INDIAN ECONOMY ON THE EVE OF INDEPENDENCE ; As the agriculture was the main source of livelihood , the country ‘s economy was characterized by various manufacturing activities , India was well known in the fields of handicrafts, cotton and silk  , metals and precious stones works .

There was COLONIAL EXPLOTATION  under the British rule was subjected to the exploitation . It implied   in all sectors of economy . i) COLONIAL EXPLOITATION in agriculture sectors through ZAMINDARI SYSTEM on the land revenue . Zamindars were declared as the owners of the land .They had to pay fixed sum to the government  in form of land revenue and free to extract as much as they wished or as much as they could from the tillers of the soil by hook or by crook which was the main reason of physical and mental exploitation over them ii) COLONIAL EXPLOITATION ON INDUSTRIAL SECTORS in India implied the predominance of handicrafts . But these were systematically destroyed by allowing tariff free import of machine made goods from Britain . iii) COLONIAL EXPLOITATION OF INTERNATIONAL TRADE : India’s international trade was  exploited through discriminatory tariff policy . Duty free  export of Indian raw material was encouraged to enhance access to the Indian Markets by the British industrialists.

AGRICULTURAL  SECTOR UNDER BRITISH RULE :  Indian agriculture under the British  rule showed following characteristics i) Low  level of productivity because of backward technology , irrigation facilities no use of modern fertilizers ii) High degree of vulnerability with good harvest when it rains good and bad harvest when if rains bad iii) Dominance of subsistence framing  in trillers of the soil took to agriculture merely as  source  of subsistence never as source of profit Farmers were  induced by higher price for producing cash crops so they could be used as a raw material for Britishers  iv ) In land settlement system all the profit accruing  out of agricultural sector went to zamindars in the form of Lagaan and they never did anything to improve condition of farming and farmers so it Widen gulf between owners of  the soil / Zamindars and tillers always trying to staved their  ejection v) Wastage of revenue income on conspicuous consumption . It  was seldom invested for the growth agriculture . Consequently backwardness of agriculture remained the permanent feature.

INDUSTRIAL SECTORS UNDER BRTISH ; The condition of industry was very poor Britishers focused in de-industrialization of Handicraft industry They destroyed the industry in very systematic manner to satisfy their two motives i) to get the raw material from India at cheaper rates for the development of their industry) to sell their finished product in the Indian markets at high price  . By the decline of Handicraft British paid any attention over it as  the public sectors remained confined to Railways, Power Station ,Communications , Ports , Departmental undertaking all of them were under their control  There was large amount of discriminatory policy between Britisher and Indian trader . Cheaper industrial goods were allowed tariff free access to the Indian market, Handicraft products from India were the subject to high duty of export so Indian Handicraft lost both Indian and Foreign markets It was completely lop sided

INERNATIONAL TRADE UNDER BRITISHERS : Internatinal trade was hit to India in two ways i) It was controlled wholly by the British which ended export from India ii) Composition of trade was made in such a way that India became the exporter of raw material for the British Industry and importer of British finish goods. The Suez Canal served as a direct route for the ships operating between India and Britain . The  export Surplus was used to make  payments  for expenses incurred by the office  setup by the Colonial government in Britain . They also use the earning for the war fought by the British government and import of invisible items

DEMGRPHIC PROFILE ; First official census conducted in1881 raveled unevenness in Indian population. In year 1921 it was described the year of great divide and found that  During British Rule India had high  birthrate, high death rate , high infant mortality rate , low expectancy rate, very low rate of literacy which main cause of the backwardness un India

OCCUPATIONAL STRUCTURE ;   More than 70% of the working population were engaged in agriculture industry which merely gave employment to 9% of the population so large unemployment is the other cause of the  backwardness

POSITIVENESS OF BRITISH RULERS :  As the Indian market was very large for the British Goods  so they focused on the infrastructure facilities  such as  transport  in fields of roads British did not accomplish much on the construction of roads, the roads  that were built primarily served the interest  of mobilizing army and shifting of raw material, Railways most important contribution which affected the Indian economy in two ways i) made long distance travel for the people easy ii) development of  commercialization of Indian agriculture , development of ports , provision of post and telegraph services were developed  to maintain  law and order of the country .They also laid the foundation of strong and efficient  administration

