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Questions and Answers
What percentage of world GDP did China and India together contribute to according to Angus Maddison?
What percentage of world GDP did China and India together contribute to according to Angus Maddison?
50.5%
What was Dadabhai Naoroji's estimate of national income for the year 1867-68?
What was Dadabhai Naoroji's estimate of national income for the year 1867-68?
Rs 340 crore
What was William Digby's calculation of Per Capita National Income of India for the year 1899?
What was William Digby's calculation of Per Capita National Income of India for the year 1899?
Rs 18
What was India's share of manufacturing in global industrial output by 1900?
What was India's share of manufacturing in global industrial output by 1900?
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What was India's economic model after independence?
What was India's economic model after independence?
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What was India's share in the world economy in 1950?
What was India's share in the world economy in 1950?
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What was the focus of the second Five-year Plan launched in 1956?
What was the focus of the second Five-year Plan launched in 1956?
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What was the Licence Raj in India?
What was the Licence Raj in India?
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What was the impact of the quest to quickly industrialize on the agriculture sector?
What was the impact of the quest to quickly industrialize on the agriculture sector?
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What was the Green Revolution in India?
What was the Green Revolution in India?
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What was the White Revolution in India?
What was the White Revolution in India?
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What was the main aim of Indira Gandhi's nationalization of 14 private banks in 1969?
What was the main aim of Indira Gandhi's nationalization of 14 private banks in 1969?
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What was the New Economic Policy launched in 1991?
What was the New Economic Policy launched in 1991?
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What were the objectives of the New Economic Policy of 1991?
What were the objectives of the New Economic Policy of 1991?
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What was Amartya Sen's contribution to economics?
What was Amartya Sen's contribution to economics?
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What was the GDP of India before and after the New Economic Policy?
What was the GDP of India before and after the New Economic Policy?
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Study Notes
Indian Economy Before Independence
- In 1000 AD, China and India together contributed 50.5% of world GDP, with China accounting for 29% and India 22.4%.
- By 1600, their share had increased to 51.4%, but by 1850, it dropped to 5-10%, with India's share estimated at about 40% of China's.
- In 1867-68, Dadabhai Naoroji estimated India's national income at Rs 340 crore and per capita income at Rs 20, and formulated the "drain of wealth" theory, accusing the British of draining India's wealth without proper returns.
- By 1900, under British rule, India's share of manufacturing declined to 2% of global industrial output, and the British made India a source of raw materials and a destination of finished goods.
Indian Economy After Independence
- Partition caused many economic problems for India, including the loss of one-third of its irrigated land to Pakistan.
- India retained the majority share of cotton and jute mills, but major centers of jute production and centers of wheat and cotton production were located in Pakistan.
- Jawaharlal Nehru's development model envisioned a dominant role of the state as an entrepreneur and financier of private businesses, with a mixed economy proposed by the Industrial Policy Resolution of 1948.
- India's share in the world economy was just 4.2% of World GDP in 1950.
Planning and Development
- The Planning Commission was set up in 1950, with Gulzarilal Nanda as Deputy Chairperson, to oversee planning, resource allocation, implementation, and appraisal of five-year plans.
- The first Five-year Plan was launched in 1951, emphasizing agriculture and irrigation, while the second Five-year Plan (1956) was based on the Mahalanobis Model, focusing on rapid industrialization and heavy industries.
- The "Licence Raj" began, categorizing industries into three groups, with basic and strategic industries exclusively in the public sector, and the private sector being kept on a system of licenses.
Economic Troubles and Shifts
- The quest to quickly industrialize led to a reallocation of funds away from the agricultural sector, causing food shortages and inflation, and depleting foreign exchange reserves.
- Lal Bahadur Shastri focused on food security, introducing the "Green Revolution" with high-yield variety seeds of wheat, and later, the "White Revolution" in the dairy sector.
- Indira Gandhi nationalized 14 private banks in 1969 to accelerate bank lending to agriculture and rural areas, but this led to complacency and crony capitalism.
New Economic Policy (1991)
- India faced a severe economic crisis in 1991, with insufficient foreign exchange reserves and high inflation, and approached the IMF and World Bank for a $7 billion loan.
- The Narasimha Rao-led government launched a series of structural reforms, including the dismantling of the "Licence Raj", opening up to foreign capital, trade, and investment, and deregulating the industrial sector.
- The New Economic Policy deviated from Nehruvian economics, emphasizing public sector and centralized planning, to a neo-liberal economic model.
- The objectives of NEP included releasing the industrial sector from bureaucratic control, integrating India with the world economy, encouraging foreign investment, reducing fiscal deficit, controlling inflation, and improving employment opportunities.
GDP and Amartya Sen
- GDP growth rates: 1980-81 (7.2%), 1990-91 (5.1%), 2001-02 (5.8%), 2010-11 (8.8%)
- Amartya Sen, a Nobel laureate in Economic Sciences, has worked on welfare economics and is critical of India's development model, which ignores the needs of the poor.
- He has made economics accessible to ordinary readers and proved that gross national product is not enough to assess standard of living, leading to the creation of the UN Human Development Index.
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Description
Explore the economic history of India before independence, including its contribution to world GDP and national income estimates. Learn about the role of China and India in the global economy from 1000 AD to 1850.
