Courses for Kids
Free study material
Offline Centres
Store Icon

Indian Economy on the Eve of Independence

Last updated date: 20th Apr 2024
Total views: 372.9k
Views today: 7.72k
hightlight icon
highlight icon
highlight icon
share icon
copy icon

Indian Economy on the Eve of Independence in Detail

An Introduction

Ancient India was prospering in every sector of life. However once the British stepped on the Indian soil, the state of the Indian economy started deteriorating. Every sector of India for example agricultural, Industrial, etc. were exploited. The country failed to produce enough food for people due to declining soil fertility. Even the few industries that India had couldn’t manage the economy.  

The infrastructure was failing and the British rulers were only concerned about their profits. The world war further depleted whatever resources were left. The struggle of the Indians for Independence meant ignoring every other aspect of life. It was the policies of the colonial government that proved to be the final nail in the coffin of the Indian economy.   

The British decentralized the long functioning cloth production industry of pre-colonial India. This led to the industrial revolution. The revolution started because Indians were forced to import British goods. The Indian industries during British rule started to crumble.

The Pre-Colonial Industrial Sector in India

The Indian cloth manufacturing industry or the handicraft industry was the first industry in India and well established before the British Empire rose in India. The Indian cloth industry was in demand across the world and also highly regarded. The Indian craftsman was applauded for their work across the world. The Indian textile industry was an important urban handicraft industry and the articles made from silk, cotton, and wool were popular both in India and outside the country. These were exported to international countries, and people loved these clothes.

Along with the cloth industry, Indians also started to craft objects. The Indian craftsman was known for his work in the metal industry, marble work, stone carvings, leather and tanning industry as well shipbuilding. The industries gained popularity and let Indians make a name for them on the world map. The British, however, tried to dominate and made sure that the popularity of India and its craftsmanship were killed. This continued till the industrial sector on the eve of independence.

Industrial Sector under British Rule

When the British set foot in India, they were looking to crush the industrial phase of India, which at that time was booming. They started to take charge of the clothing industry and also tried to cripple the work of the artisans. The British made a plan to decentralize these industries which were in their flourishing stage. The British tried to achieve two things with decentralization.

  • The export volume from India was made dominant. The raw materials from India were exported directly to Britain. Now where India was once the exporter of manufactured handicraft items, they were now reduced to just being an exporter of raw materials.

  • Since India was exporting most of its raw materials, there was now very less supply to meet the demand for finished goods in India. Thus India had to turn to the British to meet their daily demands.

With no raw materials to make finished goods along with the dependency on the British for finished goods, it also gave birth to large-scale unemployment among the Indians. The colonials, to erase this unemployment, employed the Indians to work in the tea, indigo, jute, and coffee plantations that were owned by the colonials completely. Imports from Britain now met the increase in local demand at the same time. The state of the industrial sector in India was shattered.

  • The decay of the handicraft industry was caused because of the misrule by the British in India. It led to a decline in the Indian handicraft industry. To destroy the Indian handicraft industry, the British had a discriminatory tariff where they allowed free export of the raw material from India to Britain and free import of finished goods from Britain to India. However, for the handicraft products that were exported from India, there was heavy-duty on the export.

  • The finished goods made in Britain were machine-made, and these were better in quality as well as cheaper than the Indian handicraft products. This caused many to shut their business in India.

  • The British also introduced railways in India during this time that helped to expand their market of industrial goods that were very low priced. This caused a fall in demand for the higher-priced handicraft goods and thus was the downfall of the Indian handicraft industry.

All this led to a drain in Indian wealth. The foreign trade through the British period was because of the large export surplus. The surplus came at a cost and affected the Indian economy. Many essential commodities, like kerosene and food grains, were not available in the domestic market. Also, the surplus was not used for any developmental activity in the country. It was only used to set up and maintain the administrative work of the British.

In the second half of the nineteenth century, India started a modern industry though it was at a very slow pace. If you want to name the three industries started in the 19th century in India, then these were the jute, cotton textile and iron and steel industries. The cotton industry was now confined to the west of India, and this was controlled by the Indians. The jute textile industry was operated in the eastern part of India in Bengal, and this was controlled by the British. There were other industries too that were born after the Second World War. These were the cement, paper, iron, and steel industry. It was here that in 1907 the Tata iron and steel company or TISCO was incorporated.

Other Factors

There was a dearth in the capital good industries in India. These are the industries that produce machines. The machines are then used to make consumer goods. The capital goods industry is essential in any country for manufacturing. There were some establishments in some units, but there remained a void in the textile industry because of the slow development in India.

