural productivity was very low during the British Rule, in absolute terms, there was growth in the agricultural sector due to expansion of the aggregate area under cultivation.

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Positive Contributions of British Rule: 2. Better means of transportation

Development of roads and railways provided a cheap and rapid transport system and opened up new opportunities for economic and social growth.

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Positive Contributions of British Rule: 3. Check on Famines

Roads and railways worked as a great check on the occurrence and impact of famines, as food supplies could be transported to the affected areas in case of droughts.

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Positive Contributions of British Rule: 4. Uniformity in Monetary System

British rule helped bring uniformity in the monetary system in the Indian economy, and there was enactment of the Coinage Act of 1835. The British rule also undertook to build a banking system that could handle the deposits and loans necessary for the smooth functioning of domestic and foreign commerce.

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Positive Contributions of British Rule: 5. Effective administrative setup

The British Government had an efficient administration system, which served as a ready reckoner for Indian politicians.

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State of Indian Economy on the Eve of Independence

During the British rule, the Britishers transformed the Indian economy into a colonial, backward, semi-feudal, stagnant, depleted and amputated economy. The state of the Indian economy on the eve of Independence is discussed under the following points: 1. Colonial Economy 2. Semi-feudal Economy 3. Stagnant Economy 4. Backward Economy 5. Depleted (or Depreciated) Economy 6. Amputated Economy

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State of Indian Economy on the Eve of Independence: 1. Colonial Economy

In India, colonial exploitation has a long history, spread over nearly 200 years. • British rule resulted in a huge drain of wealth from India to facilitate the growth of British industry with the supply of raw materials from India. • They also encouraged commercialisation of Indian agriculture to transform the Indian economy into a British colony. • The impact of the British colonial policy was deep on India, even at the time of Independence.

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State of Indian Economy on the Eve of Independence: 2. Semi-feudal Economy

By the end of the British period, there were two aspects of the Indian economy: • Introduction of Feudal System: The land settlement system gave birth to feudal relations (landlord-tenant relations). The landlords used to charge very high rates of lagaan and were very cruel to the cultivators. • Introduction of Capitalist System: The establishment of modern industries led to the creation of two classes — capitalists and labourers. So, India inherited the features of both feudal and capitalist systems in the Indian economy.

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State of Indian Economy on the Eve of Independence: 3. Stagnant Economy

A stagnant economy is one that is growing at a very low rate. On the eve of Independence, the Indian economy was stagnant as the growth of aggregate real output during the first half of the 20th century was less than 2% and growth in per capita output was only 0.5%.

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State of Indian Economy on the Eve of Independence: 4. Backward Economy

At the end of British rule, the Indian economy was backward and underdeveloped. The main reasons for the backwardness of the Indian economy were: • Low level of productivity • Low per capita income • Traditional methods of agriculture • High birth and death rates • Mass illiteracy

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State of Indian Economy on the Eve of Independence: 5. Depleted (or Depreciated) Economy

At the time of Independence, the Indian economy was a Depleted Economy. A depleted economy refers to an economy where no arrangements have been made to replace the physical assets depreciated due to excessive use. During the Second World War, Indian industries had to work beyond their capacities to meet the increased demand for plant, machinery, equipment, etc. for the war. However, British rulers did not make any arrangements to replace the depreciated physical assets. As a result, British rulers left India with a seriously depleted economy.

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State of Indian Economy on the Eve of Independence: 6. Amputated Economy

The Britishers' policy of divide and rule promoted discrimination between various groups on the basis of religion, caste, language and culture.
• As a result, on the eve of Independence, the country was geographically divided into two parts: India and Pakistan.
• Partition of the country virtually disrupted the economy due to:
(i) Problem of rehabilitation of a large number of refugees from Pakistan

(ii) Shortage of raw material for jute and cotton mills, as most of the cotton and jute growing areas went to Pakistan.

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Industrial Sector

Although agriculture had dominated the Indian economy during the pre-British period, some Indian industries producing special products enjoyed a worldwide reputation. India was particularly well known for its handicraft industries. Like agriculture, India could not develop a sound industrial base under British rule. The poor state of the industrial sector during British rule is illustrated in the following points: 1. De-industrialisation - Decline of Handicraft Industry 2. Adverse effects of decline of Handicraft Industry 3. Lack of Capital Goods Industries 4. Low contribution to Gross Domestic Product (GDP) 5. Limited role of Public Sector

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Industrial Sector: 1. De-industrialisation - Decline of Handicraft Industry

British Government systematically destroyed Indian handicraft industries and did not allow a modern industrial base to develop. The primary motives behind de-industrialisation were: (i) To obtain raw materials from India at cheap rates for modern industries in Britain. (ii) To sell finished British goods in the Indian market at higher prices. This policy was designed to ensure maximum advantage to Britain.

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Reasons for Decline of Handicraft Industry (Purple Box)

The main reason for the decline of India's renowned handicraft industry was the Discriminatory Tariff Policy of the colonial government: • Duty-free export of raw materials from India. • Duty-free import of final goods of British industries into India. • Heavy duty on the export of Indian handicrafts. As a result, Indian markets were flooded with low-priced British finished goods, causing the decline of Indian handicrafts in both domestic and export markets. Indian craftsmen were also unable to introduce new patterns and designs suited to European tastes.

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Industrial Sector: 2. Adverse effects of decline of Handicraft Industry

The decline of handicraft industries adversely affected the Indian economy in the following ways: (i) High Level of Unemployment: The decline of handicrafts caused mass unemployment. Displaced artisans were forced to take up agriculture, increasing the burden of population on villages and causing over-crowding in agriculture. (ii) Import of Finished Goods: Indian-made goods could not compete with cheap machine-made foreign goods. The resulting demand in the Indian consumer market was increasingly met through imports of manufactured goods from Britain.

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Industrial Sector: 3. Lack of Capital Goods Industries

Capital goods industries refer to industries that produce machine tools, which are used to produce articles for current consumption.
• During British rule, there was hardly any capital goods industry to promote further industrialisation in India.
• British rulers did not promote these industries because they wanted Indians to remain dependent on Britain for capital goods and heavy equipment.

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Industrial Sector: 4. Low contribution to Gross Domestic Product (GDP)

The growth rate of the new industrial sector and its contribution to GDP or Gross Value Added (GVA) remained very small.

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Industrial Sector: 5. Limited role of Public Sector

Because of lack of public investment, India could not develop a sound industrial base under colonial rule. The public sector remained confined mainly to railways, power generation, communications, ports and some other departmental undertakings. Thus, India remained backward in the industrial sector during British rule.

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Modern Industries operating during Independence (Purple Box)

Private sector initiative led to the emergence of modern industries during the second half of the 19th century.
• Industries were mainly limited to cotton textile and jute mills, with slow progress.
• Cotton textile mills were mainly dominated by Indians and located in Maharashtra and Gujarat.
• Jute mills, dominated by foreigners, were mainly concentrated in Bengal.
• A major breakthrough was the establishment of Tata Iron and Steel Company (TISCO) in 1907 at Jamshedpur (Bihar now in Jharkhand).
• A few industries such as sugar, cement and paper also emerged after the Second World War.