Indian Economy 1950-1990

Indian Economy 1950-1990

Indian Economy 1950-1990
Indian Economy 1950-1990

Indian Economy 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 that 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 favor of the kind of socialism 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 sympathizing with the socialist outlook, they found the.

Indian Economy Important Notes

  1. Planning Commission: India implemented the planned economic development model in 1950. Five-year plans for economic growth and development were implemented.
  2. Agrarian system: At this time the standard was the backbone of the Indian economy, in which all the central types in industry, mining, and infrastructure were assimilated to serve the point in the Indian economy.
  3. State of Licensing: Government control was given to dominate the Indian economy, regulating all industries, trade materials, and operations. It was often blamed on corruption, corruption, and a lack of innovation in America.
  4. More functions of the public sector: The public sector of the Indian economy played a major role where the government invested in agriculture, mining, and resource development or all global industries.
  5. Mixed Economy: India was to follow the mixed economy model by bridging the borders between capitalism and socialism. which

Indian Economy Explanation

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, (Indian Economy 1950-1990) the Planning Commission was set up with the Prime Minister as its Chairperson. The era of five-year plans had begun.


A plan should have some clearly specified goals. The goals of the five-year plans are growth, modernization, 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.

the goal 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 an increase in the country’s capacity to produce the output of goods and services within the country.

Indian Economy 1950-1990 It implies either a larger stock of productive capital, 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 a steady increase in the Gross Domestic Product (GDP). The GDP is the market value of all the goods and services produced in the country during a year.

You can think of the GDP as a cake and growth is an 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 derived from the different sectors 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.Indian Economy 1950-1990

In some countries, growth in agriculture contributes more to GDP growth, while in some countries the growth in the service sector contributes more to GDP growth (see Box 2.4). Modernization: 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.

The adoption of new technology is called modernization. However, modernization 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 workplace — in banks, factories, schools, etc. — and such a society on

most occasions is also prosperous. Self-reliance: A nation can promote economic growth and modernization 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.

Equity: Now growth, modernization, and self-reliance, by themselves, may not improve the kind of life that people are living. A country can have high growth, the most modern technology developed in the country itself, and also have most of its people living in poverty

.It is important to ensure that the benefits of economic prosperity reach the poor sections as well instead of being enjoyed only by the rich. So, in addition to growth, modernization, and self-reliance, equity is also important. Every Indian should be able to meet his or her basic

needs such as food, a decent house, education, and health care and inequality in the distribution of wealth should be reduced. Let us now see how the first seven five-year plans, covering the period 1950-1990,

attempted to attain these four goals and the extent to which they succeeded in doing so, with reference to agriculture, industry, and trade. You will study the policies and developmental issues taken up after 1991 in Chapter 3.


You have learned in Chapter 1 that during the colonial rule, there was neither growth nor equity in the agricultural sector. The policymakers of independent India had to address these issues which they did through land reforms and promoting the use of ‘High Yielding Variety’ (HYV) seeds which ushered in a revolution in Indian agriculture.

Land Reforms: At the time of independence, the land tenure system was characterized by intermediaries

(variously called zamindars, jagirdars etc.) who merely collected rent from the actual tillers of the soil without contributing towards improvements on the farm. The low productivity of the agricultural sector forced India to import food from the United States of America (U.S.A.).

Equity in agriculture called for land reforms which primarily refer to change in the ownership of landholdings. Just a year after independence, steps were taken to abolish intermediaries and to make the tillers the owners of land.

The idea behind this move was that ownership of land would give incentives (see Box 2.5) to the tillers to invest in making improvements provided sufficient capital was made available to them.

The land ceiling was another policy to promote equity in the agricultural sector. This means fixing the maximum size of land that could be owned by an individual. The purpose of the land ceiling was to reduce the concentration of land ownership in a few hands.

The abolition of intermediaries meant that some 200 lakh tenants came into direct contact with the government — they were thus freed from being exploited by the zamindars.

