Indian Eco 1950-1990

Indian Economy 1950-1990
Types of Economic Systems

• In a capitalist society the goods produced are distributed among people not on
the basis of what people need but on the basis of Purchasing Power—the ability
to buy goods and services.
• In Socialist In a socialist society the government decides what goods are to be

produced in accordance with the needs of society. It is assumed that the
government knows what is good for the people of the country and so the desires
of individual consumers are not given much importance.
• In a mixed economy, the market will provide whatever goods and services it can
produce well, and the government will provide essential goods and services which
the market fails to do.
PLANS
• It should have some general goals as well as specific objectives which are to be
achieved within a specified period of time; in India plans are of five years duration
and are called five year plans
• Long-term plan is called ‘perspective plan’
• In 1950, the Planning Commission was set up with the Prime Minister as its
Chairperson.
• Niti Aayog is a policy of Think Tank.
• Aim – to achieve sustainable development goals

with Co-operative federalism by fostering the
involvement of State government.
• Initatives includes 15 years road map and 7 years

vision.
• Established 1 Jan 2015 under Ministry of

Planning.
• Head is PM
Mahalanobis: the Architect of Indian Planning
Goals of planning
1. Growth: It refers to increase in the country’s capacity to produce the output of
goods and services within the country.
• It implies either a larger stock of productive capital, or a larger size of supporting
services like transport and banking, or an increase in the efficiency of productive
capital and services.
• A good indicator of economic growth, in the language of economics, is steady
increase in the Gross Domestic Product (GDP).
Two Ways of Increasing the GDP are:
• Discovery of more and more resources in the country that increases resource-base
of the country.
• Innovative technology, that enhances productivity or output per unit of input.
Goals of planning
2. Modernisation: To increase the production of goods and services

the producers have to adopt new technology.
• Adoption of new technology is called modernisation.
• Also refer to changes in social outlook such as the recognition that women
should have the same rights as men.
• A modern society makes use of the talents of women in the work place — in
banks, factories, schools etc. — and such a society in most occassions is also
prosperous.
Goals of planning
3. Self-reliance
 A nation can promote economic growth and modernisation by using its own
resources or by using resources imported from other nations.
 The first seven five year plans gave importance to self-reliance
 This policy was considered a necessity in order to reduce our dependence on
foreign countries,
 Further, it was feared that dependence on imported food supplies, foreign
technology and foreign capital may make India’s sovereignty vulnerable to foreign
interference in our policies
Goals of planning
4. Equity:
• A country can have high growth, the most modern technology developed in the
country itself, and also have most of its people living in poverty
• It is important to ensure that the benefits of economic prosperity reach the poor
sections as well instead of being enjoyed only by the rich
• Every Indian should be able to meet his or her basic need.
1. AGRICULTURE –
• Land Reforms-
• Land were in hand of zamindars, jagirdars who merely collected rent from the
actual tillers of the soil without contributing towards improvements on the farm.
• Low productivity of the agricultural sector forced India to import food from the
United States of America (U.S.A.)
• Equity in agriculture called for land reforms which primarily refer to change in
the ownership of land
• Steps were taken to abolish intermediaries and to make the tillers the owners of
land.
Land ceiling
• Means fixing the maximum size of land which could be owned by an
individual
• The purpose of land ceiling was to reduce the concentration of land
ownership in a few hands.
• 200 lakh tenants came into direct contact with the government — they were
thus freed from being exploited by the zamindars.
• Former zamindars loopholes in the legislation

