This pattern of agriculture continued throughout the medieval times. However, towards the end of the 18th century the village communities began to break up, under pressure from new forces which imparted dynamism to the Indian rural economy. This happened mainly because of two factors: (1) The changes in the property relations brought by the introduction of new forms of land tenure (2) the development of an active export trade in agricultural produce of India.

The contact with the West through the establishment of the British rule was responsible for both these developments. Despite the fact that the Indian villages were largely self-sufficient units and the means of communication were primitive. India enjoyed extensive trade both within the country and with other countries of Asia and Europe. A balance of the imports and exports was maintained.

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The items imported into India were pearls, wool, dates, dried fruits and rose water from the Persian gulf; coffee, gold, drugs and honey from Arabia; tea, sugar and silk from China; gold, musk and woollen cloth; metals like copper, iron and lead, and paper from Europe. The main items exported from India were cotton textiles. Besides cotton textiles which were famous the world over. India also exported raw silk, indigo, opium, rice, wheat, sugar, pepper and other spices, precious stones and drug.

The major features of Indian trade in pre-colonial times were: (i) a favourable balance of trade and (ii) a foreign trade most suitable to the level of manufacturing in India. A favourable balance of trade meant an excess of exports over imports i.e. India exported more than it needed to import.

Since the economy was on the whole self-sufficient in handicrafts and agricultural products. India did not need foreign imports on a large scale and continued to enjoy a healthy trade. Secondly, India’s foreign trade suited its requirements very well. In other words, the commodity pattern, so important to any country’s foreign trade, was in India’s favour. India exported the items it specialised in and imported the ones it needed.

One major change that occurred in India’s foreign trade from pre-colonial to colonial times was in its commodity pattern. Although India continued to have an export surplus, the pattern of foreign trade turned upside down. For instance, from the exporter of cotton textiles India was converted into an importer of cotton textiles, thereby ruining India’s rich traditional handicrafts.