Essays

Indian economy in the early period was a self-sufficient economy Comprising of several villages. Indian villages produced and met their requirement according to division of labour and their economic activity was restricted to village economy. Barter system prevailed as an exchange mechanism. Basically, the primary activity was agriculture. Other services like carpentry, weaving, hair dressing, etc. were offered by labourers who extended their services based on heredity. They received their wages as food products. In short, Indian villages functioned as independent republics and the only interference was from the King to whom they paid taxes in kind. Thus, India had happy villages.

Prior to the British rule, religion, system of the society and king's law influenced the economy to a great extent. There prevailed caste system which decided the division of labour for the benefit of the society's economy. Further, the prevalence of joint-family system helped them to pool their resources for their individual  family benefit and also for the benefit of the society. Another advantage of the joint-family system was that the cultivable lands were not fragmented, yielding better economic gains.

Another influencer on early Indian economy was the Hindu religion. The religious centres also functioned as Indian trade  centres. For example, major pilgrimage spots like Nasik, Allahabad, Varanasi, etc. also functioned as centres of commerce and trade. Many trade and commerce activities were linked to the religious festivals and functions. In short, the Hindu religion acted as an indirect catalyst for the Indian economy.

One of the major industries in early India was textile. Handicrafts was also part of the Indian industrial activity. Indian textile products like shawls, dhotis, dupattas, woollen products, cotton goods, etc. and handicraft products were exported to overseas markets, such as Egypt, South EastAsia, Greece, etc. It is worth noting that when Europe (birth place of modern industrialism) was inhabited by uncivilised people, India was very popular for its craftsmanship and rich economy.

Indian land had been invaded and ruled by many outsiders, amongst which the British regime was considered very important. British East India Company entered India in 1757 through the Battle of Plessey and the Crown took the complete administration during 1858. Politically, India was under the British rule for around two centuries and the Indian economy was significantly influenced during their rule. Indian culture and administration too underwent a major transition during British rule. Other invaders, prior to British, created a feeling of differentiation between Indian citizens and themselves as a separate class. However, British identified themselves as citizens of India. Thanks to this attitude, British followed an administrative set up in India to develop their motherland at the expense of India.  

Further, the spread of colonialism of the British in South East Asia also led to another problem. They transported Indians to other neighbouring countries like Sri Lanka as labourers to work in their plantations. However, when they left this sub-continent, they left several of these issues unsolved. Still today, these Indian labourers in Sri Lanka face an identity crisis. In Sri Lanka they are considered as Indians; and in India these labourers are considered as Sri Lankans.

Economic activities of their colonies including India were tuned to the interests of Great Britain. During British rule, Indian handicrafts contribution declined and the economy was ruralised. British also introduced new land mechanism to enable them to gain more land revenue in order to suit their imperialistic needs. They adopted an industrial process transition through colonial  capitalism.

The colonial imperialistic attitude of the British rule has yielded India a unique economic problem, that is, modernisation with under-development. Though British provided peace in this country, they failed to extend prosperity. The only remarkable economic fruit British rulers left for India was in the field of Indian transport system, especially that of railways and roadways. However, this benefit was only incidental. The ultimate motive of all the enterprise during British rule was to serve the benefit of the Great Britain and not that of India. Thus, when British left India in 1947, Indian economy depicted a paradoxical dual picture of modernisation and under-development; along with several unsolved political issues, such as the fate of Indian labourers in Sri Lanka.

It is paradoxical that India is a rich country (in terms of enormous natural and man power resources) with poor people. India adopts a mixed economic model which is tending towards economic liberalisation in order to attain self-reliance. Indian economy is characterised by lower per capita income, mass unemployment and under-employment, over-dependence on agriculture, over-population, poor standard of living, low level of capital formation, low levels of health and education facilities, etc. Indian population, instead of being an asset, has most often proved to be a liability and economic distress. This calls for more attention by the Government in the upliftment of the population. Thus, any economic policy treatment in India will be viewed with a social mind frame.

During 1901, urban population which was at 10.8 per cent of total population has increased to 25.7 per cent during 1991. Further, almost the entire rural population of 1901 (213 million) lives in urban India during 1991 (218 million). This indicates the extent of migration.

Savings and capital formation are very important for a country's economic development. The gross domestic savings which was at Rs 2544 crore m 1960-61 rose to Rs 157186 crore in 1992-93. The contribution of household sector to savings is the largest in India, followed by public sector and private corporate sector. The rate of savings in India to GDP is not satisfactory due to several reasons, such as, low per capita income, poor performance of public sector enterprises, poor contribution of private sector players and untapped rural savings potential.

It is worth noting that the gross savings of corporate sector, for the period 1960-61 to 1992-93, indicates an annual average growth rate of 14.23 per cent. However, when the savings and capital formation in the private corporate sector are compared with the gross domestic savings and capital formation, it has remained at more or less the same proportion around one-eighth of the total domestic savings. This is an indication of the corporate sector’s dependence on household sector savings for its long term capital requirements, which has led to a broad based structure of share ownership pattern.

Indian economy has come a long way, especially after independence. Since independence, the structure of the Indian economy has gone through several changes, out of which sectoral contribution to the economy is the most vital one. The agricultural contribution to GDP is declining gradually. The contribution of industrial sector has not improved to a great extend, the service sector's contribution to GDP has notably increased. One of the main reasons for this change can be attributed to the economic policies of India.