SOME IMPOTANT FACTS ; i) Battle of Plassey  1757 ii) Introduction of  Zamindari system by Lord Cornwallis in 1793 iii) First postal stamp 1852 iv)  Introduction of railway in India 1850 v) First Railway bridge from Bombay to Thane 1853  vi) opening of Suez Canal 1869  vii) First official census 1881 viii) Setting up of  Tata Iron and Steel Company 1907 ix) year of great divide 19 21 x) Airline by Tata 1932

INDIAN ECONOMY  (1950- 1990)

TYPES OF  ECONOMY  ; There are three types of econoic system found in the economic world i) CAPITALIST ECONOMY  It is the one in which the means of production are owned and operated by the private sectors   ii) SOCIALIST  ECONOMY  is the one in which the means of production arre owned and operated as well as controlled by the Government of the country iii) MIXED ECONOMY is the one in which the public as well as private sector are allotted their respective position for solving the central problem of the economy

INDIA is a democratic country and adopted the policy of  MIXED ECONOMY with a view that  it would be socialistic with strong public sectors and the private sectors would also be  made power to contribute in the development of India

ECONOMIC PLANNING ; For the development of Indian Economy it was very important for the Government to plan for the Economy . Economic Planning  can be defined as making the important major economic decisions  on  basis by comprehensive survey of the whole economy the determinate authority

PLAN is said to be a documents showing detailed scheme program and strategy, work out in advance for fulfilling the objective of te country’s economy. THE  GOALS OF 5 YEARS was set up was known to be FIVE YEAR PLAN  with the aim to remove all economic backwardness of the  country and to make India the developed economy. Each of the Five Year Plan  had the basic goal  for the development of India these goals were a) Growth b) Modernisation c) Sef reliance d) Equity

GROWTH means to increase  the productivity capacity of the country so that we may produce maximum goods and services within our country. It implies large stock productive capital  or large size  of supporting services  or increase in efficiency of productive capital and services  so that there is steady increase in Gross Domestic Priduct (GDP) which is good indicator of economic growth. In some countries like India growth in agriculture contributes  more on GDP  but in some countries the service sector plays the important role in contribution in GDP.

MODERNISATION  is needed to raise the standard of living of people  which includes adoption of modern technology  this will increase the production of goods and services  by the means of new technology  . The modernisation also changes the social outlook of the people  such as gender empowerment  , providing equal rights to women etc

SELF RELIANCE  It directly means overcoming the needs of external assistance  , the five year plan majorly focus on use of own resources so that there may be less dependence of foreign  goods and services  It was important for main reasons less drain out of wealth , less dependence on foreign goods and very less interference of outsiders of our country

EQUITY  aims to ensure that every Indian should be able to meet his /her basic needs ie food, house, education ,health and inequality of wealth should be reduced. This is aimed to increase the standard of living of the people of the country and this also promote the social justice.

AGRICULTURE SECTOR   has contributed large share of workforce  so it was very important for agriculture development being focused in Five Year Plan .The Two main measures were taken to develop agriculture first was the land reforms and green revolution.

LAND  REFORMS : It refers to change in the ownership of landholding . Land reforms  were needed to achieve the objective of equity in agriculture . Abolition of intermediaries that Indian Government took various steps to abolish intermediaries and to make farmers , owner lands . The ownership  rights given to the tenants gave them the incentive to increase output and this contributed to the agriculture . Land ceiling was another step in which fixing the specified the limit of land which can be owned by the individual. Beyond the specified limit all the land belonging to the person would be taken over by the Government will allocate to landless farmers which promote the equity in agriculture

GREEN REVOLUTION It refers to large  increase in the production of food grains due to use of high yielding seeds variety HYV seeds raised the agriculture production  per acre in many fold times . HYV seeds need reliable irrigation facilities and financial resources to purchase fertilizers and pesticides . GREEN REVOLUTION is responsible  for attaining marketable surplus , it is beneficial to low income groups also create the buffer stock . There are some bad effects of  green revolution such as there is a great risk of pest attack because HYV seeds were more prone to pest attack and there is a risk in income inequalities  because there are costly inputs required under the Green Revolution will increase the disparities between small and big farmers.

The Government of India  had played  important role to overcome the bad effects by providing the loans at low interest rate to small farmers so that they could buy  required inputs so the green revolution benefited both rich and small farmers . Economists who were in Favour of subsidies think that  farming in India  continue to be risky business, majority of the farmers  are very poor and they cannot buy the costly  modern inputs of  farming so subsidies must begiven if there will be no subsidies it will give birth to greater inequalities  Those Economists who were against subsidies because it is beneficial to the fertilizer industry and prosperous farmers and not the target group and huge burden to Government treasure.

