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0:00 In the last chapter, we saw how India's economy was at the time of independence in 1947? There were many challenges and problems in front of India which it had to fix. In this chapter, we will study the development of Indian economy from 1950 to 1990. If you have not seen the last video, then there is a link to the playlist in the description, you can watch it from there. After independence, India had to decide which economic system to adopt. To adopt any economic system, any society has to answer three questions. Firstly, which goods or services will be produced in the country? Second, how will they be produced? Means human labor will be used more or more machines and thirdly on what basis these goods and services
0:47 will be distributed in public. On the basis of these questions, there are three types of economic systems. Capitalist, socialist and mixed economy. All the three economies give different answers to these questions. In capitalist society only those goods or services will be produced which have demand from which profit can be earned. If there is demand for car then car, if there is demand for bicycle then bicycle. The cheaper the labor and machine , the more it will be used and the distribution will be done by looking at the purchasing power. Means goods and services will be given only to those who have the money to buy them. For example, the poor need a cheap house, but it will not be considered as a demand from the market sense. Because the poor do not have purchasing power. Countries like UK, USA are not 100% but we can call them capitalist countries. On the other hand , the government decides what goods will be made,
1:37 how they will be made and how they will be distributed in a socialist society . Goods and services are distributed by looking at what people need and not by looking at what they can buy. Like the government can decide free healthcare to all the citizens, there is no private property here because everything is under the government. Countries like China, Cuba, we can keep them in the socialist category. Last is mixed economy. In this both the government and the market together decide what will be produced, how it will be produced and how it will be distributed. Most of the world's economies are like this. Now in a democracy like India, where there is so much diversity and there is so much inequality, extreme capitalist and extreme socialist economic system is not possible.
2:22 That's why India chose mixed economic system but inclined towards socialist. In which major economic planning will be done by the government, but at the same time the private sector will also be encouraged. Economy has been decided, now it was the turn of planning, a plan is made for how to use the resources of a country . It has some goals which have to be achieved in a period of time. In the case of India, the time is of five years. In 1950, a planning commission was formed, whose chairman is the prime minister, and 5-year planning started from here . And this planning commission was changed to NITI Aayog in 2015. There were four goals of 5 year plans. Growth, modernisation, self reliance and equity. Growth means
3:09 increasing the capacity to produce goods and services in the country. In the language of economics, a good indicator of this is the increase in GDP, that is, the increase in gross domestic product. The total money value of the goods and services produced in a year within the boundary of a country is called GDP. Like in 2021, the total monetary value of all the goods and services made in India was 3.18 lakh crores US dollar. The contribution of all the three sectors of the economy ie agriculture sector, industrial sector and service sector in GDP is called structure composition of economy. For example, in the case of India, this is the structural composition at present. Next goal is modernization. It means to use new technology like new machines or new seeds in agriculture
3:57 to increase production . And apart from this, bringing modern changes in the society as well. For example, equal rights for both women and men. Self reliance means avoiding the import of such goods which can be produced in India. For example, when India became independent, the situation in the agriculture sector was very bad. Due to this we had to import most of the food supplies from other countries. That is, we were dependent on other countries for food supplies , which is not good for the sovereignty of a newly independent nation. That's why the main goal of the first seven 5 year plans was to become self dependent. Growth, modernization, self-reliance despite all this does not ensure that poverty will reduce in the country. And people's life will improve.
4:44 That's why equity is also important along with all this. It should not mean that only rich people are benefited from development and the poor are not able to fulfill their basic needs like food, house, education, healthcare. Now let us see how and how much these goals were implemented in agriculture, industry and trade by the 5 year plans between 1950 and 1990 ? We had read that the condition of the agriculture sector was very bad during the colonial rule, so some steps were taken by the policy makers in independent India to rectify it . One of which was land reform and land selling and the other was green revolution. Land reform means changing the ownership of the land. Meaning, distribution of land from landlords to farmers.
5:30 The idea behind this land to the tiller policy was that if the farmers have the ownership of the land, then they will focus on making the productivity of the land so that they can get maximum profit. Earlier the owners of the land used to be the landlords, so even if there was profit from the hard work of the farmers, it would have been to the landlords. What is the use of actual tiller in this? Another policy to bring equity in agriculture sector was land ceiling means fixing the maximum amount of land an individual can have. Its purpose was to reduce the concentration of land ownership, which means only a few people have a lot of land and the rest have nothing. There was some benefit of these policies, but many people were saved by finding some or the other loophole in this too. For example, at some places the landlords chased away the farmers and
6:16 started claiming that we are also the farmers. Those who had more land than the limit, started getting the land registered in the name of their close relative so that the land could be saved somehow. Except Kerala and West Bengal, the government in other states was not much committed regarding these policies. That's why inequality in land holding is seen even today. Next is green revolution. In this, instead of traditional seeds, HYV seeds i.e. High Yielding Variety seeds were used, due to which food grains production increased significantly, especially for wheat and rice. But in comparison to traditional seeds, HYV Seeds require fertiliser, pesticides as well as regular supply of water . That's why farmers who had reliable irrigation facilities and
7:03 money to buy fertilizers and pesticides got more benefit from it. From 1960s to 1980s, green revolution technology spread in India. Due to which India became successful in being self sufficient in food grains . Now India is not dependent on America or any other country to fulfill the food requirements of the country . There were many benefits of Green Revolution such as production of wheat and rice increased and marketed surplus also increased due to which its price in the market decreased. Whatever production happens, farmers use it in two ways. One for own consumption and the other for selling in the market. That portion of agricultural produce that farmers sell in the market is called marketed surplus. There is more benefit of growth in agricultural production
7:49 only when there is more market surplus. Government was able to purchase sufficient food grains from farmers in the form of stock , which could be used during food shortage. Apart from this, there were also some risks in the green revolution. Like there was a risk that it would increase the difference between small farmers and big farmers because In this , only big farmers can afford the required inputs like fertilizers, pesticides, irrigation facilities . The second risk was that there are more chances of pest attack in HYV crops. So the small farmers who use this technology can lose everything in pest attack. But to eliminate these risks, the government has taken some steps. For example, small farmers were given loans at low interest rates. Subsidy was given on fertilizers.
