A colonial economy
Before British rule, India was known for farming and fine handicrafts like cotton and silk cloth, metal work and jewellery. Under colonial rule (about 1757 to 1947) the economy was shaped to supply raw materials to Britain and to buy British goods.
- National income grew less than 2% a year in the first half of the 20th century.
- Income per person grew only about 0.5% a year.
- Early estimates of national income were made by Dadabhai Naoroji, William Digby, Findlay Shirras, V.K.R.V. Rao and R.C. Desai; Rao's were the most careful.
Agriculture: stagnant and backward
About 85% of people lived in villages, and most depended on farming. Yet output per acre was low and stagnant.
Why?
- Land settlement systems: under zamindari, profit went to landlords (zamindars), who took high rent and spent little on improving land.
- Fixed revenue with strict dates: farmers had to pay even in bad years.
- Poor technology: little irrigation, few fertilisers, old tools.
- Commercialisation: farmers were pushed to grow cash crops like indigo and cotton for British mills. Food production suffered.
- Partition in 1947 moved much irrigated land (like West Punjab) out of India, and jute areas went to East Pakistan.
Industry: de-industrialisation
Two aims of British policy: make India a supplier of cheap raw materials, and a big market for British factory goods.
- Handicrafts declined: cheap machine cloth from Britain and unfair duties hurt Indian artisans; many lost work and moved to farming.
- Modern industry grew slowly: cotton mills (mainly in western India), jute mills (Bengal), and later the Tata Iron and Steel Company (TISCO, 1907). A few sugar, cement and paper units came after World War I.
- There was almost no capital goods industry (machines to make machines).
- Industry's share in output stayed small. The public sector was limited to areas like railways, power, ports and communication.
Foreign trade and the drain of wealth
- India exported raw materials (raw silk, cotton, wool, indigo, jute) and imported finished goods (cloth, machines).
- Britain kept a monopoly: over half of India's trade was with Britain. The Suez Canal (1869) made the route shorter and cheaper.
- India had an export surplus, but it paid for the colonial office in London, British wars, and imports of 'invisible' services. This outflow is called the drain of wealth. It also meant shortages of food and cloth at home.
People and infrastructure
Demographic condition
The first full census was in 1881. Before 1921, population grew slowly because deaths were high; 1921 is called the year of great divide, after which it grew faster.
- Overall literacy: under 16% (women about 7%).
- Life expectancy: about 32 years.
- Infant mortality: about 218 per 1,000 births.
- Poor public health, frequent famines and diseases.
Occupational structure
About 70โ75% of workers were in agriculture, 10% in manufacturing and 15โ20% in services, with big gaps between regions.
Infrastructure
Railways (from 1853), roads, ports, posts and the electric telegraph were built. Railways helped trade and broke some distance barriers, but mainly served to move raw materials and troops and to open India to British goods.
Try it at home
Make a two-column chart: 'India 1947' and 'India today' for literacy and life expectancy. Look up today's numbers and compare.
Key formulas and definitions
- Key terms: Colonial economy: run to serve the ruling country
- Zamindari system: landlords collect land revenue and keep the surplus
- Commercialisation of agriculture: growing cash crops for sale or export
- De-industrialisation: decline of home industry, especially handicrafts
- Drain of wealth: export surplus used to pay colonial costs abroad
- Year of great divide: 1921, after which population growth rose
Worked examples
1. Give two reasons for low farm productivity in British India.
(1) The zamindari system: landlords took high rent and did not improve land. (2) Poor technology: little irrigation or fertiliser.
2. Why were Indian handicrafts ruined?
Cheap machine-made British goods flooded Indian markets, while Indian goods faced high duties in Britain. Artisans lost demand and work.
3. India had an export surplus under British rule. Why was it not good for India?
The surplus was used to pay for British administration, wars and services, not to bring gold or goods home. It was a drain of wealth.
4. What is meant by 1921 being the 'year of great divide'?
Before 1921, high death rates kept population growth low. After 1921, deaths fell and population grew faster, so 1921 marks the change.
5. State two good side effects of railways in British India.
They let people travel long distances and they helped create national markets by linking regions. Their main purpose was still colonial.
6. Out of 100 workers in 1947, about how many were in agriculture, industry and services?
About 72 in agriculture, 10 in industry (manufacturing) and 18 in services (roughly 70โ75, 10, 15โ20).
Common mistakes
- Saying India had a trade deficit under British rule. It had an export surplus, which was drained away.
- Thinking railways were built mainly to help Indians. They were mainly for colonial trade and control.
- Calling TISCO a public sector firm. It was a private Indian firm set up in 1907.
- Mixing up 'commercialisation of agriculture' with modernisation. It meant growing cash crops for British needs, not better farming.