Indian Economy 1950-1990 ( point wise notes)

Indian Economy 1950-1990

INDEPENDENCE

ECONOMY :

An economy is an organisation of economic activities which provide people with the means to work and earn a living.

Economy

Capitalist Socialist Mixed

Economy Economy Economy

* Capitalist economy : In which major economic decisions (what to produce, how to produce and for whome to produce) are left to the free play of the market forces.

* Socialist economy : In which major economic decisions are taken by the Govt. keeping in view the collective interest of the society as a whole.

* Mixed Economy : In which major economic decisions are taken by the central Govt. authority as well as are left to the free play of the market forces.

* Economic Planning : Means utilisation fo country’s resources in different development activities in accordance with national priorities.

Goals of Planning in India

Long - term goals Short term goals

To be achieved over a To be achieved over a Period of long term period of 5 years 20 years

LONG TERM GOALS / OBJECTIVES OF PLANNING

A. Modernisation - Adoption of new technology

B. Self reliance - Reducing dependence on imports.

C. Economic Growth - Increase in the aggregate output of Goods & services.

D. Equity - reduction inequality of income or wealth

E. Full employment - Refers to a situation when all the people in the working age group are actually engaged in some gainfull employment.

SHORT TERM GOELS / OBJECTIVES OR

OBJECTIVES OF FIVE YEAR PLANS

Short term objectives vary from plan to plan depending on

current needs of the country. For example first plan (1951-56)

focused on higher agricultural production while in second plan (1956-61) shifted the focus from agriculture to Industry. In India growth and equity are the objectives of all the five year plans. The goal of current five year plan (11th, 2007-2012) is faster, broad-based and inclusive growth.

Agriculture

Main Features of Indian Agriculture

1. Low productivity

2. Disguised unemployment.

3. Dependence on rainfall

4. Subsistance farming - objective of farmer is to secure subsistence for his family not to earn profit.

5. Traditional inputs

6. Small holdings

7. Backward technology.

8. Landlord tenant conflict.

Problems of Indian Agriculture

Institutional Problems.

1. Small and scattered holdings.

2. Poor implementation of land reforms.

3. Lack of credit and marketing facilities.

Technical Problems.

1. Lack of irregation facilities.

2. Wrong cropping pattern.

3. Outdated techneque of production.

General Problems :

1. Pressure of population on land

2. Land degradation

3. Subsistance farming

4. Social environment.

5. Crop losses- by pest, insect, flood, draught etc.

Reforms in Indian Agriculture

A. Institutional Reforms also called Land reforms.

(i) Abolition of intermediaries.

(ii) Regulation of rent.

(iii) Consolidation of holdings.

(iv) Ceiling on land holdings.

B. General reforms.

(i) Expansion of irrigation facilities

(ii) Provision of credit

(iii) Regulated markets and co-operative marketing societies.

(iv) Price support policy.

C. Technical Reforms or Green Revolution

(i) Use of HYV seeds

(ii) Use of dumical fortilizers.

(iii) Use of insecticides and pesticides for crop protection

(iv) Scientific rotation of crops

(v) Modernised means of cultivation.

ACHIVEMENTS OF GREEN REVOLUTION

1. Rise in production and productivity.

2. Increas in income.

3. Rise in commercial farming.

4. Impact on social revolution - use of new technology HYV seeds, fertilizers etc.

5. Increase in employment.

FAILURES OF GREEN REVOLUTION

1. Restricted to limited crops and areas such as two crops wheat & rice growing states like Punjab, Haryana, U.P and Andhra Pradish.

2. Partial removel of poverty.

3. Neglected land reforms.

4. Rise in un employment.

5. Ecological degradation.

INDUSTRY

ROLE OF INDUSTRIAL SECTOR IN INDIA

Industrialisation is important for an overall growth of a country.

following points highlight the importance of Industry is an economy.

1. Provides employment.

2. Raising people income

3. Promotes regional balance.

4. Leads to modernisation.

5. Helps to modernise agriculture.

6. Leads to self-sustainable developement

7. High potential for growth.

8. Key to high volume of exports.

9. Growth of civilisation.

* Industrialisation is a pre-condition for the final take-off of an economy.

