Class 11 Economics Notes Chapter 2 (Indian economy 1950-1990) – Indian Econimoc Development Book

Detailed Notes with MCQs of Chapter 2: Indian Economy from 1950 to 1990. This period is crucial because it laid the foundation for independent India's economic journey. Understanding the policies, goals, successes, and failures of this era is vital, not just for your Class 11 curriculum, but also for various government exams.

We'll break down the key aspects systematically.

Indian Economy (1950-1990): Planning, Policies, and Outcomes

1. Introduction: The Context

• India gained independence in 1947 with a stagnant, underdeveloped economy, crippled by colonial exploitation.
• Leaders faced the challenge of nation-building and economic development.
• There was a consensus on the need for government intervention and planning to guide economic development.
• India adopted a Mixed Economy model, combining elements of both capitalist (private sector) and socialist (public sector) systems. The public sector was envisioned to play a dominant role in strategic industries.

2. The Planning Commission and Five-Year Plans

• The Planning Commission was set up in March 1950 (chaired by the Prime Minister) to formulate plans for economic development. (Note: It has now been replaced by NITI Aayog since 2015).
• India embarked on a system of Five-Year Plans (FYPs), starting from 1951.
• Rationale for Planning: To allocate scarce resources efficiently, set national priorities, coordinate economic activities, and achieve specific socio-economic goals over a defined period.

3. The Goals of Five-Year Plans
The long-term goals, common to most FYPs during this period, were:
* (a) Growth: Increase in the country's capacity to produce goods and services. Measured primarily by the increase in Gross Domestic Product (GDP). The aim was to achieve a structural transformation – moving from agriculture towards industry and services.
* (b) Modernisation: Adoption of new technology (e.g., in agriculture, industry) and also changes in social outlook (e.g., gender empowerment, breaking traditional barriers).
* (c) Self-Reliance: Reducing dependence on foreign countries, especially for essential goods, technology, and food grains. This was crucial given India's recent colonial past and the uncertainties of the Cold War era. Emphasis was on developing domestic production capacity.
* (d) Equity: Ensuring that the benefits of economic growth reach all sections of society, reducing income inequality and poverty. This involved promoting social justice and providing basic necessities to the poor.

4. Development Strategy: Sectoral Focus

• (a) Agriculture:

  • Problem: Stagnation, low productivity, dependence on monsoons, exploitative land tenure systems (Zamindari, etc.).
  • Policies:
    • Land Reforms: Aimed at achieving 'equity in agriculture' and boosting productivity. Key components included:
      • Abolition of Intermediaries: Zamindars, Jagirdars etc., were abolished to bring cultivators into direct contact with the government. (Partial success).
      • Land Ceiling: Fixing a maximum limit on the amount of land an individual/family could own. Surplus land was to be redistributed among the landless. (Limited success due to loopholes, legal challenges, and poor implementation).
      • Tenancy Reforms: Regulating rent and providing security of tenure to tenants. (Limited effectiveness).
    • The Green Revolution (mid-1960s onwards): Focused on increasing food grain production using:
      • High Yielding Variety (HYV) Seeds: Especially for wheat and rice.
      • Increased use of Chemical Fertilizers and Pesticides.
      • Expansion of Irrigation Facilities.
      • Credit and Marketing Support.
  • Outcomes of Green Revolution:
    • Positive: Achieved self-sufficiency in food grains (food security), increased agricultural output, buffer stocks, benefits to farmers (especially in Punjab, Haryana, Western UP).
    • Negative/Limitations: Increased regional disparities, benefited large farmers more than small ones (income inequality), environmental concerns (soil degradation, water depletion), focus limited primarily to wheat and rice.

• (b) Industry:

  • Problem: Weak industrial base, lack of heavy/capital goods industries, dominance of foreign capital in some sectors.
  • Policies:
    • Industrial Policy Resolution (IPR) 1956: This formed the basis of industrial development for decades.
      • Classified industries into three schedules:
        • Schedule A: Exclusively owned by the State (e.g., arms, atomic energy, railways).
        • Schedule B: State would take the initiative, private sector could supplement (e.g., mining, machine tools, fertilizers).
        • Schedule C: Remaining industries left to the private sector, but under state control/regulation.
      • Emphasized the leading role of the Public Sector Undertakings (PSUs) in developing infrastructure and heavy industries.
      • Stressed the importance of reducing regional disparities.
    • Industrial Licensing (License Raj): Private entrepreneurs needed a government license to start a new firm, expand production, or diversify. The aim was to channel investment into desired areas and prevent concentration of economic power. However, it led to delays, corruption, and inefficiency.
    • Promotion of Small-Scale Industries (SSI): SSIs were promoted for their potential in employment generation, promoting equity, and using local resources. Measures included reservation of certain products exclusively for SSIs and providing financial/technical assistance (e.g., through Karve Committee recommendations).

