Although Russia had rich deposits of iron and coal but Industrial Revolution reached Russia very late because it did not have a good currency system, lacked adequate capital and serfdom still continued there.
The industrial output of Russia rapidly increased between1860 and 1910.
After the abolition of Serfdom 1861, Government budget procedures were regularized and the State Bank was created in 1866 to centralize credit and finance.
In 1861, emancipation did release millions of peasants from their land, the strength of peasant communes prevented the widespread development of a kulak class.
The emancipation had significant social outcomes but it failed to contribute much to Russia’s economic development.
In the 1870s the government initiated several large infrastructure programs, particularly the construction of railways.
Liberal Government policies also encouraged more foreign investment. The main instigator of economic reform was Sergei Witte, who attracted foreign investment in Russian industries.
By 1880, Russia’s Railroad network had almost quintupled compared to 1860.
Progress led to the setting up of modern factories in Moscow, St. Petersburg and several urban working classes were growing space.
He also borrowed to fund public works and infrastructure programs including new railways, telegraph lines and electrical plants.
By the late 1890s, Witte’s reforms had had a visible impact on the Russian economy.Large amounts of foreign capital, mostly from France and Britain, had funded new plants and factories in St Petersburg, Moscow, Kiev and other cities.
Witte also undertook currency reform: in 1897, he moved the Russian economy to the gold standard, strengthening and stabilizing it and improving foreign exchange.
By 1917, Railways was given more importance and the rail network increased to 81,000 KM.
But all these reforms benefited only a small segment of population. Russia had all capabilities to become an economy but this was checked by clash of class interests and discontent among the people.
New Economic Policy of Lenin’s prepared the ground for future development. This policy was continued for 1928 and with the help of five-year plan efforts were made to accelerate economic development.
The first five year plan of 1928-1932 provided advanced loans to farmers, supplied them machines and chemical fertilizers on favorable terms and allowed them to rebate in taxes which mainly emphasized collective farming.
The Soviet State bought food grains from collective farms at cheaper rates and sold them at higher prices, the differences were utilized for expanding industrialization.
Drawbacks of Economic Development of this period was the quality of product was compromised in order to achieve the production target.
Emphasis on heavy industries created shortage of consumer goods and people had to face rationing and other problems.