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Indian Economy on the Eve of Independence Notes for Class 11 Economics

Please refer to Indian Economy on the Eve of Independence Notes for Class 11 Economics provided below. These revision notes have been prepared to help you understand and learn all important topics given in your NCERT Book for Class 11 Economics. We have provided Notes for Class 11 Economics for all chapters provided in your textbooks. These concepts, notes, and solved questions have been prepared for Standard 11 Economics by our expert teachers t help you gain more marks in exams and class tests.

Class 11 Economics Chapter 1 Indian Economy on the Eve of Independence Notes

Please carefully read the Indian Economy on the Eve of Independence Notes for Class 11 Economics provided below. Use them prior to your exams as this will help you to revise the entire chapter easily. We have also provided MCQ Questions for Class 11 Economics which will be asked in the upcoming exams.

Colonial Rule: It refers to a system between two countries under which one country being the ruler and another being the colony and

the ruling country determines the economic policies of the colony.

In India, the colonial rule stays for around 200 years (1757 – 1947) under which the Britishers exploited the Indian country and form the economic policies in India.

• Stagnant economy: Stagnant economy refers to the economy which is stuck or very low at its path of development.

Features of Indian economy before colonial rule:-

• Agriculture was the main source of employment and livelihood for the people of our country. Around 85% economy derived their livelihood directly or indirectly from agriculture.

• The farmer raised only those crops which he needed for his own use and shared the same with the village artisan who supplied him with simple manufacture that he needed for his domestic consumption.

India was famous for its handicraft industries all over the globe.

• Indian was an independent, self-reliant and prosperous economy.

                                            Did you know

Before colonization India was known as golden bird (popularly known as

                                        ‘Sone Ki chidia’

It was a reference to the wealth and economic prosperity of India.

Agricultural sector at the eve of independence:

The characteristics of agricultual sector at the eve of independence was as follows:

1. Zamindari system (land tenure system): Under this system, ownership right of the land was transferred from farmers to zamindars i.e. Zamindars were the nominal head of the land who collects the revenue from the farmers (in the form of lagaan) and deposit it to the colonial government.

The zimandars collects lagaan from the farmers regardless to the economic condition of the cultivators.

The zamindar and the colonila government took no initiative to improve or to strengthen the condition of agriculture.

2. Commercialization of Agriculture: It refers to the production of crops for sale rather than for self consumption.

Farmers were given higher prices for production of cash crops (like cotton, jute, indigo) so that they can use them as raw material for British industries.

High level of prices forced to farmers to produce cash crops rather than food crops.

3. Low level of productivity: Productivity refers to the output per hectare of land. During colonial period the productivity of Indian

agriculture was very low. Reasons of which are as follows:

♦ Lack of irrigation facility

♦Low level of technology

♦ Negligible use of fertilizes

4. High degree of uncertainty:-During colonial period, the main source of irrigation was rainfall which results in high level of uncertainty. i.e. good rainfall implied good output whereas poor rainfall will results in low level of output.

Industrial sector on the eve of independence:

1. Decline of handicraft industries: During colonial rule, the Britishers systematically destroyed the Indian handicraft industries and forced the people to indulge into agriculture sector. The basic motive of british rule behind the de-industrialization was 2-fold:

a. To convert India into a supplier of raw material for the industries of Britain.

b. to develop India as a market of British manufactured goods.

2. Discriminatory tariff policy: The British Indian Government followed:

a. Free trade or unrestricted entry of british goods

b. Tariff free export of raw material from India to Britain.

c. Heacy duty was placed on the export of Indian handicraft products, due to which the Indian handicraft industry start losing its pride and place.

3. Competition from machine made products:- The pride of Indian handicraft industries stated to decline when it faced the competition from machine made products as they are of low cost and easily available. Indian craftsmen are ar behind the speed of machines and hence the only alternative available for them is to shut down their enterprises.

4. Lack of capital goods industries: Capital goods industry refers to those industries which are capable of producing machine tools.

