📝 Chapter Notes & Revision

Indian Economy 1950-1990

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Class 11 Economics: Indian Economy (1950–1990)

Madhya Pradesh Board (MPBSE)

Introduction & Economic Systems

  • On the Eve of Independence: The British left India with a stagnant, backward, and impoverished economy.
  • Economic System: The arrangement by which central problems of an economy (What to produce, How to produce, For whom to produce) are solved.
  • Types of Economic Systems:
    1. Capitalist Economy (Market Economy): Means of production are privately owned. Goods are produced for profit (e.g., USA). Market forces (Demand & Supply) decide allocation.
    2. Socialist Economy: Means of production are owned by the state/government. Social welfare is the primary objective (e.g., erstwhile USSR).
    3. Mixed Economy: Co-existence of both Private and Public sectors. India adopted a mixed economic system.

Goals of India's Five-Year Plans (1950–1990)

Plans were made for 5 years by the Planning Commission (now replaced by NITI Aayog). The general goals of Five-Year Plans were:

  1. Growth: Increase the country's capacity to produce goods and services (increase in GDP).
  2. Modernization: Adoption of new technology and changes in social outlook (e.g., gender equality).
  3. Self-Reliance: Using domestic resources and reducing dependence on foreign countries, especially for food and technology.
  4. Equity: Ensuring that the benefits of economic growth reach everyone, reducing the gap between rich and poor.

Agriculture (1950–1990)

At independence, about 75% of the population was dependent on agriculture.

  • Problems: Low productivity, lack of irrigation, dependence on monsoon, and exploitative land tenure systems (Zamindari system).

Key Reforms in Agriculture:

  1. Land Reforms (भूमि सुधार):
    • Abolition of Intermediaries (Zamindars): Brought cultivators into direct contact with the government.
    • Land Ceiling: Fixing the maximum limit of land that an individual can own. Excess land was redistributed among small farmers and landless laborers.
  2. The Green Revolution (हरित क्रांति):
    • Introduction of HYV (High Yielding Variety) seeds, chemical fertilizers, pesticides, and assured irrigation facilities in the late 1960s.
    • Resulted in a massive jump in food grain production (especially wheat and rice), making India self-sufficient in food grains.
    • Subsidies in Agriculture: Government provided fertilizers and electricity at subsidized rates to encourage farmers to adopt new technology.

Industry and Trade (1950–1990)

The leaders felt that an industrial nation can progress faster. The state played a central role in industrialization.

1. Industrial Policy Resolution (IPR) 1948 & 1956

  • IPR 1956 formed the basis of the Second Five-Year Plan.
  • Industries were classified into three categories:
    • Schedule A: Exclusively owned by the state (Public Sector).
    • Schedule B: Mixed sector (Private sector supplemented public efforts).
    • Schedule C: Private Sector.

2. Industrial Licensing

  • A policy where no new industry could be set up or expanded without a license/permission from the government. Aimed to promote regional equality.

3. Small-Scale Industries (SSI)

  • Defined in 1950 with a maximum investment limit on plant and machinery.
  • Characteristics: SSI is labour-intensive (employs more workers) and promotes equity. Certain products were exclusively reserved for production by SSI.

Trade Policy: Import Substitution

  • India adopted an inward-looking trade strategy known as Import Substitution (आयात प्रतिस्थापन).
  • Objective: To protect domestic industries from foreign competition.
  • Instruments used:
    1. Tariffs (प्रशुल्क): Taxes on imported goods making them expensive.
    2. Quotas (आयात कोटा): Fixing the maximum limit of the quantity of goods that can be imported.

Critical Appraisal of Development (1950–1990)

  • Achievements:

    • Substantial increase in GDP and National Income.
    • Growth in agricultural output (Green Revolution).
    • Industrial diversification (growth of engineering goods, consumer goods).
    • Protection and growth of Small-Scale Industries.
    • Better health and education infrastructure leading to increased life expectancy.

  • Failures/Shortcomings:

    • Inefficiencies and losses in Public Sector Undertakings (PSUs).
    • Excessive regulation (Permit Raj) resulted in corruption and delays.
    • Growth of Monopolies and lack of competition due to import protection.
    • Persistent poverty and unemployment despite economic growth.

Note: These policies laid the foundation of the Indian economy, leading up to the major structural reforms introduced in 1991 (Liberalisation, Privatisation, and Globalisation - LPG).