Indian Economy: Pre-British Rule to NITI Aayog

Abstract

India was under British rule, which lasted for almost two centuries before India won its independence on 15 August 1947.During about 200 years of British Colonial rule, traditional Indian agriculture based economy including cottage industry and handicraft was destroyed in favour of British made machine goods. In fact, all economic activities that were taking place at the time of British rule were dominated by British capital or small section of Indian monopolies to serve the interest of British. Zamindari system was introduced in the agriculture along with commercialisation of agriculture. Consequently, land came to be concentrated in few hands reducing a large number of cultivators as a share croppers or landless labourers. Thus, independent India inherited a backward economy characterised by stagnant agriculture, extreme poverty and deprivation, uneven and weak industrial sectors, low capital resources and regional imbalances. In order to overcome these problems, India has adopted a mixed economy pattern, which implies a fair balance between social goals and individual goals. It implies a concerted or harmonious organisation of the public and private sectors. The sectors have to be so re-organised as to become mutually reinforcing rather than mutually obstructive. Similarly, two mechanisms, i.e., market arrangement and planning arrangement are so coordinated that each is used to meet the social goals and individual goals to which it is most suited and ensured that the two mechanisms do not become mutually contradictory. Further, a social democratic mixed economy implies a balance commitment to freedom, to equality, and material progress. The public sector has been assigned a somewhat more dominating role to give push to the development of an economy. The public sector has to serve as the main energizing factor and has therefore to undertake upon itself the responsibility for investment and production in certain basic industries and select developmental fields. Industrialisation did not take place as expected. For instance, during 1965-1980, when Indian economy was highly controlled, the growth rate of industrial production declined to 4 per cent per annum as compared to 8 per cent in 1950-65. Laws that were formulated to regulate the private sector were said to be responsible for slow growth of industrial sector. Many public sector enterprises started making losses. All these led to the framing of New Policy, focussing on liberalisation, privatisation and globalisation was introduced in l991, which is known as the New Economic Policy. For comprehensive understanding of the Indian economic development, it would be useful to know what type of an economy we inherited from the British. Was it a stagnant or vibrant economy? Was it a backward or a developing economy? Was it an agricultural or industrial economy? Was it an economy showing some structural changes which were friendly to growth and development? The objective of this paper is to know about the development of Indian economy prior to independence and after independence, and form an idea of the various considerations that shaped India’s post-independence development strategy. The paper finds that the Indian economy, which in the early 19the century, had the potential for moving on to the modern stage of economic development, slid back to a state of stagnation.