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Economic Development Of India Post Independence (Part-1)

Economic Development Of India Post Independence (Part-1)

Introduction

  • At the time of independence India was bequeathed with a shattered economy, widespread illiteracy and shocking poverty. The entire politico economics structure has to be reconstructed for genuine development of the country.

Economic Development and Planning

Mixed Economy Model (Socialism)

  • Post Independence, apart from extreme poverty, illiteracy, a ruined agriculture and industry, the structural distortions created by colonialism in Indian economy and society made the future transition to self sustained growth much more difficult.
  • Ensuring well being and economic development were the important challenges for the Indian leadership and to pursue these goals, they had two model of economic development, the liberal – capitalist model followed in U.S.A. and Europe, another was the socialist model followed in U.S.S.R. During the debate of model of economic development, Almost everyone agreed that the development of India means economic growth and social and economic justice. Hence very few people supported the American style of capitalist development. There were many who got impressed by the Soviet model of development.
  • India had to abandon the colonial style of functioning for commercial gains only; and strive for poverty alleviation and social-economic redistribution was primary responsibility of the then government. Therefore India adopted the mixed model of economic development, which has features of both the capitalist and socialist models.

Left-Wing Politics [Economic Development Of India Post Independence (Part-1)]

  • Left-wing politics is more liberal in its approach and outlook
  • Left-wing economics policies involve reducing income equality, increasing tax rates for the wealthy, and government spending on social programs and infrastructure
  • Those belonging to the left-spectrum of politics believe that society will benefit from an expanded role for the government..
  • Left-wing politics is characterized by an emphasis on equality, fraternity, progress, and reform
  • Left-wing nationalism is based on social equality, popular sovereignty, and national-determination. It associates itself closely with national liberation movements
  • Left-wing politics is traditionally against religious institutions and believe that state and religion must be separate from each other (Secularism)
  • Populist ideas in the left-wing do not include horizontal exclusion and will rely more on egalitarian ideals.
  • The term ‘Left-wing’ has a similar origin during the French revolution where anti-monarchy revolutionaries were seated on the left side of the hall.

Right-Wing politics [Economic Development Of India Post Independence (Part-1)]

  • Right-wing politics are more conservative.
  • Its economic policies involve low taxes, less regulation on businesses by the government
  • Right-wing ideologies believe that the best outcome for society is delivered when individual rights and civil liberties are paramount with limited involvement of the government
  • Right-wing politics is characterized by ideas of authority, hierarchy, tradition, and nationalism
  • Right-wing nationalism is influenced by Romantic Nationalism where the state derives its legitimacy from the culture it governs, including, language, race, and custom “born” within this culture
  • Right-wing politics have always found supporters who believe that religion should play an expanded role in society.
  • Populism is a recurring theme in right-wing political circles. Populism is a political approach that appeals to ordinary people who feel that their rights are ignored.
  • The term ‘Right-wing’ has its origins during the days of the French Revolution (1789-1799) where the supporters of the Monarchy were seated on the right hall of the National Assembly

Why India rejected capitalist style of Modernization? 

During that era, development meant becoming more and more modern like industrialized countries of West.

  • India rejected such model because majority of the people were illiterate & to become modern, breakdown of traditional social structures was required, which was highly impossible.
  • Modernization was also associated with the ideas of growth, material progress and scientific rationality, but due to lack of resources and education, it was not possible in India which was fully dyed in the wool of caste based mentality.
  • To sum up → Lack of education, poverty, food insecurity, lack of capital, resources & technology, caste based society were major reasons behind rejection of capitalist model of economy.

