Indian Economic Development : 15 August 1947, A new dawn of freedom for India. Finally, India became the master of its fate after two hundred years of British colonialism. The job of nation-building was in our leaders’ hands.
Leaders of the newly independent India had to decide what type of economic system would be suitable for the country to promote the well-being of all. There are different types of economic systems like capitalist society, socialist society, and mixed economy. Among them, Jawaharlal Nehru preferred Socialism.
However, Nehru was not in favor of the kind of socialism which was prevalent in the Soviet Union where all the means of production were owned solely by the government. There was no private property.
Though the government of a democratic country like India couldn’t change the ownership pattern of land and other properties of the citizens.
The leadership of the newly independent India found an alternative to an extreme version of socialism and capitalism. India being tilted toward the socialist outlook sought to be a socialistic society with a strong public sector but also a private sector.
In this view, the Indian government set up the Planning Commission with Prime Minister as its Chairperson. Since then the era of the Five Year Plans had begun.
Indian Economic Development : Goals of Five-Year Plans
The goals of the five-year plan were :
- Growth: It refers to increasing the capacity of the country to produce the output of goods and services within the country.
- Modernization: Modernization includes the use of new technology as well as changes in social outlook such as equal rights for women.
- Self-reliance: The first five-year plan emphasized self-reliance by avoiding imports and producing goods by itself
- Equity: It is important to ensure that the benefits of economic wealth reach the backward and needy sections of society as well. So with growth, modernization, and self-reliance, equity is also essential.
Let’s see the first seven first five-year plans, which cover the period from 1950-1990.
Indian Economic Development : During British rule, there was no growth in the agricultural sector. Nor any equity in the agricultural sector. Independent India had to tackle these issues. So, the government made Land reforms. The low productivity in the agricultural sector forced India to import food from the USA.
Land Reforms: Equity in agriculture called for land reforms. During the pre-independence era land tenure system was characterized by intermediaries called zamindars who collected rent from actual tillers without contributing towards the improvements in the productivity of the land. Land reforms primarily refer to changes in land ownership. Steps were taken to abolish the intermediaries and to make tillers the land owner.
Land Ceiling: It meant fixing the maximum size of the land which could be owned by an individual. The purpose of the land ceiling was to lessen the ownership of land to a few hands.
However, the land ceiling legislation also faced hurdles from big landlords as they challenged the legislation in the courts which delayed its implementation. Though, land reforms were successfully implemented in Kerela and West Bengal.
The Green Revolution: Spread of green revolution technology made India capable of achieving self-sufficiency in food grains. The large increase in the production of food grains was from the use of High Yielding Variety ( HYV) seeds, especially for rice and wheat. The use of these seeds required the use of pesticides and fertilizers in the correct quantities and a regular supply of water too.
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The nation benefitted immensely from the green revolution. The government also provided loans to small farmers and gave subsidies on fertilizers so that small farmers could have access to resources.
By the late 1960s, the agricultural productivity of India had also increased. This was a great achievement. On the other hand, if we look at the negative side, 65% of the country’s population continued to be employed in agriculture till 1990.
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Indian Economic Development : At the time of independence, the industrialists of India had no capital for investment. The market was also not big enough to encourage industrialists to take on any major projects even if they had the capital to do so. And, due to these reasons, the state had to play an important role in promoting the industrial sector.
The decision of developing the Indian economy on socialist lines led to having complete control of those industries that were vital for the Indian economy.
Industrial Policy Resolution 1956 (IPR 1956)
Indian Economic Development : IPR 1956 was the basis for India’s second Five-year plan. This plan was more on the Socialist pattern. IPR 1956 resolution classified industries into three categories.
- First, the category comprising industries that were exclusively owned by the state
- Second, the category comprising industries in which the private sector was supplementary to the state sector, in which the state took the sole responsibility to start new units
- Third, the category consisting of the remaining private-sector industries
No new industries were allowed to be set up unless the license was obtained by the government. This policy was in existence to promote the industries in the backward region. The real purpose was to promote regional equality.
Effects of Policies on Industrial Development
Indian Economic Development : India had an impressive accomplishment during the first seven plans. The proportion of GDP contribution by the industrial sector increased from 11.8 percent in 1950-51 to 24.6 percent in 1990-91.
Indian industries were no longer restricted to cotton textiles and jute. The industrial sector had become diversified by 1990. Protection from foreign competition enabled the flourishing of indigenous industries. Though several economists pointed out some drawbacks too.
- Economists pointed out that the need to obtain a license for starting the industry was misused by big industrialists
- The protection from foreign competition industries was also criticized. Due to restrictions on imports, Indian consumers had to buy whatever the Indian producers produced regardless of the quality.
- Excessive state regulation prevented the growth of Indian entrepreneurs.
- Protection from foreign competition led to the low quality of goods that were produced.
The need for reforms in Indian Economy was required in the context of the global economic scenario and this gave the policymakers incentives to initiate the new economic policies in 1991.
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