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.
(Central Problems, Types of Economy)
INDIAN ECONOMY 1950-90
(PART - 2)
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.
(Plan, Goals of Indian Plans, Five Year Plan)
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Dr. Asad Ahmad
KV IIM, Lucknow
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