Indian Economy 1950-1990
INDEPENDENCE
ECONOMY :
An economy is an organisation of economic activities
which provide people with the means to work and earn a living.
Economy
Capitalist Socialist Mixed
Economy Economy Economy
* Capitalist economy : In which major economic decisions
(what to produce, how to produce and for whome to produce) are left to the free
play of the market forces.
* Socialist economy : In which major economic decisions
are taken by the Govt. keeping in view the collective interest of the society as
a whole.
* Mixed Economy : In which major economic decisions are
taken by the central Govt. authority as well as are left to the free play of the
market forces.
* Economic Planning : Means utilisation fo country’s
resources in different development activities in accordance with national priorities.
Goals of Planning in India
Long - term goals Short term goals
To be achieved over a To be achieved over a Period of
long term period of 5 years 20 years
LONG TERM GOALS / OBJECTIVES OF PLANNING
A. Modernisation - Adoption of new technology
B. Self reliance - Reducing dependence on imports.
C. Economic Growth - Increase in the aggregate output of Goods
& services.
D. Equity - reduction inequality of income or wealth
E. Full employment - Refers to a situation when all the people
in the working age group are actually engaged in some gainfull employment.
SHORT TERM GOELS / OBJECTIVES OR
OBJECTIVES OF FIVE YEAR PLANS
Short term objectives vary from plan to plan depending on
current needs of the country. For example first plan
(1951-56)
focused on higher agricultural production while in second
plan (1956-61) shifted the focus from agriculture to Industry. In India growth
and equity are the objectives of all the five year plans. The goal of current
five year plan (11th, 2007-2012) is faster, broad-based and inclusive growth.
Agriculture
Main Features of Indian Agriculture
1. Low productivity
2. Disguised unemployment.
3. Dependence on rainfall
4. Subsistance farming - objective of farmer is to secure
subsistence for his family not to earn profit.
5. Traditional inputs
6. Small holdings
7. Backward technology.
8. Landlord tenant conflict.
Problems of Indian Agriculture
Institutional Problems.
1. Small and scattered holdings.
2. Poor implementation of land reforms.
3. Lack of credit and marketing facilities.
Technical Problems.
1. Lack of irregation facilities.
2. Wrong cropping pattern.
3. Outdated techneque of production.
General Problems :
1. Pressure of population on land
2. Land degradation
3. Subsistance farming
4. Social environment.
5. Crop losses- by pest, insect, flood, draught etc.
Reforms in Indian Agriculture
A. Institutional Reforms also called Land reforms.
(i) Abolition of intermediaries.
(ii) Regulation of rent.
(iii) Consolidation of holdings.
(iv) Ceiling on land holdings.
B. General reforms.
(i) Expansion of irrigation facilities
(ii) Provision of credit
(iii) Regulated markets and co-operative marketing
societies.
(iv) Price support policy.
C. Technical Reforms or Green Revolution
(i) Use of HYV seeds
(ii) Use of dumical fortilizers.
(iii) Use of insecticides and pesticides for crop
protection
(iv) Scientific rotation of crops
(v) Modernised means of cultivation.
ACHIVEMENTS OF GREEN REVOLUTION
1. Rise in production and productivity.
2. Increas in income.
3. Rise in commercial farming.
4. Impact on social revolution - use of new technology
HYV seeds, fertilizers etc.
5. Increase in employment.
FAILURES OF GREEN REVOLUTION
1. Restricted to limited crops and areas such as two
crops wheat & rice growing states like Punjab, Haryana, U.P and Andhra
Pradish.
2. Partial removel of poverty.
3. Neglected land reforms.
4. Rise in un employment.
5. Ecological degradation.
INDUSTRY
ROLE OF INDUSTRIAL SECTOR IN INDIA
Industrialisation is important for an overall growth of a
country.
following points highlight the importance of Industry is
an economy.
1. Provides employment.
2. Raising people income
3. Promotes regional balance.
4. Leads to modernisation.
5. Helps to modernise agriculture.
6. Leads to self-sustainable developement
7. High potential for growth.
8. Key to high volume of exports.
9. Growth of civilisation.
* Industrialisation is a pre-condition for the final
take-off of an economy.