8:34 Because of all this, green revolution benefited big farmers as well as small farmers. Now, there is a debate about whether agriculture subsidies are right from the economic point of view or not. Some economists say that when a new technology comes like HYV, it is risky for small farmers to adopt it. In such a situation, subsidies are necessary to encourage the farmers. But when that technology has become widely popular, then subsidies should be removed. Secondly, subsidies are for the benefit of farmers, but the major benefit of fertilizer subsidies is also for fertilizer industries, so it is not benefiting the targeted group and it is like a burden on the government's finances, so it should be removed. The price of anything is a signal of how much the thing is available.
9:21 If something is very less available then its price increases. And those who use expensive things, they use them in a very efficient way, saving them. So there is also a point of the economist that despite the low availability of goods due to subsidies , the price does not increase, it remains low. Due to which consumers have no reason to use it efficiently. Which further reduces the availability of that good or resources. On the other hand, some economists say that subsidies should not be stopped because farming is still very risky and most of the farmers in India are still poor. Without subsidies, they will not be able to afford things. That's why removing subsidies is not a solution, but it is a solution to ensure that its benefits go only to poor farmers.
10:08 So overall, till the late 1960s, India had become self sufficient in terms of food grains. But one negative side is that even till 1990, around 65% of the population was still employed in the agriculture sector, while the same agriculture output did not require the engagement of so many people. Next is the industrial sector. Economists believe that a nation can progress only when its industrial sector is good because it provides more stable employment than agriculture and promotes modernization. We had read that there was no special base of industries at the time of independence, mostly cotton or jute were textile industries only, therefore it was very important to increase the base of industries. Now,
10:54 at the time of independence, the Indian industrialists did not have enough capital to make any special investments. And even if they had, the Indian market was not so big that they would be ready to take this risk. Therefore, the government itself had to play a major role in the development of the industrial sector. Means the government will have full control of major industries and the private sector will play a supporting role. Industrial policy resolution 1956 was adopted on the basis of this goal . This resolution divided industries into three categories. In the first category, those industries which will be exclusively owned by the government. In the second category, that industry in which the private sector can support the efforts of the government. But no new unit can start.
11:40 It will be in the hands of the government only. In the third category, that remaining industry which will remain under the private sector. But in this too, due to the license system, the government had control. No new industries could be started without obtaining license from the government. In the economically backward regions , licenses were easily available to open industries, and the government also provided tax benefits, low rate electricity to such units. Used to provide so that regional equality is promoted because otherwise no one would like to set up industry in backward region . In 1955 Village and small scale industries committee, also known as Karve Committee. He noted that small scale industry can be used for rural development. On the basis of investment, it is decided which are small scale industries.
12:25 In 1950, the industries whose maximum investment was 5 lakhs were called small scale industries. Now this amount is 1 crore. It was seen that small scale industries use more labor than large industries, which generates more employment, but small scale industries are not able to compete with large scale industries. It was necessary for their development that they should be saved from large scale industries. That's why the government reserved the production of some products for small scale industries. Meaning only small scale industries can make it. Apart from this, some more exemptions were given, such as bank loan at lower interest rate and lower excise duty. The tax that the government imposes on the production of any goods is called excise duty. Next is trade policy means policy related to export import.
13:12 The trade policy of India in the first seven 5 year plans was import substitution. It means promoting domestic production by not importing so that India's industries can grow. For this, the government's job was to protect domestic industries from foreign competition. Because obviously Indian products cannot survive in front of the products of developed countries , then how would industries grow? Protection was given in two ways. Tariffs and Quota Tariff is the tax that is imposed on imported goods. Government increased the tariff due to which the price of imported goods became high and also fixed the quota on the quantity of goods that can be imported. It was believed that if protection is given to domestic industries, then with time they will also learn to compete.
13:59 Till the mid-1980s , no special attention was paid to the promotion of exports . During the first seven 5 year plans, the growth of the Indian industrial sector was very impressive. The contribution of the industrial sector to GDP, which is a good indicator of development, also increased. Where the industries were earlier limited only to cotton and jute textile, by 1990 it had become quite diversified. With the Promotion of Small Scale Industries, people who did not have enough money to start big industries could also start a business. Getting protection from foreign competition also helped a lot in the development of domestic industries. We saw that the public sector played a major role in the growth of industries , but some economists criticize it.
14:47 He says that there are many such goods and services which can be given to the private sector. Nevertheless, the government keeps it under its control, due to which there is no competition and the quality of goods and services does not improve. For example, the telecommunication service was under the government, due to which one had to wait long to get a telephone connection till the late 1990s . Many public sector farms were running in huge loss, due to which the economy was being affected. Due to the license system, industries were not able to work in an efficient manner. Stopping foreign competition started causing more harm than benefit. The disadvantage is that there was no competition for the Indian producer. He knew that people would have to buy what he made. There is no other option. So when they can sell low quality product at high price then why would they think of improving the quality? That's why competition is important.
15:35 So overall there were many conflicts due to which the economists demanded a change in the policy. The ultimate result of which was that in 1991, the government introduced a new economic policy, which was based on the LPG model , that is, based on liberalisation, privatization and globalization. We will read about LPG and further developments in the next chapter.