CRITICAL APPRAISAL OF AGRICULTURE :  Green Revolution and Land Reforms  highly supported the farmers which increase the production many fold times , India became self  sufficient in food production ,and abolition of Zamindars gave great relief  to Farmers from their atrocities though the proportion of contribution by agriculture declined  but not the population depending on it

INDUSTRIAL DEVELOPMENT  Five Year Plans focused a lot on the industrial development. The Cotton  textile and Jute Industries were mostly developed in India but there was a strong need to expand  the industrial base  with verity of industries

ROLE OF PUBLIC SECTOR ; There was a great need for leading of public sector  because of shortage of capital with private sectors , entrepreneurs did not have the capital to undertake investment in the industrial ventures, lack of incentive for private sectors because  the Indian market  was not big enough to encourage private industrialist to undertake the major projects and finally they fulfill the objective of social welfare  which could only be achieved through direct participation of state in the process of Industrialisation

INDUSTRIAL POLICY  It is a complete package of policy measures which  covers various issues with different industrial enterprises of the  country . According to Industrial Policy Resolution 1956 the industries were divided into three schedule . In Schedule A is comprised of the industries which would exclusively be own by the state, In Schedule B  there were 12 industries were placed that would be progressively state owned and in last Schedule C  consist of the remaining industries under private sectors.

INDUSTRIAL LICENCE  was the written permission  from the Government  to the industrial unit  to manufacture goods . The Industrial Development Regulation Act 1951 empowered the government to issue the lience  for setting up new industries , expansion of existing industries and diversification the product. No new industry was not allowed unless the licence was issued to them  from the government. It was easier to obtain the licience if the industrial unit was establish in the economically backward aera. Licence was needed even if an existing industry wants to expand output or diversify its products

SMALL SCALE INDUSTRIES (SSI)  SSI  is defined   as industry of more labour  intensive so they generate more employment and there is need for the protection  from big firms as SSI cannot compete with big industry firms so Government reserved production of number of products for them and they  were also give subsidies in much field in the process of production as less cost of raw material , subsidies in various taxes etc

FOREIGN TRADE  : Foreign trade in India includes all imports and Exports to and from India . India has followed the strategy of replacing many imports by domestic production . Import substitution policy is the replacement of imports  by domestic country . This policy can serve to definite objective such as saving of precious  foreign exchange and achieving the Selfreliance .Protection through  Tariffs which is a kind of taxes levied on import goods which  make goods expensive to discourage the in the country and Quotas is non tariff barriers imposed on the quantity of import and export . All this is done to  enable them to compete against the goods produced by more developed economy and to prevent the drain out the foreign exchange reserve on the import of luxury goods

CRITICAL APPRAISAL OF INDUSTRIAL DEVELOPMENT :  The proportion of GDP increased from 11.8% to 24.6% . The industrial sector became well diversified by 1990 largely due to Public Sectors. The promotion of small scale industries gave opportunities to people with small capital to get into the business. The protection from the foreign competition through import substition enabled development of home made goods industries . Licensing Policy helped the Government to monitor and control the industrial production. Public Sectors made a remarkable contribution by creating industrial base development and infrastructure and also promoted industrial development of backward  aera

IMPORTANT  FACTS : i) First Industial policy resolution  in 1948 ii) Setting up of Planning Commission under the chairman ship of Prime Minister in1950  iii) First five year plan  1951  iv) Industrial Development  and Regulation Act  1951  v) Karve committee/ Village and small industries committee constituted  vi) Duration of Five  year plan  1 st April – 31st March 1956 vii) second  industrial policy  Resolution  30th April 1956 viii) First phase of Green Revolution  1966  ix ) New Economic Policy  1991 x) Planning Commission relaced by NITI Aayog 2015


There was the poor  performance of public sectors, large amount of deficit balance of payment ,high inflationary pressure , very low foreign exchange was left with huge burden of debts above all was the inefficient management were the main reason to make economic reforms in India

INDIAN GOVERNMENT approached to World Bank and IMF and received the loan of$7 billion in lieu from India to Liberalise and open up the Economy by i) removing restriction on Private sectors ii) Reducing the role of government in many aeras iii) Removing the trade restrictions .

