Envisioning a New Socio-Economic Order - Study Notes

Lesson summary

At Independence India was poor and largely rural. The new government chose a socialistic pattern of society and set out to reform agriculture, build heavy industry through the public sector and plan development through Five Year Plans. Later, losses in the public sector and slow growth led to liberalisation in 1991.

The economy in 1947

• Poverty was very high; nearly 80% of people lived in villages and depended on agriculture.
• Artisans had lost their crafts under British rule, so agriculture was overcrowded and per capita income was low.
• Semi-feudal relations: cultivators were exploited by landowning classes and heavily indebted to moneylenders.
• Industry was small: Tata Iron and Steel was the best known heavy industry; others were cotton, paper, chemicals, sugar, jute and cement. Industry gave only 13% of GDP in 1950.
• Most consumer goods were imported; foreign companies only marketed in India.

Socialistic pattern of society

• The Preamble declares India "a sovereign, socialist, secular democratic republic".
• Aims: reduce inequalities, eliminate exploitation, prevent concentration of wealth, equal opportunity in education and employment.
• Means: land reforms in agriculture, a public sector in industry, comprehensive planning.
• Borrowed from the Soviet experience, hence called "Nehruvian Socialism".

Agricultural policy

• Low productivity; food grains had to be imported.
• Disguised unemployment: so many depended on farming that some could leave without output falling.
• Backwardness had two causes: institutional (landowner-cultivator relations) and technological (seeds, fertilizers, machinery, irrigation). Institutional reform came first.
• Agriculture is a state subject, so each state passed its own land laws.

Land reforms

Appraisal: economically disappointing, but zamindari abolition ended the semi-feudal system and made peasants politically aware.

Green Revolution

• Mid-1960s food crisis; HYV seeds of wheat and rice adopted in 1965 in irrigated areas.
• Needed water, tractors, chemical fertilizers and pesticides; these industries grew too.
• Self-sufficiency within twenty years. Rice: 35 million tonnes (1960-61) to 104 (2011-12); wheat: 11 to 94.
• Surplus stored by the Food Corporation of India and supplied through the Public Distribution System.
• Milk and egg output also rose, diversifying diets.
• Costs: wider regional disparities, excessive chemicals, environmental problems; a move back to organic farming.

Rural development and employment

• By the 1970s nearly half the population was below the poverty line; numbers grew with population.
• IRDP (1980-1999): assets such as land improvement, cows or goats and small shops for poor households. All 5011 blocks; 600 families per block over 1980-85, 15 million families in all. Subsidy 25% for small farmers, 33.3% for marginal farmers and agricultural labourers, 50% for tribal households, shared equally by Centre and States; banks lent the rest. 53.5 million households covered till 1999. Dairy animals 50% of assets. Restructured in 1999 for self-employment.
• MGNREGA (2005): at least 100 days of wage work a year for adults of rural households willing to do unskilled manual work. Legal right to demand work; job cards; work within 15 days or unemployment allowance; site within 5 km; implemented by Gram Panchayats; no contractors; wage-capital ratio 60:40; one-third women; equal wages. Wages paid into bank or post office accounts. Rs 1,10,000 crores paid and 1200 crore person-days generated between 2006 and 2012.

Industry

• Gandhian model: village and cottage industries. Nehruvian model adopted: large-scale heavy industry owned by the state.
• 1948 policy: four categories - state monopolies (atomic energy, railways, arms), 18 industries under government control, mixed, and private.
• Industrial Policy Resolution 1956: Schedule A state monopoly; Schedule B state and private; Schedule C the rest.
• Industrial Development and Regulation Act 1951: licence needed to set up or expand a unit.
• 1973: big houses encouraged into backward areas. 1977 (Janata): rural, village and small industries. 1980 (Congress): balanced growth.
• Coal mines, petroleum companies, banking and insurance nationalised; cement rationed; consumer goods restricted.

Public sector

• 5 enterprises in 1951; 225 in 2012. Investment Rs 29 crores (1951) to 7.3 lakh crores (2012).
• Two considerations: socialist ideology, and the practical need for state investment in costly "long gestation" projects.
• Steel plants at Bhilai, Rourkela, Durgapur and Bokaro; BHEL and Hindustan Machine Tools, with help from Britain, Germany and Russia.
• BHEL first in Bhopal, later Tiruchirappalli, Hyderabad and Haridwar.
• Crisis by 1991: half the profit came from petroleum; spread into hotels, tourism and TV sets; political location choices, cost overruns, overstaffing, bureaucratic management. Disinvestment began in 1991.

Liberalisation, 1991

• Controls and licences removed; larger role for the private sector; disinvestment and closure of sick units.
• Gains: more goods for consumers, more foreign investment, faster growth.
• Costs: wider income disparities; most new jobs in the informal sector.

Five Year Plans

• Planning Commission set up in 1950 on the Soviet model.
• First Plan 1951-56: agriculture, 31% of outlay of Rs 3870 crores.
• Second Plan 1956-61, the Mahalanobis Plan: heavy industry; industry's share rose from 6% to about 24%.
• First two plans aimed at about 4% growth, the "Hindu rate of growth", and achieved it.
• Fourth Plan (1969-74): poverty alleviation. Eighth Plan (1992-97): liberalisation.
• Three annual plans 1966-69; twelve plans in all to 2017. NITI Aayog replaced the Planning Commission in 2015.

Education, science and technology

• Literacy: 18.3% (1951) to 74% (2011); female 65%, male 82%.
• 2014-15: 12.72 lakh primary and upper primary schools, 38,498 colleges, 43 Central Universities.
• Dropout schemes: SSA, RMSA and Samagra Shiksha Abhiyan.
• IISc Bangalore, 1909; TIFR 1945, through Homi J. Bhabha; NCL Pune and NPL New Delhi.
• CSIR umbrella body; Atomic Energy Commission nodal for nuclear science; ICAR coordinates farm research; 67 agricultural universities, 3 in Tamil Nadu.
• IITs: first at Kharagpur; now 23 IITs, 31 NITs and about 25 IIITs.