CHAPTER 2

INDIAN ECONOMY
1950 - 1990
 1) ECONOMIC SYSTEM :
Refers to an arrangement by which central
problems of an economy are solved.

Central Problems Of An Economy

1) What to produce 2) How to produce 3) For whom to produce

Technique Of Production

Rich Poor
Capital Intensive Labour Intensive
 2) TYPES OF ECONOMIC SYSTEM :

Capitalist Economy Socialist Economy Mixed Economy

Private Government Private + Government
Profit Maximization Social Welfare Profit Maximisation + Social welfare

INDIA ADOPTED THE :

USA
Capitalist Economic System

Socialist Economic System CHINA

Mixed Economic System
INDIA
3) ECONOMIC PLANNING :
Economic Planning means utilisation of country's resources in
different developmental activities in accordance with National
Priorities.

Planning Commission - 1950 ( Chairman - PM )

5 Year Plans - First ( 1st Apr 1951 - 31st Mar 1956 ) Jawaharlal Nehru
Last (1st Apr 2012 - 31st Mar 2017)

20 + Years Plan - Perspective Plans

1 Jan 2015 ( Planning Commission - NITI Aayog )

4) BASIC GOALS OF 5 YEAR PLAN :
a) Growth :
Refers to increase in the production capacity
of goods and services.
GDP is an indicator of Growth
GDP is derived from - Agriculture
- Industrial sector
- Service sector

b) Modernisation :
Adoption of new technology
Change in social outlook
c) Self Reliance :
Development through our own domestic resources.
Necessary - a) To reduce foreign dependence
b) To avoid foreign interference

d) Equity :

Benefits of growth - All sections

Basic Needs like Shelter, food, cloth,
education, health.
Increase standard of living
5) AGRICULTURE :
Agriculture sector was stagnant and
backward at the time of independence.
1st five year plan focused on Agriculture.

Features / Problems of agriculture

Low Productivity
Disguised Unemployment
High dependency on Rainfall
Subsistence Farming
Outdated Technology
Conflicts between Tenants and Landlords
Small Land Holdings
6) POLICIES FOR GROWTH IN AGRICULTURE

Land Reforms Green Revolution

Refers to change in ownership of Refers to large increase in food grain
landholdings production due to use of HYV seeds.
Through - Abolition of intermediaries
Land Ceiling
 Abolition of Intermediaries
Removing Zamindars and making tillers the
owner of land.
Farmers could willingly produce more.
Brought 200 Lakh tenants into direct contact
of government.

Failures :
Zamindars used some Loopholes
Zamindars claimed to be Self Cultivators.
 Land Ceiling :
Refers to fixing the specified limit of land which
could be owned by an individual.
Excess land will be distributed
Done to promote Equity

Failures :
Big landlords delayed its implementation and
registered excess land with their relatives.

Conclusion :
Successful in Kerala and West Bengal
Other states - not successful
GREEN REVOLUTION
Refers to large increase in food grain
production due to use of HYV seeds

Launched
( Punjab, A.P, T.N )
1st Phase ( Mid 60's - 70's ) Wheat and rice
2nd Phase ( Mid 70's - 80's )

HYV ( High Yielding Variety Seeds )

Miracle seeds
4-10 times fertilisers
High irrigation facility
 GREEN REVOLUTION

Merits Demerits
Attaining marketable surplus
Buffer stock of food grains Pest attack
Benefit to low income group Increase in income inequality
 Subsidies
Means farmers get input at lower price than market.

Economists debated :

Favour : Farming is still Risky

Majority farmers are poor.
If removed - Inequality

Against : Already widely accepted

Poor farmers are not getting benefit
7) CRITICAL APPRAISAL OF AGRICULTURAL DEVELOPMET :

Land reforms and green revolution - Achievements

Green Revolution - Self sufficient

Land Reforms - Zamindari system STOP

Agriculture - Workforce increase

GDP proportion not inccreasing accordingly.

Because industrial and service sector could not absorb

population from agriculture
8) INDUSTRIAL DEVELOPMENT
Developing country need good industrial sector
Industrial employment - stable
2nd five year plan - Industrial Sector
Few Iron and steel firm - Jamshedpur and Kolkata

Benefits of Industrialisation :
Increase employment opportunities
Provides infrastructure facilities
Source of mechanised means of farming
Helps in earning foreign exchange
Growth of civilisation
ROLE OF PUBLIC SECTOR IN
INDUSTRIAL DEVELOPMENT
a) Shortage of capital with private sector
b) Lack of incentive for Private sector
c) Objective of social welfare
9) IPR (Industrial Policy Resolution 1956)
It was a clear cut declaration of government on the leading
role of government in the process of industrialisation.

Under this industries were classified as :

a) Schedule A ( Government owned ) (17)

b) Schedule B (Government >Private) (12)
c) Schedule C ( Priavte owned )
 Industrial Licensing ( IDR Act 1951 )
It is a written permission from government to
manufacture goods.

License was required for :

a) Setting up of new industry

b) Expansion of existing ones
c) Diversification of products
 SSI ( Small Scale Industries )
Karve Committee (1955)
Defined with reference to the maximum
investment allowed.
1950 - 5 lakh
Present - 10 Crore

Important points about SSI :

Employment Generation
Need Protection
Flexible
 IMPORT
10) FOREIGN TRADE :
Includes all the imports and export to and from india.
India's share - 1.78 %
EXPORT

Trade Policy - Important Substitution

Refers to the policy of replacement or substitution of imports

by domestic production.
Trade was characterised with Inward Looking Trade Strategy
 Protection was done through

a) Tarrif -

to imposing taxes on imported goods.
Refers

b) Quotas -
Refers to imposing barriers on the Quantity impoted.
 Critical Appraisal ( Industrial Development )
GDP (Industrial sector ) - 1951 ( 11.8% )
1991 ( 24.6% )
Industries became well diversified ( Engineering goods )
SSI gave opportunities to people with low capital.
Import Substitution gave rise to Electronic and automobile
industries.
Licensing Policy - Helped government to control industrial
production.
Public sector made remarkable contribution in industrial sector.
BUT
a) Monopoly control
b) Continued even after losses
c) Economists - Govt - National Defence
Private - Non essential areas
IMPORTANT DATES :

Planning Commission - 1950

First 5 year plan - 1951
Last five year plan - 1956
Karve Committee - 1955
Planning commission
- NITI
Aayog - 2015
THANK YOU