1. Low level of economic development under the colonial rule

• India had an independent economy before the advent of British rule.
• Agriculture was the main source of livelihood and the economy was characterized by various kinds of manufacturing activities.
• Handcraft industries in the fields of cotton and silk textiles, metal and precious stone works etc.
• These products enjoyed a worldwide market based on the reputation of the fine quality of material and high standards of the craftsmanship seen in all imports from India.
• The economic policies of the British in India were concerned more with the protection and promotion of the economic interests of their home country than with the development of the Indian economy.
• The economy transformed into a supplier of raw materials and consumer of finished industrial products from Britain.
• Dadabhai Naoroji, William Digby, Findlay Shirras, V.K.R.K Rao and R.C. Desai were estimated during the colonial period and were considered very significant.

2. Agricultural sector

• During British rule, 85 per cent of the country’s population lived mostly in villages and derived livelihood directly or indirectly from agriculture.
• It continued to experience stagnation and frequently unusual deterioration.
• Productivity became low though, in absolute terms, the sector experienced some growth due to the expansion of the aggregate area under cultivation.
• This was caused because of land settlement that was introduced by the colonial government.
• The revenue settlements and profit accruing out of the agriculture sector went to the Zamindari instead of the cultivators.
• The low levels of technology, lack of irrigation facilities and negligible use of fertilizers, all added up to aggravate the plight of the farmers and contributed to the dismal level of agricultural productivity.
• Higher yielding of cash crops in certain areas of the country made commercialization of agriculture.
• India’s agriculture was starved of investment in terracing, flood-control, drainage and desalinization of soil.
• Some sections of farmers changed crop patterns and large sections of tenants.
• Small farmers and sharecroppers neither had resources and technology nor had an incentive to invest in agriculture.

3. Industrial sector

• The policy of systematically deindustrializing India. 
• To reduce India’s exports of important raw materials for the upcoming modern industries in Britain. 
• To turn India into a sprawling market for the finished products of those industries so that their continued expansion could be ensured to the maximum advantage to Britain.
• In the unfolding economic scenario, the decline of the indigenous handicraft industries created massive unemployment and new demand.
• During the second half of the nineteenth-century modern industry of cotton and jute textile mills was set up.
• The cotton textile mills dominated in the Maharashtra and Gujarat and jute mills were in Bengal.
• The Tata Iron and Steel Company (TISCO) was incorporated in 1907.
• Sugar, Cement, paper etc. came up after the Second World War.
• There was hardly any capital goods industry to help promote further industrialization in India.
• The growth rate of the new industrial sector and its contribution to the Gross Domestic Product (GDP) remained very small.
• The public sector remained confined only to the railways, power generation, communications, ports and some other departmental undertakings.

4. Foreign trade

• India has been an important trading nation since ancient times.
• The restrictive policies of commodity production, trade and tariff pursued by the colonial government adversely affected the structure, composition and volume of India’s foreign trade.
• India becomes an exporter of raw silk, cotton, wool, sugar, indigo, jute etc.
• An importer of finished consumer’s goods like cotton, silk and woollen clothes and capital goods like light machinery produced in the factories of Britain.
• Britain maintained monopoly control over India’s exports and imports.
• Half of India’s foreign trade was restricted to Britain while the rest was allowed to china, Sri Lanka and Iran.
• The opening of the Suez Canal Further intensified British Control over India’s foreign trade.
• Several essential commodities food grains, clothes kerosene etc. were scarcely available in the domestic market due to the generation of large exports.
• The export surplus did not result in any flow of gold or silver into India.
• Expenses on war and the import of invisible items drain Indian wealth.

5. Trade through the Suez Canal

• It is an artificial waterway running from north to south across the Isthmus of Suez in north-eastern Egypt.
• It connects Port Said on the Mediterranean Sea with the Gulf of Suez, an arm of the Red sea.
• It provides a direct trade route for ships operating between European or American ports and ports located in South Asia, East Africa and Oceania by doing away with the need to sail around Africa.
• Strategically and economically, it is one of the most important waterways in the world.
• Its opening in 1869 reduced the cost of transportation and made access to the Indian market easier.

6. Demographic Conditions

• The population of British India was first collected through a census in 1881.
• For every ten years, census operations were carried out.
• Before 1921, India was in the first stage of demographic transition.
• The second stage of transition began after 1921.
• The literacy rate was less than 16 per cent and the female literacy rate was seven per cent.
• Public health facilities were absent because the large population was highly inadequate.
• Water and air-borne diseases were rampant and the death rate is high and extensive poverty prevailed in India.
• The infant mortality rate was 218 per thousand and life expectancy was 44 years.

7. Occupational structure

• The distribution of working persons in different sectors of an economy is said to be occupational structure.
• The agricultural sector's share of the workforce is 70-75 per cent, and the manufacturing and service sectors accounted for only 10 and 15-20 per cent respectively.
• Regional variations in the parts of the madras presidency, Bombay and Bengal witnessed a decline in the workforce of the agricultural sector and an increase in the manufacturing and service sectors.
• Orissa, Rajasthan and Punjab had an increased workforce in agriculture.

8. Infrastructure

• Railways, ports, water transport and telegraphs were developed during the colonial regime.
• The real motive behind this development was not to provide basic amenities to the people but to sub serve various colonial interests.
• The roads that were built primarily served the purposes of mobilizing the army within India and drawing out raw materials from the countryside to the nearest railway station or the port to send to England.
• The British introduced the railways in India in 1850 and it is considered one of their most important contributions.
• Railways affected the structure of the Indian economy in two ways.
• It enabled people to undertake long distances travel and break geographical and cultural barriers.
• It fostered the commercialization of Indian agriculture and adversely affected the self-sufficiency of the village economics in India.
• Along with the development of roads and railways, the colonial dispensation also took measures for developing the inland and sea lanes.
• The introduction of the expensive system of the electric telegraph in India, and maintaining law and order in the postal services is inadequate.

9. Conclusion

• By the time India won its independence, The agricultural sector was saddled with surplus labour and extremely low productivity.
• The industrial sector was crying for modernization, diversification, capacity building and increased public investment.
• Foreign trade was oriented to feed the industrial revolution in Britain.
• Infrastructure facilities, including the famed railway network, needed up-gradation, expansion and public orientation.
• Prevalence of rampant poverty and unemployment required welfare orientation of public economic policy. The social and economic challenges before the country were enormous.