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Indian Economy after Independence

Five-year Plans and Types of Economic Systems such as Capitalist, Socialist, Mixed Economy.

After independence, the government of India decided that India would be a socialist society with a strong public sector and democracy where the public authority would get ready for the economy, with the private area being urged to be a piece of the arrangement exertion. 

Types of Economics System

Right after gaining independence, one of the major questions in front of the Indian leaders was to choose an economic system that is suitable for our population. The idea was to choose a system which would promote overall welfare. Types of various economies are explained below for clear understanding. 

Capitalist:

  • The production and distribution depend on the market forces of supply and demand
  • Only those consumer goods that are in demand will be produced
  • If labour is cheaper than capital, more labor-intensive production methods will have to be used and vice-versa
  • The goods produced are distributed among people not based on what people need but based on Purchasing Power which indicates the ability to buy goods and services

Socialist:

  • The government makes decisions on what goods are to be produced per the needs of society
  • The government decides how goods are to be produced and how they ought to be distributed among people
  • Strictly, a socialist society has no property of its own since the state owns everything
  • In principle, distribution under socialism is meant to be based on what people need and not on what they can afford to purchase

Mixed: 

  • In a mixed economic system, the government and the market decide what to produce, how to produce, and how to distribute
  • In general, the market produces whatever goods and services it can produce well, and the government provides essential goods and services, which the market otherwise cannot

Five-year Plans:

A plan specifies how the resources of a nation should be put to use to achieve the goals and defined objectives within a specified period. In India, plans were of a five-year duration and were called five-year plans (borrowed from the former Soviet Union, the pioneer in national planning).

In 1950, the Planning Commission was founded with the Prime Minister as its Chairperson. 

Goals of five-year plans:

The five-year plans had four primary goals, which were provided varied importance in different projects based upon the availability of resources. These goals were: 

  • Growth: Increase the country’s capacity to generate more economic output by producing more goods and services
  • A good indicator of economic growth is the steady increase in the Gross Domestic Product (GDP)
  • Modernisation: The adoption of new technology to increase the production of goods and services is called modernisation. For instance, a rancher can expand the result on the homestead by utilizing new seed assortments instead of utilizing the old ones
  • Initial seven five-year plans gave significance to be more self reliant. This strategy was viewed as a need to lessen our reliance on far-off countries, particularly for food. Modernisation isn’t simply restricted to the utilization of innovation. It also tends to change in viewpoints, such as acknowledging the similar right to work for both men and women
  • Self-reliance: The team means to avoid imports of those goods that could be manufactured in India itself
  • The first seven five-year plans gave importance to self-reliance. This arrangement was viewed as a need to lessen our reliance on far-off countries, particularly for food
  • Further, the fear appeared that reliance on imported food supplies, unfamiliar innovation, and unfamiliar capital might make India susceptible to foreign interference in our policies 
  • Equity: This is to ensure that the benefits of economic prosperity reach the poor simultaneously along with the rich 
  • Every Indian should have the ability to meet their basic needs like food, a decent house, education, and health care, and inequality in the distribution of wealth should be reduced

Conclusion:

After independence, the government of India decided that India would be a socialist society with a strong public sector and democracy, with the private area being urged to be a piece of the arrangement exertion. 

India adopted the five year planning model, wherein the plan specifies how the resources of a nation should be put to use to achieve the goals and defined objectives within a specified period. 

In 1950, the Planning Commission was founded and they had four primary goals, which were to provide varied importance in different projects based upon the availability of resources. 

The major targets which the Commission aims to achieve are growth, modernisation, equity and self reliance.