Chapter: Indian Economy 1950–1990
Introduction
On 15th August 1947, India gained independence after nearly 200 years of British colonial rule. The challenge of nation-building and economic development fell into the hands of Indian leaders.
The first key decision was to choose an economic system suitable for India. Jawaharlal Nehru and other leaders decided to avoid the extremes of capitalism and socialism, instead opting for a mixed economy with both public and private sectors.
Goals of the Five-Year Plans
2.1 Planning and Goals
India’s development was guided by Five-Year Plans initiated in 1951, modeled on the Soviet planning system. The Planning Commission was set up in 1950 to oversee these plans.
The four primary goals of the Five-Year Plans were:
Growth: Increase in the country’s capacity to produce goods and services, measured by GDP growth.
Modernization: Adoption of new technologies and changing social outlooks, especially promoting equality for women.
Self-reliance: Reducing dependency on foreign imports, especially for food and key industries.
Equity: Ensuring the benefits of economic growth were distributed fairly, improving the living standards of the poor and reducing inequalities.
Agriculture
3.1 Land Reforms
At independence, the agricultural sector was highly inequitable, with zamindars and intermediaries exploiting tenant farmers. The government sought to abolish intermediaries and ensure land reforms.
Land ceiling laws were introduced to limit the amount of land an individual could own. However, these reforms were often unsuccessful, with many landowners exploiting loopholes to retain control over large landholdings.
3.2 The Green Revolution
The Green Revolution in the 1960s introduced High Yielding Variety (HYV) seeds, fertilizers, and irrigation to boost food production, especially in wheat-growing regions.
While the Green Revolution helped India achieve self-sufficiency in food grains, it also increased inequalities as wealthier farmers benefited more due to their ability to afford the required inputs.
3.3 Marketed Surplus
Marketed surplus refers to the portion of agricultural produce sold by farmers in the market. With the Green Revolution, the marketed surplus of wheat and rice increased, stabilizing food prices and reducing India’s dependency on foreign food aid.
Industry and Trade
4.1 Industrial Policy Resolution of 1956
The Industrial Policy Resolution of 1956 classified industries into three categories:
Industries exclusively owned by the state.
Industries where both private and public sectors could participate.
Industries reserved for the private sector, although heavily regulated.
The public sector was given a leading role in key industries like steel, mining, telecommunications, and defense.
4.2 Small-Scale Industries
Small-scale industries were promoted to generate employment and regional development. They received incentives like tax breaks, lower interest loans, and protection from competition with large industries.
4.3 Import Substitution
India’s trade policy focused on import substitution, which meant producing goods domestically to reduce dependency on foreign imports.
Tariffs and quotas were imposed to protect local industries from foreign competition, ensuring that Indian firms had room to grow without being overwhelmed by more advanced foreign firms.
Public Sector and Economic Development
5.1 Role of the Public Sector
The public sector played a major role in building infrastructure, heavy industries, and utilities such as electricity and water.
While the public sector was crucial for early development, over time, many public enterprises became inefficient, leading to criticisms of resource mismanagement and loss-making industries.
5.2 License Raj
The License Raj referred to the strict system of licenses required to start new industries. While it helped regulate production and protect regional economies, it also led to bureaucratic inefficiencies and corruption.
Conclusion
Between 1950 and 1990, India made significant strides in industrialization and agricultural growth. However, the economy faced challenges due to inefficiencies in the public sector, excessive regulation, and lack of competitiveness.
These challenges, along with global changes, paved the way for economic reforms in 1991, shifting towards a more liberalized economy.