INDUSTRIAL DEVELOPMENT SINCE INDEPENDENCE
Share of industrial sector in the GDP has increased upto
8.3% in the 10th plan. It is expected to be 10.5% in the 11th plan.
The following important changes have taken place :
(i) Development of infrastructure like power transport,
communication, banking & finance, qualified and skilled human resource.
(ii) Much progress in the field of research and
development.
(iii) Expansion of public sector
(iv) Building up of capital goods industry
(v) Growth of non-essential consumer goods industries.
PROBLEMS OF INDUSTRIAL DEVELOPMENT IN INDIA
1. Sectoral imbalances - agriculture and infrastructure
have failed to provide the support to the industrial sector.
2. Regional imbalance - restricted to few states.
3. Industrial sickness- which raised the problem of
unemployment.
4. Highter cost of industrial product due to lack of
healthy competition.
5. Dependence on the Government - for reduction in tax or
duty to make import easier.
6. Poor performance of the public sector
7. Underutilisation of capacity.
8. Increasing capital - output ratio
ROLE OF PUBLIC SECTOR / GOVT. IN
INDUSTRIAL DEVELOPMENT
Direct intervention of the state was considered essential
in view of the following factors.
1. Lack of capital with the private enterpreneurs.
2. Lack of incentive among the Pvt. enterpreneures - low
demand due to limited size of the market.
3. Socialistic pattern of society - main aim of Govt. is
to generate employment rather than profits.
4. Development of infrastructure.
5. Development of backward areas.
6. To prevent concentration of economic power.
7. To promot import substitution.
INDUSTRIAL POLICY RESOLUTION (IPR) 1956
Industrial policy is an important instrument through
which the govt.
regulates the industrial activities in an economy.
The 1956 resolution laid down the following objectives of
industrial policy.
(a) To accelerate the growth of industrialisation.
(b) To develop heavy industries.
(c) To expand public sector.
(d) To reduce disparities in income and wealth.
(e) To prevent monopolies and concentration of wealth and
income in
the hand of a small member of individuals.
FEATURES OF INDUSTRIAL POLICY RESOLUTION
(IPR) OF 1956
Features of Industrial policy resolution of 1956 were.
1. New classification of Industries : Industries were
classified into three schedule depending upon role of state.
(a) Schedule-A - 17 industries listed in schedule-A whose
future development would be the responsibility of state.
(b) Schedule-B - 12 industries were included in
schedule-B, which could be established both as the private and public sector enterprises.
(c) Schedule-C - other residual industries were left open
to private sector.
2. Stress on the role of cottage and small scale
industries.
3. Industrial licensing : Industries in the pvt. sector
could be established only through a licence from the government.
4. Industrial concessions - were offered of pvt. entrepreneurs
for establishing industry in the backward regions of the country. Such as tax rebate
and concessional rates for power supply.
SMALL SCALE INDUSTRY (SSI)
A small scale industry is presently defind as the one
whose investment does not exceed Rs. 5 crore.
CHARACTERISTICS OF SSI OR
ROLE OF SMALL SCALE INDUSTRIES
1. Labour intensive - employment oriented
2. Self - employment.
3. Less capital intensive.
4. Export promotion.
5. Seed beds for large scale industries.
6. Shows locational flexibility.
PROBLEMS OF SMALL SCALE INDUSTRIES
1. Difficulty of finance.
2. Shortage of raw material.
3. Difficulty of marketing.
4. Outdated machines & equipments
5. Competition from large scale industries.
FOREIGN TRADE
At the time of independence raw material was exported
from India to Britain in abundance on the other hand finished goods from
Britain were imported into India.
Notably our balance of trade was favourable (exports >
imports) After independence India’s foreign trade recorded a noticeable change
such as.
(i) Decline in percentage share of agricultural exports.
(ii) Increase in percentage share of manufactured goods
in total exports.
(iii) Change in direction of export trade and import
trade.
TRADE POLICY
In the first seven five year plans of India, the trade
was commonly called an ‘inward looking’ trade strategy. This strategy is technically
known as ‘import substitution’.
Import substitution means substituting imports with
domestic production. Imports were protected by the imposition of tariff and quotas
which protect the domestic firms from foreign competition.
Impact of Inward looking Trade strategy on
the domestic industry.
