Chapter 17
The Economic Condition of India in 1947

AT THE end of the Second World War the India economy contained strongly contrasting elements of strength and weakness. War conditions had so stimulated development that India was officially classified as one of the eight major industrial countries of the world. Her productivity had gone up by leaps and bounds and she had a whole army of trained technicians. She had not only repatriated her sterling debt, but had, as a result of war-time production, accumulated substantial sterling balances. Last, but not least, rural indebtedness had been greatly reduced on account of the rise in grain prices, while the growing strength of labour and a more responsive attitude on the part of employers had led to an undoubted improvement in the conditions of life of urban workers. On the other hand, per capita income was still low even by Asian standards and population was increasing faster than the national income. Agriculture was unprogressive and India was dangerously dependent on substantial imports of foodstuffs. The lower middle classes were suffering severely from the increase in the cost of living and, in spite of growing industrialisation, middle-class unemployment was a grave problem.

In this chapter we shall examine these factors briefly and assess the favourableness or otherwise of the economic conditions under which India embarked on independence. It is natural to begin by considering the extent to which India, in 1947, could feed and clothe herself. Agriculture, though the most important, was in some ways the least satisfactory branch of the Indian economy. The efforts of the Agricultural Department and of every good District Officer, in the fifty years before the transfer of power, to improve methods of cultivation and to secure increased yields were, in the main, thwarted by social and economic factors. The joint family system destroyed incentive; the continual fragmentation of holdings made scientific

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