NCERT Solutions Class 12th Economics (Indian Economic Development) Chapter – 2 Indian Economy 1950 – 1990 Notes

NCERT Solutions Class 12th Economics (Economic Development of India) Chapter – 2 Indian Economy 1950 – 1990

NCERT Solutions Class 12th Economics (Economic Development of India) Chapter – 2 Indian Economy 1950 – 1990

Chapter – 2

Indian Economy 1950 – 1990

Notes

Five Year Plan – After independence, such an economic system was accepted by the Indian leaders, which would encourage and improve the interests of all instead of a few. . He developed a new economic system – mixed economy by incorporating the best features of both capitalism and society.

Mokshagundam Visvesvaraya is called the father of India’s plan. The Second Five Year Plan was based on the growth model of Prashant Chandra Mahalnabis which became the cornerstone of further planning. That is why Prashant Chand Mahalanvins is called the architect of Indian Planning.

The Planning Department or Planning Commission was formed in 1950 under the chairmanship of the Prime Minister. Through which the government makes plans for the economy and encourages the private sector. With the formation of the Planning Commission, the era of five year plans began in India. After the approval of the draft of the Planning Commission by the National Development Council, the five-year plan was implemented by passing it from the Parliament.

The following are the goals of the Five Year Plans –  General Objectives of the Five Year Plan – Every five year plan has some specific strategy and goals which have to be fulfilled.

1. High growth rate
2. Modernization of economy
3. Self-reliance
4. social equality

1. High Growth Rate – Growth refers to the increase in the production capacity of the country such as increase in the goods and services produced in the country. That is, increased stock of producer capital or ancillary services such as transportation and banking services or increased capacity of productive capital and services. Gross Domestic Product is an indicator of the economic growth of a nation. GDP is the market value of the total goods and services produced in a year.

It can be understood with the example of a piece of chocolate or cake that as the size of the chocolate or cake increases, more and more people will be able to enjoy it. In the words of the First Five Year Plan, if the life of the people of India is to be better and prosperous, then more production of goods and services is necessary.

GDP includes agriculture, service and industrial sectors in various sectors of the economy. These three sectors are included in the structure of the economy. Different sectors have different contributions in different countries, in some the service sector and in some the agriculture sector contributes the most.

2 . Modernization of the economy – New technology is accepted by the producers to increase the production of goods and services. Modernization is the use of new technology. Such as the use of new improved varieties of seeds instead of old seeds to increase crop production, it means not only the use of new technology but also changes in the ideological and social attitude of the nation such as giving equal rights to women. In traditional society women used to do only domestic work whereas in modern society they have started getting opportunity to work in all sectors of economy. Modernization makes the society civilized and prosperous.

3. Self – reliance – There are two ways to accelerate the process of economic growth and modernization of the nation

1. Use of resources imported from other countries
2. use of own means

In the first seven five year plans, greater emphasis was placed on self-reliance and import of such goods and services from other nations which could be self-produced was discouraged. This policy mainly reduced our dependence on other countries in food production. And it was necessary. Self-reliance is necessary for a newly independent country because there is a fear that our dependence on other nations may affect our sovereignty.

4. Equality – In the absence of equality, the above three objectives in themselves are not capable of increasing the standard of living of the people of a nation. If modernization, growth and self-reliance does not reach the poor sections of the nation, then only the rich will get the benefits of economic growth.

Therefore, for growth, self-reliance and participation in modernization, it is necessary that every Indian should have access to his primary needs such as food, housing, clothing, health and education, so that economic prosperity and inequality in the distribution of wealth are reduced.

In the present scenario, the nature of the event and (NITI Aayog) – After abolishing the Planning Commission from January 2015, “NITI Aayog” (NITI: National Institution of Transforming India i.e. National Institute for Transforming India) has been formed.

its purpose is 

• To act like a “Think Tank” / (Think Tank) for the Government of India.
• Promote cooperative federalism.
• Promoting the Sustainable Development Goals.
• To ensure the role of decentralization in policy making.

Sector wise development during the planning period

development of agriculture

Agriculture – In 1951, the contribution of the agricultural sector to the national income of the country was 59 percent. Agriculture was the means of livelihood for about three-fourths of the population of India. There was neither growth nor equity in the agricultural sector during the colonial rule. Therefore, the planners gave top priority to the agriculture sector.

