On the eve of independence in 1947, the Indian economy was in a state of stagnation and backwardness. After nearly two centuries of British colonial rule, India's economy was primarily agrarian, with about 85% of the population dependent on agriculture. The economy was characterized by low productivity, limited industrialization, and a structure designed to serve British colonial interests rather than Indian development needs.
The agricultural sector dominated the Indian economy, employing about 85% of the population. However, it was characterized by extremely low productivity due to primitive farming methods, dependence on monsoon rains, and lack of modern technology. The British had commercialized agriculture to serve their own interests, focusing on cash crops for export rather than food security for Indians. Food grain production was only around 50 million tonnes, insufficient for the growing population.
The industrial sector in 1947 presented a stark picture of decline and underdevelopment. Traditional handicraft industries, which had once flourished, were systematically destroyed through British policies. The textile industry, metalwork, and other crafts suffered severe de-industrialization. Modern industrial development was extremely limited and lopsided, designed primarily to serve British colonial interests rather than Indian needs. Manufacturing contributed only about 2% to the GDP, reflecting the economy's overwhelmingly agrarian character.
The trade pattern established by the British was highly exploitative and detrimental to Indian economic development. India was forced to export raw materials like cotton, jute, indigo, and spices to Britain at low prices, while importing expensive finished goods manufactured in British factories. This created unfavorable terms of trade for India. The resulting trade surplus was not used for Indian development but was drained away to Britain, financing British industrial growth and military expansion. This 'drain of wealth' was a systematic transfer of resources from India to Britain.
In conclusion, the Indian economy on the eve of independence in 1947 was characterized by stagnation, backwardness, and systematic exploitation. With high poverty rates, low literacy levels, poor infrastructure, and an economy designed primarily to serve British colonial interests, India faced enormous challenges. The per capita income was extremely low, and the majority of the population lived in rural areas dependent on subsistence agriculture. This colonial legacy meant that independent India would need comprehensive economic reforms and development strategies to transform from a stagnant colonial economy into a modern, self-reliant nation.