Indian economy during British rule

Indian economy during British rule

Indian economy during British rule

The recent speech by Shashi Tharoor at the Oxford University was highly appreciated and praised. His arguments about the economic and social conditions of India during the British raj were very well placed. And he concluded by proving that Indeed, Britain owes India a lot. So, let’s understand the economic scenario of India during the colonial rule. Following are the facts that reveal the effect of colonial rule on the economy of India:

  • Sectors of economy: During the pre colonial period and also during the colonial period, Indian economy was dominated by agriculture sector. The major part of the GDP came through the agricultural contribution. After the British invasion as well, the agriculture sector grew. Any change in the agriculture sector was clearly reflected on the GDP. But the composition of agricultural produce changed drastically. Earlier India exported finished goods and imported raw materials. After the changes in the agricultural policies, which were directed to grow specific crops, India became the importer of finished goods and exporter of raw materials mainly to Britain. After the World War I there was a global agricultural crisis.

Contribution of Industry to the national income was very low. Indian cotton textile Industry suffered a lot. After the industrial revolution in the Europe, production of cloth with the help of machines gave a stiff competition to the Indian cotton textiles. India not only lost its export market but also its internal demand. This critically affected the small scale industrial sector of Indian economy.

  • Employment structure: There was stagnation in the composition of occupation in various sectors. Employment in agriculture was the highest with around 75%; Industry had around 10% and 15% in services. The tax system was aimed at extracting the maximum benefits out of the income of people. The zamindari system is one example. People employed were forced to pay high taxes irrespective of their agricultural produce. In order to pay the taxes people used to take loans and never come out of the payment cycles. The per capita income was very low. Slavery was highly popular in those days. During the World War I around 1,780,000 Indian men were sent from India to be a part of the British army. Among them 74,187 died and 67,000 were wounded.
  • Growth: During pre world war period, the growth rate of national income was around 2%. The rate of growth of the per capita income was also positive. But, after the year 1921, i.e. when the world was moving towards the great depression, the growth was nearly 1%. And there was no growth in the per capita income. During the inter war period there was a downturn of the Indian economy. The British adopted a contractionary monetary policy during the great depression. This is a perverse behavior as during crisis, economies opt for an expansionary monetary policy. Thus British policies aimed at deterioration of the Indian economy.

These are a few indicators of British rule’s impact on Indian economy. Not only economically, but also socially British rule was a black phase for India. Lives of many people lost because of the poverty, starvation persistent in those days. Truly, Britain owes India a lot which cannot be paid in monetary terms.

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