NCERT Solutions for Class 12 Economics Part B Chapter 1 Indian Economy On The Eve Of Independence

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    1. What was the focus of the economic policies pursued by the colonial government in India? What were the impacts of these policies?

    Ans. The colonial government mainly focused on how to turn India into a mere supplier of Britain’s own thriving industrial base. The policies were focused around the promotion and advancement concerned of economic interest for their home country. And hence, interests of the Indian economy were completely ignored. Such policies brought some of the fundamental changes in the Indian economy by transforming it into a supplier of raw materials to Britain and consumer of finished products from Britain itself.

    The impacts of these policies are discussed as follows in detail: 

    (i) Low Economic Development: Throughout the British rule, Indian economy was experiencing a very low level of economic development. As per some of the researches, the growth of the Indian Economy was even less than two percent during 1900-50. The reason for such a low level of economic development was that the British government was being more concerned with the promotion of economic interests of their home country only. Resulted to which, the colonial rule transformed India’s agriculture sector to a mere supplier of raw materials for the British industries. This not only affected the production of the agricultural sector but also severely hindered the small manufacturing units like handicrafts and cotton industries. These manufacturing units were suffering from a stiff competition from the British machine made textiles and handlooms.

    (ii) Backwardness of Indian Agriculture: Under the colonial rule, India was primarily an agrarian economy which employed nearly 85% of its population. Nevertheless, the growth of the agriculture sector was meager. This was because of the existence of various systems of Land Settlement, particularly Zamindari system. Under this system, the zamindars (owners of land) were forced to pay very high revenue (lagaan) to the British government, which they themselves used to collect from the peasants (landless labourers, who were actually cultivating). The zamindars were mainly concerned with collecting high revenues from the peasants but never thought of improving the productivity of the land. Moreover, in order to serve British industries with cheap raw materials, the Indian peasants were forced to grow cash crops (such as, indigo, cotton, etc.) instead of food crops (such as, rice and wheat). This commercialisation of agriculture had increased the burden of high revenues on the poor peasants and led India to face scarcity of food grains. Therefore, Indian agriculture remained backward and primitive.

    (iii) Deindustrialisation of Indian Economy: India couldn’t develop a sound and strong industrial base during the colonial rule. The status of industrial sector during the British rule was well defined by the term ‘systematic deindustrialisation’. The downfall of India’s handicraft industry resulted into deindustrialisation and the reason behind the bleak growth of modern industry was the lack of investment. On one hand, the British government used to impose heavy tariffs on the export of Indian handicraft products and on the other hand, being unjust it allowed free exports of Indian raw materials to Britain and free imports of British products to India. As a result of constant heavy tariffs, the Indian exports were becoming costlier and its demand in the international market kept falling that led to the collapse of Indian handicrafts industries. Simultaneously, the demand for the handicrafts products also continued to fall in the domestic markets due to rigid competition from the machine made textiles of Britain. Eventually, the domestic industries lacked investment and growth initiatives.

    (iv) Regression in Foreign Trade: During the times of colonial rule, the British government maintained an absolute monopoly power over India’s foreign trade. The British government used the trade policy in accordance with the interests of their home country. The exports and imports transactions were made restricted only to India and Britain. On one hand, the exports from India provided them the cheap raw materials and on the other hand, India’s imports from Britain provided an easy market for Britain’s products. In both the ways, British industries were benefitted. Moreover, the surplus which was generated from foreign trade was not at all invested in the Indian economy; rather it was utilised in administrative and war purposes by Britain to expand their colonial power.