INDUSTRIAL DEVELOPMENT SINCE INDEPENDENCE

Share of industrial sector in the GDP has increased upto 8.3% in the 10th plan. It is expected to be 10.5% in the 11th plan.

The following important changes have taken place :

(i) Development of infrastructure like power transport, communication, banking & finance, qualified and skilled human resource.

(ii) Much progress in the field of research and development.

(iii) Expansion of public sector

(iv) Building up of capital goods industry

(v) Growth of non-essential consumer goods industries.

PROBLEMS OF INDUSTRIAL DEVELOPMENT IN INDIA

1. Sectoral imbalances - agriculture and infrastructure have failed to provide the support to the industrial sector.

2. Regional imbalance - restricted to few states.

3. Industrial sickness- which raised the problem of unemployment.

4. Highter cost of industrial product due to lack of healthy competition.

5. Dependence on the Government - for reduction in tax or duty to make import easier.

6. Poor performance of the public sector

7. Underutilisation of capacity.

8. Increasing capital - output ratio

ROLE OF PUBLIC SECTOR / GOVT. IN

INDUSTRIAL DEVELOPMENT

Direct intervention of the state was considered essential in view of the following factors.

1. Lack of capital with the private enterpreneurs.

2. Lack of incentive among the Pvt. enterpreneures - low demand due to limited size of the market.

3. Socialistic pattern of society - main aim of Govt. is to generate employment rather than profits.

4. Development of infrastructure.

5. Development of backward areas.

6. To prevent concentration of economic power.

7. To promot import substitution.

INDUSTRIAL POLICY RESOLUTION (IPR) 1956

Industrial policy is an important instrument through which the govt.

regulates the industrial activities in an economy.

The 1956 resolution laid down the following objectives of industrial policy.

(a) To accelerate the growth of industrialisation.

(b) To develop heavy industries.

(c) To expand public sector.

(d) To reduce disparities in income and wealth.

(e) To prevent monopolies and concentration of wealth and income in

the hand of a small member of individuals.

FEATURES OF INDUSTRIAL POLICY RESOLUTION (IPR) OF 1956

Features of Industrial policy resolution of 1956 were.

1. New classification of Industries : Industries were classified into three schedule depending upon role of state.

(a) Schedule-A - 17 industries listed in schedule-A whose future development would be the responsibility of state.

(b) Schedule-B - 12 industries were included in schedule-B, which could be established both as the private and public sector enterprises.

(c) Schedule-C - other residual industries were left open to private sector.

2. Stress on the role of cottage and small scale industries.

3. Industrial licensing : Industries in the pvt. sector could be established only through a licence from the government.

4. Industrial concessions - were offered of pvt. entrepreneurs for establishing industry in the backward regions of the country. Such as tax rebate and concessional rates for power supply.

SMALL SCALE INDUSTRY (SSI)

A small scale industry is presently defind as the one whose investment does not exceed Rs. 5 crore.

CHARACTERISTICS OF SSI OR

ROLE OF SMALL SCALE INDUSTRIES

1. Labour intensive - employment oriented

2. Self - employment.

3. Less capital intensive.

4. Export promotion.

5. Seed beds for large scale industries.

6. Shows locational flexibility.

PROBLEMS OF SMALL SCALE INDUSTRIES

1. Difficulty of finance.

2. Shortage of raw material.

3. Difficulty of marketing.

4. Outdated machines & equipments

5. Competition from large scale industries.

FOREIGN TRADE

At the time of independence raw material was exported from India to Britain in abundance on the other hand finished goods from Britain were imported into India.

Notably our balance of trade was favourable (exports > imports) After independence India’s foreign trade recorded a noticeable change such as.

(i) Decline in percentage share of agricultural exports.

(ii) Increase in percentage share of manufactured goods in total exports.

(iii) Change in direction of export trade and import trade.

TRADE POLICY

In the first seven five year plans of India, the trade was commonly called an ‘inward looking’ trade strategy. This strategy is technically known as ‘import substitution’.

Import substitution means substituting imports with domestic production. Imports were protected by the imposition of tariff and quotas which protect the domestic firms from foreign competition.

Impact of Inward looking Trade strategy on the domestic industry.