• The big landlords challenged the legislation in the courts
• Land reforms were successful in Kerala and West Bengal because these states
had governments committed to the policy of land to the tiller.
• Unfortunately other states did not have the same level of commitment and
vast inequality in landholding continues to this day.
• The Green Revolution
 At independence, about 75 per cent of the country’s population was dependent
on agriculture.
 Productivity in the agricultural sector was very low
 Agriculture vitally depends on the monsoon
 Green revolution was introduce
 High Yielding Variety (HYV) seeds especially for wheat and rice
 Green Revolution was introduce in mid 1960s upto mid 1970s HYV seeds was
restricted
to the more affluent states such as Punjab, Andhra Pradesh and Tamil Nadu.
 The spread of green revolution technology enabled India to achieve self-
sufficiency in food grains;
 The portion of agricultural produce which is sold in the market by the farmers
is called marketed surplus.
The Debate Over Subsidies
Generally agreed that it was necessary to use subsidies to provide an incentive for
adoption of the new HYV technology by farmers in general and small farmers in
particular.
Any new technology will be looked upon as being risky by farmers.
Subsidies were, therefore, needed to encourage farmers to test the new technology
Some economists believe that once the technology is found profitable and is widely
adopted, subsidies should be phased out since their purpose has been served.
Subsidies are meant to benefit the farmers but a substantial amount of fertiliser
subsidy also benefits the fertiliser industry; and among farmers, the subsidy largely
benefits the farmers in the more prosperous regions.
It is argued that there is no case for continuing with fertiliser subsidies; it does not
benefit the target group and it is a huge burden on the government’s finances
 Some believe that the government should continue with agricultural subsidies because farming
in India continues to be a risky business.
 Most farmers are very poor and they will not be able to afford the required inputs without
subsidies.
 Eliminating subsidies will increase the inequality between rich and poor farmers and violate the
goal of equity.
 Thus, by the late 1960s, Indian agricultural productivity had increased sufficiently to enable the
country to be self-sufficient in food grains.
 1950 and 1990, the proportion of GDP contributed by agriculture declined significantly
but not the population depending on it
2.4 Industry And Trade
Economists Have Found That Poor Nations Can Progress Only If They Have A
Good Industrial Sector.
 Industry Provides Employment Which Is More Stable Than The Employment In
Agriculture;
Investment In Industrial Ventures Required For The Development Of Our
Economy;
Nor Was The Market Big Enough To Encourage Industrialists To Undertake Major
Projects Even If They Had The Capital To Do So.
State Had To Play An Extensive Role In Promoting The Industrial Sector.
It divided the industrial sector into four broad groups:
1.Group 1 – Basic and strategic industries like arms and ammunition, atomic energy,
railways, etc. Further, these were in the exclusive monopoly of the State.
2.Group 2 – Key industries like coal, iron and steel, shipbuilding, manufacture of
telegraph, telephone, mineral oils, etc. The State took over the exclusive
responsibility of al future developments in these industries. Also, the existing
industries were allowed to function for 10 years. After the end of the tenure, the
State would review and take adequate decisions.
3.Group 3 – A total number of 18 industries including automobiles, tractors,
machine tools, etc. The private sector was allowed to open these industries subject to
government regulation and supervision.
4.Group 4 – All the remaining industries. However, the government can participate
or intervene if the need arises
Industrial Policy Resolution 1956 (IPR 1956):
• In accordance with the goal of the state controlling the commanding heights of
the economy, the Industrial Policy Resolution of 1956 was adopted.
• The first category comprised industries which would be exclusively owned by
the state.
• The second category consisted of industries in which the private sector could
supplement the efforts of the state sector, with the state taking the sole
responsibility for starting new units;
• The third category consisted of the remaining industries which were to be in the
private sector.
• The sector was kept under state control through a system of licenses.
• This policy was used for promoting industry in backward regions; it was
easier to obtain a license if the industrial unit was established in an
economically backward area. Tax benefits and electricity at a lower
tariff.
• The purpose of this policy was to promote regional equality.
• Even an existing industry had to obtain a license for expanding output
or for diversifying production
Small-scale Industry
• In 1955, The Village And Small-scale Industries Committee, Also Called The Karve
Committee, Noted The Possibility Of Using Small-scale Industries For Promoting
Rural Development.
• A ‘Small-scale Industry’ Is Defined With Reference To The Maximum Investment
Allowed On The Assets Of A Unit. This Limit Has Changed Over A Period Of
Time.
• Maximum Of Rupees Five Lakh; At Present The Maximum Investment Allowed Is
Rupees 5 Crore
• ‘Labour Intensive’
• Cannot Compete With The Big Industrial Firms;
• They Were Also Given Concessions Such As Lower Excise Duty And Bank Loans
At Lower Interest Rates.
TRADE POLICY: IMPORT SUBSTITUTION
• Trade was characterized by what is commonly called an inward looking trade
strategy.
• Import substitution Policy aimed at replacing or substituting imports with
domestic production.
• Government protected the domestic industries from foreign competition.
• Protection from imports took two forms: tariffs and quotas.
• Tariffs are a tax on imported goods; they make imported goods more
expensive and discourage their use.
• Quotas specify the quantity of goods which can be imported policy of
protection
PERMIT LICENSE RAJ
Achievements of goals;
Good Bad
• Increase in national income • Abject poverty
• Increase in per capita income • High rate of inflation
• Institutional and technical • Unemployment crisis
change in agriculture. • Deficient infrastructure
• Growth and diversification of • Skewed distribution.
industry
• Economic infrastructure
• Social infrastructure
• Employment.
Industrial sector
Good Bad
• Economic growth got a push. • Public sector monopoly.
• Diversification in industrial • Domestic industry fail to meet
sector. standard of international market.
• Growth of large scale industry. • Saving through import
• Growth of SSI substitution seems to be
insufficient.
Foreign Trade sector
Good Bad
• High rate of industrial growth • Growth of inefficient public
• Import substitution monopolies
• Diversification of industrial • Lack of competition implied
growth lack of modernization
• Telecommunication service. • Indiscriminate spread of public
• Opportunities of investment. sector
• Economically unviable state
enterprises.

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Indian Eco 1950-1990

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Indian Economy 1950-1990

Types of Economic Systems

• In Socialist In a socialist society the government decides what goods are to be

• Aim – to achieve sustainable development goals

• Initatives includes 15 years road map and 7 years

• Established 1 Jan 2015 under Ministry of

Two Ways of Increasing the GDP are:

2. Modernisation: To increase the production of goods and services

• Former zamindars loopholes in the legislation

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