CBSE Macro Economics Chapter 3 - Money and Banking Class 12 Notes

• The economy of India was known as "Sone ki Chidiya" before the British colonial period. During the colonial period, it went backwards due to excessive and continuous economic exploitation.

• The main objective of the British colonial rule was to use India as a base for the rapidly developing modern economy in Britain.

High Infant Mortality Rate:

• The infant mortality rate at the time of independence was as high as 218 per thousand.

Widespread Illiteracy:

• The average literacy rate was less than 16.5. Only 7 women were literate.

Low Life Expectancy:

• Life expectancy was only 32 years, indicating grossly inadequate health facilities.

Widespread Poverty and Low Standard of Living:

• People had to spend 80-90% of their income on basic needs. 52 per cent of the total population was below the poverty line. Some parts of the country were facing similar conditions of famine.

Majority of Agriculture Sector:

• The agricultural sector was the most important in the business structure of the economy. About 70-75 per cent of the working population of India was engaged in agriculture, 10 per cent in the industrial sector and 15-20 per cent in the service sector.

Growing Regional Inequality:

• Regional variations in the occupational structure were increasing. In states such as Tamil Nadu, Andhra Pradesh, Kerala and Karnataka (which were then part of the Madras Presidency) the workforce dependent on agriculture was decreasing, while in Orissa, Punjab, Rajasthan, the workforce dependent on agriculture was increasing.

Status of Indian Economy: 

a) Low rate of economic development The colonial government never made any effort to estimate the national and per capita income of India.

• The first attempt to measure national income and per capita income was made at the individual level in 1876 by the Grand Oldman of India, Dadabhai Naoroji.

• Dr V.K. R. According to V. Rao, the annual growth rate in Gross Domestic Product was only 2% and the annual growth in per capita income was only 0.5%. In 1947, the per capita income was only Rs 280

• Prominent among other predictors of the then national income were William Digby, Findlay Siraj, R. D.C. Desai etc. 

• The backwardness of agriculture due to these Zamindari, Mahalist and Ryotwari system.The share of the agricultural sector in the national income in 1947 was about 95%. Pressure of commercialization Production of indigo etc. In 1947 more than 75% of the population was dependent on the agriculture sector.

• Due to the partition of the country, the jute mills in West Bengal and the productive land in East Pakistan were moved and manufactured exports and imported.

Growth:

Undeveloped Industrial Areas:

• De-industrialization policy and decline of Indian handicraft industry

• The twin objectives of the de-industrialization policy were.

• To make India an exporter of raw materials

• To make India an importer or marketer of manufactured products of British industries.

• Lack of capital goods industry.

• Limited activity of the public sector.

Discriminatory Tariff Policy.

Decline and Major Consequences of Handicraft Industries:

• India Severe unemployment

• Creation of New Demand in the Indian Consumer Market

• The severe shortfall in supply of locally made goods

• Huge increase in the import of cheap manufactured products from Britain. Moreover, although modern industries such as TISCO were founded in 1907 by Jamsetji Tata, such efforts were few and insufficient.

Features of Foreign Trade:

• Net manufacturer of raw materials and importer of finished goods

• Britain's monopolistic control over foreign trade

• Outflow of India's wealth

The Pressure on India of the Expenditure of Wars being fought by Britain:

The first regular census of India started in 1881. The demographic condition of India from 1981 to 1991 is placed in the first phase of the demographic transition theory. 1921 is called the year of the Great Divide of the Population. After which the phase of demographic sampling begins.

Unfavourable Demographic Conditions of the Time:

• Pressure on India over the wars being fought by Britain. The first regular census of India was started in 1881. From 1981 to 1919, the demographic condition of India was placed in the first phase of the demographic transition theory. 1921 is called the year of the Great Divide of the Population. After which the demographic phase has started.

• High death rate 45 per thousand

• High infant birth rate 218 per thousand

• Mass Illiteracy 84 Illiteracy

• Low life expectancy 32 years

• Low standard of living 80-90% of income spent on basic needs

• Lack of public health services

Underdeveloped Infrastructure:

• Lack of good roads, power generation, health, education and communication facilities. Although efforts were made by the British administrators for the development of infrastructures such as roads, railway ports, water transport and post and telegraph departments. But their purpose was not to provide facilities to the general public but in the interest of the imperialist administration.

Over Dependence on Primary (Agriculture) Sector:

• The maximum share of the working force was about 72% in the agriculture and allied sectors.

• 10% was engaged in manufacturing.

• 18% of the workforce was in the service sector.

Some positive effects of British imperialism on the Indian economy

• Increase in traffic facilities, especially in railways

• Development of ports

• Facilities of the Department of Posts and Telegraphs

• Development of baking and monetary system negative impact 

• Britain's monopolistic control over foreign trade

• Pressure on commercialization

Backward Agriculture:

The immediate problem for India was that how it should develop the agricultural sector and its productivity, at the time of independence, some immediate needs were as follows:

• Abolition of Zamindari system,

• making land reform policies,

• Reducing inequalities of land ownership and

• Uplifting the farmers.

Some positive contributions by the British to India:

• It would be unfair to say that the British had made some positive contribution to India; some of the positive influences offered became available as a by-product of their selfish policies. These contributions were not willful and ethical but were a by-product of the exploitative colonial policies of the British.

• Therefore, some such positive contributions by the British to India are as follows:

(a) Introduction of Railways:- The introduction of railways in India by the British government was a major achievement for the Indian economy. It removed all kinds of geographical and cultural barriers and made possible the commercialization of agriculture.

(b) Beginning of Commercialization of Agriculture: - The commercialization of agriculture by the British government was another major achievement for the Indian economy. Before British rule in India, Indian agriculture was autotrophic. But after the commercialization of agriculture, agricultural production was done according to the needs of the market. This is the reason that today India has been able to achieve the goal of being self-sufficient in food grains.

(c) Development of Infrastructure: - The infrastructure developed by the British made a positive contribution in providing quick relief material and information when the famine spread in the country. It became a window to know the world outside India. It connected India with other parts of the world. The British also banned the practice of Sati in India and also announced the Widow Remarriage Act.

(d) Unification of India: - Before British rule, India was divided into small states and borders. In the name of the war of independence, the British became a reason to integrate India and Indians.

(e) Example of An Efficient and Powerful Administration:- The British left behind an example of an efficient and powerful administration which the Indian leaders could follow.