Chapter-2 , Notes , Indian Economy During 1950-1990
Chapter -2 [Indian economy during 1950-1990]
ECONOMIC SYSTEM
It
refer to an arrangement by which central problems of an economy are solved
CENTRAL PROBLEM
Following are the
main central of an economy :-
a)
What to produced:-It involves deciding
the combination of goods and services to
be produced . It involves selection of goods and services & quantity of
each selective goods
b)
How to produced :-it involved deciding
the technology of producing i.e. whether the goods be produced with labour
Intensive technology (More labour less capital ) or with capital Intensive
technology (More capital less Labour)
c)
For whom to produced
:- It
involve deciding the distribution of output among the people i.e. selection of
category of people who will ultimately
consume the goods
TYPE OF ECONOMIES AND
SOLUTION OF CENTRAL PROBLEMS
There are three types of economies
1.
Capitalist economy eg.
Russia
2.
Socialist economy eg.
USA
3.
Mixed economy eg.
India
CAPITALIST ECONOMY
A
capitalist economy is the one in which the means of production are owned
controlled and operated by private sector . Production is mainly done for profit motive and the
central problem are solved with the use of market forces of demand and supply
a)
What to produced :-Under this only
those goods are produced which can be sold at a profit .
b)
How to produced :- goods must be
produced using cheaper technology of production If labour is available at
cheaper rate then labour intensive technology is used and if labour is costly
then capital intensive technology should be used .
c)
For whom to produced
:-In
this goods which are produced are distributed among the people according to
their purchasing power .
Play the Quiz from the link given below to master the Chapter
SOCIALIST ECONOMY
A
socialist economy is one , in which means of production are owned by govt.
sector
a)
WHAT TO PRODUCED :- In this govt.
decided to produced the goods as per the need of the society .
b)
HOW TO PRODUCED :- Govt. decide the
technique of production According to the favour of society .
c)
FOR WHOM TO PRODUCED
:-goods
produced must be distributed as per the need of society and not according to
the purchasing power .
MIXED ECONOMY
It
refer to a system in which public sector and the private sector are allotted
their respective role to solve the
central problem .
In
mixed economy govt. and market together solve the central problem .
The
private sector will provide those goods services which they can produce well
and govt. will provide essential goods and services which the private sector
fails to provide .
INDIA ADOPTED THE
MIXED ECONOMY
After
the Independence some leader were in the
favour of socialist economy but complete dilution of Pvt. Ownership was not
possible .
Capitalist
economy was also not favorable because their would be less chance for
Improvement in the Quality of life of poor .
As
a result mixed economy was adopted by the India with a strong public sector but
also with Pvt. Property and democracy
ECONOMIC PLANNING
It
can be defined as making major economic decision by a determinant authority on
the basis of survey of whole economy .The govt. of India set up planning
commission in 1950 with the prime minister as the chairman
The
purpose of planning commission was to
analysis the effective utilisation of
human and physical resources .
The
planning commission fixed the planning period for 5 year .
LONG TERM GOALS /
GOALS OF FIVE YEARS PLAN
Long
term goals are
1.
Growth
2.
Modernisation
3.
Self Reliance
4.
Full Employment
5.
Equity / Equitable Distribution
1.
GROWTH :- It refers to
increase in the capacity of a country to produce goods and services
Growth implies any of
the following :-
a)
Increase in the stock of productive capital .
Or
b) Increase in the size
of supporting services like transport and banking
Or
c)
Increase in efficiency of productive capital
GDP
is the good indicator of the growth . GDP refers to market value of all final
goods and services produced during an accounting year
GDP
can be derived from primary sector, from secondary sector as well as from
tertiary sector
By
1990 , the share of tertiary sector in GDP was 40.59 percent.
2.
MODERNISATION :- We have always
recognized the need for modernization of
soc iety to increase the standard of living of people modernization includes the following
Adoption of New
Technology :- Modernisation
aims to increase the production of goods and services through the use of new
technology .A farmer can increase the
output by using new variety of seeds and factory can increase the output by
using new types of machines
Change in social
outlook:-Modernisation
also require change in social outlook like gender empowerment or providing
equal rights to women
Modernisation Implies
a)
*Diversification of activities
b)
*Advancement of technology
Modernisation
aims to transform a feudal economy into modern and Independent economy
3. SELF RELIANCE :-It means overcoming the need of external
assistance self reliance means to have development through domestic resource only .
