INDEPENDENT INDIA

INDIAN ECONOMY 1950 - 1990

● Parliamentary democracy and

● Mixed Economy.

After independence, India chose

CAPITALISM MIXED ECONOMY

SOCIALISM

TYPES OF ECONOMY

WHAT IS CAPITALISM AND WHAT ARE

ITS FEATURES ?

●Central problems are solved by the market forces

(demand and supply).

●Goods & services are distributed on the basis

of purchasing power of people.

●Labour intensive or capital intensive technique

of production is used.

Capitalism - Features

Example ?

CAPITALISM

WHAT IS SOCIALISM AND WHAT ERE

ITS FEATURES ?

●Central problems are solved by the Government

or Planning authority

●Goods & services are distributed by the Govt.

based on the needs of the people

●All means of production are owned and

managed by the Government.

Socialism - Features

Example ?

SOCIALISM

SOCIALISM

WHAT IS MIXED ECONOMY AND WHAT ERE

ITS FEATURES ?

● It is a mixture of capitalism and socialism

●Public sector and private sector co exist.

●The market will provide goods and services

which consumers demand

●Government provides goods and services

●which people need

Mixed Economy - Features

Example ?

AT A GLANCE ....

● The Directive Principles of Indian Constitution and ● the Industrial Development Regulation Act 1948

Why in India Mixed Economy Policy ?

COMMISSION DISCUSSES INDIA’S' FUTURE ....

● The Planning Commission was set up in 1950

● India started Five year Plan in 1951

● Jawaharlal Nehru was the first Chairman

● Gulzari Lal Nanda was the First Vice Chairman

● P C Mahalanobis was the chief architect of Indian

Planning

PLANNING COMMISSION

P C MAHALANOBIS

FATHER OF INDIAN PLANNING

FIRST CHAIRMAN PRESENT CHAIRMAN

PLANNING COMMISSION NITI AYOG

GULZARI LAL NANDA

FIR

ST

VIC

E C

HA

IRM

AN

OF

PL

AN

NIN

G C

OM

MIS

SIO

NFIRST VICE CHAIRMAN OF NITI AYOG

ARAVIND PANAGARIYA

●The new name for Planning Commission

● Came into being on 1st January 2015.

●Narendra Modi is the firs

t Chairman

●Aravind Panagariya is the First Vice Chairman

NITI AYOG

Planning is a process by which resources are allocated according to pre determined manner to achieve certain goals.

What is Planning ?

Growth (increase in the country's capacity to produce)

Modernisation (adoption of modern technology)

Self Reliance (relying on oneself)

Equity (should have the basic needs)

Goals of Five year Plans

GROWTH

MODERNISATION

SELF RELIANCE

EQUITY

It is the policy of substituting imports

with domestic production.

Import substitution

SectorContribution to GDP (In %)

1950 - 51

1970 - 71

1990 - 91 2010 - 112014 -

15

Primary sector59.26 48.23 34.52 14.5 16.1

Secondary sector 13.29 19.91 24.49 22.9 23.3

Tertiary sector28.03 32.18 40.58 62.6 60.6

Average annual growth rate of GDP

Average annual growth rate of GDP

1900 - 1950 Around 2 %1950 - 1960 3.59 %1960 - 1970 3.95 %1970 - 1980 2.94 %1980 - 1990 5.79 %1990 - 2000 5.80 %2000 - 2010 7.26 %2015 - 2016 7.6 %

Average annual growth rate of GDP

Changes in Agriculture Sector

● Land Reforms

● Green Revolution

Land Reforms

Aims

● Reducing inequalities in the distribution of land

● Raising agricultural production through increased productivity.

Land Reforms

Measures/ Features

● Abolition of intermediaries like Zamindars● Distribution of land among landless● Fixed ceiling on agricultural holdings.● Organisation of Cooperative farming

Land ReformsEffects/ Results

● The abolition of intermediaries ● The reform faced resistance in many areas● Some big landlords challenged the law in courts● Some landlords registered the land in the name

of their relatives

Land ReformsEstimate

● Land reforms were successfully implemented in states like Kerala and West Bengal.

● The poor landless agricultural workers who really worked on land did not get any land.

● Most of these agricultural labourers belonged to SC/ST.

● So they did not benefit from land reforms.

FIVE YEAR PLANNING IN INDIA – A GLANCE

TARGET AND ACTUAL – FIVE YEAR PLANS

ACHIEVEMENTS AT A GLANCE

Green Revolution

● India was predominantly agrarian economy at the time of independence.

● 75% of population depended on agriculture.● Agricultural productivity was low● Traditional farming based on old technology

prevailed.● There was only poor irrigation facilities.● India had to depend on food imports and food aid.

Why Green Revolution ?

Dr. M S Swaminathan is known as the 'father of Green Revolution' in India

Aim

Increase agricultural productivity and production through modern

farming

AIM

● Use of High Yielding Variety (HYV) seeds

● Use of Chemical fertilisers and pesticides

● Use of modern implements like tractors,

pump sets etc

● Better irrigation facilities

● Credit facilities to farmers at low interest rate

Features

NEW FACE OF IRRIGATIONH Y V SEEDS

It had two phases :

● First phase (1965 - 75)

● In the first phase the new strategy was

confined to states like Punjab, TN and AP.

