Economic policies and their impact MCQ Quiz - Objective Question with Answer for Economic policies and their impact - Download Free PDF

The correct answer is a source of its raw material Key Points

• During the British era, India's economy was known as a market for agricultural products and a source of raw materials for British industries.
• British rule in India:
• Commercialization of agriculture
  • The British introduced cash crops like tea, coffee, indigo, opium, cotton, jute, sugarcane, and oilseeds.
  • This reduced India's self-sufficiency in food. 
• Negative impact on Indian industries
  • The British imported large quantities of products made by mechanical looms in England, which threatened Indian handicraft industries. 
• Slow industrial development
  • The British did not establish a capital goods industry to support India's industrial development.
  • They wanted Indians to depend on Britain for capital and heavy goods. 
• Stagnant per-capita income
  • India's per-capita income remained mostly stagnant during the British Raj.
  • Most of its GDP growth came from an expanding population. 

Additional Information

• The British Raj had a devastating impact on India's economy, leading to a decline in the country's share of the world economy: 
• Trade
  • India's exports changed from processed goods to raw materials, and imports changed from bullion to manufactured goods.
  • The British used tariffs to limit India's exports of finished goods, while allowing raw materials to be exported freely. 
• Agriculture
  • British economic policies led to a decline in agricultural yields and worsened the conditions of farmers. 
• Poverty
  • The British used land revenue for war, leaving little for development.
  • This led to widespread poverty and recurring famines. 
• Infrastructure
  • The British built railways to connect inland regions with exporting ports, which made trading easier and more profitable for the British.
  • However, the railways were built to facilitate exploitation of the local Indians. 
• Handicrafts
  • The British used discriminatory tariffs to undermine the Indian handicraft sector.
  • The finished goods produced in the United Kingdom were machine-made and of higher quality and lower cost than the Indian handicraft ones. 
• GDP
  • India's GDP (PPP) per capita began to decline prior to the onset of British rule.
  • From 1600 to 1871 the ratio of GDP per capita in India to that in Britain fell from more than 60% to less than 15%. 

The correct answer is VKRV Rao.

Key Points

• VKRV Rao, whose full name is Vijayendra Kasturi Ranga Varadaraja Rao, was a renowned Indian economist, educator, and institution builder.
• During the colonial period, he was one of the first Indian economists to provide detailed estimates of India’s national income and per capita income.
• His work on national income estimation was crucial in understanding the economic conditions of India under British rule.
• VKRV Rao's methodical approach and use of statistical data made his estimates reliable and significant for policymaking in post-independence India.
• He was also the founder of institutions like the Institute of Economic Growth (IEG) and played a key role in shaping India's economic planning process.
• His contributions laid the foundation for subsequent economic research and analysis in India.
• VKRV Rao’s work provided a basis for understanding the economic exploitation during colonial rule and helped formulate policies for economic recovery and growth after independence.

 Additional Information

• Adam Smith
  • Adam Smith is often referred to as the "Father of Economics" due to his seminal work, "The Wealth of Nations", published in 1776.
  • He was a Scottish economist and philosopher who introduced the concept of the invisible hand and focused on the benefits of a free-market economy.
  • While his contributions were foundational to economic thought, he did not specifically provide estimates of India’s national income.
• John Maynard Keynes
  • John Maynard Keynes was a British economist known for his work during the Great Depression and his development of Keynesian economics.
  • He advocated for government intervention in the economy to address unemployment and stimulate growth.
  • Although influential globally, Keynes did not focus on India’s economic data or provide estimates of its income during the colonial period.
• Karl Marx
  • Karl Marx was a German philosopher, economist, and political theorist best known for his work on communism and his critique of capitalism.
  • He wrote influential works such as "The Communist Manifesto" and "Das Kapital", focusing on class struggles and economic systems.
  • Marx did not provide any estimates of India’s national income, as his focus was more on theoretical frameworks rather than empirical data.

The correct answer is Industrial sector.

Key Points

• During British rule in India, the industrial sector was severely neglected, as the colonial administration focused on extracting raw materials from India for industries in Britain.
• The British policies were designed to deindustrialize India, leading to the decline of traditional industries like textiles and handicrafts.
• No significant investment was made in modern industrial infrastructure or technology within India during this period.
• India was reduced to an agrarian economy, with its industrial sector serving primarily as a supplier of raw materials such as cotton and jute to British factories.
• The lack of industrial development during the colonial era contributed to widespread poverty and unemployment in post-independence India.

