Post Independence History-II | History Optional for UPSC (Notes) PDF Download

Economic Development of India

• Post-Independence India faced numerous challenges, including poverty, illiteracy, and a distorted economy marked by a struggling agriculture and industrial sector. The primary objectives for Indian leaders were to ensure well-being and promote economic development.
• To achieve these goals, they had two models of economic development to choose from: the liberal-capitalist model followed in the United States and Europe, and the socialist model followed in the Soviet Union. In 1954, the Indian Parliament accepted the socialist pattern of society as the objective of social and economic policy.
• However, the actual model that was implemented in India was a "mixed economy," where both public and private sectors co-existed and complemented each other. The private sector was given the freedom to grow and develop within the broad objectives of the national plan, while the public sector played a crucial role in addressing the country's social and economic challenges. This approach aimed to strike a balance between the advantages of both the capitalist and socialist models, offering India a unique path towards economic development and progress.

India adopted the mixed model of economic development, which has features of both the capitalist & socialist models as there was a mature indigenous entrepreneurial class (Birlas, Tatas, Singhanias) that developed an independent economic base which was an asset for post-independence planned development.

Everyone was more or less agreed on following agenda

• Multi-pronged strategy of economic development based on self-reliance.
• Rapid industrialization based on import-substitution including capital goods industries.
• Prevention of imperialist or foreign capital domination.
• Land reforms involving tenancy reforms.
• Abolition of Zamindari system.
• Introduction of cooperatives especially of service cooperatives like marketing, credit, etc.

Why India rejected capitalist style of Modernization? 

During that era, development meant becoming more and more modern like industrialized countries of West.

• India rejected such model because majority of the people were illiterate & to become modern, breakdown of traditional social structures was required, which was highly impossible.
• Modernization was also associated with the ideas of growth, material progress and scientific rationality, but due to lack of resources and education, it was not possible in India which was fully dyed in the wool of caste based mentality.

To sum up → Lack of education, poverty, food insecurity, lack of capital, resources & technology, caste based society were major reasons behind rejection of capitalist model of economy.

New Economic Policy 1991

In the late 1980s, the Indian government faced a severe economic crisis as its expenditures significantly exceeded its revenues. This led to soaring inflation, and imports grew disproportionately compared to exports. Consequently, foreign exchange reserves dropped to a level that was insufficient to finance imports for more than two weeks or pay interest to international lenders.

• To address this economic crisis, India approached the World Bank and the International Monetary Fund (IMF) and secured a $7 billion loan to manage the situation. 
• In exchange for this financial assistance, these institutions demanded that India implement economic reforms. 
• These reforms included opening up various sectors of the economy by removing restrictions, reducing the role of the government in many areas, and eliminating trade barriers. 
• These measures, collectively known as the New Economic Policy of 1991, aimed to liberalize and modernize India's economy.

LPG Reforms

• India had no choice but to accept these conditions and announced the New Economic Policy.
• The Crux of the policy was to remove the barrier to the entry of private firms and to create more competitive environment for the economy.

• These reforms can be classified into two types:

• The stabilization measures [short term]
• The structural reform measures [Long term]

• Government initiated a variety of policies which fall under three heads viz. Liberalization, Privatization & Globalization, “LPG Policy”.

• The first two are policy strategies & the last one is the outcome of these strategies.

 Liberalization 

• Industrial licensing was abolished for almost all but product categories – alcohol, cigarettes, hazardous chemicals industries, expensive electronics, aerospace drugs and pharmaceuticals.
• The only industries now reserved for the public sector are defence equipment, atomic energy generation and railway transport.
• In many industries, the market has been allowed to determine the prices.

 Financial sector reforms – Major aim was to reduce the role of RBI from regulator to facilitator of financial sector. These reforms led to the establishment of private sector banks & entry of foreign banks with certain conditions on FII. 

Tax Reforms – Since 1991, there has been a continuous reduction in the taxes on individual incomes. The rate of corporation tax was reduced; simplification of procedures to pay the income tax was also initiated. 

Foreign Exchange Reforms – Initially the rupee was devalued against foreign currencies. This led to the increase in the inflow of foreign exchange. Now usually, markets determine exchange rates based on the demand and supply of foreign exchange.

Privatization 

• Government had shed off the ownership and management of various government owned enterprises.
• Government started disinvestment by selling off equity of PSU’s.