    2. Name some notable economists who estimated India’s per capita income during the colonial period.

    Ans. The British government never showed any interest in the upliftment of our country. So, they never took any initiative to measure India’s national and per capita income. Though some of the economists tried to measure and estimate India’s national income and per capita income during the colonial rule, whose results were mixed and conflicting. Following are some of the notable economists who made an attempt to estimate the national income and per capita income:
    (i) Dadabhai Naroji
    (ii) William Digby
    (iii) G. Findlay Shirras
    (iv) V.K.R.V Rao
    (v) R.C. Desai Amongst
    all these, V.K.R.V Rao’s estimates are considered as the most significant. Most of these studies have revealed that Indian economy was growing at even less than two percent during 1900-50 with half per cent growth in per capita output per year.

    3. What were the main causes of India’s agricultural stagnation during the colonial period?

    Ans. Under the colonial rule, India was primarily an agrarian economy, which employed nearly 85% of its population. Nevertheless, the growth of the agriculture sector was significantly low.

    The following are the causes explaining stagnancy in Indian agriculture sector during the colonial rule:

    (i) Introduction of Land Revenue System: One of the main reasons was the existence of various systems like Land Settlement, especially Zamindari system. This system was brought in by Lord Cornwallis in Bengal, back in 1793. Under this system, the zamindars (owners of land) were made to pay very high revenue (lagaan) to the British government, which they themselves used to collect from the peasants (landless labourers, who were actually involved in the cultivation). The zamindars were only concerned with extracting high revenues from the peasants but hardly ever took any steps to improve the productivity of the land. This further resulted in low agricultural productivity and worsened the conditions of peasants economically.

    (ii) Forceful Commercialisation: Before the British rule, the farmers used to practice conventional subsistence farming. They grew crops like rice and wheat for their own consumption. But later in order to serve the British industries with cheap raw materials, the Indian farmers were forced to cultivate commercial crops (like indigo which was required by British industries to dye textiles) instead of food crops (like rice and wheat). This led to the commercialisation of Indian agriculture. This commercialisation of Indian agriculture not only increased the burden of high revenues on the poor farmers but also led India to suffer serious shortage of food grains, resources, technology and investment. All of this collectively resulted, Indian agriculture to remain backward and primitive.

    (iii) Lack of Irrigation Facilities and Resources: Besides the preceding factors, Indian agricultural sector was also facing a lack of irrigation facilities, insignificant use of fertilisers, lack of adequate investment, frequent famines and other natural calamities, etc. which eventually hindered the agricultural performance of India and made it more vulnerable.

    4. Name some modern industries which were in operation in our country at the time of independence.

    Ans. The second half of the nineteenth century had observed the emergence of modern industries. During the early stages, development was majorly restricted to the setting up of cotton and jute textile mills. The western parts of the country like Maharashtra and Gujarat were the hub for cotton textile mills and they were mainly dominated by the Indians whereas the jute industries were mainly centered around in Bengal and were dominated by the British. In the beginning of the 20th century, iron and steel industries also witnessed to emerge gradually. It was incorporated in 1907. Some other industries that were operating simultaneously at a relatively smaller scale during the British era were sugar industry, cement industry and paper industry.

    5. What was the two-fold motive behind the systematic deindustrialisation effected by the British in pre-independent India?

    Ans. The following are the two-fold motives behind the systematic deindustrialisation affected by the British:

    (i) Making India a Supplier of Raw Materials: The basic aim of the British government was to make India a mere supplier of cheap raw materials in order to serve its own thriving industrial base.

    (ii) Making India a Market for Finished Goods: To use India as a virgin market to sell the finished goods produced by the British industries was yet another main aim of the British government.

    6. The traditional handicrafts industries were ruined under the British rule. Do you agree with this view? Give reasons in support of your answer.

    Ans. Yes, we do agree with the above mentioned statement that the traditional handicrafts industries were ruined under the British times.

    Given below are the reasons in favour of the statement.

    (i) Discriminatory Tariff Policy: British rule in India coincided with the country's industrialisation. The British rule has exploited India not only as a source of cheap raw materials but also as an easy accessible market for their finished products. Thereby, imposing heavy tariffs (export duties) on India’s export of handicraft products, while allowing free export of India’s raw material to Britain and free import of British products into India. This made Indian exports even more costlier and its international demand fell considerably leading to the collapse of handicrafts industries.