Additional Information

• Deindustrialization:
  • It refers to the decline of traditional industries such as textiles and handicrafts, largely due to British policies favoring imported goods from England.
  • India's artisans and craftsmen suffered immensely, as their products were replaced by cheap machine-made goods from Britain.
• Drain of Wealth Theory:
  • Proposed by Dadabhai Naoroji, this theory highlights how the British systematically drained India’s wealth by exporting raw materials and importing finished goods.
  • The industrial sector stagnated as profits were siphoned off to Britain.
• Railway Development:
  • The British developed railways in India, but primarily to facilitate the transport of raw materials to ports for export.
  • This infrastructure development did not contribute significantly to industrial growth within India.
• Post-Independence Industrialization:
  • After independence, India implemented policies such as the Industrial Policy Resolution of 1948 to revive and modernize its industrial sector.
  • Public sector undertakings (PSUs) and five-year plans were introduced to accelerate industrialization.

The correct answer is Raw materials like raw cotton, opium and indigo.

Key Points

• During British colonial rule, India primarily exported raw materials such as cotton, opium, and indigo to Britain and other countries.
• This export pattern was dictated by the British policy of exploiting India's natural resources to feed the industrial revolution in Britain.
• Raw cotton was a critical export commodity, used by British textile industries to produce finished goods.
• Opium was cultivated in India and exported to China, significantly contributing to the British economy.
• Indigo production surged due to British demand for dyes, with Indian farmers forced into its cultivation under exploitative conditions.

Additional Information

• Industrial Revolution in Britain: British industries required raw materials like cotton and indigo from colonies, including India, to sustain their production of manufactured goods.
• Opium Trade: Opium cultivated in India was exported to China, leading to the infamous Opium Wars and contributing significantly to British profits.
• Indigo Cultivation: Indigo dye was highly valued in Europe, forcing Indian farmers into its cultivation under exploitative plantation systems such as the "Nij" and "Ryoti" systems.
• Economic Drain Theory: Indian nationalist leaders like Dadabhai Naoroji highlighted how British policies drained India's wealth through the export of raw materials and import of British manufactured goods.
• Colonial Trade Policies: The British imposed restrictions on Indian industries, ensuring that India served as a supplier of raw materials and a market for British finished goods.

The correct answer is Spices.

Key Points

• India was renowned for exporting spices during the colonial period, with black pepper, cardamom, cloves, and cinnamon being highly sought after globally.
• Spices from India were in great demand in Europe, especially during the 17th and 18th centuries, due to their use in cooking, medicine, and preservation.
• Indian spices were a crucial part of the global trade networks, with ports like Cochin and Calicut being major spice trading hubs.
• Colonial powers such as the Portuguese, Dutch, British, and French established control over spice-producing regions in India to dominate the lucrative trade.
• The spice trade significantly influenced India’s economy and was a major reason for the colonial powers’ interest in the Indian subcontinent.

Additional Information

• Spices and Their Importance
  • Spices like turmeric, ginger, and pepper were prized for their medicinal properties in Ayurveda and traditional medicine systems globally.
  • They were used as preservatives before the advent of refrigeration, making them indispensable in trade.
• Impact of Spice Trade
  • The spice trade led to the establishment of European settlements and colonial rule in India, significantly impacting the country's political and social structure.
  • It also boosted the maritime exploration efforts of European powers such as Portugal and Spain.
• Key Trading Ports in India
  • Prominent ports like Calicut (Kozhikode), Cochin (Kochi), and Surat were integral to spice exports.
  • These ports were connected to the Red Sea and Mediterranean trade routes, facilitating global distribution.
• Colonial Monopoly
  • The East India Company and Dutch East India Company established monopolies over the spice trade by controlling production and trade routes.
  • Spice plantations were set up in regions like Kerala, Karnataka, and Tamil Nadu under colonial rule.

The correct answer is Town Planning.

​Key Points​

• Town Planning Under East India Company :
  • After Wellesley’s departure, the work of town planning was carried on by the Lottery Committee (1817) with the help of the government.
  • The Lottery Committee was so named because funds for town improvement were raised through public lotteries.
  • In the early decades of the nineteenth century raising funds for the city was still thought to be the responsibility of public-minded citizens and not exclusively that of the government.
  • The Lottery Committee commissioned a new map of the city so as to get a comprehensive picture of Calcutta.
  • Among the Committee’s major activities was road building in the Indian part of the city and clearing the riverbank of “encroachments”.
  • In its drive to make the Indian areas of Calcutta cleaner, the committee removed many huts and displaced the labouring poor, who were now pushed to the outskirts of Calcutta.

