Class 12 Indian Economic Development Notes · CBSE

Critical Appraisal of Industrial Development (1950-1990)

Achievements and drawbacks of India's industrial sector. CBSE Class 12 Indian Economic Development notes

Last updated: 14 Jul 2026

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)

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

Public Sector — Contribution vs Problems
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

Summary of India's economic sectors (1950-1990)
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)