Indian Economy – 1950 – 1990
- With independent our leaders were concerned for a system which would promote the welfare of all rather than a few.
- Socialism appealed to Jawaharlal Nehru the most, he was not in favour 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.
- Sympathising with the socialist outlook, they found the answer in an economic system which, in their view, combined the best features of socialism without its drawbacks.
- In this view, India would be a ‘socialist’ society with a strong public sector but also with private property and democracy.
- The government would ‘plan’ 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.
THE GOALS OF FIVE YEAR PLANS
- 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
- 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).
- The GDP is the market value of all the goods and services produced in the country during a year.
- 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.
- To increase the production of goods and services the producers have to adopt new technology.
- Modernisation does not refer only to the use of new technology but also to changes in social outlook
- 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.
- 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
- This policy was considered a necessity in order to reduce our dependence on foreign countries, especially for food.
- 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.
- A country can have high growth; the most modern technology developed in the country itself, and also has 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.
- In addition to growth, modernisation and self-reliance, equity is also important
- The first seven five year plans, covering the period 1950-1990, attempted to attain these four goals.