Economic Condition and Planning After Independence

India has always been a rich cultural and historical heritage country, officially called the Republic of India. It’s in South Asia and is the seventh-largest country by area and second-largest by population. It is called a peninsular because it is surrounded by oceans on three sides, i.e., the Bay of Bengal, the Arabian Sea, and the Indian Ocean. It shares the border with Nepal, Pakistan, China, Bangladesh, and Sri Lanka. Due to this place’s tremendous potential, the British colonized the country. After a constant struggle, the people of India achieved independence from British rule in 1947. Though the British Government had left India, the problems of India were far from over.

Economic Condition After Independence:

After the Britishers left India, the Indian economy was left in ruins. Just after independence, the Indian economy was highly underdeveloped. The per capita income was meager; people did not have food, clothing, or shelter. The country depended heavily on imports from foreign countries, even for primary machines. More than 82% of people in India were illiterate, which was the cause and effect of poverty. After independence, around 75% of the total population depended on agriculture for their livelihood, and the agricultural sector contributed 50% of the national income. The industrial sector was underdeveloped, and the production capacity was deficient. The ever-increasing population was a risk to the economy.

The newly formed Indian Government proposed five-year plans to tackle all these problems. The five-year plans were an economic strategy used by the governments to improve the economy. Joseph Stalin first implemented these programs in the Soviet Union in 1928. Since then, many countries have adopted this technique to strengthen and revive their economies. India is among the countries which adopted this method and used it with few modifications. The main aim of these plans was to rebuild the economy.

The Idea of Five-Year Plans:

Jawaharlal Nehru, the first prime minister of India, presented the first five-year plan. The parliament passed this bill. The first five-year plan was launched in 1951 and mainly focused on developing the private sector (which included any industry involved in extracting and producing raw materials). This includes farming, logging, fishing, mining, and forestry. It was mainly based on the Harrod Domar model with a few changes to suit the country. The motto of the first five-year plan was “Development of Agriculture” The main focus was to solve all the problems that arose during the partition. This plan acted as a foundation for the development of industries and to provide affordable education and health care for all. The total budget of the first five-year plan was 2069 crores, distributed among various sectors like irrigation and energy, agriculture, Industry, and social service.

First Five-Year Plan:

• The first five-year plan was hugely successful as the national income increased by 8%, and the boosting exchange reserves also increased. 
• The country’s net domestic product went up by almost 14%, the first time in many years when the economy had increased compared to the stagnant economy under British rule. 
• The target growth rate of the economy was 2.1% annual gross domestic product growth, and the achieved growth rate was 3.6%. The monsoon helped to increase the crop yield that year. For many years this was the first time the country’s economy was growing. 
• Many irrigation projects were started during this time, like the Bhakra and Hirakud dams. 
• The World Health Organization helped the Indian Government increase the health care facilities and indirectly contributed to the Indian economy. 
• The education sector benefited from the first five-year plan as five Indian Institutes of Technology were built to promote education. The University Grants Commission was established to look after higher education in India. 
• Contracts to build five steel were signed which were fulfilled in the second five-year plan.

Economic planning is the proper usage of the country’s resources in various sectors for the development of the country according to the nation’s priorities. The Government had divided the reforms or developments it wanted to achieve into two categories: long-term goals, which were to be completed over 20 to 40 years, and short-term goals, which had to be conducted over five years.

Long Term Goals of the First Five-Year Plan:

• The long-term goals included various goals like adapting to newer machinery and technology and changing people’s perspective toward the increasing modernization. 
• As discussed earlier, the country depended heavily on exports from other countries, even for basic things. The Government’s goal was to decrease the country’s dependence on imports and trades from other countries. 
• The country’s economic growth was stagnant under British rule; the Government aimed to change that and help achieve growth in the previously stagnant economy. 
• The main reason for poverty and equal distribution of wealth was the lack of proper employment or job you the youth. The Government wanted to solve this and provide work to all the people.

Short Term Goals of the First Five-Year Plan:

• The short-term goal was generally different for every five years based on the five-year plan, which was designed on the present need of the country. 
• The main focus of the first-year plan was the agricultural sector; it had various problems. Even after a large quantity of good agricultural land yield per unit year, many people depended on this sector with little exposure to other industries for their income. 