Along with the crush in the capital goods industries in India, there were also operational issues in the public sector. This included power generation, railways, ports, communications, and other departments. One can see the sorry state that the Indian industry sectors were going through under the British Raj.

The colonials, on the other hand, took full advantage of the rich geographical diversity of India. They set up many industries like coffee, jute, and tea plantations. The exploitation done by the British was seen in every sector in India. However, the industrial sector was the one that was the most affected.


The British forced Indian farmers to produce cash crops such as Indigo. It was bought from the farmers at cheaper rates and exported to Britain. Cultivating Indigo led to a decline in soil fertility. The administrators were not interested in growing food products in India. The agricultural sector of India was surviving miserably. Lack of technology and dependency on rains for irrigation made the condition even worse. Poor food production made the population of India malnourished and weak. 


Poor economy, low employment rate, and poverty form a vicious cycle that is difficult to break. The condition of the economy of India at the time of independence was not good. It was almost on the verge of collapsing. This coupled with the years of exploitation, two world wars and a sudden government change made the condition of the people living in India even worse. 

The unemployment rate was extremely high. In every sector, there was a dearth of opportunity and a thousand people willing to work. The agricultural sector was not very advanced and was failing miserably. This led to a decline in job prospects in the industrial sector as well. There was a lack of educated population and even the few people that had degrees, found it difficult to get some work.  

Life Expectancy of People

People of any State are considered as a natural resource of that nation. Therefore it is necessary to maintain the health of the people. It is also important to provide education and employment opportunities so that they can prove beneficial to their motherland. India’s population at the eve of independence reflected the economic state of the country.

The majority of people were not educated. The illiteracy rate was very high. The health care facilities were also not readily available. This coupled with various other factors led to a high mortality rate. A country where people are illiterate and unhealthy reflects poorly on the world map.  

India was once known as a golden bird. However, it was soon exploited by the British rulers. India under English rule failed to do good in any sector. The agriculture sector was performing poorly. Low rainfall and poor irrigation system were some of the factors that contributed to it.  There weren’t many industries established in India at that time. People did not focus on education much. All this coupled with unsound infrastructure led to a steep decline in the economy of India. Apart from this, the second world war also destroyed the Indian economy. Therefore we can safely conclude that the state of the Indian Economy on the Eve of Independence was horrible.

FAQs on Indian Economy on the Eve of Independence

1. What was the State of the Industrial Sector During British Rule?

India was well known across the world for its handicraft industry. This was in the pre-British era. The Indians' silk and cotton textiles, precious stone, and metalwork were popular. These products had a market worldwide because of its high craftsmanship standard and quality. However, when the British ruled India, they started a systematic decentralisation where they created circumstances that led to the decay of the Indian handicraft industry. There were no steps taken to promote the modern industry in India. The Indian industry was reduced merely to an exporter of raw materials and an importer of finished goods.

2. Explain the Slow Growth of the Modern Industry in India During British Rule.

The development of modern industries was slow and was confined to the jute and the cotton textile mills. Most of the industries were because of a private endeavour, but there was very less participation of the state in the modern industrialization process. The public sector enterprises like power, railways, and post were only confined to expanding the British market. The industrial growth was lopsided, and there was also no priority given to developing any heavy and basic industries in India.

3. What was the condition of the Agriculture sector during Independence?

During the Independence, the agriculture sector in India was barely functioning. The farmers depended mostly on natural resources for good produce. In case the weather was unexpected or there was less rainfall, the crops failed. Moreover, the British rulers were not interested in developing the agricultural industry. Hence there were very few irrigation facilities. The farmers were forced to produce cash crops. This led to a decline in the fertility of the soil.

4. What were the Different Factors that Contributed to the Poor Indian Economy during British Rule?

The policies of the British favoured only their country. They were never concerned about working for the benefit of the Indian subjects. Their policy of exploiting the Indian soil and exporting raw materials led to a shortage of opportunities in India. India also became a dumping ground for the products manufactured in bulk on British soil. This meant the destruction of the handloom industry of India.

5. Was the Indian Economy always failing throughout history?

The Indian economy was extremely bad only during the period of British rule. The Ancient Indian land was considered very prosperous. During the Indus civilization, the Indian economy was doing extremely well. Even during the period of later rulers, the people of India lived comfortably. However, once the British stepped on Indian soil, the condition of the Indian Economy started failing. It took a lot of time for the Indian economy to recover from the damages done by the British.