1. It helped to save foreign exchange by reducing import
of goods.
2. Created a protected market and large demand for
domestically produced goods.
3. Helped to build a strong industrial base in our
country which directly lead to economic growth.
Criticism of import substituting strategy
1. It did not led to growth.
2. Lack of competition implied lack of modernisation.
3. Growth of inefficient public monopolies
4. It did not lead to efficiency.
INDUSTRIAL LICENSING
Licensing is a tool for channelising scare resources in predetermined
priority sector of an economy.
The Industries developement and resolution act (IDRA) was
enacted in 1951.
MAIN OBJECTIVES OF IDRA act of 1951
1. Regulation of industrial development in accordance
with planned priorities.
2. Avoidance of monopoly
3. Balanced regional development.
4. Prevention of undue competition between large-scale
industries and small scale industries
5. Optimum utilisation of scare foreign exchange
resoures. Under this objective the following were applicable.
A. All the scheduled industries should be registered with
the govt.
B. A licence must be obtained by all the new industries.
C. Govt. is authorised to examine the working of any
industrial undertaking.
D. If the undertaking continued to be mismanaged, govt
can take over its management.
CRITICISM AGAINST INDUSTRIAL LICENSING
1. There was an adhoc system for accepting or rejecting
an application for licence.
2. The quality of techno economic examination conducted
by Director general of technical developement was generally poor.
3. Licensing policy resulted in under utilisation of
capacity ln many industries.
4. In reality the policy helped large business houses in
accumulating economic power.
PERMIT LICENCE RAJ
The licensing authorities many a times granted licence to
big business houses without proper scrutiry of their applications.
INDIAN ECONOMY 1950-1990
ONE MARK QUESTION
1. Define economy.
2. Who is the chairman of the planning commission in
India?
3. What was the idea behind abolition of intermediaries?
4. Write the classification of industries according to
IPR-1956.
5. What do you mean by green revolution?
6. What is meant by small scale industries?
7. What is marketable surplus.
8. Who formulates five year plans in India.
9. Write the duration of current five year plan.
10. Name any two Common goals of five year plan.
11. Name the type of economy adopted in India.
12. Name three general problems of an economy.
13. What is import - substitution?
3/4 MARKS QUESTIONS
1. Explain how import substitution can protect domestic
industry.
2. Why was public sector given a leading role in
industrial developement during the planning period?
3. How subsidies encourage farmers to use new technology?
explain.
4. What were the benefits of green revolution.
5. How has India’s occupational structure changed during
the period from 1950 to 1990.
6. Small scale industries promote rural development.
explain.
7. Write the limitation of green revolution.
8. What are the main goals of the five year plans in
India?
9. Distinguish between planning objectives and plan
objectives.
6 MARKS QUESTIONS
1. Explain the problems of industrial development in
India.
2. Explain the role of small scale industries in the
socio economic development of our country.
3. How did green revolution benifit and harm the farmers?
4. Describe the objectives and main features of
industrial policy resolution 1956.
5. What is import substitution policy? why was it adopted
in the initial period of development in India?
6. Describe the achievements and failures of economic
planning in India.
7. Evaluate inward looking trade policy of the government
during
1950-90
ANSWER OF ONE MARK QUESTIONS
1. It is organisation of economic activities which
provides people with the means to work and earn a livlihood.
2. Prime minister is the chairman of planning commision
in India.
3. The aim of abolition of Zamindar was to make direct
link between government and real cultivators so that cultivators can get
maximum profit
4. Classification of industries according to IPR 1956
was.
(a) Schedule ‘A’ includes 17 in dustries governed by
public sector.
(b) Schedule ‘B’ includes 12 industries governed by
public & pvt. Sector both.
(c) Schedule ‘C’ includes other residual industries under
pvt. sector.
5. Green revolution refers to the tremendous increase in
agricultural production and productivity with the introduction of new
technology.
6. Small scale industires are those in which the
investment limit is Rs 5 crores.
7. Marketable surplus means production soldin the market
after self consumption by the farmers.
8. Planning commision
9. First april 2007 to 31 March 2012.
10. Growth and equity.
11. Mixed economy
12. What to produce, how to produce and to whom to
produce.
13. Import substitution means encouraging domestic
production of such goods which the country is importing.
