INDIAN ECONOMY (1950-1990)

CHAPTER -II

INDIAN ECONOMY (1950-1990)

1.INTRODUCTION

•          Agriculture was the principal source of subsistence for the bulk of the population.

•          Secondary and tertiary sectors of the economy were grossly insignificant.

•          Majority of the countrymen were living under extreme poverty.

•          Life expectancy was extremely low.

•          Problems of large scale unemployment and absolute poverty could not find their own solution, left to the forces of supply and demand.

•          Direct participation of the government in the process of growth and development was needed. This meant adoption of economic planning.

2.MEANING OF ECONOMIC PLANNING AND FORMATION OF PLANNING COMMISSION IN INDIA

A) Meaning : 

Planning is a systematic process of achieving the predetermined goals  within the specific period of time. Economic planning means utilization of country’s resources into different development activities in accordance with national priorities.

B) The Planning commission : In India the economic planning process began by establishing a PLANNING COMMISSION in 1950. The chairman of the planning commission in PRIME MINISTER OF INDIA . It has a Deputy chairman(An  Economist) and members (State chief Ministers and others)

NOTE: IN 2015 THE NEW NDA GOVERNMENT ABOLISHED THE PLANNING COMMISSION AND INTRODUCED NITI AYOG IN PLACE OF IT.

3. LONG TERM OBJECTIVES OF FIVE YEAR PLANS:

There are following LONG TERM OBJECTIVES OF FIVE YEAR PLANS-

1. GROWTH-

Ø  Economic growth implies a consistent increase in GDP (Gross Domestic Product).

Ø  Or a consistent increase in the flow of goods and services in the economy over a long period of time.

Ø  Per capita GDP = Gross Domestic Product

                                                              Population size

Ø  Per capita GDP income may not increase if population size continues to increase.

Ø  Accordingly, the objective of the five year plans is to ensure that increase in GDP is reflected as increase in per capita GDP

2. EQUITY or 

EQUITABLE DISTRIBUTION -

Ø  Equitable distribution refers to a situation when differences in income are allowed but only within certain limits.

Ø  ‘Equity’ in terms of equitable distribution of income implies social justice.

Ø  Only when economic growth is combined with social justice that growth is converted into development.

3. MODERNISATION-

Ø  To increase the production of goods and services the producers have to adopt a new technology.

Ø  Adoption of new technology is called modernization

Ø  However, modernization does not refer only to the use of new technology but also to changes in social outlook such as the recognition that women should have the same rights as men. 

4.SELF RELIANCE-

•          Self  reliance  means achieving the ability to meet own needs independently

Ø  A nation can promote economic growth and modernization by using its own resources.

Ø  It was necessary for a developing country like India to achieve self sufficiency in food grain production.

Ø  Otherwise, depending on imports of food grains India would have to yield to political pressures of the advanced countries offering food grains.

Ø  This would mean plain subservient to the political interests of the advanced nations.

4.AGRICULTURE SECTOR

•          On the eve of independence, Indian agriculture was backward, stagnant and also non-vibrant.

•          Agriculture during 1950 – 1990

Ø  Growth of Agriculture

a)The level of output and the level of productivity recorded a substantial breakthrough in agricultural sector of the economy.

b)There was a substantial increase in            marketed surplus, implying a change                      in outlook towards farming.

c)The change was so marked and pronounced that it was rightly named as Green Revolution.

d)Instead of importer, India became exporter of food grains.

e)India started maintaining buffer stocks of food grains to be used during emergencies

Ø  Green Revolution

Green revolution was introduced during 1960-70(1965) with the following objectives :

  (i) Self sufficiency in the production of Rice and wheat ( For Rice – West Bengal,Tamilnadu and Mahrastra , For Wheat –Punjab ,Haryana, Uttarpradesh )

 (ii) exponential increase in agricultural production owing to a substantial jump in Crop-productivity, and

(iii) stabilization of high level of agricultural production.  

(iv) Modernization of Agriculture

Ø  New technology in Indian agriculture that brought about revolutionary rise in crop productivity was popularly known as HYV seeds technology.It does not imply the use of HYV seeds alone it was to be accepted as a package of innovative inputs.

It included HYV seeds, chemical fertilizers, insecticides and pesticides, besides judicious use of water. 

5.INDUSTRY AND TRADE-

1. Role of the State in Industrial Development

§  Lack of capital with the private entrepreneurs

Ø  The requirement of capital for diversified industrial growth far exceeded its availability in the private sector

Ø  The government was to undertake industrial investment through public sector undertakings

§  Lack of incentive among the private entrepreneurs

Ø  Private investors lacked incentives

Ø  Owing to limited size of the market, there was no inducement to invest.

Ø  Limited size of the market refers to low level of demand for the industrial goods in the market.

2. IPR (Industrial Policy Resolution) – 1956

§  Classification of industries

Ø  Industries were classified into three categories-

                                                                                i.     Enterprises that would be established and developed by public sector

                                                                              ii.    Those which could be established both as private and public sector enterprises. However, the private sector was to play only a secondary role.

                                                                            iii.    All industries established and developed by private sector

§  Industrial licensing

Ø  Licensing policy of the government was to promote regional equality.

Ø  Private entrepreneurs were expected to establish industry in backward regions of the country

Ø  License were liberally issued for the backward regions compared to the relatively developed regions of the country

3. Development of SSI (Small Scale Industry)

Ø  Growth of small scale industry is to foster the goals of employment and equity

Ø  SSI is generally considered to be labour-intensive, while large scale industry is capital-intensive

Ø  To produce a given output small scale industries is expected to use more of labour than capital.

Ø  SSI contributes to equality of growth and development across the different regions of the country.

6. TRADE POLICY

•          In the first seven plans, trade was characterized by what is commonly called an inward looking trade strategy, this strategy is called import substitution

•          The Policy of Import Substitution

•          India accorded a high priority to the policy of import substitution.

•          It was sought to be actualized and promoted using a double-edged sword, implying:

•          Heavy tariffs on imports

•          Import quotas.

  Import quotas implied a maximum limit on the import of a commodity by a domestic producer

•          Excessive regulations for obtaining a license came to be called as permit license raj.

CONCLUSSION-

•          Indian economy during the first seven plans was successful.

•          Abolition of zamindari system.

•          Industries became diversified compared to the situation at independence.

•          Excessive government regulation prevented growth of entrepreneurship .

•          Indian producers were protected against foreign competitions.

•          And this did not give them incentive to improve the quality of goods that they produced.