• enumerate some of the problems of the Indian economy at the time of Independence;
• reason out the need for economic development;
• distinguish between economic growth and economic development;
• point out some of the measures of economic development;
• explain the meaning of economic planning;
• state the objectives of economic planning in India;
• give an account of the planning process in India;
• indicate how economic planning is better than free market;
• outline the specific tasks of Planning Commission in India.

The country had been experiencing famines. Expected average age was low. There was a high infant mortality rate. The incidence of communicable and contagious disease was also very high.

Population was increasing at a rapid rate. Birth rate was quite high.

Level of literacy was low. In 1951 the literacy rate was only 16.7 percent. »

The economy derived more than half of its domestic product from agriculture and nearly 70% of the working people derived their income from agricultural activities. Industrial growth was negligible.

Technology was backward. Techniques of production were old and traditional. Productivity was therefore low.

The economy was also marked by rigid and traditional social attitudes. Caste rigidities were a hindrance to change in occupational structure. Food habits were guided by tradition. Attitudes towards technological change were also traditional.

Females, which constitute nearly half of the total population were largely illiterate because of the rigid attitudes towards their education. All these and several other factors were not only adding to the problems of poverty but were also acting as a hindrance to any progress or change.

Moreover, with independence came the partition. This artificial political division not only created social tensions but also aggravated some economic problems. Scarcity of food was increased because some of the food surplus areas were now in Pakistan. Similarly jute growing areas were in East Pakistan (now Bangladesh) but the jute factories were on the Indian side. Railway system was also suddenly disrupted. There was also the immediate and huge problem of rehabilitation of a huge mass of population which migrated from one part of the undivided India to the other parts after division.

Compared to some of the other countries of the world India's economic situation was dismal. Per capita income in India was less than even 1/30th of the per capita income in USA. Even in comparison to some other countries, namely Japan, England, France, Germany, Australia, New Zealand, the per capita income and the standard of living in India was very low.

After independence the expectations of the people were raised. With the end of colonial rule there was a hope of rise in the standards of living and end to poverty and misery which had marked the life of a large number of people in India. This required that national product must grow. It should grow at a rate faster than that of the population. Only then the per capita income can rise. It was also necessary that national income of India grows at a rate faster than the rate of growth of income in some of the rich industrial countries like UK, USA, France, Germany, Japan etc. so that the country can catch up with their levels of living in a reasonable period of time.

Thus Indian economy at the time of independence was an economy marked by mass poverty inequality, illiteracy, backward technology, high degree of dependence on agriculture and rapidly growing population. There was an urgent need to eradicate poverty, build up industry, improve technology, eliminate illiteracy, reduce inequalities and bring about a change in the overall outlook. This required massive resources.

What do you mean by economic development? There is another term 'economic growth'. Do both mean the same? No. There is a difference. Let us note this difference.

Economic growth means rise in only per capita real income over a long period of time. Here real income means physical production. Per capita means total production divided by total population. So economic growth simply means the rise in per capita availability of goods and services over a long period of time.

Economic development, on the other hand, is much more than economic growth. It not only means rise in per capita income, it also means reduction in economic inequality and poverty.

The policy makers in India were clear that India needed economic development. As you know economic development means a sustained rise in national product plus other positive changes.

The economy could not possess more unless it produced more. Increase in production was possible only if more and more resources of the economy were brought into use. More labour could be put into use only if tool and equipment or machinery was made available. More machinery or tools and equipments called for investment. More investment, was therefore; the primary need of the country.

Not only production was required to be raised it was required to be raised at a rate faster than the rate of growth of population so that per capita income could rise. It is only then that people can experience a higher standard of living.

Also was required to reduce the gap between the rich and the poor i.e. to reduce inequality.

Once the process of economic development starts other qualitative changes also start taking place in the economy. Technology improves. Productivity increases. There is a greater role of industries. In the situation of economic growth this may happen in a part of the economy but in a situation of economic development these changes are more evenly spread. Rural areas experience as much growth as the urban areas. If however only the urban areas experience these changes in productivity, technology etc. then economic growth may take place but it is not economic development.

Was India's need at the time of independence economic growth or economic development? We are sure your answer would be economic development. India needed to raise the levels of living of its people. But it was not merely a rise in real per capita income that was needed but also a more equitable or less unequal distribution of income which was also necessary.

Moreover, for better levels of living there are several other things that should also happen. There should be increase in literacy. There should be an easier and quicker access to drinking water, postal services, telephone services, banking services, medical and sanitation services, transport services, educational facilities etc. Economic development results not only from an easier and quicker access to all these and similar services but also from an improvement in the quality of these services over time. For instance if drinking water becomes available in a village it is an improvement in the level of living of the people living in that village. It will be a further improvement if the water taps are available in each residence of the village rather than at one place. Similarly if there are more educational institutions per kilometer of area of a country there is an improvement. There will be further improvement if the number of pupils per teacher also declines. That would mean that a teacher has to pay attention to fewer students and can therefore attend to their individual educational needs. Likewise, if the number of doctors, nurses etc. increases per hundred persons then their is an improvement in medical facilities.

