3.2         ndian    onom
                                                                   its literacy was only 17 per cent with 32.5 years of
        The Background                                             life expectancy at birth.3
     The economic profile of India was in complete                        Industrialisation of India was also neglected by
     distress at the time of Independence. Being a                 the colonisers—the infrastructure was not built to
     typical case of colonial economy, India was serving           industrialise India but to exploit its raw materials.
     a purpose of development not for herself but                  Indian capitalists who did emerge were highly
     for a foreign land—the United kingdom. Both                   dependent on British commercial capital and
     agriculture and industry were having structural               many sectors of the industry were dominated by
     distortions while the state was playing not even              British firms, e.g., shipping, banking, insurance,
     a marginal role. During the half century before               coal, plantation crops and jute.4
     India became independent, the world was having                       The pre-independence period was altogether
     accelerated development and expansion in its                  a period of near stagnation showing almost no
     agriculture and industry on the shoulders of the              change in the structure of production or in the
     active role being played by the states, with the
                                                                   levels of productivity—the aggregate real output
     same happening in the UK itself.1
                                                                   during the first half of the 20th century estimated
          There was not only the unilateral transfer of            at less than 2 per cent a year or less.5
     investible capital to Britain by the colonial state
                                                                          The overall economic performance of India
     (the ‘drain of wealth’), but the unequal exchange
                                                                   under the British rule was very low. According
     was day by day crippling India’s commerce, trade
                                                                   to economic statistician Angus Maddison, there
     and the thriving handloom industry, too. The
                                                                   was no per capita growth in India from 1600 to
     colonial state practiced policies which were great
                                                                   1870—per capita growth was a meagre 0.2 per
     impediments in the process of development in
                                                                   cent from 1870 to 1947, compared with 1 per cent
     the country. Throughout the colonial rule, the
                                                                   in the UK.6 The per capita incomes of Rs. 18 for
     economic vision that the state had was to increase
                                                                   1899 and Rs. 39.5 for 1895 in current prices say
     India’s capacity to export primary products,
                                                                   the true story of the abject poverty Indian masses
     and increase the purchase/import of the British
     manufactured goods and raise revenues to meet                 were faced with.7 The repeated famines and disease
     the drain of capital as well as meet the revenue              epidemics during the second half of the nineteenth
     requirements of the imperial defence.2                            3.   B. R. Tomlinson, The Economy of Modern India
          The social sector was a neglected area for the                    1860–1970, Cambridge University Press, Cambridge,
                                                                            1993, p. 7.
     British rulers which had a negative impact on the
                                                                       4.   Angus Maddison, The World Economy: A Millennial
     production and productivity of the economy.                            Perspective, OECD, Paris, 2001, p. 116.
     India remained a continent of illiterate peasants                 5.   A. Vaidyanathan, ‘The Indian Economy Since
     under British rule. At the time of Independence,                       Independence (1947–90)’, in Dharma kumar (ed.),
                                                                            The Cambridge Economic History of India, Vol.II,
        1.  Bipan Chandra, Mridula Mukherjee and Aditya                     Cambridge University Press, Cambridge, England,
            Mukherjee, India After Independence, Penguin Books,             Expanded Edition, 2005, p. 947.
            New Delhi, p. 341.                                         6.   Angus Maddison, The World Economy, p. 116.
        2.  Bipan Chandra, ‘The colonial legacy’ in Bimal Jalan        7.   The respective data of Digby and Atkinson have been
            (ed.) The Indian Economy: Problems and Prospects,               quoted by Sumit Sarkar, Modern India 1885–1947,
            Penguin Books, New Delhi, Revised Edition, 2004, p. 5.          Macmillan, New Delhi, 1983, p. 42.