Indian economy up to 1947:

Low use of technology

Dependent on imports
Exporter or raw materials, mainly to England
Completely destroyed traditional industries
Nascent stages of development of a small group of capitalists
Debate on type of economic system to be adopted:
Capitalist v/s socialist
Bombay plan of 1944
USA v/s USSR
Prevailing socio economic conditions
Beginning of FYPs
Borrowed the concept from USSR
Tweaked it according to prevailing situations
Nehru Mahalanobis model
o Emphasis on self reliance, PSUs, and vibrant SMEs
o Trickledown effect and strong basic industries
o Criticism
Some important events:
1948- Pakistan war
1962- China war
1965- Pakistan war
1971- Liberation of Bangladesh
1970s- oil and energy crises
1975- Emergency
1991- BOP crisis
From 1947-1979:

First FYP 1951-1956- emphasis on Agriculture

Second FYP 1956-1961- emphasis on industry
Third FYP 1961- 1966 balance between both
Three yearly plans from 1966-1969
Nationalization of banks 1969
o Up to now most of the banks except SBI were owned by private individuals
o 14 banks were nationalized. They had about 85 percent of the total deposits
Fourth FYP 1969-1974- emphasis on social justice
o Whatever liberal measures initiated since independence were reversed
o Recall the events discussed earlier
Fifth FYP 1974-1978- emphasis on poverty alleviation and employment

o Recall the events

o Newly elected government rejected the plan
Rolling plans 1978-1980
Sixth FYP1980-1985
o End of Nehruvian socialism
o Beginning of economic liberalization
o Achieved 5.4 percent growth against the target of 5.2. So considered to be
a great success
Seventh FYP 1985-1990
o Focus on technology up gradation
o Liberalization entered into the policy debates
o Growth rate was more than the targeted rate
BOP crisis of 1991
o BOP issues started first in 60s.. u should be able to guess the reason
o Rupee was devalued 36.5%, the position remained favorable after wards
o The oil shock of 1973 brought back the problems
o The problem was lingering since then and the successive governments
could not address the issue fully
o It finally culminated in 1991.
o Causes- rise in imports, external debt, lack of focus on exports, meager
FDI/FII inflows
Aftermath..
o Immediate response- pledging 67 tonnes of gold to get a loan
o Structural reforms- commonly known as LPG (licenses, permits etc were
done away with in many sectors)
o Devaluation of rupee- it fell from 17.5 rupees per dollar in 1991 to 40+
rupees per dollar in 1992
Annual plans 1990-1992
Eighth FYP 1992-1997- focus on LPG and modernization of industries
Ninth FYP 1997-2002- promoting economic and social growth
Tenth FYP 2002-2007- achieving higher growth and bringing down regional
inequalities

Eleventh FYP (2007-2012) emphasis on rapid and inclusive growth (poverty

reduction)
Twelfth FYP (2012-2017) motto Faster, Sustainable and More Inclusive Growth

The last decade..

FDI in retail
o
o
o
o
o
o

Total size estimated to be US $ 500bn and contributed 22% percent to the

GDP.
The issue has been in news since UPA-I
Allowing global giants into wholesale and not retail
100% FDI allowed in single brand retail
On 7th December government allowed 51% FDI in multi brand retail
Pros and cons discussion in the class

Telecom- 2G scam and beyond

o
o
o
o
o
o

Coal sector- COALGATE Scam and further developments

o
o
o
o
o
o

It is crucial as 60% of the power plants are coal based

CAG said that private firms gained 1.86 lakh crores due to improper
allocation.
In September 2014 supreme court cancelled 214 blocks out of 218 allotted
since 1993
And the operational mines were to pay 295 rupees per tonne as penalty
In 2015 GOI auctioned the coal blocks through competitive bidding. It made
the government richer by 80000 crore rupees.
CIL is the only producer of coal in the country. We are the second largest
importers of coal

Infrastructure
o
o
o
o
o
o

Unearthed by CAG in 2010

The value of the scam was estimated to be 1.76 lakh crore rupees based on
3G spectrum auction in 2010.
Supreme Court acting on a PIL cancelled 122 licenses and said that
spectrum is a public good.
All public goods must be allocated through transparent and competitive
processes.
Hence forth the resources are being allotted through competitive bidding
processes.
Net neutrality issue discussion in the classroom

It consists of roads, railways, shipping, aviation, power, telecommunication

etc..
Social infrastructure- mainly education and health care facilities. It is very
important to harness demographic dividend
The infra projects were facing problems of land, finance, approvals etc
The crisis of 2008 was the genesis of the problem
This sector is the biggest contributor to the NPAs of the banks
This dragged down the growth rate

Land Acquisition Act, 2013

o
o

Replaced the archaic land acquisition act 1894

For the first time the act clearly mentions rehabilitation and resettlement

o
o
o

Goods and Services Tax (GST)

o

o
o
o
o

o
o
o

Earlier initiatives- MFG policy, IT policy, Telecom policy

Five point action plan
simplify processes
improve infra
Skilling
Focus on 30 sectors
Open up sectors
IPR protection
Challenges- skill development, investment, private sector participation
China launched MADE IN CHINA

Railways..
o
o
o
o

It seeks to replace a plethora of indirect taxes like VAT, service tax, excise
duty etc that vary with the state with a single uniform tax throughout the
country
Needs constitutional amendment as the tax structure changes
Many of the states having manufacturing industries fear loss of revenue due
to its implementation
Alcohol, some petroleum products are not covered under GST
Pros and cons will be discussed in the class

Make In India (MII) Campaign

o
o

SIA and consent of the affected are the important features of the act
Land ordinance 2014 removes the need of SIA and consent provisions for
certain categories of projects
Immunity for civil servants

Largest employer in India

Has a separate budget since 1921
Plays a key role in transportation of goods over long distances and a lifeline
of economy
Reforms- sampitroda committee, Bibek Debroy committee

Banking sector
o
o
o

India has three types of banks public sector, private sector and co operative
RBI is the regulator. It is also called bankers banker