The ownership conferred on tenants gave them the incentive to increase output and this contributed to growth in agriculture. However, the goal of equity was not fully served by the abolition of intermediaries. In some areas the former Zamindars

continued to own large areas of land by making use of some loopholes in the legislation; there were cases where tenants were evicted and the landowners claimed to be self-cultivators (the actual tillers), claiming ownership of the land; and even when the tillers got

ownership of land, the poorest of the agricultural laborers (such as sharecroppers and landless laborers) did not benefit from land reforms. The land ceiling legislation also faced hurdles. The big landlords challenged the legislation in the courts, delaying its

implementation. They used this delay to register their lands in the name of close relatives, thereby escaping from the legislation. The legislation also had a lot of loopholes which were exploited by the big landholders to retain their land. Land reforms were successful in Kerala and West Bengal because these states had governments committed to the policy of land to

the tiller. Unfortunately, other states did not have the same level of commitment, and vast inequality in landholding continues to this day. The Green Revolution: At independence,

about 75 percent of the country’s population was dependent on agriculture. Productivity in the agricultural sector was very low because of the use of old technology and the absence of required infrastructure for the vast majority of farmers. India’s agriculture vitally depends on the

monsoon and if the monsoon fell short the farmers were in trouble unless they had access to irrigation facilities which very few had. The stagnation in agriculture during the colonial rule was permanently broken by the Green Revolution.

This refers to the large increase in the production of food grains resulting from the use of high-yielding variety (HYV) seeds, especially for wheat and rice. The use of these seeds required the use of fertilizer and pesticide in the correct quantities as well as a regular supply of water; the application of these inputs in correct proportions is vital.

The farmers who could benefit from HYV seeds required reliable irrigation facilities as well as the financial resources to purchase fertilizer and pesticides. As a result, in the first phase of the green revolution (approximately mid-1960s up to mid-1970s), the use of HYV seeds was

restricted to the more affluent states such as Punjab, Andhra Pradesh, and Tamil Nadu. Further, the use of HYV seeds primarily benefited the wheat-growing regions only. In the second phase of the green revolution (mid-1970s to mid-1980s), the HYV technology spread to a larger number of states and benefited more variety of crops.

The spread of green revolution technology enabled India to achieve self-sufficiency in food grains; we no longer had to be at the mercy of America, or any other nation, to meet our nation’s food requirements. Growth in agricultural output is important but it is not enough. If a large proportion of this increase is

consumed by the farmers themselves instead of being sold in the market, the higher output will not make much of a difference to the economy as a whole. If, on the other hand, a substantial amount of agricultural produce is sold in the market by the farmers, the higher output can make a difference to the economy.

The portion of agricultural produce that is sold in the market by the farmers is called marketed surplus.

Indian Economy 1950-1990
Indian Economy 1950-1990

A good proportion of the rice and wheat produced during the Green Revolution period (available as marketed surplus) was sold by the farmers in the market. As a result, the price of food grains declined relative to other items of consumption. The low-income groups, who spend a large

percentage of their income on food, benefited from this decline in relative prices. The Green Revolution enabled the government to procure a sufficient amount of food grains to build a stock that could be used in times of food shortage.

While the nation had immensely benefited from the green revolution, the technology involved was not free from risks. One such risk was the possibility that it would increase the disparities between small and big farmers—since only the big farmers could afford the required inputs, thereby reaping most of the benefits of the green revolution.

Moreover, the HYV crops were also more prone to attack by pests and the small farmers who adopted this technology could lose everything in a pest attack.

Indian Economy 1950-1990 Question and Answer

Question:1 What was the economy of India in 1950 to 1990 in the agriculture sector?

Answer: During the 1950s to 1990s, the economic condition of India’s agricultural sector was quite high. Meanwhile, technological advancements took place in the agricultural industry and new technologies and visions were offered to farmers.

This led to economic growth in the agricultural industry and improved the economic condition of the farmers. In particular, in today’s context, this content is a result of globalization, in which the agricultural industry has received more literature and improved.

Question:2 What are the objectives of the Indian economy from 1950 to 1990?


Economic Development and Liberalization: India’s prime objective was to take the path of better economic development and liberalization of society.

Eradication of Poverty: Eradication of the struggles of poverty and improving the quality of life of common people was the main religious objective of this period.

Employment Equity: The supporting theory that economic reforms would improve the employment situation was to ensure that people should get jobs.

Liberal and Social Democracy: Liberal and social democracy was to be strengthened so that the society could hear the views of others concerned.

Principles of Liberalization and Objectives: Religious objectives were the main objectives in liberalizing and reforming society. This gave prominence to issues of human rights, competition, and imperialism.

Question:3 How was the economy of India in the 1990s?

Answer: In the 1990s, India’s economic condition was greatly improved. Meanwhile, India began to follow the path of liberalization and made many reforms in economic policies. In turn, economic growth and liberalization enhanced and improved the fundamental aspects of the Indian nation’s development.

Meanwhile, the status of Indian economists rose, and online resources became available to students and youth. The Indian nation has reformed the scholarship system and given students more opportunities for studentship and liberalization.

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