The
policy of self reliance was considered a necessity because of two reasons
a)
To reduce foreign
dependence :-As
India was recently under foreign control so it is necessary to reduce our
dependence on foreign country especially on food .
b)
To avoid foreign
interference :-
Due to import of food supply , foreign technology and foreign capital.
Foreign interference in our country will increase self reliance is
a policy to avoid these interference.
4.
FULL EMPLOYMENT:-It refers to a
situation when all the people who are able to work and willing to work are
getting work
Full
employment means those who are able to work and willing to work must get work
The
objective of full employment focuses on following :-
*More
and more people should participate in the process of growth
*Benefits
of growth must be availed by all section of society.
5.
EQUITY /EQUITABLE
DISTRIBUTION
The
objective of growth , modernization and
self reliance may not improve the standard of living of people
It
is important to ensure that the benefit are availed by all the section of
society ace to the objective of equity every Indian should be able to meet all
his need and income distribution must be equitable
Equity aims to increase the standard of living
of people.
ECONOMIC POLICY
DURING 1950-1990
1.
Heavy Reliance on
public sector :-
Economic policy from 1950-90, indicate heavy reliance on public sector . In
1956,17 industries were reserved for public sector . it was realized that the
objective of society could be achieved through the development of public sector
only .
2.
Regulated private
sector :-acc.
To Industrial Act 1948, new Industries in pvt. Sector could not be established
without a license or registration .
3.
Protection Of Small
scale Industries :-
SSI was offered protection from competition certain area of protection were
reserved for SSI and provide them financial help.
4.
Import substitution
:-
It implied domestic production of those goods which are imported from abroad .
FAILURE OF THESE
ECONOMIC POLICIES
1.
Elimination of poverty was the main objective of planning
but still 21.9% of population is below poverty line .
2.
We have failed to tackle Inflation in the economy
,because of high rate of Inflation purchasing power of people trends to decline
.
3.
Development of Infrastructure is still inadequate actual
growth has failed to match with target growth
4.
Social Inequality has forced the govt. to offer job
reservation to poor and backward section of society .
AGRICULTURE SECTOR
DURING 1950-1990
Problem in the agriculture
sector during 1950-1990
1.
Low productivity :- Indian agriculture
sector was known for its low productivity lack of knowledge with the farmer was
the main reason behind stagnation of the Indian agriculture
2.
Disguised
Unemployment :-It
refer to a situation in which more people are engaged in work than actually
needed there was high incidence of disguised Unemployment during 1950-1990
3.
Dependence on
Rainfall :-Due
to poor agriculture technique farmer were mainly dependent on rainfall . there
was minimum growth of agriculture Incase of least rainfall .
4.
Subsistence farming
:-
it is the practice of growing crop only for own consumption there is high
Incidence of subsistence framing during 1950-1990.
5.
Outdated technology
:-
There was outdated technology and poor harvesting Machine .harvesting was
generally done manually .
6.
Conflict between
landlord and farmer :-Farmer were often a part of contract with the landlord .
landlord were used to charge very high rate of Interest on the money borrowed
by farmer .
Land
reforms
Green revolution
Land reforms :- Land reforms mainly
refers to change in the Ownership of land holdings.
Indian
govt. took various steps to abolished Intermediaries and to make farmer the
owner of the land like
·
The
abolition of Intermediaries brought 200 lacs tenant /tiller into the direct
contact with the govt.
·
The
ownership right given to tenant to increase more output in the country.
The Objective of the
Govt. was not accomplished due to three reasons .
·
Zamindars
continued to hold large area of land by
making some loop holes in the law
·
Zamindars
claimed to be the self cultivator
·
Even
after getting the ownership of land the farmer did not get any benefit due to
lack of finance
LAND CEILING :-
It
refer to fixing the specified limit of land which could be owned by an
individual beyind the specified limit all the land would be taken over by the
govt. and will be allotted to the small Farmers
The
purpose of land ceiling policy was to reduce the concentration of land
ownership in few hands
Land
ceiling help to promote equity in the agriculture sector .
