Indian Economy 1950-90 (Part 1&2)

CHAPTER 2

INDIAN ECONOMY 1950-90

(PART - 1)

1. Economy – Refers to an organization in which people engaged in economic activities and earn means of living.

1.1 Economic System – Refers to a system which solves the central problems of an economy. There are three central Problems –

(i) What To Produce - To decide the final goods and services to be produced. It involves selection of goods and services and the quantity of each that economy should produce.

(ii) How To Produce – To decide the Choice of technique of production. Whether goods to be produced with more labour and less capital (Labour Intensive Technique) or with more capital and less labour (Capital Intensive Technique).

(iii) For Whom to Produce – How distribution of goods will take place. It involves selection of the category of people who will ultimately consume the goods.  

1.2 Types of Economy –

Market or Capitalist Economy –

* Factors of production owned and operated by individuals.

* Main motive to earn profit.

* Market demand and supply decides what, how and for whom to be produced in economy.   

What to produce – Only those goods will be produced that can be sold profitably in domestic market as well as foreign market.

How to Produce – Goods are produced using cheaper technique. If labour is available at cheap rate then labour Intensive Technique will be used and If capital is available at cheap rate then Capital Intensive Technique will be used in production.

For whom to Produce – Goods produced are distributed among people not on the basis of their needs but in the basis of their purchasing power or income.

Socialist of Planned Economy –

* Factors of production owned and operated by government.

* Main motive is social welfare.

* Government decides what, how and for whom to be produced. 

What to produce – The government will decide what to produce as per need of yje society.

How to Produce – Govt. will decides how to be produced.

For whom to Produce – Goods produced are distributed among people on the basis of their needs not on the basis of their purchasing power or income.

Mixed Economy –

* Government and private individuals owned and operated factors of production;

* Govt. and the market forces decide together what, how and for whom to be produced.

As a result India adopted Mixed Economy System with best features of both capitalist and socialist economy. Now India would be a socialist economy, with a strong public sector, but also with private property and democracy.

(for more data please watch video)

VIDEO REFERENCE  

Indian Economy (1950-90) - PART 1

(Central Problems, Types of Economy)

https://youtu.be/cEs30CQFcBI

INDIAN ECONOMY 1950-90

(PART - 2)

COMMON GOALS OF FIVE YEAR PLAN

1. Meaning of Planning - Planning is a technique and a means to attain goals. These pre-determined goals are specially formulated by the central planning authority.

2. Characteristics of Economic Planning –

l. Organisation system,

2. Maximum utilization of Resources,

3. Applicable on the whole economy,

4. Central planning Authority,

5. Interference by the state,

6. Changes in the economy,

7. Long term process,

8. Pre-determined objectives,

9 Existence of valuation mechanism,

10. Achievement of objectives.

3. Plan period in India - India has completed 12 Five Year Plans. Time Period of 12th Plan was 2012-2017.

4. Indian Planning Commission - The Planning Commission of India was established on 15th March 1950, to evaluate the physical, capital and human resources and on this basis programmes for the Plan Development and its evaluation.

The Planning Commission of India has now been dissolved in 2015 and replaced with National Institution for Transforming India (NITI) Aayog.

5. National Development Council (NDC) - As an apex body to planning, it was constituted on 6th August 1952. No plan was implemented without its approval.

6. Objectives of Planning in India –

6.1 Economic growth – Increase in country’s capacity to production of goods and services. Primary, Secondary and Tertiary sector contribute in GDP. Contribution of agriculture was nearly 50 percent pre 1991 and after reforms tertiary sector contribution increases nearly 42 percent which is a good indicator of structural transformation.

* A larger stock of productive capital;

* A larger size of supporting services like infrastructure;

* An increase in the efficiency of productive capital and services.

6.2 Modernisation – To adopt new technology with change in social outlook i.e. women also have same rights as men. 

* Adoption of New Technology

* Change in Social Outlook

6.3 Self-reliance – Non-dependency on foreign for factors of production and new technology as well as self reliance in food grain production.

* Overcoming from the external assistance;

* Development through domestic resources;

* To promote economic growth and modernization;

This policy was adopted because of two reasons-

* To reduce foreign dependency; and

* To avoid foreign interference.

6.4 Economic equity – Every Indian should have meet basic needs. Improve standard of living of weaker section of society and reducing regional inequalities.

* It is important to ensure that benefits of economic prosperity are availed by all sections of society;

* Every Indian should be able to meet his or her basic need.

* Ensure reduction in inequality in income and wealth.

Equity aims to raise standard of living of all people and promote social justice.

7. Achievements of Indian Plans -

7.1 Growth-Oriented Development Strategy (1951-65) - In first plan, actual growth rate was higher than targeted. But in second and third plans, it was less than targeted.