The New Economic Policy was announced to create competitive atmosphere in the economy and removal of barriers to entry and growth firms .NEP  was adopted with various measure i) Stabilisation Measure which focus on correcting the weakness of BOP by maintaing the sufficient amount of foreign exchange reserve and secondly by controlling the inflation by keeping price rise under control  ii) India started improving efficiency of the economy and also increase the international competitiveness as it’s structural reforms .

The main policy of NEP  were liberlisation, Privitisation and Globalisation

LIBERALISATION  which means removal of entry and growth restrictions on the private sectors with the aim to unlock the economic potential of the country with good competition into the economy  by making reforms in Industry  Sectors , Financial Sectors, Tax, Foreign Exchange  , Trade Investment Policy

IN THE INDUSTRIAL REFORMS  various steps were taken  as i) Reduction in Industrial Licensing  NEP  abolished industrial License system from all the projects except some short list industries . They also decrease the role of Public Sectors . The number of industries exclusively  reserved for Public Sectors have been reduced in quantity. Many goods produced by small industry were de reserved .The Monopolies and Restrictive Trade Practices Act (MRTP) was removed in which large companies had to take permission for the expansion / merger now they can produce as much as they can and may merge per their requirements.

FINANCIAL REFORMS  includes various changes in the sector s i) The Role of RBI was reduced  from Regulator to Facilitator of financial sectors ,  This also lead to establishment of Private Banks .ii)The limit of foreign investment  in banks raised to around to 51%  iii) Banks were given  the complete freedom to open the new branches without any approval from RBI

TAX REFORMS The Government of India made lots of reform in ta policy and public expenditure policy which is also called FISCAL POLICY ,There are two kinds of taxes Direct and Indirect Taxes the major reforms were i) Rationalisation in Direct Taxes ii) Simplification in filling the taxes iii) Many reforms were made in the indirect taxation

FOREIGN EXCHANGE REFORMS : This includes  the devaluation of rupee to overcome balance of payment and the Government allowed rupee value to be free from it’s control and made it market determination of exchange rate

TRADE AND INVESTMENT REFORMS :  The important trade and investment reforms were i) Indian Government removed the quantitative restrictions on export and import ,ii) They removed the Export Duties and large reduction was made on import duties  iii) Great relaxation was made in import licensing system

PRIVATISATION  is shedding of he ownership/management  of the government owned enterprises  .Privatisation can be done in two ways  i) Disinvestment ii) By Transfer of ownership  and management to some Private sectors

GLOBALISATION  is integrating the national economy with the world economy through the removal of barriers on the international trade and capital investment . It resulted in  greater access to global market with advanced technology and better future prospects for large industries of developing countries but it give benefits  more to developed economy though Golbalisatiob comprises the welfare and identity of people belonging to poor countries but market driven globalisation creates economic disparities among the nation and people

OUTSOURCING  is the hiring business services  from external sources , mostly from the other countries which were previously  provided internally of from within the country . India has become  a  favourable destination of out sourcing because of low wages and more availability of skill manpower

WORLD TRADE ORGANISATION  was formed in 1995  as the successor of GATT. As an important member of WTO , India has  been in forefront of framing fair global rules and regulations  and advocating the interests of developing world.  India should not be the member of WTO  because major volume of international trade occurs among the developed  countries and developing countries are being c to open up their market cheated as they are forced to open market for developed nations but not allowed to access  to market of developed countries

SOME IMPORTANT FACTS OF MARKET as i) BILATERAL TRADE  means trade between the two countries ii) MULTILATERAL TRADE  is the trade  among more than two countries iii) TARIFF BARRIERS are the barriers imposed on the imports to make than relatively costly  to protect the domestic production  iv ) NON TARRIF BARRIERS which are imposed on the amount of imports and exports

Some of the Economists are in Favour of Economic reforms because it increase in the rate of Economic Growth , Inflow of foreign investment ,that will rise the foreign exchange reserves , rise in export  and control the inflation  also will increase the role of private sectors Some of the Economics highly criticized the economic reforms because  it created more and more unemployment , It had purely neglected the Agriculture. The Public investment has been reduced along with the reduction in fertilizer subsidy which adversely affected the  small and marginal farmers, reduction in import duties of food product due liberisation and shift to cash crops of the farmers led to rise  in the prices of food grains

Industrial growth  recorded the slow down  because of cheaper imports replaced the demand for domestic goods and the domestic manufacturer are facing the stiff competition they lack with intrastromal facilities  and non tariff barriers of developed countries. The dis- investment policy of the Government was not successful because  assets of PSU were undervalued and sold to private sectors at very low price and the proceeds  received were used to compensate shortage of government revenues .