● Concentration was mainly in the production

of wheat

● So it is criticised as 'Wheat revolution'

Phases

● New strategy spread to more states and more crops.

● Agricultural production increased the marketable surplus

● It is the surplus after meeting farmers requirements that can be sold in the market

● Reduced prices of food grains. It benefited the poor people.

Second Phase (1975 85)–

Benefits/ Effects/ Achievements/ Merits/ Advantages

● India became self sufficient in food grains● Reduced dependence on imports & food aid● Reduced the prices of food grains ● Increase in production of commercial crops● Helped the Govt to create buffer stock● Enabled distribution of food grains● Public Distribution System (PDS) started

● Growth of capitalist farming in Indian agriculture● Increased the disparity between rich and poor

farmers● Heavy dependence on irrigation facilities● High dose of chemical fertilisers, pesticides and

insecticides poisoned the soil.● The HYV crops were prone to attack from insects

and pests.● In the first phase it was mainly a wheat revolution.

Limitations/ Drawbacks/ Deficiencies

The provision of agricultural inputs like seeds, pesticides, fertilisers, farm implements at a low rate to the farmers by the Government is termed as Subsidy

Debate over Subsidies

What is Subsidy ?

HOW POWERFUL I AM ?

● Agriculture in India is a risky business.● Help to reduce the gap between poor and rich

agriculturists.● Helps to spread agriculture and increase

agricultural produce.● Stopping subsidies will increase inequality

between rich and poor farmers

Arguments FOR subsidy

● Encourage to adopt new methods of farming ● Agriculture is a non profit making business.● Even developed countries distribute subsidies● Marginal farmers cant afford the agricultural

inputs without subsidies● Provide cultivators courage to confront great

losses.

Arguments FOR subsidy

● Major parts of subsidy goes to the rich farmers

● A substantial part goes to fertiliser industry

and not to farmers.

● The subsidy amount could have been used for

the welfare of the poor people

● Failure in better allocation of subsidies to real

beneficiaries

Arguments AGAINST subsidy

● Subsidised inputs make agriculturists unaware

of their real value which results in wastage of resources

● Subsidy need not be given once new technology is adopted and agriculture made profitable.

Arguments AGAINST subsidy

DO YOU KNOW ?

➔ In 1951 the share of agriculture in GDP was 59.26

➔ In 2015 the share of agriculture in GDP was 16.1

➔ In 1951 the % of people depending on agriculture was 67.5

➔ In 2015 the % of people depending on agriculture was 52

Why it is so ?

✔ The industrial sector and the service sector could not absorb people from the agricultural sector

Why it is so ?

It may be due to

the fa

ilure of the policies

that we fo

llowed from 1951 to

1991

✔ After the second world war, modern industries started to grow in India.

✔ After Independence we needed to speed up industrialization.

✔ It helps us to achieve fast growth and development.

Industry and Trade

For this India chose the role of the state (Public sector).

PUBLIC AND PRIVATE SECTORS

✔ Indian industrialist did not have sufficient

capital to undertake investments.

✔ The size of market was not big enough to

attract private investors

✔ India opted to have a socialist pattern of

economy, where role of private sector was

limited.

Why India was in favour of Public sector?

The IPR classified industries into three :

● Industries exclusively owned by the state● Industries in which the private sector could

supplement the efforts of the state● Industries in the private sector, controlled by

the state through license system.

to keep the private sector under the government control.

to promote balanced regional growth or regional equality.

The system of license was

● The government appointed the Village and Small Scale Industries Committee In 1955.

● This committee was headed by Sri Karve.● So it is also known as Karve Committee.● Recommended promotion of small scale

industries● Promotion of employment and

development of rural areas.

Smal l Scale Industries

KARVE

WHY SMALL SCALE INDUSTRIES ?

V

V

V

V

V

LESS CAPITAL INVESTMENT

LESS DEPENDENCE ON IMPORTS

RURAL DEVELOPMENT

LESS POLLUTION

MORE EMPLOYMENT

WHY SMALL SCALE INDUSTRIES ?

TRADE POLICY

After Independence, India followed trade policy of Import Substitution

Substituting imports with domestic production is called Import Substitution

The policy of import substitution leads to the

policy of protection, policy of protecting

domestic industries from foreign competition. .

● Protection is given through :

1. Tariffs (duties on imports/ exports)import duties are used to for protecting domestic industry from foreign products

2. Quotas (quantitative restrictions)The quota system allows only a limited quantity of the product to be imported.

Benefits

The industrial sector grew by 6% during 1950 to 1990

Increase in the share of contribution to GDP (11.8% to 24.6 %)

Growth of indigenous industries

India's industrial sector became highly diversified with a wide range of industries

Created many entrepreneurs with small capital investments

Generated millions of job opportunities

Effects of policies on Industrial development

Deficiencies

The performance of some public sector firms were not up to mark as it expected.

The system of licensing created 'license permit raj'

It created a huge bureaucracy characterised by red tape and corruptions

Indian consumers are forced to purchase whatever the Indian producer produced.

Effects of policies on Industrial development

Deficiencies

Some Indian producers exploited domestic consumers

Some of the public sector firms created public sector monopoly

Some inefficient firms took undue advantage of protection

Unduly regulated private initiative and enterprise.

Public sector entered into unnecessary areas wasting precious resources.

Effects of policies on Industrial development