Achievements of the First Five-Year Plan:

The main features of Indian Agriculture before the reforms were low productivity, disguised unemployment, the massive dependence on rainfall, the lack of proper machinery in the agricultural sector, the traditional methods in the field were not efficient, and the constant conflicts about land ownership. There were many problems in the Indian agrarian sector like the land available for farming was less when compared to population, land degradation, the lack of proper pesticides, and loss of crops due to pests, floods, insects, or droughts, and the land holdings were minimal and scattered without any accurate records, the implementation of the reforms was abysmal, The farmers were hugely dependent on rains for irrigation without any alternative, the lack of awareness about the crop pattern, the outdated technologies and methods were ineffective.

To tackle the above problems, the Government took significant steps: 

• The institutional reforms were called Land reforms. It included regulating the collected rent, consolidating holdings, maintaining the proper records, and cooperative farming. The main objective of the land reforms was to decrease the financial inequality between the rich and the poor. Still, it did the exact opposite, as the large farmers were profiting from this more than the small farmers who needed these reforms. The extensive use of artificial fertilizers and pesticides polluted the soil and the groundwater, which led to environmental degradation.
• The general reforms included the development of proper irrigation facilities to counter the dependence on rain, the availability of credit for low interest for agricultural usage, and the formation of regulated markets.

1. Improved Roadways

• The roadways of India before the independence were moderate at best. The Government aimed to construct roads and highways to help people to travel easily. 
• In total 1770 kilometres of the road were built during the tenure of the first five-year plan. 
• The 1770 kilometres also included 208 kilometres as a highway. The said highway connected Phuntsholing with Thimphu and Paro. A large number of roads were constructed during this time.

2. Education

• The British Government did not give any importance to the education of the people but unlike the previous Government, the Indian Government understood the importance of education and aspired to increase the country’s literacy. 
• Considerable progress was made in the field of education in the said years. 108 schools were made in Bhutan alone. 
• At the beginning of this plan, the number of training institutions for basic education was 449 and that number rose to 114 in just five years. 
• Almost 8600 medical educations were built during the five years. These institutions aided not only as teaching institutions but also as hospitals and provided medical facilities.
• The percentage of facilities of schooling for children in the age group of 6-11 increased from 42 %  to 51%.
• The number of primary schools and higher secondary schools increased to 274038 and 106000 respectively.

3. Industrial Development

• The sector which saw the maximum growth was industrial production. The increase in Industrial production during the first five years was 38 percent. 
• The private sector saw a huge increase in investments as fixed capital. The total investment made in the private sector was almost 340 crores. 
• The process of production of goods was made steam lined, and the Government aided in expanding capacity. A new iron and steel plant was set up with a capacity of 35000 tonnes of iron.

4. Agriculture

• The agricultural sector was the backbone of the economy. More than 75 percent of the population was dependent on agriculture but still, the production was very low when compared to other countries. 
• To improve the agricultural sector a lot of efforts were taken by the Government. The main focus was the Improvement of Irrigation facilities. 16 million acres of land were brought under irrigation over the course of 5 years. The total irrigation work was divided into two parts the major large-scale works were about 6 million acres and the rest was through small-scale work.
• The index number of agricultural production for all crops increased from 26 to 117 and there was a drastic reduction in the import of food.
• The production of some major crops like rice, wheat, and cotton was recorded way above the target.

5. Other Developments

• A department of Animal Husbandry was set up and many livestock and sheep breeding farms were established. 
• There was an 18% increase in the National Income and 11% in the per capita income. The consumption also increased by about 8% which in turn increased the rate of interest by 7.3%. 
• A Public Health Department was set up at Thimpu under a chief medical officer. Many steps were taken to remove malaria and along with that three hospitals and forty new
  dispensaries were established in different parts of the nation.
• A large amount of infrastructure was built to support the functioning of the country. Many multipurpose projects were built over the period of five years. These multipurpose projects include Bhakra Nangal and Damodar Valley. Many new projects were started on the Kosi, Koyna, and Chambal rivers. The increase of the railways was one of the main priorities. The traffic carriers increased by 9%. The total capacity of the Indian railways as people carriers and goods carriers increased exponentially. 

