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The Indian economy comprises of all the production activities and distribution activities that relate to people. It also comprises of economic activities which related to people and hence determines their appropriate standard of living. However, in this article, we will discuss the status of the Indian economy on the eve of independence. It is important for every Indian to know that on the eve of our independence, the economy of the country was in a very bad shape. The end of the colonial rule left the nation in bits. We picked it up and placed it in order. This bad condition of the country was the outcome of every policy of the British. Since every policy that they were framing was constantly focusing on favouring their nation, we had very little left towards the end.

Therefore, in 1947, when British gave us back India to us, we took back our torn nation.


During the decades of British colonial rule in India, there were no efforts made to calculate India’s per capital income. Similarly, the British rulers never found it necessary to calculate our National Income or our Gross Domestic Product. Upon gaining independence, some Indian individuals did try to measure India’s incomes. But the attempts tragically failed due to inconsistency, lack of expertise and inaccuracy. But the contributions of VKRV Rao and Dadabai Naoroji was very significant in this field.

Our economy had been a victim of enormous exploitation. Our natural resources, iron ores, gold mines, wealth and manpower was subject to intense exploitation. Due to these atrocities, the Indian economy on the eve of independence showed poor/low economic growth. Immense efforts and knowledge were essential in order to move ahead.

Although India was a very independent economy before the British rule, towards the end, it was exhausted. The Indian economy on the eve of independence was struggling to find the path. Since all the policies that the British were framing only promote their interests, we were diverging from prosperity. We were mere raw-material suppliers to the British. They made use of our labour without treating them well. The 200 years of British rule also took away our will to gain knowledge and awareness. Since we were their slaves, we never got the right to proper education. And as a result of these actions, towards the end of their reign, we were illiterate. The Indian economy on the eve of independence was full of people who had absolutely no plan as to how to help the nation.


It is a known fact that over 70% of India’s National Income comes from its agricultural activities. Back then, before 1947, over 95% of the country’s income came from its agricultural activity. And over 85% of the country’s population lived in villages where livelihood completely depended on agriculture. The Indian economy on the eve of independence with respect to agriculture was disheartening. The most important Indian sector was facing massive stagnation and continuous deterioration.

Hence the resulting situation of the sector was as follows.

Low productivity level. Productivity and output per hectare of land were very low. This situation led to a very low yield of output irrespective of the large cultivation area.

High vulnerability level. Agricultural activities are dependent on climatic factors. Because a poor rainfall generally led to a low output level and high crop failures. And no efforts were made by the British to eradicate irrigation issues. Hence making it vulnerable to external factors.

Discussed below are some of the reasons for the stagnation of the agricultural sector.

  • The Indian economy on the eve of independence suffered and continues to suffer the effects of zamindari system. In this system, the main focus of the landlords is to extract rent regardless of the economic conditions of the farmers. This is one of the focus reason for stress among farmers and fear to take a chance to grow. Hence, leading to a stagnant agricultural sector.
  • The lack of resources, be it financial or otherwise, is a critical factor leading to a stagnant agricultural sector.
  • Extensive commercialization of agriculture refers to the shift from cultivating for self to cultivating for sale in the market. This has not been helpful in improving the condition of farmers due to the existence of middlemen. Hence, the stagnation or retardation of the Indian agricultural sector.


Before the British period, India’s well-known industry was the handicraft and textile industry. India was well-known for its industries in cotton and silk textiles as well. And in addition, Indians were excellent in metal and precious stonework as well. When the Britishers came, they were followers of de-industrialization in India. They did this by creating situations which were conducive to the decay of the handicraft and textile industry. They also did not make any effort to promote to permit the continuation of the metal and precious stone works.

The following was the condition of the industrial sector on the eve of independence.

The decay of the Handicraft Industry. The traditional handicraft industry in India initially was in high demand. But the British rule completely discriminated the practice. The prevalence of discriminatory tariff policy and the competition from machine-made products was very critical for the downfall. Also, the introduction of railways in India was the reason for market expansion. Consequently, the demand for the handicrafts began to fall. All of these directly led to the downfall of our prominent industry.

Slow Growth of the Modern Industry. Due to the limited growth of the PSEs and the lopsided industrial structure, the growth of the modern industry was slow. In addition, there was a lack of basic and heavy industries.

To conclude,

Not only was the industrial and agricultural sectors of the country affected but so was the foreign trade. Foreign trade plays a crucial role in the development and earnings of a country. Although it is great to be a self-sustaining and independent country, foreign trade and globalization are critical to a country’s success. Indian economy on the eve of independence in relation to the foreign trade was very poor. Due to the rules imposed by the British, none of India’s products or skills had any recognition. And hence, adversely affecting the structure, composition and volume of the country’s foreign trade and income.

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