The correct answer is Bengal.

• The Charter Act of 1833 made the Governor-General of Bengal as the Governor-General of India and vested in him all civil and military powers.

Key Points

• The Charter Act of 1833:
  • The Governor-General and his Council were given vast powers.
  • The Council got full powers regarding revenue, and a single budget for the country was prepared by the Governor-General.
  • For the first time, the Governor-General’s Government was known as the ‘Government of India’ and his Council as the ‘Indian Council’.
  • The Governor-General of Bengal was to be the Governor-General of India.
  • All powers, administrative and financial, were handed over to Governor-General in Council.
  • A Law Commission under Lord Macaulay was constituted for the codification of laws.

The correct answer is Madras and Bombay.Key Points

• The Ryotwari Settlement was introduced in Madras and Bombay provinces during the British rule in India.
• Under this system, cultivators or farmers had to pay annual taxes directly to the government, unlike the Zamindari system where they paid taxes to intermediaries or landlords.
• The Ryotwari system was considered more beneficial for small and marginal farmers as they had direct access to the government and could negotiate the amount of taxes based on their produce and income.
• The system also helped in increasing agricultural productivity and revenue for the government.
• However, the system was criticized for being exploitative towards farmers in some cases, especially during famines and crop failures.

Additional Information

• The Central province was mainly governed under the Zamindari system, where intermediaries collected taxes from farmers and paid a fixed amount to the government.
• Assam and Bengal provinces had a mix of Zamindari and Mahalwari systems, where taxes were collected either by intermediaries or directly from farmers through village-level committees.
• Punjab province had a predominantly Mahalwari system, where large landlords or Zamindars collected taxes from farmers and paid a fixed amount to the government.

The correct answer is Mahalwari system.

Key Points

• In India, the Mahalwari system is utilised to safeguard local autonomy.
• Holt Mackenzie was the first to introduce it in 1822. Mahal, which means house, district, neighbourhood, or sector in Hindi, is the source of the name "Mahalwari."
• Landlords or Nambardars were designated to represent villages or groups of villages in Mahalwari.
• The landlords were jointly responsible for the payment of taxes to the village communities. In sections of Uttar Pradesh, the North-Western province, Central India, and Punjab, this system was dominant.
• Holt Mackenzie was a British colonial administrator in India.
• In July 1807, he was hired as an East India Company writer and advanced quickly through the ranks until he retired to England in 1831.
• He was influential in the establishment of the Mahalwari system of land revenue in India.

Important Points

• The Ryotwari system, instituted by Thomas Munro in British India, allowed the government to deal directly with the cultivator ('ryot') for revenue collection and granted peasants the freedom to relinquish or purchase more land for cultivation.
• Under his Permanent Settlement Act, Lord Cornwallis, who was governor-general of India from 1786 to 1793, instituted the Zamindari System.
• The East India Company, led by Governor-General Lord Cornwallis, implemented the Permanent Settlement of Bengal in 1793.

The correct answer is Option 4. 

Key Points

• The first English factory in Bengal was set up on the banks of the river "Hugli" in 1651.
• The factory was established by the East India Company and was located in the village of Hooghly, which was then a part of the Bengal Subah of the Mughal Empire.
• The factory was initially used as a trading post for the Company's goods, particularly textiles and spices.
• Over time, the English established more factories in the region, including in Calcutta (now Kolkata), which became the Company's headquarters in Bengal.
• The establishment of these factories was a crucial step in the East India Company's expansion in India and its eventual domination of the Indian subcontinent.

Additional Information

•  The East India Company was a British joint-stock company that was formed in 1600 for the purpose of trading with India and Southeast Asia.
• The Company had a monopoly on English trade with these regions and was granted extensive privileges and powers by the British Crown, including the right to establish its own army and navy, negotiate treaties with local rulers, and administer justice in its own territories.
• Over time, the Company became increasingly involved in Indian politics and began to exert its influence over local rulers and territories.
• The Company's domination of Indian trade and its political power eventually led to the colonization of India by the British Empire.
• The Company's rule in India came to an end in 1858, when the British Crown assumed direct control over India following the Indian Rebellion of 1857.

