When India became independent in 1947, the economy of the country was very fragile and facing many problems. The level of poverty was very high. Nearly 80 percent of the population was living in rural areas, depending on agriculture for their livelihood. As the craft-based occupations had suffered during British rule, many skilled artisans had lost their livelihood. As a result, agriculture was overcrowded, and the per capita income from agriculture was very low. Agriculture was also characterized by semi-feudal relations between landowners and cultivators or peasants, who were often exploited by the land-owning classes.The industrial sector had grown in the decades before Independence, but it was still quite small. The best known heavy industry was Tata Iron and Steel. Besides this, the main manufactures were cotton spinning and weaving, paper, chemicals, sugar, jute and cement. Engineering units produced machinery for these units. However, the sector was relatively small and did not offer a significant potential for employing the surplus labour from the agricultural sector. In fact, the industry sector only accounted for 13% of the total Gross Domestic Product (GDP) in 1950. Most manufactured consumer goods were imported. T he Indian offices of major foreign companies were involved only in marketing and sales, and not in manufacturing. T hus, the new government of India was faced with the mammoth task of developing the economy, improving conditions in agriculture, widening the manufacturing sector, increasing employment and reducing poverty.
Socialistic Pattern of Society
Economic development can be achieved in many ways. One option would be to follow the free enterprise, capitalist path; the other was to follow the socialist path. India chose the latter. In fact, the Preamble to the Indian Constitution, cited in the previous lesson, stated unambiguously that India would be “a sovereign, socialist, secular democratic republic”. The objectives of this socialist pattern of development were: the reduction of inequalities, elimination of exploitation, and prevention of concentration of wealth. Social justice meant that all citizens would have an equal opportunity to education and employment. This essentially entailed the active participation of the state in the process of development.
Jawaharlal Nehru In agriculture, social and economic justice was to be achieved through a process of land reforms which would empower the cultivator. In industry, the state would play an active role by setting up major industries under the public sector. These were to be achieved through a comprehensive process of planning under Five Year Plans. These strategies had been borrowed from the Soviet experience of rapid economic development. Nehru was a great admirer of the success of the Soviet Union in achieving rapid development, and thus the ideology on which this strategy is based is often referred to as “Nehruvian socialism”.
At the time of Independence, agriculture in India was beset with many problems. In general, productivity was low. The total production of food grains was not enough to feed the country, so that a large quantity of food grains had to be imported. Nearly 80 percent of the population depended on agriculture for their livelihood. T his automatically reduced the income of each person to very low levels. This is a situation described as ‘disguised unemployment’. That is, even if many people shifted to other occupations, total production levels would remain the same, because this surplus population was not really required to sustain the activity, and was, in effect, unemployed. Given the high level of poverty level among the rural population, most of them were heavily indebted to money lenders. T he backwardness of agriculture could be attributed to two factors: institutional and technological. Institutional factors refer to the social and economic relations that prevailed, particularly between the land-owning classes and the cultivating classes. Technological factors relate to use of better seeds, improved methods of cultivation, use of chemical fertilizers, use of machinery like tractors and harvester combines, and provision of irrigation. The government decided to tackle the institutional drawbacks first and began a programme of land reforms to improve the conditions in agriculture. The basic assumption was that such measures would improve the efficiency of land use or productivity, apart from empowering the peasants by creating a socially just system.