• The purpose behind such move was to improve financial discipline and to facilitate modernization.
• The government also made attempts to improve the efficiency of PSUs by giving them autonomy in taking managerial decisions.

 Globalization 

• Globalisation is the outcome of liberalisation & privatisation.
• Globalisation implies greater interdependence & integration.
• The best example is of outsourcing. e.g. BPOs.

• Globalization is mix bag of results. On one hand it has provided greater access to global markets, imports of high Technology etc. on the other hand developed countries expands their markets in other countries.
• It has also been pointed out that markets driven globalization has widened the economic disparities among nations and people.

ERA of Information and Communication Technology 

In India, the path towards technology induced development especially associated with ICT, was given a vent in 1984 by Rajiv Gandhi government. He adopted an effective route to development with massive programme of computerization, launched in commercial and the public sectors undertakings and in administrative departments.

• In 1998, National Task Force on Information Technology and Software Development prepared the blue print for making the adoption of IT as a national movement by establishing a wide network of empowered taskforce at all governmental & non-governmental level.
• In 1999, the Ministry of Information Technology was established by bringing together government agencies involved in different aspects of IT for creating job to harness opportunities provided by convergence of communication technologies and to facilitate the use of IT in use of Electronic Governance.
• ICT generated new possibilities to address problems of rural poverty, inequality and environmental degradation.

IT Industry India

• In India, the growth of information technology and communications is very significant in the past two decades.
• IT Industry in India comprises of software industry and information technology enabled services [ITES] which also includes BPO industry.
• India is considered as a pioneer in software development and a favorite destination for IT-enabled services (ITES).
• Many other countries look to India as a model for global outsourcing and try to imitate elements of this is their own strategies.
• Indian government use ICT for delivery of government information & services to citizens (G2C), to businesses [G2B], to employees [G2E], and to governments [G2G].

• Government of India initiated an e-government programme by adopting the Information Technology Act in 2000.
• The major aims of this Act were to recognize electronic contracts, prevent computer crimes and make electronic filing possible.
• Later in 2006, Government approved the National e governance Plan [NeGP) to enhance e government initiatives in India.
• Recently Indian Government has launched Digital India Programme to take Indian IT industry on whole new level.
• Almost all state governments & UTs have implemented their own e government services to serve their citizens.

Land Reforms in India

• Land reforms in India refer to the redistribution of land from the wealthy to the impoverished. This includes the regulation of land ownership, operation, leasing, sale, and inheritance. India, an agrarian economy with significant wealth and income inequalities, faces a severe scarcity of land and a large population living below the poverty line. As a result, there are compelling economic and political reasons for implementing land reforms.
• Land reform is a crucial government initiative aimed at supporting people living in unfavorable conditions. It mainly involves redistributing land from those who have an excess to those who lack it, with the goal of increasing the income and bargaining power of the rural poor. Land reform aims to assist the weaker sections of society and ensure fair distribution of land.
• During the 1950s, the Indian Government was dedicated to land reforms and distributive justice, as promised during the country's struggle for independence. As a result, all state governments passed laws aimed at abolishing landlordism, imposing land ceilings, protecting tenants, and consolidating land holdings.
• Government land policies are designed to promote the rational use of scarce land resources by influencing holding conditions and imposing ceilings on landholdings. This ensures that land cultivation is carried out in the most economically efficient manner.

Objectives of land reforms

• To enhance the productivity of land by improving the economic conditions of farmers and tenants so that they may have the interest to invest in and improve agriculture
• To ensure distributive justice and to create an egalitarian society by eliminating all forms of exploitation
• To create a system of peasant proprietorship with the motto of land to the tiller
• To transfer the incomes of the few to many so that the demand for consumer goods would be created.

Need for land reforms

• To make redistribution of Land to make a socialistic pattern of society. Such an effort will reduce the inequalities in ownership of land.
• To ensure land ceiling and take away the surplus land to be distributed among the small and marginal farmers.
• To legitimize tenancy with the ceiling limit.
• To register all the tenancy with the village Panchayats.
• To establish relation between tenancy and ceiling.
• To remove rural poverty.
• Proliferating socialist development to lessen social inequality
• Empowerment of women in the traditionally male driven society.
• To increase productivity of agriculture.
• To see that everyone can have a right on a piece of land.
• Protection of tribal by not allowing outsiders to take their land.