7.2 Equity Oriented Development Strategy (1966-90) - There are two big achievements in the field of self-reliance.

(i) India attained almost self-sufficiency 1n the field of food grains, and

(ii) Due to development of heavy engineering, machinery equipment, iron and steel and other capital goods industries, India become self-sufficient in machinery equipment and other capital goods.

8. Failures of Economic Planning –

1. Slow progress in per capita and national income,

2. Unemployment,

3. Increase in economic disparity,

4. Economic instability,

5. Failure in agriculture sector,

6. Failure in industrial sector,

7. Failure in resource mobilisation,

8. Dependence on foreign aid,

9. Defective regulatory policy.

9. Suggestions for the Success of Plans –

1. Widespread mass participation,

2. Control on prices,

3. Co-ordination between public and private sector,

4. Integration between long term and short term programmes,

5. Physical achievements should be basis of success,

6. Encouragement of saving and investment,

7. Control on population growth,

8. Job oriented economic planning,

9. Coordination between capital intensive and consumption oriented industries,

10. Utilization of human power,

11. Clean administration.

(for more data please watch video)

VIDEO REFERENCE  

Indian Economy (1950-90) - PART 2

(Plan, Goals of Indian Plans, Five Year Plan)

https://youtu.be/GtoQglw2N2w

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Regards 

Dr. Asad Ahmad

KV IIM, Lucknow

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Indian Economic Development - Chapter 1 - Indian Economy on the Eve of Independence

CHAPTER – 1

INDIAN ECONOMY ON THE EVE OF INDEPENDANCE

India had an independent economy before the advent of British rule. Though agriculture was the main source of livelihood for most of people, yet, the economy of the country was characterized by various kinds of manufacturing activities.

Origin of British Rule – Battle of Plassey, fought in 1757.

Basic Purpose of British Rule – To use Indian economy as feeder economy for the development of British Economy. They exploited India’s natural as well as human resources for the glory of their own country.

Features of Indian economy before British rule –

(1) Prosperous Economy

(2) Agrarian Economy

(3) Well known Handicraft Industries

Meaning of Colonialism – It is a system of political and social relationship between two countries, of which one is ruler and other is its colony. The ruling country not only has political control but also determine economic policy of the dominated country.

Low National Income and Per Capita Income -

o   The colonial government never made any sincere attempt to estimate India’s national income and per capita income.

o   Some individual attempts made by experts like Dada Bhai Naoroji, William Digby, Findlay Shirras, VKRV Rao and R C Desai.

o   First scientific estimate was made by V.K.R.V. Rao in 1931-32 during colonial rule.

o   Most of studies shows that country’s growth of real output during first half of the twentieth century was less than 2% and Per Capita output growth per year was only 0.5%.

1. Agriculture sector on the Eve of Independence - Indian economy under the British colonial rule remained fundamentally agrarian.

1.1 Features of Indian Agriculture on the Eve of Independence –

(i) Low Productivity,

(ii) Loss due to huge cost involved,

(iii) Lack of means of irrigation,

(iv) Subdivision of landholdings.

1.2 Causes of stagnation of agricultural sector -

1. Change in System and Tenure

(i) Permanent settlement or Zamindari system,

(ii) Ryotwari system and

(iii) Mahalwari system

          Under this zamindaree system, profits accruing out of agriculture sector went to the zamindars in the form of LAGAAN. Zamindar’s interest was only to collect lagan as they have to deposit lagan to the British  govt on a fixed date. If they fails to do so, they may lost their rights. Both British govt. and  zamindars did nothing for the betterment of farmers.

2. Commercialisation of Agriculture – It means production of crops foe sale in market rather than for self consumption.

Main causes were :

(i) Industrial revolution

(ii) Commercial policy of British Government,

(iii) Increase in foreign trade,

(iv) Payment of Land Revenue in cash,

(v) Use of money,

(vi) Development of the means of transportation and communication,

(vii) Expansion of the agricultural market,

(viii) High price of cash Crops.

          Farmers were given higher price for producing cash crops like cotton or jute, to feed raw material to the British base industries. This resulted in shortage of food grains, which cause to frequent famines in India. Although farmers are getting higher price for their crops but their economic condition did not improve.

3. Low level of productivity – Low level of technology, lack of irrigation facilities and negligible use of fertilizers resulted in low level of productivity.

4. Scarcity of Investment – Scarcity of investment in terracing, flood control and drainage. A large section of tenants, small farmers and sharecroppers neither had resources nor have incentive to invest in agriculture.

 REFERENCE VIDEO LINK

1. Indian Economy on the Eve of Independence - PART 1

(Basic concept, Agriculture Sector)

https://youtu.be/a9Fb4BdGuGk

2. Industrial Sector on the Eve of Independence – Like agriculture, industrial sector of India could not develop. The primary motive of the British government behind the de-industrialization of Indian handicraft industry was two-fold.