During colonial period there was no capital goods industry worth the name, moreover Britishers don’t pay any attention in promoting or supporting these industries as they want India to be a supplier of raw materials only.

5. Change in pattern ofdemand:- The impact of British culture started to arise in the public, as a results a new class emerged in India which was keen to adopt the western lifestyle. This changed the pattern of demand against the Indian products.

6. Negative effects of Railways:- Although introduction of Railways was one of the positive impact of colonial period but at that time, Railways proves to be a terror for lndian industries.

Britishers use railways for their benefits only as a result, Size of market of loan-cost British product started to expand whereas high-cost handmade products began to shrink.

Foreign trade:

Since ancient period, India has been an important trading nation. India was well-known exporter of finished goods like silk, fine cotton, textiles, ivory work, handicrafts, precious stones etc. But the discriminatory trade and tariff policies of Britishers brought it to an end.

The condition of Foreign trade is explained below:

1. Exporter of primary products and importer of finished 

goods:During colonial rule, India became the exporter of raw materials (such as raw silk, cotton, indigo, jute etc.) which are of low cost and became the importer of finished goods (such as capital goods, woolen clothes, silk clothes and other machine made products) which are of high cost. Due to this the economic condition of our economy started to decline.

2. Monopoly control on trade by britishers: During colonial period the british government maintained a monopoly control over Indian trade policies.

 ♦ Majority of trade was restricted to Britain (more than 1/2) while the rest was allowed with some other countries only (such as china, Sri Lanka (Ceylon) and Iran (Persia))

 ♦ Majority of trade was restricted to Britain (more than 1/2) while the rest was allowed with some other countries only (such as china, Sri Lanka (Ceylon) and Iran (Persia))

♦ Opening of Suez Canal in 1869 provides a direct trade route for ships operating between Britain and India. 

Suez Canal:

It is an artificial waterway running from north to south across the Isthmus of Suez in north- eastern Egypt.
The opening of canal reduced rthe transportation cost as now there is no need to sail around Africa.

Traiff free import and export between India and Britain whereas heavy duty was placed on the export of Indian handicraft products (which increase their price in the market).

3. Economic exploitation: Due to the exporter of raw material, India has a huge export surplus. But the amount of export surplus does not give any pust to Indian economy as the amount of surplus is used by the government in non-developing activities, such as:

♦ To meet expenses of war fought by the British government.

♦ To make payment of office setup of colonial government.

♦ To make trade of invisible items (services)

Demographic conditions: Demographic refers to the study of various aspects of population, such as age, sex, education level, income level, martial status, birth rate, death rate etc.

1. High birth rate and death rate:

Birth rate refers to the number of children born per thousand in a year.

Death rate refers to the number of people dying per thousand persons in a year. During colonial period both birth rate and death rate are very high (nearly 48 and 40) which means India was at the First stage of demographic transition (before 1921). Year 1921, is regarded as the year of Great Divide as thereon India has started its enty into the second stage of demographic transition.
Stage of demographic transition
First stage- High birth rate and his death rate (stagnant economy)
Second stage – High birth rate and low death rate (initial stage of development)
Third stage – Low birth rate and low death rate (developing or developed economy)

2. Low literacy rate:

Literacy rate refers to the number of persons who is 7 or above, who has the ability to read, write and understand and one language. During colonial period the overall literacy rate of the economy was less than 16 per cent. Moreover, the female literacy rate was about 7 per cent.

3. High infant mortality rate:

Infant mortality rate refers to the number of infant dying before the age of 1 year per thousand live births annually. The IMR during colonial period was about 218 per thousand (before 1921).

4. Poor health facilities:

Public health facilities were either unavailable or when available, were higher inadequate. Due to which water and air-borne disease were widespread and took a huge toll on life.

5. Low life expectancy:

It refers the average number of years for which a person is expected to live. Due to poor health facilities, the life expectancy during colonial rule was as low as 32 years, whereas as per the latest WHO data published in
2018, the current overall life expectancy of India is 68.8 years.

