Indian Economy- A Historical perspective

Indian economy portrayed a pathetic picture on the eve of independence. Two hundred years of  drudgery under British colonialism had plunged Indian economy into a dilapidated state with productivity abysmally low in agriculture and industrial sector.

The following article throws light on the course of economic reforms undertaken by the government to ameliorate the situation and bolster the Indian economy!! Here, its worth mentioning that political and economic thinkers adopted a "socialist" model of economic system although not as stringent as that of China or Russia. "Nehruvian socialism" allowed co-existence of both public and private sectors, thus giving Indian economy a "mixed" form.

Economic Planning:

Borrowed from Soviet Union, the idea of economic planning was central to the economic reforms of the country. P.C. Mahalanobis is regarded as the "architect of Indian planning". Planning commission was set up in 1950 with focus on economic growth, modernization in terms of technology and social outlook, self-reliance in terms of productivity and equity. "Five year plans" were formulated which focussed primarily on boosting agriculture and industrial growth in initial years.

Agrarian Reforms:

"Land Reforms" and "Land Ceiling Act" are regarded as breakthrough reforms in agriculture sector. It helped reduce socio-economic inequalities and gave a fillip to agricultural productivity. However, loopholes in the implementation curtailed its success. Then came the phase of "Green Revolution" when government laid emphasis on high yielding variety(HYV) of seeds. It made India self-sufficient in food grains but gap between rich and poor farmers widened. The high input costs involved in HYV seeds was beyond the affordability of small and marginal farmers. Moreover, there were inter-regional disparities as not all regions could reap the benefits of green revolution. In order to bridge this gap, subsidies were provided on agriculture inputs such as fertilizers which largely benefitted fertilizer industries and led to environmental degradation.

Industrial Reforms:

"Industrial policy resolution of 1956" which categorized industries into public and private sectors. Privatization was not encouraged so as to protect Indian industries from getting stifled by the hands of competition in its nascent phase only. However, lack of competition led to inefficient productivity. Furthermore, public sector undertakings were incurring huge losses. License system was also introduced for industrial expansion in terms of quantity and product diversification.

In order to promote growth of village and small scale industries, "Karve Committee" was formed. Being labour intensive, it promoted employment and rural development.

LPG Reforms of 1991:

Series of events such as ever dwindling forex reserves, inflation of essential goods and non-payment of external borrowings due to crippled state of Balance of Payments (BoP) plunged India into a crisis like situation. IMF and IBRD agreed to grant loans only on one condition- "New Economic Policy" popularly known as "Liberalisation, Privatisation and Globalisation". Thus, there was liberalisation in trade and investment resulting in greater FDI and FII inflows; deregulation of industries thus ending "permit license raj"; financial sector reforms where role of RBI was enhanced from being a mere regulator to facilitator of banking system; forex reforms where government intervention was drastically reduced in currency devaluation or revaluation; private players encouraged to flourish in diverse sectors of economy to enhance productivity through fair competition thus interlinking Indian economy with global economy.

Thanks to the relentless efforts of our eminent leaders which proved to be fruitful in integrating the crumbling blocks of Indian economy and transforming it into a globally competitive one!! India, today, stands on the threshold of new era where bright opportunities beckons us with twinkling light.

The beautiful words of Jawaharlal Nehru symbolising steadfastness and eternity will act as the beacon light in taking India to the heights of glory in this millenium.

"Woods are lovely, dark and deep;

 But I have promises to keep and 

 Miles to go before I sleep"

Happy reading!!