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HSSLIVE Plus One Economics Chapter 2: Indian Economy 1950-1990 Notes

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Post-independence, India adopted a mixed economy approach with centralized planning through Five-Year Plans, focusing on import substitution and self-reliance. This period witnessed the establishment of heavy industries, expansion of the public sector, and implementation of land reforms. While industrial development progressed, agricultural growth remained volatile until the Green Revolution in the late 1960s, which significantly increased food grain production. However, this era also faced challenges like industrial licensing restrictions (the “License Raj”), inefficient public sector undertakings, and insufficient attention to social infrastructure, resulting in modest economic growth rates averaging around 3.5% (often called the “Hindu rate of growth”).

Chapter 2: Indian Economy 1950-1990

After gaining independence in 1947, India adopted a mixed economy approach with elements of both socialism and capitalism. The period from 1950 to 1990 was characterized by central planning, import substitution, and a dominant public sector.

Five-Year Plans:

  • Planning Commission established in 1950 to formulate and implement Five-Year Plans
  • First Five-Year Plan (1951-56): Focus on agriculture and irrigation
  • Second Five-Year Plan (1956-61): Emphasized industrialization, especially heavy industries
  • Subsequent plans continued to balance agricultural and industrial development

Economic Objectives:

  • Economic growth and industrialization
  • Self-reliance and import substitution
  • Reduction of inequalities and poverty alleviation
  • Social justice and balanced regional development

Industrial Policy:

  • Industrial Policy Resolution of 1956 classified industries into three categories:
    1. Industries exclusively under state ownership
    2. Industries with both public and private participation
    3. Industries primarily left to private sector
  • License Raj: Elaborate system of licenses, permits and regulations for starting and operating businesses
  • Stringent import controls and high tariffs to protect domestic industries

Agricultural Policy:

  • Land reforms: Abolition of zamindari system, land ceiling acts, and tenancy reforms
  • Green Revolution (mid-1960s): Introduction of high-yielding variety seeds, chemical fertilizers, and modern farming techniques
  • Significant increase in food grain production, achieving self-sufficiency
  • Establishment of Agricultural Price Commission and Food Corporation of India

Banking and Financial Reforms:

  • Nationalization of 14 major commercial banks in 1969 (and 6 more in 1980)
  • Focus on expanding banking services to rural areas and priority sector lending
  • Establishment of Regional Rural Banks and NABARD

Trade Policy:

  • Import substitution to reduce dependency on foreign goods
  • Export promotion through incentives
  • High tariffs and quantitative restrictions on imports
  • Conservation of foreign exchange

Achievements of the Planning Era:

  • Development of a diverse industrial base
  • Expansion of infrastructure (power, transportation, irrigation)
  • Self-sufficiency in food grain production
  • Creation of scientific and technical institutions
  • Building capacity for economic self-reliance

Limitations and Criticisms:

  • Slow economic growth (the “Hindu rate of growth” of about 3.5% per annum)
  • Inefficiencies due to excessive regulation and bureaucratic controls
  • Industrial licensing led to monopolistic practices and lack of competition
  • Public sector enterprises suffered from low productivity and losses
  • Limited foreign investment and technology transfer
  • Regional imbalances in development

By the end of the 1980s, India faced serious economic challenges including:

  • Fiscal deficit
  • Balance of payments crisis
  • High inflation
  • Industrial stagnation
  • Low foreign exchange reserves

These problems eventually led to the economic reforms of 1991, marking a significant shift in India’s economic policy.

Complete Chapter-wise Hsslive Plus One Economics Notes

Our HSSLive Plus One Economics Notes cover all chapters with key focus areas to help you organize your study effectively:

Economics: Indian Economic Development

Economics: Statistics for Economics

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