• (c) Foreign Trade:

  • Policy: Inward-Looking Trade Strategy or Import Substitution.
  • Rationale: To protect domestic industries from foreign competition, conserve foreign exchange, and achieve self-reliance.
  • Tools Used:
    • Tariffs: Taxes imposed on imported goods, making them more expensive.
    • Quotas: Quantitative restrictions limiting the amount of specific goods that could be imported.
  • Impact:
    • Positive: Enabled the growth of a diversified domestic industrial base (though often inefficient). Protected nascent industries.
    • Negative: Lack of competition led to inefficiency, poor quality goods, and limited innovation in domestic industries. Consumers had limited choice and often paid higher prices. Exports were neglected.

5. Critical Appraisal of Development Strategy (1950-1990)

• Achievements:

  • Diversification of Industry: India developed a reasonably diversified industrial base, including capital goods industries.
  • Growth in National Income: GDP and per capita income did increase, although the growth rate (often termed the 'Hindu rate of growth' around 3.5%) was modest compared to other developing nations.
  • Food Security: Achieved self-sufficiency in food grains due to the Green Revolution.
  • Growth in Savings and Investment: Domestic savings rate increased significantly.
  • Development of Infrastructure: Significant expansion in power, transport, communication, banking etc., largely through public sector efforts.

• Failures/Limitations:

  • Inefficiency of Public Sector: Many PSUs became loss-making, bureaucratic, and inefficient due to lack of competition, political interference, and poor management.
  • License Raj: Stifled entrepreneurship, led to corruption and delays, and created inefficiencies.
  • Inward-Looking Strategy: While protecting domestic industry, it bred inefficiency and technological backwardness due to lack of competition. Export potential remained largely untapped.
  • Limited Impact on Poverty and Inequality: Despite the goal of equity, poverty remained widespread, and income/regional inequalities often widened. Land reforms were largely unsuccessful.
  • Slow Growth: Economic growth was slow compared to potential and performance of East Asian economies.
  • Fiscal Deficits: Government expenditure often exceeded revenue, leading to borrowing and fiscal imbalances, contributing to the 1991 crisis.

Conclusion (Setting the Stage for Reforms):
The period 1950-1990 saw India establish the foundations of a planned, mixed economy aiming for growth with equity and self-reliance. While there were significant achievements, particularly in industrial diversification and food security, the system also generated major inefficiencies, bureaucratic hurdles, and slow growth. These accumulated problems, culminating in a balance of payments crisis, eventually forced India to undertake major economic reforms in 1991, marking a shift away from the policies dominant in this era.

Multiple Choice Questions (MCQs) for Practice:

1. The body responsible for formulating Five-Year Plans in India from 1950 to 2014 was:
   a) NITI Aayog
   b) Finance Ministry
   c) Planning Commission
   d) National Development Council

2. Which of the following was NOT a primary goal of India's Five-Year Plans during 1950-1990?
   a) Growth
   b) Modernisation
   c) Privatisation
   d) Self-Reliance

3. The strategy of protecting domestic industries by restricting imports through tariffs and quotas is known as:
   a) Export Promotion
   b) Import Substitution
   c) Liberalisation
   d) Globalisation

4. The Green Revolution primarily focused on increasing the production of:
   a) Cotton and Jute
   b) Pulses and Oilseeds
   c) Wheat and Rice
   d) Fruits and Vegetables

5. The Industrial Policy Resolution (IPR) that emphasised the leading role of the public sector and classified industries was adopted in:
   a) 1948
   b) 1951
   c) 1956
   d) 1991

6. Land Ceiling, a component of land reforms, aimed to:
   a) Abolish intermediaries like Zamindars.
   b) Fix the maximum size of landholding an individual could own.
   c) Provide security of tenure to tenants.
   d) Encourage cooperative farming.

7. The term 'License Raj' refers to the system of:
   a) Promoting exports through licenses.
   b) Regulating industries through government permits and licenses.
   c) Distributing essential goods through ration cards.
   d) Controlling foreign exchange transactions.

8. A major criticism of the Green Revolution in India was that it:
   a) Led to a decline in overall food production.
   b) Primarily benefited small and marginal farmers.
   c) Increased regional and interpersonal inequalities.
   d) Reduced dependence on chemical fertilizers.

9. Small-Scale Industries (SSIs) were promoted during the planning era primarily because they were considered:
   a) More capital-intensive.

   • b) More employment-generating and equitable.
     c) Better suited for export markets.
     d) Technologically advanced.

10. The economic model adopted by India after independence, featuring both public and private sectors, is best described as a:
    a) Capitalist Economy
    b) Socialist Economy
    c) Mixed Economy
    d) Communist Economy

Answer Key:

1. c) Planning Commission
2. c) Privatisation
3. b) Import Substitution
4. c) Wheat and Rice
5. c) 1956
6. b) Fix the maximum size of landholding an individual could own.
7. b) Regulating industries through government permits and licenses.
8. c) Increased regional and interpersonal inequalities.
9. b) More employment-generating and equitable.
10. c) Mixed Economy

Make sure you revise these points thoroughly. Understand the why behind each policy, not just the what. This analytical approach will be very helpful for your exams. Let me know if any part needs further clarification.