Role of agriculture

• share in national income share
• in employment
• Basis for industrial development Importance
• of foreign trade
• Significant share in domestic consumption

problems of indian agriculture 

social problems

• Social environment
• Population pressure on land Degradation of subsistence
• agricultural
• land
• Loss of crops

Institutional problems

• Defective trend of improvement Lack of
• credit and market credit and market facilities Size of holdings

Technical problems

• Obsolete technology of production
• Lack of irrigation facilities
• Simulation of crops

Agricultural Policy during the period 1950-90 

Land Reforms 

• Elimination of intermediaries,
• regulation of rent
• , determination of land limits
• , consolidation of holdings,
• cooperative farming

technology improvement

• Use of HYVs Use of
• chemical fertilizers
• Increase in use of pesticides

General Reforms 

• Extension of Irrigation Facilities
• Provision of Institutional Credit
• Improvement in Agricultural Marketing System
• Agricultural Price Policy

Green Revolution – In the context of India, Green Revolution refers to the rapid increase in agricultural production in the middle of the sixth decade, which is due to the use of high yielding seeds (HYVS) and chemical fertilizers and new technology.

Two Stages of Green Revolution

First Stage – From the mid 60s to the mid 70s

Stage II – mid 70s to mid 80s

Features of Green Revolution

• Use of high yielding varieties of seeds (HYVS) Use of
• chemical fertilizers
• Irrigation system (Development of adequate irrigation facilities)
• Use of pesticides
• Promoting agricultural mechanization

Effects of Green Revolution

• Realization of sales surplus.
• Buffer stock of food grains.
• Benefit of lower income groups.
• Achievement of food self-sufficiency.

Limitations of Green Revolution

• limited to food crops (especially wheat, maize and paddy)
• limited area (limited to some states like Punjab, western UP etc.)
• Inequality and decline in economic equality among farmers,
• effective for a limited time and now the end of maturity and
• normative increase but decline in quality and nutritional quality

Financial assistance to farmers – Agriculture subsidy refers to the assistance received by the farmers. In other words, to supply certain inputs to the farmers at a rate less than the market rate.

Arguments in favor – Most of the farmers in India are poor. Without subsidy, they would not be able to buy the necessary inputs.

The disparity between rich and poor farmers will increase if the financial aid is abolished.

Arguments in opposition – The high yielding technology mainly benefited the big farmers. Therefore, now agriculture subsidy should not be given.

After a limit, subsidies lead to wasteful use of resources.

Industrial Area 

Importance of industry

• employment generation
• , development of agriculture,
• use of natural resources,
• greater productivity of labor,
• greater capacity for growth,
• the key to greater volume of exports, promoting self-
• reliant development.
• Enhances regional balance.

Industrial Policy 1956 – (Industrial Constitution of India)

Features – Classification of industries into three categories:

(A) Those 17 industries were kept in the first category, which would be established and developed only as public sector enterprises.
(B) Those 12 industries were kept in this category, which will be established in private and public sectors, but the private sector will play only a secondary role.
(C) Except for the categories (i) and (ii) above, all other industries were left to the private sector.

Industrial Licensing – To set up industries in the private sector, it was made necessary to take a license from the government.

Development of small scale industries.

Decrease in industrial peace.

Technical education and training.

Role of Public Sector

• Creation of a strong industrial base.
• Infrastructure development.
• Development of backward areas.
• Mobilization of savings and for foreign exchange.
• To prevent the concentration of economic power.
• To promote equality in the distribution of income and wealth.
• To provide employment.
• To promote import substitution

Small scale industry 

Role of small scale industries 

• labor intensive technology ,
• self-employment ,
• less capital intensive
• import substitution
• promotion of exports
• , equal distribution of income
• , decentralization of industries, development of agriculture
• as the basis for large scale industries

Problems of Small Scale Industries

• Finance Problems
• Raw Material Problems
• Market Problems
• Obsolete Machines and Plants Underutilization
• of Export Capacity
• Dictatorship Obstacles
• Competition from Large Scale Industries

Foreign trade 

Trade Policy: Import Substitution –  After independence, the Government of India adopted the policy of import substitution, which is called inward trade policy. Import substitution means the policy of substituting imports with domestic production.

The government gave protection from import to the goods produced in India in two ways:-

 1. Tariffs – Taxes imposed on imported goods.

 2 . Quota – It refers to the maximum limit that a commodity can be imported by the domestic producer.

Due to import substitution – The industries of developing countries like India are not in this position to compete with the goods produced in more developed economies.

To save foreign exchange for import of important items.