Kerala Plus One Economics Notes Chapter 2 Indian Economy 1950-1990
The Goals of Five Year Plans
A plan should have some clearly specified goals. The goals of the five-year plans are: growth, modernization, self-reliance, and equity. This does not mean that all the plans have given equal importance to all these goals. Let us now learn about the goals of planning in some detail.
1. Growth: It refers to an 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 a steady increase in the Gross Domestic Product (GDP).
2. Modernization: To increase the production of goods and services the producers have to adopt new technology Adoption of new technology is called modernization.
3. Self-reliance: A nation can promote economic growth and modernization by using its own resources or by using resources imported from other nations. The first seven five-year plans gave importance to self-reliance which means avoiding imports of those goods which could be produced in India itself. This policy was considered a necessity in order to reduce our dependence on foreign countries, especially for food. It is understandable that people who were recently freed from foreign domination should give importance to self-reliance.
4. Equity: Now growth, modernization and self-reliance, by themselves, may not improve the kind of life which people are living. A country can have high growth; the most modem technology developed in the country itself.
Agriculture
Land reforms and green revolution were the two important changes in India’s agricultural sector during the initial periods of independence.
Land Reforms: The purpose of land reforms is twofold. On the one hand, it aims to make rational use of the scarce land resource by enforcing conditions on holding land. Secondly, it aims at the redistribution of land in favour of landless farmers.
Land reform consists of the following measures:
- Abolition of intermediaries like Zamindars
- Tenancy reforms, ie. regulation of rent, the security of tenure, etc.
- Ceiling of landholding
- Distribution of land among landless by acquiring surplus land from big landlords
- Consolidation of holding and prevention of subdivision and fragmentation
- Organization of cooperative farming
The policy decisions and legislative initiatives of the government on land reforms were very progressive. As a result of it, tillers were able to undertake the permanent improvement of their land and this contributed to growth in agriculture. However, the implementation of land reforms was not free from limitations. Some loopholes in the law were conveniently exploited by the landlords and transferred surplus land in the name of their relatives or binamies. But states like Kerala and West Bengal implemented the land reform measures in a relatively successful way.
The Green Revolution: Planners and policymakers of independent India gave top priority to the development of agriculture. In 1960s the new technology in agriculture was tried in seven districts and was called the Intensive Agricultural Districts Programme (IADP). Later, the High Yielding Varieties Programme (HYVP) “as extended to the entire country, which is popularly known as Green Revolution or modem agricultural technology, seed fertilizer water technology. Norman Borlaug, an American Biologist was known as the father of the green revolution. Prof. M.S. Swaminathan is known as the father of the green revolution in India.
Features of the green revolution are:
- Use of high yielding variety (HYV) seeds
- Use of chemical fertilizers and pesticides
- Use of modem farm implements like power tillers, tractors, water pump sets, etc.
- Better irrigation facilities
- Easy availability of credit to farmers at lower interest rates
Industry and Trade
Economic growth and development depend upon industry and trade. The industry provides employment. In order to promote the industrial sector government introduced industrial policies.
Industrial Policy Resolution 1956 (IPR-1956)
To mold the economy into a socialist pattern, where the state ‘hold the commanding heights’ the Industrial Policy Resolution of 1956 (IPR1956) was adopted. This resolution classified industries into three categories:
- Industries exclusively owned by the state.
- Industries in which the private sector could supplement the efforts of the state.
- Remaining industries which were to be in the private sector. But they will be kept under state control through a system of licenses.
Small Scale Industries
Small scale industries are crucial for economic development. A small scale industry is defined with the reference to the maximum investment allowed to set up a unit. This limit of investment has changed over a period of time. In 1950 a small-scale industry unit was one which invests a maximum of rupees five lakhs, in 1966 it was raised to rupees 7.5 lakhs, in 1990 it was raised to rupees 60 lakhs and from 2000 it has been fixed at rupees one crore.
Small scale industries have the following advantages:
- Less capital investment
- Labour intensive technology – generates more employment opportunities
- Less dependence on imports
- Less pollution-environment friendly
- Rural development
Import Substitution
The practice of replacing imports with the products made within the country is known as import substitution. The government allowed a policy of protection in order to protect domestic industries.