Land
reforms were successful in Kerala and west Bengal
GREEN REVOLUTION (Other name of new
Agriculture strategy )
The
Traditional agriculture practice followed in India were replaced by modern
technology .the aim of this strategy was to increase agriculture production
with the help of modern Inputs
NEED FOR GREEN
REVOLUTION
1.
75%
of population of India was dependent on agriculture.
·
India’s
agriculture was mainly dependent on monsoon . productivity decline in case of
least rainfall .
·
The
production in the agriculture was very low due to outdated technology.
MEANING AND ORIGIN OF
GREEN REVOLUTION
Green
revolution refers to the increase in the output of food grain due to the use of
high yielding variety of seeds (HYV seeds )
ORIGIN :- In 1966 , India
adopted high Yielding variety programme for the first time . the programme was
successful due to :-
·
HYV
seeds
·
Adequate
irrigation facility
·
Latest
technology and fertilizer
Green
revolution is also known as modern Agriculture technology
Que :- write a short
note HYV seeds (2 marks )
Ans:- These seeds can be
used in those places where there are adequate facility for drainage and water
supply
·
HYV
seeds required heavy doze of chemical fertilizer like pesticides
·
To
drive benefit from HYV seeds Indian farmer need to have proper Irrigation facility
and proper financial support
GREEN REVOLUTION IN
TWO PHASE :-
Phase I:-
In
the 1st phase the use of HYV seeds was limited to Punjab , Tamil
Nadu and Andhra Pradesh . The Use of HYV seeds benefited wheat crop only .
Phase 2nd
:-
In
this 2nd phase HYV technology spread to large no. of state and more
variety of crops .
BENEFIT OF GREEN
REVOLUTION
Or
IMPORTANT EFFECT OF
GREEN REVOLUTION
1.
Marketable surplus :- green revolution
results in marketable surplus . marketable surplus refers to that part of
output which is sold in the market by the farmer after meeting its own
consumption
Due to green revolution a greater proportion
of rice and wheat was sold by the farmer in the market . during 1950-90
2.
Buffer stock :-green revolution
enable the govt. to purchase sufficient amount of food grain to build a stock
which could be used in case of shortage
3.
Benefit to low Income
people :-
due to green revolution there was significant rise in the output which leads to
rise in supply thus price declined which ultimately benefited low income people
.
RISK ASSOCIATED WITH HYV SEEDS
Or
RISK ASSOCIATED WITH
GREEN REVOLUTION
RISK OF PEST ATTACK
:- The
HYV crop were more proven to attack by pest . There was a risk that small
farmer who adopted this technology could loose everything in pest attack .
SOLUTION :- this risk was
reduced by the govt. by providing training by the research institute set up by
the govt.
RISK OF INEQUALITIES
:-There
was a risk that HYV seeds were very costly and will increase the gap between
small farmers because small farmers were unable to afford the HYV seeds
SOLUTION :- Government provided
loans to the small farmers at a low rate of interest so that they could also
afford the HYV technology
SUBSIDIES
It
means that the farmer get Input at a price lower than the market price
It
was necessary for the government to grant subsidies to the farmers to provide
an incentive for adoption of HYV technology
POINTS IN THE FAVOUR
OF SUBSIDIES
·
The
government should continue with agriculture subsidies because farming in India
is a risky business.
·
Majority
of the farmers in India are poor and they are not able to afford the required
inputs without the subsidies.
·
By
providing subsidies govt can eliminate the inequality b/w rich and poor farmers
POINTS AGAINST
SUBSIDIES
1.
According to some economist subsidies were granted by the
by the govt to provide an incentive for the adoption of HYV technology so after
the adoption this technology subsidies should be removed as the purpose is
accomplished
2.
Subsidies do not benefit the poor farmer beer the
substantial amount of subsidies go to fertilizer industry and big farmers
CRITICAL APPRAISAL OF
AGRICULTURE DEVELOPMENT DURING 1950-90
1.
The land reform and green revolution were the greatest
achievement of the India govt to chance the productivity
2.
Due to green revolution then was substantia rise in
output and thus India become self sufficient in food grains the proportion of
GDP continues by agriculture declined significantly
3.
Till it to 65 percent of population of India was employed
in agriculture .
