Ramesh Singh : Summary of Evolution of the Indian Economy - Notes | Study Indian Economy for UPSC CSE - UPSC

PRIME MOVING FORCE : AGRICULTURE VS. INDUSTRY :

• Every economy has to go for its development through exploitation of its natural and human resources. There are priorities of objectives set by the economy which is attempted to be realised in a proper time frame.
• The availability and non-availability of resources are not the only issues which make an economy decide whether to opts for agriculture or industry as its prime moving force.
• There are many more socio-political compulsions and objectives which play their roles in such decision making.
• Given the available resource base it seems an illogical decision as India lacked all those prerequisites which could suggest the declaration of industry as its prime mover:

Almost no presence of infrastructure sector, i.e., power, transportation and communication. Negligible presence of the infrastructure industries, i.e., iron and steel, cement, coal, crude oil, oil refining and electricity.
(i) Lack of investible capital—either by the government or the
(ii) Absence of required technology to support the process of industrialisation and no research and development.
(iii) Lack of skilled manpower.
(iv) Absence of entrepreneurship among the people
(v) Absence of a market for industrial goods.
(vi) Many other socio-psychological factors which acted as negative forces for the proper industrialisation of the economy.

• The obvious choice for India would have been the agriculture sector as the prime moving force of the economy because :
  (i) The country was having the natural resource of fertile land which was fit for cultivation.
  (ii) Human capital did not require any kind of higher training.
• There were many decisions which were taken under the influence of the main political force of the times, still some very vital ones were influenced by the visionary hunches of the political leadership mainly being J. L. Nehru. This is why the economic thinking of independent India is considered and said to be nurtured by Nehruvian Economics even today.
• Looking at the resources available, agriculture would have been the obvious choice as the prime moving force (PMF) of the economy
• The dominant ideology around the world as well as in the WB and the IMF was in favour of industrialisation as a means to faster growth, which could be translated into faster development.
• The second World War has proved the supremacy of defence power. For defence a country needs not only the support of science and technology, but also an industrial base. India also required a powerful defence base for herself as a deterrent force.
• Even before Independence, there was a socio-economic consensus among social scientists along with the nationalist leaders, that India needed a boost towards social change as the country lagged behind in the areas of modernisation.
• By the time India got her independence the might of industrialisation was already proven and there were no doubts regarding its efficacy.
• As per the Planning Commission such a policy shift will solve the three major challenges faced by the economy :
  (i) Economy will be able to achieve food security with the increase in agricultural production. Besides, the agricultural surplus will generate exports in the globalising world economy benefiting out of the WTO regime.
  (ii) The challenge of poverty alleviation will be solved to a great extent as the emphasis will make agriculture a higher income-generating occupation and induce growth in the rural economy by generating more gainful employment.
  (iii) The situation of India as an example of 'market failure' will cease.

PLANNED AND MIXED ECONOMY

• India was constitutionally declared a federation of states, in the process of planning, the authority of regulation, directing and undertaking economic activities got more and more centralised in the Union government, 
• The Great Depression of 1929 and the reconstruction challenges after the second world War had made experts to conclude in favour of a state intervention in the economy. 
• It was the same time that the command economies (i.e., state economies) of the soviet Union and the East European countries started making news about their faster economic growth. In the 1950s and 1960s, the dominant view among policymakers around the world was in favour of an active role of the state in the economy. 
• A dominant role for the state in the economy to neutralise market failure situations was gaining ground around the world.

EMPHASIS ON THE PUBLIC SECTOR

• Infrastructural Needs : Every economy whether it is agrarian, industrial or post-industrial, needs suitable levels of infrastructure such as power, transportation and communication. Without their healthy presence and expansion, no economy can grow and develop.
• Industrial Needs : India had opted for the industrial sector as its prime moving force.
• Employment Generation : The PSUs were also seen as an important part of the employment generation strategy. A government in a democratic set up cannot think only economics, but it has to realise the socio-political dimensions of the nation too. The country was faced with the serious problem of poverty and the workforce was increasing at a fast rate. Giving employment to the poor people is a time-tested tool of poverty alleviation. The PSUs were thought to create enough jobs for the employable workforce of the economy.
• Profit and Development of the Social Sector : The investment to be made by the government in PSUs was in the nature of asset creation and these entities were to be involved in production activities. It was natural for the government to gain control over the profits and dividends accruing from them.
• Rise of the Private Sector : As the PSUs took the responsibility of supplying the infrastructure and the basic industries to the economy, a base for the rise of private sector industries was slowly established. With the rise of private sector industries in the country, the process of industrialisation was thought to be completed. Out of the many roles the PSUs were supposed to play, this was the most far-sighted.