    (ii) Competition from Machine made Britain Goods: The demand for the handicrafts products witnessed a downward trend in the domestic markets as well. This was due to stiff and an unjust competition from the machine made textiles from Britain. This was due to the goods produced mechanically in Britain were comparatively cheaper and were also of superior quality than the Indian handicraft goods. This narrowed the market for Indian industries.

    (iii) Emergence of New Class: The British rule in India had popularised the western lifestyle in India. An emergence of a new section of population (consisting mainly of zamindars) in India who happened to like the British goods was witnessed. This section spended lavishly on the British products that acted as a catalyst in the development of British industries at the cost of the domestic industries. Hence, gradually Indian industries were perished away.

    (iv) Disappearance of Princely State: Prior to the emergence of British, India was ruled by princely states. They used to patronise the handicrafts industries which resulted the Indian handicrafts gained a good reputation in the international markets. But with the emergence of British rule, these princely states were ruined thereby ruining the protection of these handicrafts industries as well. Thus, Indian handicrafts lost its popularity and reputation gradually and its importance deteriorated.

    7. What objectives did the British intend to achieve through their policies of infrastructure development in India?

    Ans. There was a significant change in the infrastructural development in the country under the British rule. But the bonafide motive of the British behind the infrastructure development was mainly to faciliate their own colonial interests. There was infrastructural development in the fields of transport and communication as well. The roads fulfilled the purpose of facilitating a smooth transportation of raw materials from different parts of the country to ports, and ports were developed for quick and easy exports to and imports from Britain. Likewise, railways were introduced and developed in order to transport the finished goods of British industries to the inner parts of India. Railways assisted British industries to expand the market for their finished products. Post and telegraphs were also developed to grease the efficiency and effectiveness of the British administration. Hence, the aim of infrastructural development was to serve their own interest and not the development or growth of India.

    8. Critically appraise some of the shortfalls of the industrial policy pursued by the British colonial administration.

    Ans. Industrial policies pursued by the colonial government in India was mainly focused around how to make our country a mere supplier of Britain’s own flourishing industrial base. The policies were concentrating on the the fortification and advancement for their own country. The industrial policy formulated by the British colonial administration has the following shortfalls:

    (i) Ignorance of Indian Handicraft Industries: The British had followed a discriminatory tariff policy under which they imposed heavy tariffs (export duties) on India’s export of handicraft products while allowing the free exports of Indian raw material to Britain and free import of British products to India. This eventually made Indian exports costlier and its international demand also fell drastically leading to the collapse of Indian handicrafts industries. Also, Indian handicrafts suffered from a stiff competition from machine made textiles of Britain. The emergence of a new section of people who were promoting the British goods more in comparison to the domestic goods gave a boost to British industries at the cost of Indian industries. This led to the declination of demand for Indian products and encouraged foreign products.

    (ii) Lack of Investment in Indian Industries: Investments in capital goods was required by the Modern Industries in India which was beyond the means of Indian investors. On the other hand, British government was not at all interested in making any investment in Indian industries. Thus, due to lack of adequate investment, the growth of Indian industries was stagnated.

    9. What do you understand by the drain of Indian wealth during the colonial period?

    Ans. Dadabhai Naoroji advocated the theory of ‘Drain of Wealth’ back in the 19th century. Indian resources were expolited the colonial era which stained the period. The only aim of Britain was to conquer India in order to own perennial source of cheap raw materials to serve fulfill its own industrial base in Britain. Furthermore, British government had also exploited India’s manpower to spread its colonial base outside India. The administrative expenses that were incurred by the British government to manage the colonial rule in India were also made to be borne by Indian Exchequer. Thus, the British rule drained out Indian maximum of the wealth for the fulfilment of its own interests and needs.

