Panjab University

Assignment - Contemporary India (504)

No.2 31 August 2019

Submitted by: Submitted to:

Akshat Aggarwal Prof. Rajiv Lochan

17105403

Panjab University Chandigarh (India)

Appraisal of Strategies Adopted by the Government of India to
Improve the Indian Economy 1947-1990

 
India was significantly poorer in 1957 as compared to 1947 or par with other countries.
Growth being steady at 3.0 - 3.5% of India was the natural rate of growth, even Pakistan had
a greater growth rate of 6.7% in 1960-70. Further, the growth rate of 3.5 was negligible with
the fact of India population being rose by 1.25% annually in those times. Every other country
broom for say Japan, Korea, Germany thus asserted colonialism was not the reason for
holding back India but were the actions of the govt. disincentivising the country leading to an
abysmal & abominable growth. As soon as India became Independent the govt. realised that
there is no investible capital to spare for growth. Formers of Planning Commission were
familiar with the problem of non-availability of Surplus capital. Thus, the govt adopted the
Five-Year Plans (FYP) as a tool to raise the living standards of the people, but also the new
opportunities on the other hand. Therefore, the objective of 1st FYP was on redistribution of
wealth through moral choice distributive justice, for which took land reforms and promoted
savings. It ensured money was handed over to the people which generate investible money.
Though there was a spurt in the early years of Independence 1947-55 and the plan ended
much before, but soon the enthusiasm of freedom among these new freebies ended too. The
structural problem of Capital was not resolved. Though there was an increase in agricultural
production as more land was being brought under cultivation and over 80% of the population
subsisted through working in it but food grains cannot bring profit and growth alone. Further,
there was no increase in the total yield of harvest and quality of food grains. Thus, due to
more focus on agricultural production India of fall in Scissors Crises, with a situation of
lacking Industrial Growth. As is commonly known, India's leaders have chosen to adhere to
democratic ideals in their struggle for economic development. In China, on the other hand,
totalitarian methods were being utilized in the quest for economic development, planning for
Great Leap Forward. 

By the time of 2nd FYP, P.C. Mahalanobis suggested focussing the shift on increasing
Capital Investment in the form of promoting industries which would automatically translate
into output, though there were slippages, the plan could be said a success. Thus, accounting
such progress Congress Party committed to Socialism and Socialist Economy but such
growth nowhere promoted efficiency and production. India refused to the expansion of
education, unlike China, leading to inefficiency, yet asserted of being socialist. India needed
to create infrastructure and decided to invest in Heavy Industries which required huge
investment and whose profit would have come late of which private players were not ready.
Thus, the govt. invested in such industries and gave them the tag of socialism. Several plants,
steel plants, factories were set up in 3rd FYP. In the 4th plan, the economic crises further
increased due to situations like Oil Shocks, growth rate accounting of 3.30%. India fell
shortage of foreign currency due to such remittances, thus didn’t have currency to buy
machines and couldn’t make one because of lacking Infrastructure and capital good industries
as of untrained staff. Meanwhile, in subsequent years, Indian Growth stagnates at 3%. In
1970 Heavy Engineering Corporation was set up in Ranchi which created factories whose
inefficient functioning were exposed. Thus, the govt started winding up the PSU’s by
increasing public investment and protecting existing Indian Industries from foreign
competition by taxing imports and from the domestic competition by regulating govt. quotas.
Such actions of Govt. drastically incentivised bad economy, less production, low efficiency
and murdered the investment and the innovation. According to KN Raj India had a large
amount of capacity which was being unused, asserting it to be the reason for not having
money as though people were saving money but not in the Banks. Politicians discovered the
benefits of such an economy thus promoted poverty and used PSU’s as a source of income of
which they became addicted and started initiating PSU’s for every unit. On the other hand,
India’s moral further diminished and worsened the economy.

References

ARTHUR A. WICHMANN (1957). “India's Economic Problems and the Second Five-Year
Plan”, The Southwestern Social Science Quarterly, Vol. 38, No. 3 pp. 215-227,
https://www.jstor.org/stable/42866117, Wiley, 27-08-2019 16:23 UTC.

R Nagaraj (1990). “Growth Rate of India's GDP, 1950-51 to 1987-88 Examination of

Alternative Hypotheses”, Economic and Political Weekly, Vol. 25, No. 26 pp. 1396-1403,
http://www.igidr.ac.in/nag/Growth%20Rate%20of%20India%27s%20GDP.pdf, 28-08-2019 19:23
UTC.