Revision: Indian Economic Development >> Development Experience (1947-90) and Economic Reforms since 1991 Economics Commerce (English Medium) Class 12 CBSE

According to Wasserman and Hultman, “International Trade consists of transaction between residents of different countries.”

Viticulture is grape cultivation which is speciality of the Mediterranean region.

It is the type of farming where farmers specialize in and grow vegetables only. The distance of truck farms from the market is governed by the distance a truck can cover overnight.

Factory farming is a modern development in the industrial regions of West Europe where livestock especially poultry and cattle rearing is done installs and pens and fed on manufactured feedstuff and carefully supervised against diseases.

Liberalisation means removing unnecessary government restrictions and controls on business activities so that trade and industries can grow freely and compete globally.

Integration of national economies and societies through cross-country flows of information, ideas, technologies, goods, services, capital, finance, and people.

• The book 'Indian Economic Development' covers basic features of the Indian economy post-Independence.
• India's present economic structure is rooted in its history, especially the British colonial period.
• British rule lasted for almost two centuries, ending on 15 August 1947.
• The British colonial objective was to make India a raw material supplier for Great Britain's industrial base.
• The colonial relationship was exploitative in nature.
• Understanding this past is essential for assessing India's post-independence development.
• India's post-independence strategy was shaped by considerations arising from this colonial legacy.

• Pre-British India had a self-sufficient economy with agriculture as its backbone and globally recognised handicraft industries.
• Daccai Muslin — especially "Malmal Khas" — is a prime example of India's pre-colonial textile excellence.
• British colonial policies converted India into a raw material supplier and a market for British goods.
• These policies fundamentally damaged India's economic structure and industrial base.
• No official efforts were made to estimate India's national income during colonial rule.
• Economists like Dadabhai Naoroji, V.K.R.V. Rao, and R.C. Desai made independent estimates of national income.
• Economic growth was extremely sluggish — aggregate output grew under 2% and per capita output at just ~0.5% per year in the first half of the 20th century.

• India's economy was primarily agrarian, with the majority dependent on farming for livelihood.
• Agriculture was stagnant and deteriorating at the time of independence.
• The land settlement system, especially the zamindari system, was a major cause of agricultural backwardness.
• Zamindars had no interest in improving land; their focus was only on collecting rent.
• Cultivators lacked incentives, resources, and access to modern inputs and irrigation.
• Moneylenders exploited small cultivators who borrowed to pay rent and meet basic needs.
• The commercialisation of agriculture forced farmers to shift from food crops to cash crops for British industries.

• India had no strong capital goods industry before independence.
• Deindustrialisation under colonial rule destroyed the handicrafts sector.
• Cotton mills and jute mills were the first forms of modern industrial activity.
• TISCO (1907) at Jamshedpur was among the earliest modern industrial enterprises.
• The public sector was restricted to railways, power, ports, and communications.
• The new industrial sector contributed minimally to GDP/GVA before independence.

• Foreign trade = trade between residents of different countries; also called international or external trade.
• India's foreign trade under colonial rule was shaped by British economic interests.
• India exported primary products (jute, cotton, silk, indigo) and imported finished goods.
• Despite an export surplus, India faced domestic scarcity and a net drain of wealth.
• The Suez Canal played a key role by reducing transport costs and increasing British market access to India.

• Census data available from 1881 onwards; population growth was uneven.
• India was in the first stage of demographic transition before 1921.
• After 1921, India entered the second stage with faster population growth.
• Literacy was critically low — under 16% overall, ~7% for females.
• Public health was poor; water-borne and air-borne diseases were rampant.
• Infant mortality stood at 218 per thousand; life expectancy was only 32 years.
• Extensive poverty during colonial rule was the root cause of the poor demographic profile.

• ​Occupational structure shows how working people are distributed across agriculture, manufacturing, and services.
• Around 70–75% of India's colonial workforce was in agriculture — indicating economic backwardness.
• Manufacturing employed only ~10% of the workforce, reflecting weak industrialisation.
• Services accounted for ~15–20% of the workforce.
• Regional disparities existed — Bombay, Bengal, and Madras were more developed; Orissa, Rajasthan, and Punjab were more agrarian.
• Workers lacked basic needs like housing, highlighting poor living standards under colonial rule.

• Infrastructure is of two types: Economic and Social.
• Colonial infrastructure (railways, roads, ports, water transport, posts and telegraphs) was developed mainly to serve British interests.
• Railways promoted the commercialisation of agriculture and colonial trade.
• All-weather roads were inadequate during British rule.
• India inherited weak infrastructure and major economic and social challenges at independence.

• India adopted the Five Year Plan model from the USSR (Russia); the Planning Commission was established in 1950 under Jawaharlal Nehru.
• The main aims were agricultural & industrial development, employment generation, poverty reduction, and self-reliance.
• The four goals of planning were Growth, Modernisation, Self-reliance, and Equity.
• The First Plan focused on agriculture, while the Second Plan focused on heavy industries under the Mahalanobis Model.
• Wars, famines, the oil crisis, and political instability affected the success of several plans.
• The Planning Commission was replaced by NITI Aayog (2015), and the Twelfth Plan (2012–17) was the last Five Year Plan.