    10. Which is regarded as the defining year to mark the demographic transition from its first to the second decisive stage?

    Ans. The year 1921 is regarded as the “defining year” or the ‘Year of Great Divide’ as prior to 1921, population growth in India was never witnessed to be consistent. India was in the first phase of demographic transition till 1921 which was characterised by high birth rate and high death rate. It clearly implied low survival rate (or low life expectancy), which happened to be at nearly 8 per thousand per annum. Therefore, the period before 1921 was observed as a stagnant population growth rate. After 1921, India’s population growth never declined and showed a consistent upward trend.

    11. Give a quantitative appraisal of India’s demographic profile during the colonial period.

    Ans. India’s demographic conditions during the British rule depicted our economy to be stagnant and backward. The birth rate as well as death rate were as high as 48 and 40 per thousand. Due to the high birth rate and high death rate, the population growth was stagnant. The Infant Mortality Rate also stood at a very high rate of about 218 per thousand. The Life Expectancy Rate was as low as 32 years whereas presently it is 70.42 years. The literacy rate was also, significantly low as it was measured to be even less than 16 percent which clearly reflected social backwardness and gender bias in the economy. We can infer from the above figures that India was dewelling into massive poverty, low standard and quality of living and low survival rate in the country. The lack of health care facilities which collectively became the main causes behind such demographic conditions of India.

    12. Highlight the salient features of India’s pre-independence occupational structure.

    Ans. The occupational structure refers to the distribution of population actively engaged in different occupations which showed hardly any variation throughout the British rule.
    The following are the salient features of India’s pre-independence occupational structure:

    (i) Agriculture the Prime Occupation: Under the colonial rule, India primarily used to be an agrarian economy, which employed nearly 85% of its total population. As India had a massive poverty to deal with during the colonial rule, so a large proportion of the population was engaged in agricultural sector to earn their livelihood and to ensure their survival. But due to of the existence of Zamindari system, agricultural sector lacked adequate investment and, thereby, its growth was severly hampered. Therefore, in other words, despite employing a significant proportion of the population, the growth of agriculture sector was very low.

    (ii) Industry the Bleak Occupation: Apart from agriculture, a small proportion of population was also employed in manufacturing sector. Almost 10% of the total workforce was actively engaged in manufacturing and industrial sector. This was because of the stiff and unjust competition that the Indian industries were facing from the machine made cheap goods from Britain. Further, the lack of sufficient investment, effective initiatives and the unfavourable tariff structure constrained industrial sector. Hence, the Indian industrial sector couldn’t contribute significantly to India’s GDP.

    (iii) Unbalanced Growth: The three sectors of Indian economy, i.e. agricultural, industrial and tertiary sector were not at par with each other in terms of development. While the agricultural sector was relatively developed, the other two sectors remained at their infant stage. Futhermore, there was high regional variation in the occupational structure of India. While on one side, the states like Tamil Nadu, Andhra Pradesh and Bombay experienced a fall in the agricultural work force. On the other side, the states like Orissa, Rajasthan and Punjab experienced a rise in the agricultural workforce.

    13. Underscore some of the India’s most crucial economic challenges at the time of independence.

    Ans. The exploitative colonial rule of the British hampered all the possible spheres of Indian economy badly. Resulted to which, India faced the acute economic challenges at the time of independence.

    The following are some of the economic challenges that Indian economy had faced evidently:

    (i) Low Level of Agricultural Productivity: During the period of colonial rule Indian agricultural sector was exploited by the British to fulfill their own interest. Consequently, Indian agricultural sector suffered from stagnancy, low level of productivity, lack of investment, poor condition of landless farmers and peasants. Thus, the immediate and most important concern for India was to develop its agricultural sector and its productivity. Some of the important and efficient reforms needed at the time of independence were abolition of Zamindari system, need of land reforms, reducing inequality of land ownership and upliftment of the peasants.

