Indian Economy 1950-1990

Indian Economy 1950-1990

• Learners will understand India's five-year plans' goals
• Will gain knowledge of development policies in sectors (agriculture and industry) from 1950-1990
• Will learn about the pros and cons of a regulated economy

Introduction

• India gained independence on August 15, 1947
• The nation needed to establish an economic system that promoted the welfare of all citizens
• Nehru favoured socialism, but not the Soviet Union's model which involved government ownership of all means of production
• India, under Nehru, sought a hybrid approach with aspects of both capitalism and socialism

Types of Economic Systems

• A market economy relies on supply and demand to determine what is produced and distributed
• A socialist economy prioritizes the needs of society and how goods are produced and distributed.
• Mixed economies, such as India's, combine aspects of market and socialist models

What is a Plan?

• A plan outlines how national resources are used
• Includes specific objectives and goals for a given time period
• Plans in India are five-year (five-year plans)
• Longer-term plans (perspective plans) establish goals for twenty years or more

Goals of Five Year Plans

• Growth in the economy
• Self-reliance (reduced dependence on foreign countries, especially for resources)
• Modernization (improving technology and methods in industries and agriculture)
• Equity (fair distribution of benefits)

The Structure Sectors

• The agricultural sector was dominant (over 50%) in early stages; then industrial sector growing; then service sector
• Increase in service sector share in GDP from 1950-1990.

The Service Sector

• The service sector is the part of economy that provides services, such as transportation, communication and finance.
• The service sector's growth has increased as the Indian economy has developed.

Modernisation

• Adoption of new technologies
• Social changes
• Include the recognition of women's rights

Self-Reliance

• A nation can promote economic growth by using its own resources, and thereby reducing reliance on imported goods.

Equity

• It is important to ensure that the benefits of economic prosperity reach all sections of the population, particularly the poor.

Land Reforms

• Land reforms were aimed at more equitable ownership of land, reducing concentration of land in the hands of few
• Improvements on land encouraged those working on it to increase output

The Green Revolution

• The increase in food production resulted from improvements in agricultural practices, use of HYV seeds, and other technologies
• Increased production benefited farmers, and lowered food prices.

Import Substitution

• The goal was to promote domestic production and reduce reliance on imported goods
• Increased barriers for foreign-made goods (e.g., tax and quotas).

Industrial and Trade Policy

• Government (public sector) played a significant role in the development of industry
• Industrial Policy Resolution 1956 categorized industries into those solely government-owned, those in which the private sector would have a role, and those to be primarily private sector driven
• Import substitution increased domestic production of items previously imported.

The Debate Over Subsidies

• Subsidies are meant to benefit farmers.
• Can have huge burden on government finances.
• It is debated if subsidies should continue, especially if they benefit rich farmers more than poorer ones.

Conclusion

• Indian industrial and economic progress is impressive
• India has shifted from a primarily agricultural-based economy to a more balanced economy; with a larger (and growing) service industry.
• Further reforms in economic policy occurred after 1991, to improve efficiency.