Critical Appraisal of Industrial Development (1950-1990)
Achievements and drawbacks of India's industrial sector.
Notes
Achievements of Industrial Sector
Growth and Contribution to GDP
The proportion of GDP contributed by the industrial sector increased from 11.8% in 1950-51 to 24.6% in 1990-91. The 6% annual growth rate of the industrial sector during the period is admirable.
Diversification of Industries
Indian industry was no longer restricted to cotton textiles and jute. It also included engineering goods and a wide range of consumer goods. The industrial sector became well diversified by 1990, largely due to the public sector.
Promotion of Small-Scale Industries
Small-scale industries gave opportunities to people with small capital to get into business. New investment opportunities helped generate more employment. It promoted growth with equity.
Key Stats
11.8% → 24.6%
GDP share (1950-51 to 1990-91)
6%
Annual industrial growth rate
40+
Industries diversified by 1990
Drawbacks — Inward-Looking Strategy & Licensing
Protection from Foreign Competition had two major drawbacks. Click each to learn more.
Industrial Drawbacks
Drawbacks — Public Sector Inefficiency
Public sector made remarkable contribution by creating strong industrial base, developing infrastructure and promoting backward area development. However:
✗Continued monopolising (ineffectively) in non-essential areas that private sector could handle: telecommunication, hotel industry, production of goods (like Modern Bread)
✗Precious funds channelised into areas where private sector could easily engage
✗Many PSUs incurred huge losses but continued functioning due to difficulty in closing government undertaking
| Aspect | Contributions | Problems |
|---|---|---|
| Industrial Base | Created strong industrial base | Monopolised non-essential areas (telecom, hotels) |
| Infrastructure | Developed infrastructure | Funds wasted on areas private sector could handle |
| Backward Areas | Promoted development of backward areas | Many PSUs incurred huge losses but continued |
| Employment | Generated employment | Inefficient operations due to lack of competition |
Counter-argument: Some economists argue public sector is not meant to earn profits but promote welfare of nation — should be evaluated on welfare contribution, not profits.
Three-Sector Summary & Conclusion
| Sector | Achievements | Remaining Issues |
|---|---|---|
| Agriculture | Self-sufficient in food production (Green Revolution); abolition of zamindari system | Large workforce still stuck in agriculture |
| Industry | Diversified industrial base; growth from 11.8% to 24.6% of GDP | Excessive regulation prevented growth; PSUs dissatisfying |
| Trade | Protected domestic producers for self-reliance | Inward-oriented; failed to develop strong export sector; no incentive to improve quality |
The need for reform of economic policy was widely felt in the context of changing global economic scenario. The New Economic Policy (NEP) was initiated in 1991 to make economy more efficient.
Key Takeaways
- India became self-sufficient in food production
- Industrial sector diversified significantly (11.8% → 24.6% GDP)
- Land reforms abolished zamindari system
- BUT: Excessive regulation (licence raj) prevented industrial growth
- Inward-looking trade policy failed to build export sector
- ~65% workforce remained in agriculture despite declining GDP share
- Need for reform led to NEP 1991 (next chapter)