Cheat Sheet: Evolution of Indian Economy | Indian Economy for UPSC CSE PDF Download

Pre-Independence Economy

• India had a self-sufficient village economy with strong handicrafts and agriculture.
• Colonial policies led to deindustrialization (decline of indigenous industries) and commercialization of agriculture.
• Drain of wealth theory by Dadabhai Naoroji highlighted how British policies extracted surplus from India.
• Indian economy became stagnant, agrarian, and highly dependent on British markets.
• No major industrial base was developed due to British emphasis on raw material export.

Post-Independence Economy

• Faced challenges like partition, refugee influx, food shortage, lack of infrastructure and industrial base.
• Adopted a planned development approach under the Planning Commission (1950).
• First Five-Year Plan (1951–56) focused on agriculture, irrigation, and land reforms.
• Second Plan (1956–61) followed the Mahalanobis model, emphasizing heavy industries.
• Public sector dominated the commanding heights of the economy.

Prime Moving Force: Agriculture vs. Industry

• In the early decades, agriculture was the focus due to food insecurity and rural employment.
• Green Revolution (1960s–70s) improved productivity, especially in wheat and rice, but remained regionally skewed.
• Industrialization gained pace under the second and third Five-Year Plans.
• By the 1980s, industry and services began contributing more to GDP, reducing agriculture's share in total output.
• However, agriculture still employs a majority of the population.

Planned and Mixed Economy

• India adopted a mixed economy model combining public and private sectors.
• The public sector was entrusted with infrastructure, heavy industries, and social sectors.
• Private sector operated in consumer goods, small-scale industries, and services.
• Industrial Policy Resolution (1956) reinforced this approach, giving the state a dominant role.
• Emphasis was on import substitution, license-permit raj, and central planning.

Economic Reforms Since Independence