1. It helped to save foreign exchange by reducing import of goods.

2. Created a protected market and large demand for domestically produced goods.

3. Helped to build a strong industrial base in our country which directly lead to economic growth.

Criticism of import substituting strategy

1. It did not led to growth.

2. Lack of competition implied lack of modernisation.

3. Growth of inefficient public monopolies

4. It did not lead to efficiency.

INDUSTRIAL LICENSING

Licensing is a tool for channelising scare resources in predetermined priority sector of an economy.

The Industries developement and resolution act (IDRA) was enacted in 1951.

MAIN OBJECTIVES OF IDRA act of 1951

1. Regulation of industrial development in accordance with planned priorities.

2. Avoidance of monopoly

3. Balanced regional development.

4. Prevention of undue competition between large-scale industries and small scale industries

5. Optimum utilisation of scare foreign exchange resoures. Under this objective the following were applicable.

A. All the scheduled industries should be registered with the govt.

B. A licence must be obtained by all the new industries.

C. Govt. is authorised to examine the working of any industrial undertaking.

D. If the undertaking continued to be mismanaged, govt can take over its management.

CRITICISM AGAINST INDUSTRIAL LICENSING

1. There was an adhoc system for accepting or rejecting an application for licence.

2. The quality of techno economic examination conducted by Director general of technical developement was generally poor.

3. Licensing policy resulted in under utilisation of capacity ln many industries.

4. In reality the policy helped large business houses in accumulating economic power.

PERMIT LICENCE RAJ

The licensing authorities many a times granted licence to big business houses without proper scrutiry of their applications.

INDIAN ECONOMY 1950-1990

ONE MARK QUESTION

1. Define economy.

2. Who is the chairman of the planning commission in India?

3. What was the idea behind abolition of intermediaries?

4. Write the classification of industries according to IPR-1956.

5. What do you mean by green revolution?

6. What is meant by small scale industries?

7. What is marketable surplus.

8. Who formulates five year plans in India.

9. Write the duration of current five year plan.

10. Name any two Common goals of five year plan.

11. Name the type of economy adopted in India.

12. Name three general problems of an economy.

13. What is import - substitution?

3/4 MARKS QUESTIONS

1. Explain how import substitution can protect domestic industry.

2. Why was public sector given a leading role in industrial developement during the planning period?

3. How subsidies encourage farmers to use new technology? explain.

4. What were the benefits of green revolution.

5. How has India’s occupational structure changed during the period from 1950 to 1990.

6. Small scale industries promote rural development. explain.

7. Write the limitation of green revolution.

8. What are the main goals of the five year plans in India?

9. Distinguish between planning objectives and plan objectives.

6 MARKS QUESTIONS

1. Explain the problems of industrial development in India.

2. Explain the role of small scale industries in the socio economic development of our country.

3. How did green revolution benifit and harm the farmers?

4. Describe the objectives and main features of industrial policy resolution 1956.

5. What is import substitution policy? why was it adopted in the initial period of development in India?

6. Describe the achievements and failures of economic planning in India.

7. Evaluate inward looking trade policy of the government during

1950-90

ANSWER OF ONE MARK QUESTIONS

1. It is organisation of economic activities which provides people with the means to work and earn a livlihood.

2. Prime minister is the chairman of planning commision in India.

3. The aim of abolition of Zamindar was to make direct link between government and real cultivators so that cultivators can get maximum profit

4. Classification of industries according to IPR 1956 was.

(a) Schedule ‘A’ includes 17 in dustries governed by public sector.

(b) Schedule ‘B’ includes 12 industries governed by public & pvt. Sector both.

(c) Schedule ‘C’ includes other residual industries under pvt. sector.

5. Green revolution refers to the tremendous increase in agricultural production and productivity with the introduction of new technology.

6. Small scale industires are those in which the investment limit is Rs 5 crores.

7. Marketable surplus means production soldin the market after self consumption by the farmers.

8. Planning commision

9. First april 2007 to 31 March 2012.

10. Growth and equity.

11. Mixed economy

12. What to produce, how to produce and to whom to produce.

13. Import substitution means encouraging domestic production of such goods which the country is importing.