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Unit 11: India Independent to 1964

the first three Plans (again leaving out 1965-66), Indian agriculture grew at an annual rate of over Notes
3 per cent, a growth rate 7.5 times higher than that achieved during the last half century or so of
the colonial period. The growth rates achieved compared very favourably with what was achieved
by other countries in a comparable situation, say China or Japan. For example, Japan achieved
a growth rate of less than 2.5 per cent between 1878 and 1912 and an even lower growth rate till
1937. What was particularly creditable was that India, unlike most other countries (such as China,
Japan, Korea, Taiwan, Soviet Union, Britain, etc.) achieved its land reforms and agricultural growth
in the context of civil liberties and a modern democratic structure. However, the commendable
agricultural growth achieved during this period was hot sufficient to meet the growing demand of
agricultural produce, necessitating increasing imports of foodgrains throughout the first three
Plans. Since 1956, India had to rely heavily on food imports from the US under the controversial
PL-480 scheme. It was only after the process of the Green Revolution took off, since the late sixties,
that this dependence on imports ceased.
Industry, during the first three Plans, grew even more rapidly than agriculture, at a compounded
growth rate of 7.1 per cent per annum between 1951 and 1965. The industrial growth was based
on rapid import substitution, initially, of consumer goods and particularly, since the Second Plan,
of capital goods and intermediate goods. The emphasis on the latter since the Second Plan was
reflected in the fact that 70 per cent of Plan expenditure on industry went to the metal, machinery
and chemical industries in the Second Plan and 80 per cent in the Third Plan. Consequently, ‘the
three-fold increase in aggregate index of industrial production between 1951 and 1969 was the
result of a 70 per cent increase in consumer goods industries, a quadrupling of the intermediate
goods production and a tenfold increase in the output of capital goods,’ a stupendous growth of the
capital goods sector by any standards. Tables 11.1 and 11.2 reflect this growth pattern (over a
longer period) in which intermediate and capital goods industries like basic metals, chemicals,
transport equipment and electrical and non-electrical machinery grew very rapidly and much
faster than consumer goods industries like textiles, particularly between 1951 and 1971.

Table 11.1: Indices of Industrial Production in India: 1951-1979
1960 = 100 (for 1951-1971) and 1970 = 100 (for 1978-79)
Industrial Group 1951 1961 1971 1978-79
General 55 109 153 186
Textiles 80 103 106 110
Basic Metals 47 119 209 144
Machinery 22 121 373 208
Electrical Machinery 26 110 405 162

Source: India: A Reference Annual, GOI, New Delhi, 1980, p. 312, cited in B.L.C. Jobnson, Development
in South Asia, Harmondsworth, 1983, p. 136.
This growth pattern went a long way in reducing India’s near-total dependence on the advanced
countries for basic goods and capital equipment, which was necessary for investment or creation
of new capacity. At independence, to make any capital investment, virtually the entire equipment
had to be imported. For example, in 1950, India met 89.8 per cent of its needs for even machine
tools through imports. In contrast to this, the share of imported equipment in the total fixed
investment in the form of equipment in India had come down to 43 per cent in 1960 and a mere 9
per cent in 1974, whereas the value of the fixed investment in India increased by about two and a
half times over this period. In other words, by the mid-1970s, India could meet indigenously more
than 90 per cent of her equipment requirements for maintaining her rate of investment. This was
a major achievement, and it considerably increased India’s autonomy from the advanced countries
in determining her own rate of capital accumulation or

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