(i) Mere exporter of raw material – To get raw material from India at cheap rates to be used by upcoming modern industries in Britain.

(ii) Importer of finished goods – To sell finished products of British industries in Indian market at high price.

2.1 State of industrial sector was as follows:

(A) Decay of indigenous handicraft industries -

(i) Introduction of discriminatory tariff policy,

(ii) Low priced machine made goods,

(iii) Changes in taste and preference,

(iv) Fall in encouragement to Indian handicraft.

          Discriminatory Tariff Policy – This policy allowed (a) Free export of raw material from India and free import of finished goods from Britain; (b) Heavy duty was imposed on the export of Indian handicrafts. As a result Indian market was full of cheap finished goods from Britain and domestic goods couldn’t compete with foreign cheap goods.

 (v) Adverse effect of decline of handicraft industry – Due to decline of handicraft industry there was a high level of unemployment in country and resulted in over crowd of agriculture sector. Many people engaged in agriculture sector due to this unemployment and to find livelihood in agriculture sector. Second, Indian people depend on import of finished goods from Britain.

(B) Slow Growth of Modern Industry –

(i) Lopsided growth;

(ii) Lack of capital goods industries;     

(iii) Lower contribution to GDP – It refers to those industries which can produce machine tools, which are in turn used for producing article for current consumption. British govt. never paid any attention in this regards as they wanted Indian people to be dependent on Britain, for the supply of capital goods and heavy equipments.

(iv) Limited area of operation / Limited role of the public sector – The public sector were remained confined only to the railways, power generation, communication, ports and some other departmental undertakings.

2.2 Main characteristics of Industrial Development during British rule - 

(i) Development of consumer product industries,

(ii) Rising share of Indian capital,

(iii) Concentration of enterprises in few hands,

(iv) Dominance of foreign capital,

(v) Investment of own capital of capitalists,

(vi) Industrial policy,

(vii) Regional imbalance in industrial development.

3. Foreign Trade on the Eve of Independence - India was a trading nation before the advent of colonial rule. But due to restrictive policies adopted by the colonial government, India’s foreign trade was affected adversely. Foreign Trade conditions on the eve of independence were as follows:

(i) Export of primary products and import of finished goods – Exporter of primary products such as raw silk, cotton, wool, sugar, indigo, jute etc. and importer of finished consumer goods like cotton, silk, woolen clothes and capital goods like light machinery produced in Britain.

(ii) Monopoly control of Britain on foreign trade – More than half (>50%) foreign trade was restricted to Britain. Opening of Suez Canal in 1869 gives speed to foreign trade with Britain.

(iii) Drain of Indian wealth – Due to excess exports of raw material from India to Britain, India has a huge export surplus. However export surplus was used to:

(a) Expenditure on office setup by British Govt. in India;

(b) Meet expenses of war fought by British government;

(c) To import invisible items.

(iv) Misuse of export surplus.

 
REFERENCE VIDEO LINK

2. Indian Economy on the Eve of Independence - PART 2

(Foreign Trade, Industrial Sector)

https://youtu.be/BUOxMUkVS3A

4. Demographic conditions on the eve of Independence - First Census of population of British India was made in 1881. 1921 is the year of great divide. Before 1921 India was in the first stage of demographic transition. The second stage of transition began after 1921. The population of India also decreases 1n 1921 as compared to 1911. At the time of independence, the features of demographic conditions were as follows:

(i) High birth and death rate- Birth rate refers to number of children born per thousand in a year. Death rate refers to number of people dying per thousand  persons in a year. Both birth rate and death rate were very high as 48 and 40 per thousand respectively.

(ii) High infant mortality rate – It refers to infants dying before reaching one year of age per thousand live births in a year. It was 218/1000.

(iii) Low life expectancy ratio – It refers to the average number of years for which people are expected to live. It is based on the birth year, demographic factors, its age and gender. The life expectance was 44 years at the eve of independence.

(iv) Low literacy rate – Total literacy was less than 16 percent. Female literacy was about 7 %.

(v) Low standard of living and widespread poverty – There is no doubt extensive poverty prevailed in India. The standard of living of common people was very low and widespread poverty in the country.

(vi) Poor state of health facilities – Public health care facilities either unavailable to the mass or inadequate. As a result air and water born diseases were widespread.

5. Occupational structure on the eve of independence - Occupational structure refers to distribution of working population across different industries and sectors. During colonial rule, occupational structure did not change much. The state of occupational structure during the British rule was as follows :

(i) Pre-dominance of agricultural sector – This sector accounted nearly 75%  share of workforce. Service and manufacturing sector accounted for remaining 25%.