6. High level of poverty:

During colonial period, India faced the condition fo extensive poverty, per capita consumption was very low. The overall standard of living of common people of India was very low.

Occupational structure:

It refers to the distribution of working persons across different industries and sectors.

1. Predominance of agriculture:

As colonial government aims at making India as exporter of raw material, as a result about 72.7% of working populatio was engaged in agriculture.

As the income generation rate of agriculture sector is very low, this predominance reflects backwardness of the economy.

2. Unbalanced growth:

Growth of an economy is said to be balanced when all the 3 sectors are equally developed. But in case of Indian economy only primary sector is the main source of employment, whereas secondary and tertiary sector were in their infant stage of growth.


It refers to the basis physical and organizational structure and facilities (buildings, roads, power supplies etc.) needed for the operation of an economy. The state of infrastructure was very poor during colonial period, although some efforts were taken by the British government to improve the condition of infrastructure in the economy (railways, port, post and telegrams, roads etc.) so that it can serve economices benefits to them.
The conditions of infrastructure was explained here:-

1. Railways:

One of the biggest contributions of colonial rule was the introduction of railways in India in 1850. It helps to remove geographical and cultural barriers in the economy. Although the benefits of railways was mostly restricted to Britishers during colonial period but it also helps in developing the Indian economy post colonial period.

2. Roads:

The construction of raods during colonial rule was very limited (due to scarcity of funds). The roads that were built, primarily served the interests

of mobilizing the army and shifting of raw materials so that they can be transported to Britain via posts.

3. Air and water transport:

The colonial government took various measures for developing the ports and air transport. But the development was far from satisfactory measure of development.

4. Communication:

During colonial period, posts and telegraphs were the most popular means of communication. The system of electric was introduced at a high cost to serve the purpose of maintaining law and order. Despite serving a useful publicpurpose, the postal service remained al through inadequate.

Positive contribution of British rule:

As every coin has 2 sides, similarly the colonial rule had some leads some positive impacts on our economy which are as follows

1. Introduction of railways:-

The first and the most efficient contribution was the introduction of railways in India. Britishers introduced railways so that they can transport their products and the raw materials easily from one place to another but in post colonial period railways turned out to be the key factor for the economy.

2. Commercialization of agriculture:-

Under pre-colonial period, farmers grow crops just to sustain themselves and other people of the village. But forced commercialization of agriculture under colonial rule brings new opportunities for farmers in the market

3. Monetary system of exchange:- 

Barter system of exchange was no longer effective in the economy. Britishers brings a new system of exchange popularly known as monetary system of exchange (Introduction of money).

4. Effective system of administration:-

The colonial government ion India left a legacy of an efficient system of administration, which serve to be a readymade for our eonomic and political planners.

                      Did you know:
1. The first official census of India was conducted in 1881.

2. 1921, is the year of great divide, as the first stage of demographic transition has ended and India has entered into its second stage of demographic transition.


♦ Stagnant economy

♦ Features of Indian economy before colonial rule

♦ Agricultural sector at the eve of independence

♦ Zamindari system

♦ Commercialization of agriculture

♦ Low level of productivity

♦ High degree of uncertainity.

♦ Industrial sector on the eve of independence

♦ Decline of handicraft industries

♦ Discriminatory tariff policy

♦ Lack of capital goods industires

♦ Change in pattern of demand

♦ Negative effects of railways

♦ Foreign trade

♦ Exporter of primary products and importer of finished goods.

♦ Monopoly control on trade by britishers.

♦ Economic exploitation.

♦ Demographic Conditions

♦ High borth rate and death rate

♦ Low literacy rate

♦ High infant mortality rate

♦ Poor health facilities

♦ Low life expectancy

♦ High level of poverty

♦ Occupational structure

♦ Infrastructure

♦ Positive contributions of British rule

Indian Economy on the Eve of Independence Notes for Class 11 Economics

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