• Agriculture depends on physical, institutional, infrastructural, and technological factors.
• Farming includes subsistence, plantation, and market gardening, based on local conditions.
• Land reforms aimed to reduce unequal land ownership.
• The Green Revolution increased crop production using HYV seeds, fertilizers, and pesticides.
• Agricultural subsidies support farmers but remain debated.
• Tamil Nadu has different agro-climatic zones with specific crops and a declining net sown area.
• Across India, urbanization has reduced the net sown area as the economy shifts away from agriculture.

• The industrial sector provides employment stability unlike agriculture.
• The public sector was given "commanding heights" — control over key economic industries.
• The Industrial Policy Resolution 1956 divided industries into three categories based on government vs. private sector ownership.
• A licensing system was used to regulate private sector industries.
• The Karve Committee (1955) underscored the importance of small-scale industries.
• SSIs are defined by their investment limit and are labour-intensive.
• Government support to SSIs included product reservation and concessions.

• Import substitution = replacing imports with domestic production using tariffs and quotas.
• Tariffs make imports costlier; quotas limit import quantity.
• Industrial GDP share grew from 13% to 24.6% between 1950–51 and 1990–91, with ~6% annual growth.
• Public sector enterprises were often inefficient and loss-making.
• Licensing misuse by big businesses created the notorious "Permit Licence Raj".
• The policy caused poor-quality goods, limited consumer choice, and a weak export sector.
• These failures were key drivers behind India's 1991 economic liberalisation reforms.

• Post-independence excessive controls under the mixed economy model led to the 1991 crisis.
• Fiscal deficit hit 6.6% of GDP, inflation 13–14%, and forex reserves fell below 2 weeks of imports.
• Credit rating was downgraded from AAA to BB+, pushing India close to external default.
• India pledged 47 tonnes of gold to the Bank of England, raising ~$600 million as an emergency measure.
• New Industrial Policy (July 1991) delicensed most industries and established FIPB.
• Rupee devalued by ~18%; LERMS introduced for exchange rate management.
• Reforms launched the LPG framework — Liberalisation, Privatisation, and Globalisation.

• Inefficient economic management and large fiscal deficits in the 1980s triggered India's financial crisis.
• Exports could not match rising imports, causing a severe Balance of Payments crisis.
• Foreign exchange reserves declined and inflation rose sharply.
• India approached World Bank and IMF and received a $7 billion loan with reform conditionalities.
• The New Economic Policy (NEP) comprised stabilisation measures (short-term) and structural reforms (long-term).
• The NEP was organised under three heads: Liberalisation, Privatisation, and Globalisation.

• Liberalisation helps markets run freely with less government control.
• Boosts investment, competition, and technology use.
• Protects investor interests and makes trade easier.
• Liberalisation (from 1991) reduced government controls and licensing and opened more sectors to private competition.
• Industrial licensing removed for most industries; only a few areas reserved for public sector and small‑scale reservations reduced.
• Financial sector: private and foreign banks allowed; FIIs (foreign investors) permitted in markets; RBI became more of a facilitator.
• Tax reforms: income and corporate tax rates cut, procedures simplified; GST introduced to create one national market and reduce evasion.
• Foreign exchange: rupee devalued in 1991; exchange rate mostly determined by market demand and supply.
• Trade & investment: import licensing and quantitative restrictions removed, tariffs reduced, export duties scrapped to make Indian industry more competitive globally.

• Privatisation = reducing state ownership/management in favour of private sector.
• Key reasons: inefficiency, losses, political interference, mismanagement in PSUs.
• Main measures: disinvestment, dereservation, full sale, MoU system, BIFR, NRB.
• Disinvestment beyond 51% transfers both ownership and management to private sector.
• PSUs are classified as Maharatna, Navratna, and Miniratna (I & II) based on autonomy levels.
• Real examples include Air India, Maruti, Hindustan Zinc, BALCO, and IPCL.
• Privatisation is one of the three components of the New Economic Policy (along with Liberalisation and Globalisation).

• WTO is the successor to GATT and governs international trade rules.
• Its primary goal is free, fair, and non-discriminatory global trade
• WTO works to reduce tariffs and remove trade barriers among nations.
• Special provisions exist to protect Less Developed Countries (LDCs).
• India is a member and has accepted WTO commitments affecting its economy.
• WTO membership has influenced India's sectors and social indicators.
• It functions through a multilateral conference structure involving all member countries.

• GDP growth rate improved to 5.6% per annum post-reforms but employment growth lagged behind.
• Service sector grew significantly; agriculture and industry underperformed.
• FDI inflows rose sharply from $100 million (1990–91) to $4,029 million (2000–01).
• Forex reserves jumped from $6 billion to $54.1 billion within a decade.
• Reforms hurt small industries and farmers through cheaper imports and reduced subsidies.
• PSU disinvestment was criticised for undervaluation and non-utilisation of proceeds.
• Globalisation widened income inequality, with the poor not benefiting proportionately