As part of the anti-Indian economic policy, the British government squeezed the country of the surpluses from the budget and the foreign trade sector. This drain of resources from India to the United Kingdom consisted of various payments for which India did not get any return. The heads under which this took place were many. For example, before 1833, when the East India Company ceased its operations Indian exports to the UK were financed by Indians. The tax collected by the Company was used to buy Indian goods for exports to Britain. There were then Home Charges paid by the Indian Government to the United Kingdom.
These charges consisted. of such payments as pensions to the British who served in India and interest on loans. The Indian Government also inherited from the British unproductive and avoidable debts. Repayment of these imposed a heavy burden on the country’s economy. The payments thus made were in fact the savings of Indians. But India got nothing on it; neither the return on it nor the principal itself. It amounted to forcibly taking away India’s savings for the development of Britain.
If this surplus had been left with India, “she would have been able to attain a growth rate only a little lower than that attained by the United States and the United 4 Kingdom during the nineteenth century.” But this surplus went out as exports for which nothing was paid in return. These are the words of Romesh Dutt that drained the life-blood of India in a continuous, ceaseless flow. It was this drain that impoverished India.
It follows from the discussion above that the basic cause of stagnation during the British period was government policy. A few steps, apparently good on the part of the government such as the establishment of railways, promotion of plantations, etc. were in fact largely intended to strengthen those fields of the Indian economy which Britain wanted to suck. 9 As a result of all this, the Indian economy got stuck in a state of under-development channel.
Introduction To Indian Economy
The third World countries including India are considered underdeveloped. India in particular is underdeveloped through a developing economy. Poverty is not only acute but chronic. Industrial development is slow, agriculture is the primary occupation, rich natural resources and abundant manpower are not utilized to the optimum. The economic under-development has been attributed to various factors like colonialism, restrictive role of social structure, religious orthodoxy, shortage of capital, lack of enterprise, unbridled population growth and so on. The colonial powers left the Indian economy stagnating as they drained its rich resources and destroyed its indigenous industries for over two centuries.
After Independence, India opted for planned capitalist development and accordingly built up a mixed economy. It has been growing in terms of increase in per capita income (per capita income is the average income per person for a specified period of time) as well as structural changes. There is also a dualistic nature in our economy where the modern sector co-exists along with the traditional primitive economy. A Mixed ‘economy in simple terms is an economy in which there is a large private sector and a large state sector, neither of which predominates over the other. The economies of Western Europe where the balance between private and government enterprise are more or less equal are therefore examples of mixed economies.