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Indian Freedom Struggle (1707–1947 A.D.)

Notes the objective was to do away with this need as soon as possible by rapidly increasing domestic
savings. (In fact, in the initial years after independence, Nehru had tried to woo foreign investments
into India, much to the chagrin of, as yet not too confident, Indian capitalists.)
Another critical element of the Nehru-Mahalanobis strategy was the emphasis on growth with
equity. Hence, the issue of concentration and distribution in industry and agriculture was given a
lot of attention though perhaps not with commensurate success. It may be added that the strategy
did not posit equity against growth but assumed that higher growth enabled higher levels of
equity and was critical for meeting the challenge of poverty; utmost attention was therefore given
to rapid growth.
State supervision of development along planned lines, dividing activity between the public and
the private sectors, preventing rise of concentration and monopoly, protecting small industry,
ensuring regional balance, canalizing resources according to planned priorities and targets, etc.—
all this involved the setting up of an elaborate and complicated system of controls and industrial
licensing, which was done through the Industries Development and Regulation Act (IDRA) of
1951. Further, the balance of payments crisis and acute shortage of foreign exchange that occurred
in 1956-57, at the very start of the Second Plan, led to the imposition of stringent import and
foreign exchange controls. The seeds of the Kafkaesque web of licence quota rules and regulations
were thus laid and in later years it was found that it was not easy to dismantle a system that had
acquired a vicious stranglehold over the Indian economy. The bureaucracy-politician nexus and
certain sections of business that were beneficiaries of the system resisted such a change.
Achievements

Considerable progress on several fronts was made during the first phase of the development
effort, spanning the first three Five-Year Plans, i.e., by the mid-1960s. The overall economy
performed impressively compared to the colonial period. India’s national income or Gross National
Product (GNP) grew at an average rate of about 4 per cent per annum, between 1951 and 1964—
65 excluding the last year of the Third Plan, i.e., 1965-66, which saw an unprecedented drought
and a war). This was roughly four times the rate of growth achieved during the last half century
of colonial rule. The rate of growth achieved by India after independence compared favourably
with the rates achieved by the advanced countries at a comparable stage, i.e., during their early
development. To quote eminent economist Professor K.N. Raj:
Japan is generally believed to be a country which grew rapidly in the latter part of the 19th and the
first quarter of the 20th century; yet the rate of growth of national income in Japan was slightly
less than 3 per cent per annum in the period 1893-1912 and did not go up to more than 4 per cent
per annum even in the following decade. Judged by criteria such as these the growth rate achieved
in India in the last decade and a half (1950-65) is certainly a matter for some satisfaction.
Stepping up the rate of growth required a substantial increase in the investment rate. An important
achievement in this period was the rise in the savings and investment rates. On the basis of rather
rudimentary data, the draft outline of the Fourth Plan estimated that domestic savings and total
investment in the Indian economy were both 5.5 per cent of national income in 1950-51, rising to
savings of 10.5 per cent and investment of 14 per cent in 1965-66. The gap between domestic
savings and investment in later years was met partly by liquidating the foreign exchange reserves
(mainly the huge sterling balances, about Rs 16 billion, that England owed India in 1947, because
of the forced credit England had extracted from India during the war) and partly through foreign
borrowing and aid. It has been estimated that the total investment in 1965-66 was nearly five times
the 1951-52 level in nominal terms and more than three times in real terms.
11.3.1 Agrarian Reforms
On the agrarian front, the comprehensive land reform measures initiated soon after independence,
the setting up of a massive network for agricultural extension and community development work
at the village level, the large infrastructural investment in irrigation, power, agricultural research,
and so on, had created the conditions for considerable agricultural growth in this period. During

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