NCERT Class 11 Economics Indian Economy

Indian Economy

1950-1990

2.1 INTRODUCTION

On 15 August 1947, India woke to a new dawn of freedom: finally we were masters of our own destiny after some two hundred years of British rule; the job of nation building was now in our own hands. The leaders of independent India had to decide, among other things, the type of economic system most suitable for our nation, a system which would promote the welfare of all rather than a few. There are different types of economic systems (see Box 2.1) and among them, socialism appealed to Jawaharlal Nehru the most. However, he was not in favour of the kind ofsocialism established in the former Soviet Union where all the means of production, i.e., all the factories and farms in the country, were owned by the government. There was no private property. It is not possible in a democracy like India for the government to change the ownership pattern of land and other properties of its citizens in the way that it was done in the former Soviet Union. Nehru, and many other leaders and thinkers of the newly independent India, sought an alternative to the extreme versions of capitalism and socialism. Basically sympathising with the socialist outlook, they found the economy with the private sector being encouraged to be part of the plan effort. The ‘Industrial Policy Resolution’ of 1948 and the Directive Principles of the Indian Constitution reflected this outlook. In 1950, the Planning Commission was set up with the Prime Minister as its Chairperson. The era of five year plans had begun.

2.2 THE GOALS OF FIVE YEAR PLANS

A plan should have some clearly specified goals. The goals of the five year plans are: growth, modernisation, self-reliance and equity. This does not mean that all the plans have given equal importance to all these goals. Due to limited resources, a choice has to be made in each plan about which of the goals is to be given primary importance. Nevertheless, the planners have to ensure that, as far as possible, the policies of the plans do not contradict these four goals. Let us now learn about the goals of planning in some detail. Growth: It refers to increase in the country’s capacity to produce the output of goods and services within the country. It implies either a larger stock of productive capital, or a larger size of supporting services like transport and banking, or an increase in the efficiency of productive capital and services. A good indicator of economic growth, in the language of economics, is steady increase in the Gross Domestic Product (GDP). TheGDP is the market value of all thegoods and services produced in the country during a year. You can think of the GDP as a cake: growth is increase in the size of the cake. If the cake is larger, more people can enjoy it. It is necessary to produce more goods and services if the people of India are to enjoy (in the words of the First Five Year Plan) a more rich and varied life.

The GDP of a country is derive from the different sector’s of the economy, namely the agricultural sector, the industrial sector and the service sector. The contribution made by each of these sectors makes up the structural composition of the economy. In some countries growth in agriculture contributes more to the GDP growth, while in some countries the growth in the service sector contributes more to GDP growth (see Box 2.4). Modernisation: To increase the production of goods and services the producers have to adopt new technology. For example, a farmer can increase the output on the farm by using new seed varieties instead of using the old ones. Similarly, a factory can increase output by using a new type of machine. Adoption of new technology is called modernisation. However, modernisation does not refer only to the use of new technology but also to changes in social outlook such as the recognition that women should have the same rights as men. In a traditional society, women are supposed to remain at home while men work. A modern society makes use of the talents of women in the work place — in banks, factories, schools etc. — and such a society will be more civilised and prosperous. Self-reliance: A nation can promote economic growth and modernisation by using its own resources or by using resources imported from other nations. The first seven five year plans gave importance to self-reliance which means avoiding imports of those goods which could be produced in India itself. This policy was considered a necessity in order to reduce our dependence on foreign countries, especially for food. It is understandable that people who were recently freed from foreign domination should give importance to self-reliance. Further, it was feared that dependence on imported food supplies, foreign technology and foreign capital may make India’s sovereignty vulnerable to foreign interference in our policies.

EXERCISES

1. Define a plan.

2. Why did India opt for planning?

3. Why should plans have goals?

4. What are miracle seeds?

5. What is marketable surplus?

6. Explain the need and type of land reforms implemented in the agriculture sector.

7. What is Green Revolution? Why was it implemented and how did it benefit the farmers? Explain in brief.

8. Explain ‘growth with equity’ as a planning objective.

9. Does modernisation as a planning objective create contradiction in the light of employment generation? Explain.

10. Why was it necessary for a developing country like India to follow self-reliance as a planning objective?

11. What is sectoral composition of an economy? Is it necessary that the service sector should contribute maximum to GDP of an economy? Comment.

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

13. Explain the statement that green revolution enabled the government to procure sufficient food grains to build its stocks that could be used during times of shortage.

14. While subsidies encourage farmers to use new technology, they are a huge burden on government finances. Discuss the usefulness of subsidies in the light of this fact.

15. Why, despite the implementation of green revolution, 65 per cent of our population continued to be engaged in the agriculture sector till 1990?

16. Though public sector is very essential for industries, many public sector undertakings incur huge losses and are a drain on the economy’s resources. Discuss the usefulness of public sector undertakings in the light of this fact.

Please refer to attached file for NCERT Class 11 Economics Indian Economy