The colonial economy

Before British rule, India had an independent economy. It was so rich that it was called the 'golden bird' (sone ki chidiya). Most people lived by farming, but India was also famous all over the world for its handicrafts: fine cotton and silk textiles, and beautiful work in metal and precious stones. These goods had a worldwide market.

British rule changed this completely. Its economic policy served Britain, not India. The aim was to turn India into:

• a supplier of raw materials (cotton, jute, indigo) for Britain's growing factories; and
• a market for the finished goods those factories produced.

How poor did India become? The colonial government made no official effort to measure India's national income. A few individuals tried: Dadabhai Naoroji, William Digby, Findlay Shirras, V.K.R.V. Rao and R.C. Desai. Their estimates showed that in the first half of the twentieth century, India's total real output grew by less than two per cent a year, and output per person by only about half a per cent a year.

In short, because policy served Britain, India's economy stagnated.