Key Points

After 1947, India adopted a 'mixed economy' model. This system combined features of socialism, with a strong public sector, and capitalism, allowing for private property and democracy.

In 1950, the Planning Commission was established with the Prime Minister as its Chairperson. India adopted a system of Five Year Plans, borrowed from the Soviet Union, to guide its economic development.

The four common goals of the Five Year Plans from 1950 to 1990 were growth, modernisation, self-reliance, and equity. The emphasis on each goal varied from plan to plan.

Prasanta Chandra Mahalanobis, a renowned statistician, is considered the architect of Indian planning. His ideas formed the basis of the Second Five Year Plan, which focused on industrial development.

To promote equity in agriculture, India implemented land reforms. These included the abolition of intermediaries like zamindars and the introduction of land ceilings to limit the maximum size of landholdings.

The Green Revolution, starting in the mid-1960s, refers to the large increase in food grain production. This was achieved through the use of High Yielding Variety (HYV) seeds, especially for wheat and rice, along with fertilizers and irrigation.

This revolution made India self-sufficient in food grains, reducing dependence on imports. Government support through subsidies and credit helped ensure that both small and large farmers could benefit from the new technology.

Subsidies on inputs like fertilizers were provided to encourage farmers to adopt new technology. However, this became a huge burden on government finances and led to a debate on whether these subsidies should be continued.

A major failure of the 1950-1990 period was that the proportion of the population dependent on agriculture did not decline significantly. The industrial and service sectors failed to absorb the surplus workforce from agriculture.

The IPR 1956 established a leading role for the public sector in industrial development. It classified industries into three categories, with key industries being exclusively owned by the state.

The private sector was heavily regulated through a system of licenses required to start a new industry, expand production, or diversify. This system is often referred to as the 'Permit License Raj'.

Small-scale industries were promoted to generate employment and encourage rural development. They were protected from large firms through measures like reservation of certain products for exclusive production by SSIs.

India followed an 'inward looking' trade strategy known as import substitution. This policy aimed to protect domestic industries from foreign competition by replacing imports with domestic production, using high tariffs and quotas.

The industrial sector became well-diversified, and its contribution to GDP increased from 13 percent in 1950-51 to 24.6 percent in 1990-91. Protection from foreign competition enabled the growth of indigenous industries like electronics and automobiles.

The protectionist policies led to a lack of competition, resulting in poor quality goods and inefficiency. Many public sector enterprises incurred huge losses, and the 'license raj' stifled entrepreneurship.