Discuss some of the sources of thinking that went in to formulating a strategy for development immediately after Independence.
Answers
Answer:
Independence brought dreams of not just individual, but also economic, social and political freedom. Seventy-two years later, these ideals have undergone a transformation as India seeks to join the $5 trillion club. Reflecting on what shaped economic policy and the transition to millennial India, Mint’s editors bring you a curated history of the economy since 15 August 1947. In a snippety, easy-to-read format, we examine the influences of each era—socialism, post-socialism, liberalization and after. Mint’s Short History of the Indian Economy since 1947 gives you a glimpse into the making of a billion aspirations and opportunities.
An ancient land has a new beginning as a country facing monumental tasks
India’s independence was in itself a turning point in its economic history. The country was hopelessly poor as a result of steady deindustrialization by Britain. Less than a sixth of Indians were literate. The abject poverty and sharp social differences had cast doubts on India’s survival as one nation. Cambridge historian Angus Maddison’s work shows that India’s share of world income shrank from 22.6% in 1700—almost equal to Europe’s share of 23.3%—to 3.8% in 1952. As former prime minister Manmohan Singh put it: “The brightest jewel in the British Crown" was the poorest country in the world in terms of per capita income at the beginning of the 20th century.
Explanation:
India’s economic model: the state’s primacy over individual enterprise
Prime minister Jawaharlal Nehru’s development model envisaged a dominant role of the state as an all-pervasive entrepreneur and financier of private businesses. The Industrial Policy Resolution of 1948 proposed a mixed economy. Earlier, the Bombay Plan, proposed by eight influential industrialists including J.R.D Tata and G.D. Birla, envisaged a substantial public sector with state interventions and regulations in order to protect indigenous industries. The political leadership believed that since planning was not possible in a market economy, the state and public sector would inevitably play a leading role in economic progress.
Alawyer, economist and politician who served as independent India’s fi
Planning, commissioning, executing the programme to hasten growth
India set up the Planning Commission in 1950 to oversee the entire range of planning, including resource allocation, implementation and appraisal of five-year plans. The five-year plans were centralized economic and social growth programmes modelled after those prevalent in the USSR. India’s first five-year plan, launched in 1951, focused on agriculture and irrigation to boost farm output as India was losing precious foreign reserves on foodgrain imports. It was based on the Harrod-Domar model that sought to boost economic growth through higher savings and investments. The plan was a success, with the economy growing at an annualized 3.6%, beating the target of 2.1%.
The free-market proponent who cried wolf on policy—but was proved right
Astudent of the libertarian economist F.A. Hayek, B.R. Shenoy was an influential early advocate of free market liberalism. In a celebrated dissent note, he warned that the second five-year plan’s dependence on deficit financing to promote “heavy industrialization" was a recipe for trouble. Government control over the economy would undermine a young democracy, he said. Shenoy was proved right when India faced an external payments crisis a year after the plan period began. He was also critical of the Nehru government’s penchant for import substitution. Though ignored in his lifetime, his ideas outlived him and became part of India’s mainstream economic doctrine.
The man who gave India modern statistics and the swadeshi spirit .
The second five-year Plan and the Industrial Policy Resolution 1956 (long considered the economic constitution of India) paved the way for the development of the public sector and ushered in the licence Raj. The resolution set out as national objective the establishment of a socialist pattern of society. It also categorized industries into three groups. Industries of basic and strategic importance were to be exclusively in the public sector. The second group comprised industries that were to be incrementally state-owned. The third, comprising mostly consumer industries, was left for the private sector. The private sector, however, was kept on a tight leash through a system of licences.