Key Points

The sole purpose of British colonial rule was to reduce India to a raw material supplier for Great Britain's industrial base and a consumer of its finished goods.

On the eve of independence, the Indian economy was underdeveloped and stagnant, characterized by low agricultural productivity and a weak industrial base.

Notable individuals like Dadabhai Naoroji, William Digby, and V.K.R.V. Rao attempted to estimate national income. Rao's estimates were considered the most significant during the colonial period.

Agriculture was stagnant mainly due to the zamindari system of land settlement, low technology levels, lack of irrigation, and negligible use of fertilizers. About 85 percent of the population depended on agriculture.

The British systematically de-industrialized India by ruining its world-famous handicraft industries. This created unemployment and made India dependent on cheap manufactured goods from Britain.

Modern industry saw slow progress, confined mainly to cotton textiles in western India and jute mills in Bengal. The Tata Iron and Steel Company (TISCO) was incorporated in 1907.

A major drawback of the industrial sector was the near absence of capital goods industries, which produce machines and tools needed for further industrialization.

India became an exporter of primary products like raw cotton, silk, and jute, and an importer of finished consumer goods like cotton clothes and light machinery from Britain.

Britain maintained monopoly control over India's foreign trade, with more than half of the trade restricted to Britain. The opening of the Suez Canal in 1869 further intensified this control.

India's large export surplus did not benefit its economy. It was used to pay for British administrative and war expenses, leading to a significant drain of wealth from India.

The demographic profile was poor, with high birth and death rates. The overall literacy rate was less than 16 percent, and the infant mortality rate was alarmingly high at 218 per thousand.

The year 1921 is regarded as the 'Year of the Great Divide', marking the transition from the first to the second stage of demographic transition in India.

The occupational structure showed little change, with a large workforce (70-75 percent) engaged in agriculture. The manufacturing and service sectors accounted for only 10 percent and 15-20 percent respectively.

Infrastructure like railways, ports, and telegraphs were developed not for public welfare but to serve colonial interests, such as mobilizing the army and transporting raw materials.

The British introduced railways in 1850. While they helped in long-distance travel, they also fostered the commercialization of agriculture which harmed the self-sufficiency of village economies.

At independence, India faced enormous challenges including a crippled agricultural sector, a weak industrial base, rampant poverty, unemployment, and the need for massive public investment.