Introduction: Two Very Different Economies

To understand where the Indian economy stands today, it helps to look back at where it started. For roughly two centuries, India was under British colonial rule, and the way the economy was organised during that period was shaped almost entirely by British commercial interests rather than by the needs of the Indian people. When India became independent in August 1947, it inherited an economy that was poor, largely agrarian, and structurally weak — and the newly formed government had to make deliberate choices about how to rebuild it.

This chapter looks at the Indian economy in two parts. First, we examine the colonial economy: how British rule turned India into a supplier of raw materials and a market for British goods, why agriculture stagnated even though most people depended on it, why India's famous handicraft industries declined, and what economists have called the 'Drain of Wealth' out of India. Second, we look at the economy after Independence: the condition India was in when it began its journey as a free nation, the objectives its leaders set for economic planning, the Five Year Plans that guided development for decades, and the major shift toward liberalisation, privatisation and globalisation (LPG) that began in 1991.

This broad arc — a colonial economy shaped by an outside power, followed by planned development and later market-oriented reform — is the same essential economic history that every Indian board's Class 11/12 economics or 'Indian Economic Development' course covers, because it is India's shared national economic history, not something specific to any one syllabus. What differs from board to board is only how the material is organised and sequenced; the underlying facts are common ground.