Indian Economic Development (1952-1990)

Jul 9, 2024

Indian Economic Development (1952-1990)

Introduction

  • Focus: Economic development in India (1950-1990).
  • Covers agriculture, industry, and foreign trade.

Economic Systems

  • Central Economic Problem: What to produce, how to produce, for whom to produce.
  • Types of Economic Systems:
    • Capitalist: Major production by private sector.
    • Socialist: Major production by government.
    • Mixed: Both private sector and government play significant roles (ex: India).

Key Points of Mixed Economy

  • Government own critical industries (Telecommunication, Atomic Energy).
  • Regulated role of private sector in some industries.

Economic Planning

  • 1947 Independence: Focus on planning for development.
  • Planning Commission (1950): Created to oversee major economic decisions.

Features of Planning Commission

  • Chaired by Prime Minister.
  • Key tasks included assessment and optimal use of resources.
  • Five-Year Plans: Major tool for planned economic development.
  • Industrial Policy Resolution (1948): Emphasized public sector over private.

Features of Economic Planning (1950-1991)

  1. Heavy Reliance on Public Sector: For social welfare and regulated private sector role.
  2. Protection of Small-Scale Industries: Provided subsidies and protections to small industries.
  3. Focus on Savings and Investment: Essential for economic growth.
  4. Protection from Foreign Competition: Limited imports to protect domestic industries.
  5. Emphasis on Import Substitution: Production of goods domestically instead of importing.
  6. Restriction on Foreign Capital: To minimize foreign control over domestic market.

Achievements of Planning

  • Increased National Income: Moved towards GDP growth targets.
  • Enhanced Savings and Investments: Significant growth in domestic savings and investments.
  • Industrial Growth and Diversification: Broad expansion into new sectors.
  • Increased Employment: Reduction in unemployment rates.

Failures of Planning

  • Persistent Poverty: Large segments of population remained impoverished.
  • High Inflation: Failure to adequately control prices and inflation rates.
  • Unemployment: Continued to be a significant issue despite some improvements.
  • Inadequate Infrastructure: Insufficient development of critical infrastructure (roads, schools, hospitals).

Goals of Five-Year Plans

  • GEMS:
    • Growth: Focus on GDP growth.
    • Equity: Economic equality across society.
    • Modernization: Adoption of new technologies and advancements.
    • Self-Reliance: Reducing dependency on imports and foreign aid.

Sectoral Analysis

Agriculture

  • Importance: Largest employment sector (75% at independence).
  • Problems: Low productivity, heavy reliance on rainfall, subsistence farming, technological backwardness.
  • Reforms:
    • Technical Reforms: High-yield variety seeds, chemical fertilizers, and pesticides.
    • Land Reforms: Abolishment of intermediaries, rent regulation, land consolidation, and land ceilings.
    • General Reforms: Improved irrigation, credit facilities, regulated markets, and minimum support prices.
  • Green Revolution: Introduction of high-yield variety seeds in mid-1960s leading to increased production but also new challenges (pest attacks, inequality).

Industry

  • Development: Building and growing of industries vital for nation’s economic progress.
  • Public Sector Role: Major emphasis on public enterprises due to lack of private capital.
  • Industrial Policy Resolution (1956): Categorized industries into three schedules with varying degrees of government and private sector control.
  • Licensing: Requirement for private enterprises to obtain licenses for establishment and expansion.
  • Small Scale Industries: Defined by investment below ₹1 crore in fixed assets.

Foreign Trade

  • Trend: Decline in the share of agricultural exports due to rising domestic demand.
  • Trade Strategy: Emphasis on import substitution to achieve self-reliance and protect local industries.
    • Measures: High import duties, quantitative restrictions.
  • Protection Measures: Aimed at saving foreign exchange and shielding domestic markets from foreign competition. -Rise in manufactured goods exports; -Decrease in traditional export items (jute, food grains, minerals).

Appraisal

  • Overall Impact: Varied successes and challenges; significant strides in some areas, while persistent issues in others.
  • Economic Transformation: Despite challenges, the period marked a substantial transformation in India’s economic landscape.

Next Chapter: Moving to Chapter 3 in the next session.