XIII - The Indian Economy since Independence (1947–70)

Summary

THE LEGACY OF COLONIAL RULE

During the colonial era, government's economic policies in India were concerned more with protecting and promoting British interests than with advancing the welfare of the Indian population. The administration's primary preoccupation was with maintaining law and order, tax collection and defence. These activities absorbed the bulk of the meagre public revenues. As for development, government adopted a basically laissez-faire attitude. The government supported and encouraged large investments in building the railway network. Though designed to facilitate the transport of raw materials from the hinterland to ports, and to meet strategic requirements, the railways did stimulate development by providing easier and cheaper access to a wider market. Public investment in irrigation, roads, education and other development oriented infrastructures was very limited. Particularly lacking was a sustained positive policy to promote indigenous industry. Indeed, it is believed that government policies, far from encouraging development, were responsible for the decline and disappearance of much of India's traditional industry. There was some shift in attitudes especially since the 1930s signalling a more active interest in developmental problems, but this did not make any significant difference.

Altogether, the pre-Independence period was a period of near stagnation for the Indian economy. The growth of aggregate real output during the first half of the twentieth century is estimated at less than 2 per cent a year, and per capita output by half a per cent a year or less. There was hardly any change in the structure of production or in productivity levels.