LIMITATION OF GREEN
REVOLUTION
1.
Limited Crops :- Due to green
revolution their was significant rise in output
but the benefit as limited to wheat and rice only
2.
Uneven spread :-Spread of green revolution had not been uniformed
across all the states in the states like Punjab, Haryana ,Tamil Nadu, Andhra
Pradesh, Maharashtra . There was a remarkable Impact was in significant.
3.
Limited Farming
Population:- The
bulk of farming population in India consist of small and marginal farmers the
benefits of green revolution have ignored these farmers because HYV technology was expensive
and out of the reach of these farmers
Question Does India
need another green revolution?
Ans:-Yes, India actually
need another green revolution because of following reasons:-
1.
Our productivity standards are extremely low.
2.
Our food grains stock are still uncertain .
3.
Most of the farmers in India are still facing uncertainties
of weather.
4.
Loan waiver are
becoming a compulsion
INDUSTRIAL SECTOR
DURING 1950-90
Importance
of industries :-
1.
SOURCE OF
EMPLOYMENT:-
Industry is an important source of employment . When agriculture is
overburdened and labour force is rising
then industries will provide employment to the largest number of people in
India.
2.
Technical means of
farming :-
Industry plays a crucial role in the modernization of farming has become
possible only with the growth of industries.
3.
IMPORTS GROWTH
PROCESS :-Industries
import expansion to growth process .In the absence of industries growth process
would have been restricted to the production of food only.
4.
INFRASTRUCTURAL
GROWTH :-
Industries leads to infrastructural growth in the economy. As industries spread
, there is an expansion of infrastructural facilities like Transport,
communication ,banking , insurance etc.
ROLE OF PUBLIC SECTOR
IN THE INDUSTRIAL DEVELOPMENT
There
was a need for a leading role of public sector in the development of industries
due to following reasons:-
1.
Shortage of capital
with private sector :- Pvt entrepreneur did not have the capital to undertake
industries investment at the time of independence Tata and Birla were the only
well known entrepreneurs due to limited size of market low demands and less
profit.
2.
Lack incentive for
pvt sector :-
The Indian market was not big enough to encourage pvt entrepreneurs due to limited
size of market low demand and less profit.
3.
Objective of social welfare:-The objective of
social welfare and equity could be
achieved only with involvement of public sector and not with pvt sector .
INDUSTRIAL POLICY
RESOLUTION ,1956 ( IPR)
On
30th April 1956, Industrial policy resolution was adopted In India
.it includes various procedure , policies , principle , rules & regulation
for controlling the Industries
CLASSIFICATION OF
INDUSTRIES
·
Schedule A :- the first category
contain those Industries which would be exclusively owned by the state .in this
17 Industries were Included like weapons , Atomic energy, Aircraft ,railway,
shipping etc .
·
Schedule B:- In this schedule 12
industries were placed which would be progressively owned by the state . the
state take the initiative of setting up of Industries and Pvt. Sector will
supplement the efforts .it include industries like aluminum , mine machinery ,
fertilizer etc .
·
Schedule C :- this schedule contain
remaining industries which were totally controlled by Pvt. Sector .
INDUSTRIAL LICENSING
AN
Industrial licensing is a written permission from the govt. to an industrial
Unit .
License were required
for the following :-
1.
Setting up of industries
2.
Expansion of existing industries
3.
Diversification of product
According to
Industrial licensing :-
·
No
new industry was allowed until the license obtain from the govt.
·
It
was easier to obtain license if industries were established in backward area
INDUSTRIAL CONCESSION
The
private entrepreneurs offered many type of
Industrial concession for setting up of Industries in backward area .
The
concession were :-
1.
Tax holiday
2.
Subsidy in power Supply
SMALL SCAlE
INDUSTRIES
In
1955 the village and small scale industrial committee (karve committee )
recognised the need of small scale industries .
According
to 1951 , small scale industry is defined as an industry whose maximum
investment in the fixed asset is Rs 5,00,000 .
According
to recent survey ,small scale Industry is defined as an industry whose maximum
investment in the fixed assets is one crore
FEATURE
/CHARCTERSTICES OF SMALL SCALE INDUSTRIES :-
1.
