Agriculture was the chief source of livelihood for most people in India, before the advent of British rule. India was also a hub of various kinds of manufacturing activities, particularly well known for its handicraft industries in the fields of cotton and silk textiles metal and precious stone works, etc. Indian products had a worldwide reputation for the fine quality of material used and high standards of craftsmanship.
The British Colonial Government mercilessly looted India before they departed from India. The country was miserably poor as a result of steady deindustrialization by Britain. As Cambridge historian Angus Maddison’s work shows India’s share of the world’s income went from 27% in 1700 AD (compared to Europe’s share of 23%) to 3% in 1950. In 1867, Dadabhai Naoroji put forward the ‘drain of wealth’ theory in which he stated that Britain was completely draining India. He mentioned this theory in his book Poverty and Un-British Rule in India. Former Prime Minister of India Dr. 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.”
At the time of Independence, India’s accounted for only three per cent of the world’s GDP, or about Rs 2.7 lakh crores. Per-capita income figures from 1947 are sketchy but according to some estimates, India’s share of total world income fell to as low as 3.8 percent. India had a population of 340 million and its literacy level was also alarmingly low pegged at around 12 per cent. The abject poverty and sharp social differences had cast doubts on India’s survival as one nation.
After India gained independence from colonial rule in 1947, the process of rebuilding the economy started. The objective of India’s development strategy has been to establish a socialistic pattern of society through economic growth with self-reliance, social justice, and alleviation of poverty. These objectives were to be achieved within a democratic political framework using the mechanism of a mixed economy where both public and private sectors co-exist.
1st Five-year Plan: The first Prime Minister of India, Pandit Jawaharlal Nehru’s development model envisaged a dominant role of the state as an all-pervasive entrepreneur and financier of private businesses. The idea was to plan public spending for equitable growth rather than leaving expenditure to the market forces. In 1950, India set up the Planning Commission to oversee the entire range of planning, including resource allocation, implementation, and appraisal of the five-year plans. India followed the Five-Year Plans which successfully transformed with centralizing plans adopted by the erstwhile USSR as a tool for development. In the first five-year plan, investments were made in the creation of irrigation facilities, construction of dams, and laying infrastructure. Due importance was also given to the establishment of modern industries, modern scientific and technological institutes, development of space and nuclear programmes. Despite every effort of the Government for fast development on the economic front, the country did not develop at a rapid pace largely due to a lack of capital formation, cold war politics, defence expenditure, a rise in population, and inadequate infrastructure.
2nd Five-year Plan: The second five-year plan (1956-61) laid the foundation for economic modernization to better serve India’s long-term growth imperatives. The second five-year Plan and the Industrial Policy Resolution 1956 paved the way for the development of the public sector and steered the Licence- Raj. The resolution set out as a national objective the establishment of a socialist pattern of society. It divided industries into three groups. Industries of basic and strategic importance were to be exclusively in the public sector. The second group encompassed industries that were to be incrementally state-owned. The third, containing mostly consumer industries, was left for the private sector. The private sector, however, was kept on a tight leash through a system of licences.
Green Revolution: In 1960, Agricultural Scientist Dr.M.S.Swaminathan (who is known as the father of India’s green revolution) introduced crops to end famine in India. Agriculture in India was converted into a modern industrial system by the adoption of technology, such as the use of high-yielding variety (HYV) seeds, mechanized farm tools, irrigation facilities, pesticides, and fertilizers.
3rd Five-Year Plan: The Third Five-year Plan stressed agriculture and improvement in the production of wheat, but the brief Sino-Indian War of 1962 exposed weaknesses in the economy and shifted the focus towards the defence industry and the Indian Army. Nehru identified power and steel as the key bases for planning. In 1963, a 680ft Bhakra Nangal Dam, a multi-purpose project was built on the Sutlej River in Himachal Pradesh. The primary use of the Bhakra-Nangal dam is irrigation, and storing rainwater. The dam provides irrigation water to Haryana, Rajasthan, Gujarat, and Himachal Pradesh. The dam is also famous for tourism and generating electricity. The huge Bhakra-Nangal dam is accountable for several hydel projects India built to light up homes, run factories, and irrigate crops. The second plan set a target to produce 6 million tonnes of steel. Germany was contracted to build a steel plant in Rourkela, while Russia and Britain would build one each in Bhilai and Durgapur, respectively. The Indian Institutes of Technology and the Atomic Energy Commission were the other “modern temples”.
4th Five-Year Plan: The Fourth Five-Year Plan (1969-74) adopted the objective of correcting the earlier trend of increased concentration of wealth and economic power. It was based on the Gadgil formula focusing on growth with stability and progress towards self-reliance. At this time Indira Gandhi was the prime minister.