The correct answer is Option 3.

Key Points

• Ryotwari system of land revenue:
  • Implemented by: Thomas Munro, Governor of Madras.
  • Year: 1820.
  • Areas under the system: Madras, Bombay, Assam and Coorg provinces.
  • Tax to be paid by: Farmers directly to the government.
  • Peasants or cultivators were regarded as the owners of the land. They had ownership rights of the land.
  • Tax rates:-  50% in dryland and 60% in the wetland.
  • Taxes had to be paid in form of cash which caused the rise of moneylenders and increased exploitation of peasants and cultivators.

The correct answer is 'Zamindari System'.

Key Points

• Lord Cornwallis introduced the Zamindari System under his Permanent Settlement Act.
• Zamindari System is a system of land tenure in which land rights of intermediaries were confirmed through permanent settlement in 1793 by Lord Cornwallis.
• The three major components of the Zamindari System were – British, Zamindar (Landlord), and peasants. 
• The system recognized the zamindars as landowners who then let out their lands to tenant farmers in return of a share of the produce.
• The zamindar, in turn, had to pay a fixed sum to the British Government.
• This led to a lot of exploitation of the peasants.

Hence, the correct answer is Zamindari System.

Important Points

Let's have a look at other options:

The correct answer is English; French.

• The First Carnatic War was fought between the English and the French.

Key Points

• Though the British and the French came to India for trading purposes, they were ultimately drawn into the politics of India.
• Both had visions for establishing political power over the region.
• The Anglo-French rivalry in India reflected the traditional rivalry of England and France throughout their histories.
• Specifically, in India, the rivalry, in the form of three Carnatic wars decided once for all the English and not French was the more suitable ones to establish their rule all over India. 
• First Carnatic War (1740-48)
  • The First Carnatic War was the Indian theatre of the War of the Austrian Succession and the first of a series of Carnatic Wars that established early British dominance on the east coast of the Indian subcontinent.
  • Carnatic was the name given by the Europeans to the Coromandel coast and its hinterland.
  • The First Carnatic War was an extension of the Anglo-French War in Europe which was caused by the Austrian War of Succession.
  • The First Carnatic War is remembered for the Battle of St. Thome (in Madras) fought between the French forces and the forces of Anwar-ud-din, the Nawab of Carnatic, to whom the English appealed for help.
• The First Carnatic War ended in 1748 when the Treaty of Aix-La Chapelle was signed bringing the Austrian War of Succession to a conclusion.

Additional Information

• Conclusion
  • The victory at Wandiwash left the English East India Company with no European rival in India.
  • Thus they were ready to take over the rule of the entire Country.
  • Significantly, in the Battle of Wandiwash, natives served in both armies as sepoys.
  • It makes one think that irrespective of which side won, there was an inevitability about the fall of India to European invaders.

The correct answer is Independent economy.

Key Points

• Independent economy was a major feature of Indian economy before British rule.
• Indian economy was independent and self-sufficient before British rule, consisting of various types of agriculture, handicrafts, and trade.
• India was a major exporter of various textiles, spices, and other products, making it a strong and prosperous economy.
• Local cottage industries and handicraft industries were the backbone of the Indian economy, providing employment in rural and urban areas.
• With the advent of British rule, the structure of the Indian economy underwent significant changes, making it dependent and vulnerable.

Additional Information

• During British rule, the Indian economy was exploited and restructured to suit British economic interests.
• Many local industries and handicrafts were destroyed or weakened, leading to increased poverty and unemployment.
• Indian economy became overly dependent on agriculture, and farmers were forced to cultivate cash crops, leading to food crisis.
• During this period, the development of manufacturing and industry in the Indian economy was hampered, and the overall economic condition of the country weakened.

The correct answer is option 3.

Key Points

• Formation of the British trading centers
  • Surat (1613 )
  • Madras (1639)
  • Bombay (1668)
  • Calcutta (1686)

Additional Information

• Surat British Trading Center - Captain Thomas Best  and his crew's exploits in the naval Battle of Swally (a corruption of suvali) on October 28, 1612, impressed the Mughal governor of the province so much that's he got them a treaty ratified by the Jahangir which gave them trading rights. 
• By January 1613, the first East India Company Factory had come up at Surat