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Indian Economy on the Eve of Independence – Class 11 Economics notes, important questions and MCQs

NCERT Class 11 Economics, chapter 8. Notes, key terms, important questions with answers and MCQs.

Chapter overview

Before British rule India had a prosperous economy known for agriculture and handicrafts such as cotton and silk textiles. Nearly two centuries of colonial rule turned India into a supplier of raw materials and a market for British goods. At independence in 1947, India's economy was backward, stagnant and poor, with low agricultural productivity, weak industry and poor social indicators.

Agriculture and industry

About 85 per cent of the population lived in villages and depended on agriculture, but productivity was very low.
The zamindari system made landlords collect high rents without improving land, and commercialisation of agriculture forced farmers to grow cash crops for British industries.
Traditional handicrafts declined (de-industrialisation) because of cheap British machine-made goods and unfair policies.
Modern industry grew slowly; the Tata Iron and Steel Company was set up in 1907, but capital goods industries were almost absent.

Trade and the drain of wealth

India exported raw materials such as cotton, jute, indigo and silk and imported finished goods from Britain.
Britain had a monopoly over India's foreign trade; the opening of the Suez Canal in 1869 made trade even easier.
India's export surplus was used to pay for British administration and war expenses, which is called the drain of wealth.

Population and infrastructure

Social indicators were poor: overall literacy was below 16 per cent, infant mortality was about 218 per 1,000 and life expectancy only about 32 years.
Railways (from 1853), ports, posts and telegraphs were developed mainly to serve colonial interests.
Occupational structure was dominated by agriculture with little change over time.

Key terms

Colonial economy: an economy run mainly to serve the interests of the ruling foreign power
De-industrialisation: the decline of traditional handicraft industries
Zamindari system: a land system in which landlords collected rent from cultivators and paid revenue to the government
Drain of wealth: the transfer of India's wealth to Britain without adequate return
Commercialisation of agriculture: growing crops for sale in the market rather than for one's own use

Important questions with answers

What is meant by de-industrialisation?2 marks

De-industrialisation means the decline of India's traditional handicraft industries, such as cotton and silk textiles, under British rule, because of competition from cheap machine-made British goods, discriminatory tariff policies and loss of royal patronage, which pushed artisans into agriculture.

What was the drain of wealth?3 marks

Under British rule India had an export surplus, but this surplus did not bring gold or goods into India. It was used to pay for the expenses of the British administration, wars fought by the British and the salaries and pensions of British officers. This transfer of wealth to Britain without adequate return is called the drain of wealth.

Describe the state of the Indian economy on the eve of independence.5 marks

At independence in 1947, the Indian economy was backward and stagnant after nearly two centuries of colonial rule. Agriculture supported about 85 per cent of the population but suffered low productivity because of the zamindari system, high rents, lack of irrigation and technology, and forced commercialisation that made farmers grow cash crops for British industries. Traditional handicrafts declined because of cheap British machine-made goods and discriminatory policies, a process called de-industrialisation. Modern industry grew very slowly; a few industries such as cotton and jute textiles grew, and the Tata Iron and Steel Company was set up in 1907, but capital goods industries were nearly absent. Foreign trade was controlled by Britain; India exported raw materials such as cotton, jute and indigo and imported finished goods, and the export surplus was used to meet British administrative and war expenses, causing a drain of wealth. Social indicators were very poor: literacy was below 16 per cent, infant mortality about 218 per 1,000 and life expectancy about 32 years. Infrastructure such as railways, ports and telegraphs was developed mainly to serve colonial interests. Thus independent India inherited widespread poverty and unemployment and the task of rebuilding the economy.

Quick revision

Stagnant, low-productivity agriculture; zamindari.
De-industrialisation of handicrafts.
Raw materials out, finished goods in; drain of wealth.
Poor health and literacy; infrastructure for colonial use.

Exam tips

Organise answers under agriculture, industry, trade, demography and infrastructure.
Remember three figures: literacy below 16 per cent, infant mortality about 218 per 1,000, life expectancy about 32 years.

Practice MCQs

On the eve of independence, the main occupation of most Indians was
1. industry
2. agriculture
3. services
4. trade
Show answer
Answer: (b) agriculture. About 85 per cent lived in villages.
The decline of India's traditional handicrafts is called
1. de-industrialisation
2. industrialisation
3. urbanisation
4. modernisation
Show answer
Answer: (a) de-industrialisation. It was caused by colonial policies.
Railways were introduced in India in
1. 1853
2. 1907
3. 1947
4. 1951
Show answer
Answer: (a) 1853. They mainly served British trade.
The Tata Iron and Steel Company was set up in
1. 1907
2. 1853
3. 1947
4. 1869
Show answer
Answer: (a) 1907. It was at Jamshedpur.
The transfer of India's export surplus to meet British expenses is called
1. foreign aid
2. free trade
3. drain of wealth
4. import substitution
Show answer
Answer: (c) drain of wealth. It drained India's resources.
The Suez Canal, which made India–Britain trade easier, was opened in
1. 1857
2. 1869
3. 1905
4. 1947
Show answer
Answer: (b) 1869. It shortened the route.
Why was agricultural productivity low under colonial rule
1. excess investment in irrigation
2. the zamindari system, lack of investment and forced cash cropping
3. too many tractors
4. high literacy
Show answer
Answer: (b) the zamindari system, lack of investment and forced cash cropping. Landlords and the government took surplus without improving land.
Which statement best describes India's foreign trade under British rule
1. India exported finished goods and imported raw materials
2. India exported raw materials and imported finished goods
3. India had no foreign trade
4. trade was controlled by India
Show answer
Answer: (b) India exported raw materials and imported finished goods. It served British industry.

All chapters of Class 11 Economics

Written by Kundali IQ from standard, well-established facts to help with revision. This is not an official NCERT publication; always read your textbook too.