    (ii) Infant Industrial Sector: India couldn’t develop a effective industrial base during the colonial rule. For developing the industrial sector, what all India needed were huge capital investments, infrastructure, human skills, technical knowledge and modern technology. Further, due to the cut throat competition from the British industries, India’s domestic industries could not survive. Thus, developing small scale and large scale industries simultaneously became the main concern for India to develop its industrial sector. Moreover, the requirement to increase the share of industrial sector to India’s GDP was one of the important economic challenges for India.

    (iii) Lack in Infrastructure: Although the change in the infrastructural development in the country was significant but this was somehow not sufficient to improve the performance of agricultural and industrial sector. Also, there was an urgent need to upgrade the existing infrastructure and to modernise the infrastructure to enhance its efficiency and effectiveness.

    (iv) Poverty and Inequalities: India was evidently trapped in the vicious circle of poverty and inequality. The colonial rule drained out a significant portion of India's wealth to Britain. Consequently, majority of India’s population fell into the trap of poverty. This further eleviated the economic inequalities across the country.

    14. When was India’s first official census operation undertaken?

    Ans. India’s first official census operation took place in the year 1881. Afterwards, the census has been conducted in every 10 years. It deals with a detailed estimation of population size, along with a complete demographic scenario of the country.

    15. Indicate the volume and direction of trade at the time of independence.

    Ans. During the colonial rule, the British in accordance with a discriminatory tariff policy under which they were imposing heavy tariffs (export duties) on India’s export of handicraft products, the export of India’s raw material to Britain was absolutely free and free import of British products to India. This made Indian exports even more costlier and its international demand fell drastically. India’s export during the colonial rule consisted mainly primary products like sugar, jute, silk, etc. and the imports consisted of finished consumer goods like cotton, woolen clothes, etc, from Britain. As the monopoly power of India’s export and import was centralised with Britain, so, more than half of India’s trade was restricted to Britain only and the remaining imports were directed towards countries like China, Persia, and Srilanka. The opening up of Suez Canal further intensified the monopoly power of the British over India’s foreign trade. It paved the way for a faster movement of goods from India to Britain and vice-versa. The surplus that was generated from India’s foreign trade was not at all invested in Indian economy; rather it was utilised for administrative and war purposes that led to the drain of Indian wealth to Britain.

    16. Were there any positive contributions made by the British in India? Discuss.

    Ans. Yes, there were various positive contributions that were made by the British in India. The contributions were not intended for the betterment of India but were purely supporting the colonial exploitation by the British.
    The following are the positive contributions made by the British:

    (i) Introduction of Railways: The introduction of railways by the British was although the step forward in the development process of Indian economy. As it opened up the cultural and geographical barriers which worked as a catalyst in commercialisation of Indian agriculture.

    (ii) Introduction of Commercialisation of Agriculture: The introduction of commercial agriculture was also proven to be an important breakthrough in the history of Indian agriculture. Indian agriculture was of subsistence nature, before the emergence of the British. But with the commercialisation of agriculture, the agricultural production was carried out in accordance with the market requirements. It was due to the factor that today India is able to aim at attaining self-sufficiency in food grains production.

    (iii) Introduced Free Trade to India: British urged India to follow free trade pattern during the colonial rule. This further became the key concept of globalisation today. The free trade provided domestic industry with a platform to compete with the British industries. The evolution of free trade led to a increase in the volume of India’s export rapidly.

    (iv) Development of Infrastructure: The infrastructure which was developed in India by the British proved to be a supportive tool to check the spread of famines. The telegram and postal services served also Indian public.

    (v) Promoted Western Culture: English as a language undoubtedly promoted westernised form of education. The English language acted as a gateway to the outside world. This has somehow integrated India with the rest of the world.

    (vi) Role Model: The way and the technique of British administration acts as a role model for the Indian politicians and planners and guided the Indian politicians to govern the country in an efficient and effective manner

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