White Revolution: In 1970, India set in motion the ‘White Revolution’, the world’s biggest dairy development program, led by Dr. Verghese Kurien. ‘Operation Flood’, as it is otherwise known, transformed the dairy-deficient nation into the global leader in milk production.
5th Five-Year Plan: The Fifth Five-Year Plan of India (1974–1979) was formulated by the Indira Gandhi government. It focused on agriculture, poverty alleviation, and employment generation. The plan also aimed to reduce social and economic inequality between different sections of society.
From 1951 to 1979, the economy grew at an average rate of about 3.1 per cent a year in constant prices, or at an annual rate of 1.0 percent per capita. During this period, the industry grew at an average rate of 4.5 percent a year, compared with an annual average of 3.0 percent for agriculture.
6th Five-Year Plan: After suspending the 5th Five Year Plan in 1977-78, Rolling Plan was the sixth five-year plan introduced by the Janata Government in 1978-83, According to the Rolling Plan, the plan’s performance will be evaluated each year, and a new plan will be developed the following year based on this evaluation.
7th Five-year plan: The Seventh Five-Year Plan (1985-1990) was led by the Congress Party with Rajiv Gandhi as the prime minister. The plan laid stress on improving the productivity level of industries by upgrading technology. The thrust area of the 7th Plan was Social Justice, the removal of oppression of the weak, using modern technology, agricultural development, and shelter, increasing through productivity of small and large-scale farmers making India a self-sufficient economy. Target growth was 5% actual growth was 6.1% and the growth rate of per capita income was 3.7%.
8th five-year Plan: The Eighth five-year plan (1992-1997) targeted the generation of adequate employment opportunities. The basic objective of this period was the modernization of the industrial sector. This plan focused on technical development. The plan also targeted the creation of human development, through provisioning adequate facilities like education, healthcare infrastructure, and safe drinking water.
9th Five-year Plan and 10th Five year Plan: The main objective of the Ninth (1997-2002) led by Atal Bihari Vajpayee and Tenth Five Year Plan (2002-2012) led by Vajpayee and Dr. Manmohan Singh) is to achieve an average annual growth rate of seven per cent. However, the growth rate of agriculture, Industry, and services dropped during this period. The total growth rate of the Indian Economy dropped from 6.68 to 5.35 due to global economic crises like floods across the country, the Southeast Asian financial crisis, and high oil prices. After the Pokhran nuclear tests, the international community imposed sanctions on India. This led to a slowdown in economic growth.
11th Five-Year Plan: The Eleventh Five-Year Plan is the economic and development plan of India for the period 2007–2012. The 11th FYP focused on infrastructure development with an investment target of US$500 billion. The plan also aimed to achieve an improved quality of life for the citizens of the state and contribute to the larger national goals of socio-economic development. This will require faster and more equitable social and economic development of the state. The plan was launched by the then Prime Minister of India, Dr Manmohan Singh, on December 18, 2007. During the 11th Plan (2007-12), India recorded a growth rate of 7.9 % which is less than the targeted growth rate of 9%.
12th Five-Year Plan: The 12th and final Five-Year Plan of the Government of India was implemented from 2012 to 2017. The 12th Five-Year Plan is prepared by the Planning Commission of India. The Twelfth Plan has proposed a two-pronged strategy focusing initially on the need to bring the macroeconomic imbalances under control and to reverse the slow-down, while also pushing for structural reforms in many areas that are critical for maintaining medium-term growth. The 12th five-year plan aimed to increase private infrastructure investment to $ one trillion and lower the Government subsidy from 2% to 1.5% of GDP. However, In 2014 NDA Government led by Narendra Modi dissolved the Planning Commission and replaced it with Niti Ayog
Growth of the Indian Economy since 2014
India started recovery in 2013–14 when the GDP growth rate accelerated to 6.4% from the previous year’s 5.5%. The acceleration continued through 2014–15 and 2015–16 with growth rates of 7.5% and 8.0% respectively. For the first time since 1990, India grew faster than China which registered a 6.9% growth in 2015. The Government of India initiated several structural reforms strengthening macroeconomic fundamentals. India emerged as the fastest-growing economy among G20 nations. The estimated growth of the economy is 7.3% in 2023-24 following 9.1% (FY22) and 7.2% (FY23).
Related Posts:
| Indian Economy in the Pre-British period, | Structural Changes in the Indian Economy |
| Indian Economy till 2008 and after 2008 | Basic Characteristics of the Indian Economy |