Economic Planning In India [Economic Development Of India Post Independence (Part-1)]

  • The term economic planning is used to describe the long term plans of the government of India to develop and coordinate the economy with efficient utilization of resources. Economic planning in India started after independence in the year 1950 when it was deemed necessary for economic growth and development of the nation.
  • After the Independence, the Planning Commission was set up in March 1950 by a simple resolution of the Government of India. It has an advisory role and its recommendation become effective only when the Union cabinet approves these. The scope of the resolution by which Planning Commission was formed:
  • Every individual should have the right to an adequate means of livelihood.
  • Material resources of community their ownership and control should served the common good.
  • Economic system should operate in such a way that use of ‘means of production’ and ‘wealth’ should not result in well being of particular community and to the detriment of the society.
  • Noted civil engineer and administrator M. Visvesvaraya is regarded as a pioneer of economic planning in India. His book “Planned Economy for India” published in 1934 suggested a ten year plan, with an outlay of Rs. 1000 crore and a planned increase of 600% in industrial output per annum based on economic conditions of the time.
  • The Industrial Policy Statement published just after independence in 1948 recommended setting up of a Planning Commission and following a mixed economic model. Here are the major milestones related to economic planning in India:
    • Setting up of the Planning Commission: 15 March 1950
    • First Five Year Plan: 9 July 1951
    • Dissolution of the Planning Commission: 17 August 2014
    • Setting up of NITI (National Institution for Transforming India) Aayog: 1 January 2015

The First Five Year Plan: [Economic Development Of India Post Independence (Part-1)]

  • The draft of the first five year plan and the actual plan document was released in December 1951. People from all walks of life-academics, journalists, government and private sector employees, industrialists, farmers, politicians etc. discussed and debated the documents extremely.
  • The first five year plan (1951-56) sought to get economy out of the vicious cycle of poverty. The prominent young economist K.N. Raj argued for “hasten slowly” for the development for the first two decades as a fast rate of development might endanger democracy. The First Five Year Plan addressed mainly the agrarian sector including investment in dams and irrigation. Due to the bitter Partition, Agricultural sector was hit hardest and needed urgent attention. Huge allocations were made for “Modern Temples of India” like the Bhakhra Nangal Dam. The First Five Year Plan also focused on land reform for the country’s development. One of the basic aims of the planners was to raise the level of national income. Basic level of spending was very low in the 1950’s.
  • Hence planners sought to push savings up. Due to the efforts of the planners, savings did rise up and that rise continued till the Third Five Year Plan, but later it declined sharply.

Second Five Year Plan  [ Economic Development Of India Post Independence (Part-1)]

  • The second plan stressed on heavy industries and it was drafted by a team of economists and planners under the strong leadership of P.C. Mahalanobis. Contrary to the patience preached in first plan, second plan aspired to bring about quick structural transformation by making changes as all possible directions. The congress party passed a resolution in Avadi near Madras before finalization of the draft of the second plan and declared its goal of “Socialist pattern of society”. This was visible in Second Plan document. The government imposed substantial tariffs on imports to protect domestic industries, which helped them to grow. Savings and investments were growing, bulk of these industries like electricity, railways, steel, machineries and communication could be developed in the public sectors. The push for industrialization marked a turning point in India development.

Key controversies regarding 5 year plans [Economic Development Of India Post Independence (Part-1)]

The strategy of development followed in the early years raised several important questions.

  • Agriculture vs. Industry
  • Many thought that the second Plan lacked an agrarian strategy for development and the stress on industry caused agriculture and rural India to suffer badly. Veteran Gandhian economists like J.C. Kumarappa proposed an alternative blueprint that put greater emphasis on rural industrialisation. The stress on rapid industrialisation required import of technology for which India has to spend precious foreign exchange to buy from global market. It was the industry that attracted more investment than agriculture, the possibility of food shortage loomed large.
  • Public vs. Private Sector:
  • The state controlled key heavy industries, provided industrial infrastructure, regulated trade and made some crucial interventions in agriculture. Critics argued that the planners refused to provide the private sector with enough space and the stimulus to grow. The enlarged public sector produced powerful vested interests that created enough hurdles for private capital by installing systems of licenses and permits for investment. With the restriction on imports, of goods, Production of such goods in domestic market with little or no competition in addition to no incentive to improve the quality of products. The state controlled more things than required which led to inefficiency and corruption.

 

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