Chapter 2: Indian Economy 1950-1990Class 11 Economics — summary, notes, extra questions & MCQ quiz

Summary

After independence India chose a mixed economy, combining features of socialism and capitalism, in which both the state and the market guide economic activity. The Planning Commission was set up in 1950 with the Prime Minister as chairperson, and five-year plans, borrowed from the Soviet model, were launched to pursue four goals: growth, modernisation, self-reliance and equity. The Second Plan, drawn up by statistician P.C. Mahalanobis, emphasised heavy industry. In agriculture, land reforms abolished intermediaries such as zamindars and imposed land ceilings to give "land to the tiller," succeeding most in Kerala and West Bengal. The Green Revolution, based on high-yielding-variety seeds with fertiliser, pesticide and irrigation, spread first to wheat-growing states like Punjab in the mid-1960s and later to more crops and regions, making India self-sufficient in food grains and creating a marketed surplus, though about two-thirds of the population still depended on agriculture in 1990. In industry the Industrial Policy Resolution of 1956 classified industries into three categories, reserved key sectors for the public sector ("commanding heights of the economy") and required licences (the permit-licence raj); small-scale industry was promoted following the Karve Committee. Trade policy was inward-looking, based on import substitution and protection through tariffs and quotas rather than export promotion. By 1990 industry's share of GDP had risen and the service sector had grown, but inefficiencies of excessive regulation set the stage for the 1991 reforms.

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