Overview
This lecture covers the Indian economy from 1950 to 1990, focusing on five year plans, development strategies in agriculture and industry, and evaluating the merits and limitations of a regulated economy.
Economic Systems and Planning in India
- After independence, India chose a mixed economy, combining aspects of socialism and capitalism.
- Mixed economy allowed both public (government) and private sectors to operate within a planned framework.
- The Planning Commission was set up in 1950 to formulate and implement five year plans.
- The Industrial Policy Resolution of 1948 and the Constitution reflected socialist-inspired development.
Goals of Five Year Plans
- The main goals: growth, modernisation, self-reliance, and equity.
- Growth means increasing the country’s capacity to produce more goods and services (measured by GDP).
- Modernisation involves adopting new technology and progressive social values, including gender equality.
- Self-reliance aims to reduce dependence on imports by promoting domestic production.
- Equity seeks to ensure fair distribution of wealth and basic needs for all.
Agriculture: Reforms and Green Revolution
- Land reforms abolished intermediaries (zamindars), transferring land to actual tillers.
- Land ceiling laws aimed to limit maximum land ownership, promoting equity but faced implementation issues.
- The Green Revolution (mid-1960s onwards) increased food grain production using HYV seeds, fertilisers, pesticides, and irrigation.
- Marketed surplus (portion of output sold) increased, improving food grain availability and lowering prices.
- Green Revolution initially benefited rich farmers but later government support enabled small farmers to benefit too.
- Debate exists on agricultural subsidies, balancing the needs of poor farmers against fiscal burden and inefficiency.
Industry, Trade, and Public-Private Sector Roles
- Industrial Policy Resolution 1956 assigned key industries to the public sector, with others regulated for private sector participation.
- Licensing (permit/license raj) controlled private industry entry, expansion, and location to promote regional equality and prevent monopolies.
- Small-scale industries were promoted through reserved products and financial concessions to boost employment.
- Import substitution protected domestic industries through tariffs and quotas, developing local manufacturing.
- Industrial sector’s share in GDP rose from 13% (1950-51) to 24.6% (1990-91); however, inefficiency and losses grew in public sector enterprises.
- Excessive regulation discouraged entrepreneurship, and lack of competition led to poor quality products.
Merits and Limitations of the Regulated Economy
- Achievements include diversification of industry, self-sufficiency in food, and abolition of landlordism.
- Drawbacks: over-regulation hampered efficiency, public sector losses, and insufficient export growth.
- By 1991, the need for economic reforms was recognized to enhance efficiency and global competitiveness.
Key Terms & Definitions
- Mixed Economy — An economic system combining government and private sector roles.
- Five Year Plan — A government plan outlining economic goals and resource allocation over five years.
- Gross Domestic Product (GDP) — Total market value of all final goods and services produced in a country in a year.
- Land Reforms — Changes in land ownership and regulation to promote equity and productivity.
- Green Revolution — Introduction of HYV seeds and modern inputs to boost agricultural output.
- Marketed Surplus — Portion of agricultural produce sold in the market.
- Import Substitution — Trade policy encouraging domestic production to replace imports.
- Permit/License Raj — System requiring government licenses to start or expand industries.
Action Items / Next Steps
- Prepare a chart on economic systems and countries following them (capitalist, socialist, mixed).
- Research major items India imported and exported in 1990-91 vs 2018-19.
- Create pie charts of sectoral GDP and occupational structure for 1950-51 and 1990-91.
- Discuss and debate the pros/cons of agricultural subsidies and public sector undertakings.
- Answer review questions from the exercise section for practice.