EMPLOYMENT GENERATION
:-small
scale industries are labour intensive i.e. they use more labour than the
machinery and thus they generate more
employment small scale industries provide employment to the largest number of
people in India
2.
NEED FOR PROTECTION
:- small
scale industries cannot compete with large scale industries so various steps
were taken by the govt. for their growth
·
Govt.
reserved a large number of product for the small scale industries .
·
Small
scale industries were also given concession like loan at low rate of interest
3.
EQUITY ORIENTED:- small scale industry
require small investment as compare to large scale industry. it does not leads
to concentration of economic power rather it promote equality among all the
section of society .
GOOD AND BAD EFFECT
OR MERIT AND DEMERITS OF INDUSTRIAL DEVELOPMENT
OR
CRITICAL APPRAISAL OF
INDUSTRIAL DEVELOPMENT DURING 1950-1990
1.
The proportion of GDP contribution by Industries was very
significant .The 6% growth rate of industries was remarkable
2.
The industrial sector become well diversified by 1990 .
Indian industries were no longer restricted to cotton and jute
3.
The promotion of small scale industries gave opportunity
to people with small capital to enter into the business
4.
Import substitution enable the development of domestic
industries .however there were 2 drawbacks
·
We
failed to develop a strong export sector .
·
We
failed to achieve the product quality
5.
Licensing policy helped the govt. to control the
industries but there were Two drawback .
· Some big entrepreneur
would get a license to prevent new industries to enter into the market
· The procedure of
obtaining license was very time consuming
6.
Public sector made a remarkable contribution by creating
strong industries base ,however
· Public sector created
inefficient monopolies
· Public sector firm
incurred huge losses but still continued to function .
FOREIGN TRADE
1950-1990
Import
substitution policy / Inward looking trade strategy
In
order to be self reliant , India has followed the strategy of replacing Import
with domestic production .
This
policy was characterised by inward look trade policy
Import
substitution refer to a policy of replacement of Import with domestic product.
For
eg. Instead of Importing vehical from foreign country domestic industries would
be encourage to produced vehicles in India .
This policy was
adopted for three motives:-
1.
To protect India from foreign competition .
2.
To save foreign exchange reserve .
3.
To achieve self reliance .
REASON FOR IMPORT
SUBSITITUTION
1.
The policy of Import substitution is based on the fact
that India is not in a position to compete with foreign goods , so In order to
develop domestic substitution was adopted.
2.
Restriction on Import was necessary as their was a risk
of drain of foreign currency
REDUCTION OF IMPORT
THROUGH TARIFFS AND QUOTA
TARIFF :-
it
refer to the taxes imposed on imported goods . the basic aim of imposing heavy
taxes was to make the Import more costly and thus Import will reduced
Quantitative restriction
QUOTA :-
It
refer to fixing the maximum limit on the import of commodity
Both
tariff and quota helped in reducing the import
GOOD AND BAD EFFECT
OF IMPORT SUBSITITUTION POLICY
GOOD EFFECT :-
1.
Due to import substitution policy their was a high rate
of industrial growth with structural Transformation and GDP from industries
sector rises by 13% .
2.
Due to this policy there was diversification of
Industrial growth
· Modern Industries was
no longer limited to cotton & jute textile
· There was remarkable
growth of automobile and electronic Industries .
3.
Protection to SSI ( SMALL SCALE INDUSTRIES):-Opened up
new opportunities of Investment for
those who did not have much capital .
BAD EFFECT :-
1.
Due to this policy , public sector Industries leads to
inefficient monopoly . telecommunication was a govt. monopoly , till 1990 with
poor facilities .
2.
Due to this policy , there was lack of competition for
domestic producers and thus it leads to lack of upgradation .
INDIA’S FOREIGN TRADE
AT THE TIME INDEPENDENCE .
1.
The britisher’s used natural resources as raw material
for domestic Industries .
2.
Indian economy was also exploited as a market for goods
of Britain .
3.
Foreign trade had significant decline due to decay of
handicrafts.
4.
Our balance of trade was restricted to Britain.
5.
Our direction of trade was restricted to Britain .
6.
The composition of Indian trade Indicate the backwardness
of Indian economy .
Play the Quiz from the link given below to master the Chapter
Comments
Post a Comment