Land reforms undertaken

The process of land reform after independence basically occurred in two broad phases.

• The first phase also called the phase of institutional reforms started soon after independence and continued till the early 1960s focussed on the following features:
• Abolition of intermediaries like zamindars, jagirdars, etc.
• Tenancy reforms involving providing security of tenure to the tenants, decrease in rents and conferment of ownership rights to tenants
• Ceilings on size of landholdings
• Cooperativization and community development programmes.
• The second phase beginning around the mid- or late 1960s saw the gradual ushering in of the so-called Green Revolution and has been seen as the phase of technological reforms.
• Digitisation of land records:
• Making land records available to all, to contain/check property frauds, became one of the objectives of the government of India in the late 1980s.
• To address the same, the Digital India Land Records Modernisation Programme (DILRMP) was launched by the government of India in August 2008

Impact of land reforms

• Earlier large tracts of wasteland belonging to zamindars/ big farmers remained uncultivated. These lands were given to landless labourers as a result of which there is increase in area under cultivation leading to food security.
• Equal distribution of land will encourage intensive cultivation resulting in increased agricultural production leading to higher production levels.
• Some farm management studies conducted in India testified that small farms yielded more production per hectare. It is so because family members themselves cultivate small farms.
• Even one hectare of land is also an economic holding these days on account of improvement in agricultural technique. Hence, small size of holding due to ceiling will not have any adverse effect on agricultural production.
• Atleast some of the Land owners shifted to direct ‘efficient’ farming in order to get ‘exemption’ from land ceiling.
• Consolidation of landholdings ensures that small bits of land belonging to the same small landowner but situated at some distance from one another could be consolidated into a single holding to boost viability and productivity.

 Social Equity

• In a land-scarce country with a significant section of the rural population below the poverty line, the case for ensuring that everyone has access to some minimum amount of land seems compelling from  the  point  of
• In a rural economy, whoever controls land, controls the power.
• The tenancy laws have given the tillers protection from exploitation by providing them security of tenure and fixing maximum chargeable rents.
• Land ceiling reduced this power inequality among villagers.
• The intermediary rights have been abolished. India no longer presents a picture of feudalism at the top and serfdom at the bottom.
• Promoted spirit of cooperation among villagers.
• It will help develop cooperative farming

Problems in implementation of land reforms

Weaknesses with the zamindari abolition

• The absence of adequate land records made implementation of these acts difficult.
• Personal cultivation: ‘Personal cultivation’ was very loosely defined which led to not only those who tilled the soil, but also those who supervised the land personally or did so through a relative, or provided capital and credit to the land, to call themselves a cultivator.
• Moreover, in states like Uttar Pradesh, Bihar and Madras there was no limit on the size of the lands that could be declared to be under the ‘personal cultivation’ of the zamindar
• Zamindars resorted to large-scale eviction of tenants, mainly the less secure small tenants.
• Even after the laws were enacted the landlords used the judicial system to defer the implementation of the laws.
• Zamindars refused to hand over the land records in their possession, forcing the government to go through the lengthy procedure of reconstructing the records.
• Implementation of the law was made difficult with the collusion between the landlords and lower-level revenue officials.

 Weaknesses of tenancy reforms

• The provisions introduced to protect the small landowners were misused by the larger landlords with the active connivance of the revenue officials.
• The inordinate delays in enacting and implementing the legislations
• Voluntary surrenders by tenants also took place as they were ‘persuaded’ under threat to give up their tenancy rights ‘voluntarily’.
• No tenancy rights to sharecroppers.
• Most tenancies were oral and informal andwere not recorded.
• Providing security of tenure to all tenants, met with only limited success.
• The Green Revolution which started in some parts of India in the late 1960s aggravated the problems, with land values and rentals rising further.
• The acquisition of ownership rights by tenants was achieved only partially.
• Even today 5% farmers hold 32% of land holdings.
• The right of resumption and the loose definition of ‘personal cultivation’ was used for eviction of tenants on a massive scale.
• Voluntary surrenders by tenants also took place as they were ‘persuaded’ under threat to give up their tenancy rights ‘voluntarily’.
• In West Bengal sharecroppers, known as Bargadars received no protection till as late as July 1970, when the West Bengal Land Reforms Act was amended to accord limited protection to them.
• Most tenancies were oral and informal and were not recorded.
• Providing security of tenure to all tenants, met with only limited success. There were still large numbers who remained unprotected. So reducing rents to a ‘fair’ level was almost impossible to achieve 