Economic development is thus, reflected in the increase in per capita incomes plus a reduction in inequalities in the distribution of incomes plus an improvement in the levels of-living. The improvement in the level of living is reflected in the availability of various types of services to the population of the country and their quality. More people having access to drinking water, high literacy rate, more post offices per kilometer of area, more roads per kilometer area, etc. will reflect the level of living. Improvement in these is an improvement in the levels of living.

Now the question was as to how to achieve economic growth? Should it be left to the free market? Or should there be some regulation of market mechanism? In a free market there is no government interference in the free working of the forces of demand and supply. Only those goods and services are produced which are in current demand. Only those demand these goods and services who have income. Rich people have more income than the poor. So more production takes place for the rich. Why should market produce infrastructural services? Huge investment is required in these services. At the same investors in infrastructural services start getting some return only after a long time. The return is also low. Therefore, if everything is left to the free market total production (i.e. economic growth) may increase but economic development may not take place.

Government intervention is necessary to initiate the process of economic development. Government, through its actions, can divert resources towards the production of goods and services needed by common man. She can invest in infrastructure. She can reduce inequalities. So, it was not desirable to leave everything to the free market.

It was on account of the above reasons that government chose economic planning as a means to economic development so that alongwith economic growth standard of living improves, poverty and inequalities reduced. Economic planning implies best mobilization, allocation and utilization of available resources to the benefit of the people.

In a free market resources are used for earning profit and not for public welfare. This is why, keeping in mind the objectives of economic planning, government decided to regulate the market. Economic planning is considered better than the free market system on account of the following reasons :

Thus a Planning Commission was set up in March 1950 by the Government of India. It was expected to prepare a plan for the country's economic development. The specific tasks before the Planning Commission in India are the following:

It should be noted that five year plans are prepared to fulfil the overall objectives of economic planning in India. Each five year plan lays down certain targets, prepares a plan of investment for their achievement and sets into motion the mechanism for fulfilling the targets. At the end of the five year plan an appraisal of the achievements during the plan period is made. The next five year plan to fulfil the overall objectives is made after taking into account the achievements of the past plan and the tasks yet to achieved.

The overall objectives of economic planning in India are the following:

As stated earlier the per capita income in India was low. It had to be raised. This required an increase in production "t a rate faster than that of the growth of population. Planning Commission had expected that the rate of growth will be fast enough in the economy so that the real per capita income will be doubled in about 20 years time.

Indian economy is not only marked by low incomes but also by large inequalities in the distribution of incomes. Those who are rich are very rich. The poor are so poor that they could not meet even their food requirements. They either remain hungary and died of hunger and malnutrition or live on charity of others. Economic planning aims at reducing the inequalities of income by raising the income levels of the poor.

In fact these two objectives of economic planning are considered equally important. ' Growth with equity' (i.e. growth with equality of income distribution) is considered as the main objective of economic planning in India.

This is another important objective of economic planning in India. This implies that instead of exporting minerals and agricultural raw materials the country could use them to manufacture the goods that it imports from other countries. The economy would thus be able to increase its industrial production. The objective of self-reliance also meant that the economy would be increasing its productive capacity to pay for its imports.

Economic planning also aims at reducing inequalities in the levels of development of different regions. Some regions were more advanced industrially whereas others were very backward. For instance industrial advancement of Maharashtra and Gujratwas in sharp contrast with the neighboring Madhya Pradesh or with Orissa. There 'was a need to build up the infrastructure which was'necessary for industrial growth in these backward regions. Economic planning aims at reducing the inequalities between different regions of the country.

Modernisation of the economy is another objective of planning in India. Building up new industries, improving techniques of production, improving organisation of production units are necessary fur ensuring the economic growth continues to take place over a long period of time. Modernisation aims at increasing the ability of the Indian industries to compete with industries of other countries. Modernisation also aims at changing social attitudes and habits so that productivity and incomes can be increased.

• At the time of independence, Indian economy was not only marked by low income but also a considerable degree of inequality.
• Excessive dependence on agriculture, backward technology, low productivity and traditional attitudes made the economics situation extremely difficult.
• There was an urgent need for economic development. Economic growth only would not be sufficient as the levels of living of the poor had to be raised.
• Free market system could not have guaranteed the desired rate of economics growth alongwith reduction of inequalities. So, there was a need for planning in order to best utilise the resources for the benefit of the people rather than a few.
• Economic planning could also help in mobilishing an allocating resources in the desired manner.
• The Objectives of economic planning in India are economics growth, reduction of inequalities, self reliance, modernisation, reduction of unemployment and balanced regional growth.
• Each five year aims at achieving certain targets. Five year plans constitute the step towards the fulfilment of the objectives of economics planning.

2. Stale the impact of partition on the economy of divided India.

3. Distinguish between economic growth and economic development.

4. Did India need economic growth or economic development at the time of Independence. Explain.

5. Bring out the case for economic planning in India.

6. State the major objectives of economic planning in India.

2. (i) inequality (ii) low (iii) backward (iv) literacy

1. (iii)

2. (i) Reduction in inequality (ii) Reduction in poverty

3. (i) Infant mortality rate (ii) Illiteracy rate

1. (i) D (ii) C

2. (i) planning (ii) market system (iii) objectives

1. (i) and (iii)

2. (iii)

3. (i) low (ii) more (iii) imports

1. Read section 23.3

2. Read section 23.3(8)

3. Read section 23.4

4. Read section 23.4

5. Read section 23.5

6. Read section 23.6