(ii) Growing regional variation – The states of Tamil Nadu, Andhra Pradesh, Maharashtra, Kerala, Karnataka and west Bengal witnessed a decline in dependency of workforce on agriculture sector. However at the same time states such as Orissa, Rajasthan and Punjab reported increase in the share of workforce in agriculture.   

 

REFERENCE VIDEO LINK

3. Indian Economy on the Eve of Independence - PART 3

(Demographic Condition, Occupational Structure)

https://youtu.be/SWpXgw458iI

6. Infrastructure on the eve of independence - Under infrastructure, we include all those industries and services which are used to develop other industries. Development of infrastructure during colonial rule was not to provide better facilities to general public but serve the British interest only. We include the following under infrastructure:

(i) Railway – Railways introduce in 1850. First passenger train (Sahib, Sindh, Sultan) with 400 passengers run between Mumbai to thane in 1853. It enabled:

(a) People to travel long distance; and

(b) Fostered commercialization of Indian agriculture.

(ii) Roads – Built primarily for the purpose of mobilizing the army within the country and send raw material to the nearest port.

(iii) Water and Air Transport – This is developed but proved uneconomical and failed to compete with railways.

(iv) Communication System – Post and telegraph were developed to maintain law and order in country. First stamp was released in 1952 and first telegraph line was started in 1953.

Reasons for Infrastructural Development –

1. Roads – The roads were built for:

(a) Mobilizing the army within India and

(b) Drawing out raw materials from countryside to the nearest ports.

2. Railways – The railways were developed for:

          (a) To have effective check on the vast Indian economic territory,

(b) To make huge profit by linking railways with Indian ports.

(c) To invest British fund in India to make profit.

3. Electric Telegraph – The electric telegraph was introduced at a high cost to serve the purpose of maintaining law and order.

Real motive was to serve various selfish interests of the British Government. 

7. Indian Economy on the Eve of Independence –

(i) Colonial economy – They exploited Indian economy in many ways like:

(a) Facilitate growing British industries with the supply of raw materials           from India;

(b) They encouraged commercialization of agriculture which has adverse impact on Indian economy.

(ii) Semi-feudal economy –

(a) The land settlement system gave birth to feudal relations between landlord and tenants. Landlords are very cruel to the cultivators and used to charge very high lagan.

(b) Establishment of modern industries led to creation of two classes – capitalist and labourers.

(iii) Backward Economy – The main reasons of backwardness are:

(a) Low level of productivity;

(b) Low per capita income;

(c) Traditional methods of agriculture;

(d) High birth rate and death rate;

(e) Mass illiteracy.

(iv) Stagnant Economy – An economy wish have very low growth rate is termed as stagnant economy. India’s growth of aggregate real output was (first half of 20^th  century) was less than 2% and Per Capita Output was only 0.5%.

(v) Depleted (Depreciated) Economy – It refers to an economy, where no arrangements have been made to replace the physical assets, depreciated due to excessive use. During the second world war Indian industries had to work beyond their capacities to meet the increase demand of plant. Machinery, equipments etc for the war.

(vi) Amputated Economy – The Britishers believe in ‘divide and rule’. They always promoted discrimination between various groups on the basis of religion, race, cast, language and culture. As a result, on the eve of independence, country was geographically divided into two parts: India and Pakistan. Partition resulted shortage of raw material for jute and cotton mills as most of the cotton and jute producing areas went to East Pakistan and industries are in west Indian states.

8. Positive contribution of British rule –

(i) Self-sufficiency in food grain production,

(ii) Better means of transportation,

(iii) Check on famines,

(iv) Shift to monetary economy, and

(v) Effective administration set up.

         

After independence, India envisaged an economic system which combines the best features of socialism and capitalism - this culminated in the mixed economic model.

REFERENCE VIDEO LINK

1. Indian Economy on the Eve of Independence - PART 1

(Basic concept, Agriculture Sector)

https://youtu.be/a9Fb4BdGuGk

2. Indian Economy on the Eve of Independence - PART 2

(Foreign Trade, Industrial Sector)

https://youtu.be/BUOxMUkVS3A

3. Indian Economy on the Eve of Independence - PART 3

(Demographic Condition, Occupational Structure)

https://youtu.be/SWpXgw458iI

4. Indian Economy on the Eve of Independence - PART 4

(Infrastructure, Positive Contribution, Condition of Indian Economy)

https://youtu.be/3p25C0FIWIQ

Please like, Share Subscribe and download app from play store by link given in description.

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Regards 

Dr. Asad Ahmad

KV IIM, Lucknow

##pls share other educational / official school group, so that more students will get benefit. Thanks a lot.

To get link text on 

08770981320/ 09451927636

Facebook page - https://m.facebook.com/madeeconomicseasy/?ref=bookmarks

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eco.lecturer1984@gmail.com