NEP had very ineffective tax policy ,The reduction in tax  decrease the scope of increase the revenue by custom duties and tax incentives to attract the foreign investment which badly affected the revenue of the country . It also encouraged the consumerism by encouraging the production of consumer luxuries goods and superior consumption . There was unbalanced growth in some selected aeras such as service sectors but very less in production

AAPRASIAL OF  LPG : There has been increase in the growth  . India  rate after LPG the growth rate of GDP  has become as high as 8% mainly in service sector , Due to the Policies of LPG  IT industry in India has  obtained the Global recognition . There had been large increase in foreign exchange reserve. India became large exporter of auto parts, engineering goods ,IT software , Textiles etc . Inflation  was brought under control from 16.67% to 2.9% in (2017-18).Fiscal deficit reduce to 3.5% of GDP and Deficit in Balance of Payment has reduced

DEMONTISATION : It is a situation where the central bank of the country withdraw the old currency notes of certain denomination as the mode of the payment. On  8thNovember 2016 the government of India announced the denomination of Rs 500  and Rs 1000 banknotes of the Mahatma Gandhi series and issue of new Rs500 and Rs2000 banknotes of Mahatma Gandhi series in the exchange for the old notes. In India the government had demontised banknotes on two prior occasions once in 1946 again in1978 to  control the black money

THE AIM OF  DEMONTISATION  was to curb the corruption and   illicit activities, to curtail  the circulation of counterfeit currency ,tax evasion may be control, it channelise saving through formal banking system and  shifted cash economy to digital economy

DEMONTISATION slow down in the growth process due to reduction in both demand and supply . It decline in the stock of black money and increase in bank deposits  this decline in the indirect and corporate taxes to the extent of slow down in the growth process

GOODS AND SERVICE TAX (GST)  It is an indirect tax levied on the supply of goods and services . GST ACT  was passed in the Parliament on 24  March 2017  and came into effect on 1st July of same year. Before GST many central and state taxes were levied in India but after GST all the indirect taxes were summed up under GST with the Principle of one nation one tax.

GST is a comprehensive tax as various indirect taxes have been merged in it , IT is a multistage tax as it is proposed to be levied at all stages. It is value added tax because it is levied  on the value addition at each  stage on the supply chain . It is a destination based tax as the tax would accrue to the tax authority which have jurisdiction  over the place of consumption.

The custom duty, Taxes on petroleum products , Taxes on Alcoholic drinks and taxes levied by local bodies were not included in GST

The taxes that have been summed up under GST are Central level Taxes such as excise duty service tax and central sales tax  and state level tax such as entertainment taxes .

There are three types of GST i) CENTRAL GST  (CGST)  Itis levied and collected by the collected  by the central government on any transaction of goods and services that takes place within the state ii) STATE GST (SGST)  Itis the tax levied and collected by the state  government on every intra-state  transaction of goods and services iii) UNION TERRITORY GST (UGST)  It is applicable on the goods and services transactions that take place in any of the five union territory of India  iv ) INTEGRATED GST (IGST) Itis applicable on the interstate transaction of goods and services .

MAIN BENEFIT OF GST ; It has fostered economic growth ,Introduction of a single tax has led to ease of doing business for enterprises .It help in attracting foreign investment and it has insured better tax compliance  and reduction in the cost of goods

THE MAIN OBJECTIVE  were to eliminate multiple taxes , improve tax compliances ,boost the economic growth , it will increase the ease of doing business , it will reduce the overall burden of taxes  ,It subsumes all indirect taxes at Centre and state level , It also eliminate the cascading effect of indirect taxes on single transactions and it promote consumption base tax than manufacturing

IMPORTANT FACTS I) Establishment of GATT with 23 members countries as global trade organisation ii)NEW ECONOMIC REFORM POLICY in July 1991 iii) NEW INDUSTRIAL POLICY  in 24 July 1991 iv) WTO  in 1995  v) Removal of quantitative restriction on imports of manufacturing consumer goods and agricultural products  in April 2001 vii)  Make in India  i September  2014 viii)  Demontisation in India in * November 2016  ix ) GST ACT  passed in Parliament  in29 March 2017  and came into effect 1 July 2017.

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