Frequently Asked Questions Related to Economic Planning:

Q1. What were the main features and problems faced by the agricultural sector?
Answer: The main features of Indian Agriculture before the reforms were low productivity, disguised unemployment, the massive dependence on rainfall, the lack of proper machinery in the agricultural sector, the traditional methods in the field were not efficient, and the constant conflicts about land ownership. There were many problems in the Indian agricultural sector like the land available for farming was less when compared to population, land degradation, the lack of proper pesticides, and loss of crops due to pests, floods, insects, or droughts, the land holdings were tiny and scattered without any pertinent records, the implementation of the reforms was very poor, The farmers were hugely dependent on rains for irrigation without any alternative, the lack of awareness about the crop pattern, the outdated technologies and methods were ineffective.

Q2. What were the long-term goals in economic planning?
Answer: The long-term goals were to be achieved over 20 to 40 years. It included various plans like adapting to newer machinery and technology and changing the people’s perspective toward the increasing modernization. As discussed earlier, the country was heavily dependent on exports from other countries, even for basic things; the Government’s goal was to decrease the country’s dependence on imports and trades from other countries. The economic growth of the country was stagnant under British rule; the Government aimed to change that and help achieve growth in the previously stagnant economy. The country’s per capita income was very low, but the main problem was that only a small group of people owned a majority of the wealth, and the remaining people were very poor. The Government envisioned reducing that and achieving financial equality. The main reason for poverty and equal distribution of wealth was the lack of proper employment or job you the youth; the Government wanted to solve this and provide employment to all the people.

Q3. What were the short-term goals in the economic planning?
Answer:  Short-term goals were generally different for every five years based on the five-year plan designed on the country’s present needs. The main focus of the first year plan was the agricultural sector, and it had various problems even after having a large quantity of good agricultural land, the yield per unit year, a large number of people were dependent on this sector with very little exposure to other industries for their income. The second five-year plan focused on the industrial sector. The industrial sector was largely underdeveloped and only contributed 10 percent of the revenue. Some of the goals were common over the years, like growth in the economy and reducing financial inequality. The purpose of the five-year plan for 2012-2017 was inclusive development.

Q4. Explain the Contribution of Industry to the Economy.
Answer: The present-day industrial sector is an essential and integral part of the country’s economy. The rapid Industrialization helped to grow the economy of the country. This sector employed the previously unemployed youth of the nation, led to modernization, it indirectly improved the agricultural sector by modernizing it. The growth in the industrial sector changed the country’s economic structure as it was previously only dependent on the agricultural sector. The total share of the industrial sector has increased up to 20 percent in recent years. Even though the industrial sector faced many problems like the lack of capital or incentive for private entrepreneurs, the development of infrastructure proved to be very costly.

Q5. Explain the Green Revolution.
Answer: The start of the green revolution helped overcome many of the problems faced in the agricultural sector by the introduction of HYV seeds which were easier for cultivation, the wide use, and availability of chemical fertilizers, insecticides, and pesticides, more knowledge about crop rotation, the introduction of proper machinery and technology into this sector. The green revolution even had some failures like it was restricted to only some crops like wheat and rice and areas like Andhra Pradesh, Uttar Pradesh, and Punjab, this only helped remove poverty partially rather than the aim completely. The main aim of the land reforms was to decrease the financial inequality between the rich and the poor but it did the exact opposite as the large farmers were profiting from this more than the small farmers who actually needed these reforms. The extensive use of artificial fertilizers and pesticides polluted the soil leading to environmental degradation.

Q6. Discuss the main focus of the First Five-Year Plan.
Answer:  The first five-year plan was launched in 1951 and mainly focused on the development of the private sector (which included any industry involved in the extraction and production of raw materials. This includes farming, logging, fishing, mining, and forestry. It was mainly based on the Harrod Domar model with a few changes to suit the country. The motto of the first five-year plan was “Development of agriculture“. The main focus was to solve all the problems that arose during the partition. This plan acted as a foundation for the development of industries and to provide affordable education and health care for all.

Q7. What were the Achievements of the Five-Year Plans in fields other than the Primary Sector?
Answer: The World Health Organization helped the Indian Government to increase the health care facility, indirectly contributing to the Indian economy. The education sector benefited from the first five-year plan as five Indian Institutes of Technology were built to promote education. The University Grants Commission was set up to look after higher education in India. Contracts to build five steel were signed which were fulfilled in the second five-year plan.