Weaknesses in Land Ceiling Legislation

• Post-independence India had more than 70 per cent of landholdings in India under 5 acres so the ceiling fixed on existing holdings by the states were very high.
• In most states the ceilings were imposed on individual and not family holdings, enabling landowners to divide up their holdings in the names of relatives or make Benami transfers merely to avoid the ceiling.
• Further, in many states the ceiling could be raised if the size of the family of the landholder exceeded five.
• A large number of exemptions to the ceiling limits were permitted by most states following the Second Plan recommendations that certain categories of land could be exempted from ceilings.

 Digitization of land records failed

• Insufficient data: Lack of clear and sufficient data and mismanagement between the various agencies handling land records, the data registered at various government levels is not identical.
• Progress over the past decade has been uneven, with some states, such as Madhya Pradesh, Andhra Pradesh, Telangana, Chhattisgarh, Tamil Nadu and Maharashtra, doing better than the others. However, there are challenges, even in advanced states such as Maharashtra.
• New digitized land records do a good job in reflecting ownership of land, but less so when it comes to recording encumbrances and area of land parcels.

 Weaknesses of consolidation of land holdings

• The programme failed to achieve its desired objective because the farmers are reluctant to exchange their lands for the new one.
• The arguments given by the farmers is that their existing land is much more fertile and productive than the new land provided under land consolidation.
• The farmers also complained about nepotism and corruption in the process of consolidation.
• The farmers complained that the rich and influential often bribes and manage to get fertile and well-situated land, whereas the poor farmers get unfertile land. 

Failure of cooperative farming:

• Attachment with Land: The farmers are not willing to surrender the rights of land in favour of the society because they have too much attachment with it.
• Lack of Cooperative Spirit: The spirit of cooperation and love is lacking among farmers. They are divided in various sections on caste basis.
• Illiteracy: some of them are using the old methods of cultivation.
• Lack of Capital: The co-operative farming societies are also facing the capital shortage problem and these are unable to meet the growing needs of agriculture. Credit facilities to these societies are also not sufficient.
• Re-Payment of Debt: Sometimes debt is not re-paid in time which creates many problems for the financial institutions. Some members do not realize their responsibility and it becomes the cause of failure.

Conclusion

In conclusion, India's journey towards economic development has been marked by the adoption of a mixed economy model, land reforms, and the implementation of the New Economic Policy of 1991. While the mixed economy model aimed to strike a balance between capitalist and socialist approaches, land reforms sought to redistribute land and empower the rural poor. The 1991 economic policy introduced liberalization, privatization, and globalization reforms to modernize India's economy. However, challenges remain in the implementation of land reforms and digitization of land records, as well as the uneven progress of various states. Overall, India's economic development has seen significant progress, but there is still room for improvement to ensure a more equitable and prosperous society for all.

Frequently Asked Questions (FAQs) of Post Independence History-II

What is the mixed economy model followed by India?

The mixed economy model followed by India is a combination of both capitalist and socialist models, where the public and private sectors co-exist and complement each other. This approach aims to strike a balance between the advantages of both models, offering India a unique path towards economic development and progress.

Why did India reject the capitalist style of modernization?

India rejected the capitalist model of modernization because the majority of the population was illiterate, and the traditional social structures were difficult to break down. Additionally, modernization required resources and education that were lacking in India, which was deeply rooted in a caste-based society.

What is the New Economic Policy of 1991?

The New Economic Policy of 1991 is a set of economic reforms introduced in India to liberalize and modernize the economy. These reforms included opening up various sectors, reducing the role of the government, and eliminating trade barriers. It was implemented in response to a severe economic crisis in the late 1980s and as a condition for receiving financial assistance from the World Bank and the IMF.

What are the objectives of land reforms in India?

The objectives of land reforms in India include enhancing agricultural productivity, ensuring distributive justice, creating an egalitarian society, transferring incomes from a few to many, providing land to the landless, and protecting tribal lands from being acquired by outsiders.

Why were land reforms necessary in India?

Land reforms were necessary in India to address issues such as unequal distribution of land, land scarcity, rural poverty, and social inequality. These reforms aimed to ensure fair distribution of land, improve the economic conditions of farmers and tenants, and promote sustainable agricultural practices.