Chapter -10 : Indian Economy

● Between the first and seventeenth century AD, India is believed to had the largest
economy of the ancient and the mediaeval world.
● The earliest known treatise on ancient Indian economic philosophy is 'Arthshastra'
the pioneering work attributed to Kautilya (Chanakya) (321-296 BCE)
● True kingship is defined as a ruler's subordination of his own desires and ambitions
to the good of his people.
● The rule of East India Company from 1757 to 1858
● British Government in India from 1858 to 1947
● The 'Modern' industrial enterprises in colonial India started to grow in the mid-19th
century.
● The cotton mill industry in India had 9 million spindles in the 1930s, which placed
India in the fifth position globally in terms of number of spindles.
● Jute mills also expanded rapidly in and around Calcutta in response to a mounting
global demand for ropes and other products, and Indian jute occupied a large share
of the international market by the late 19th century.
● At the end of the 19th century, the Indian jute mill industry was the largest in the
world in terms of the amount of raw jute consumed in production.
● Heavy industries such as the iron industry were also established as early as 1814 by
British Capital.
● India's iron industry was ranked 8th in the world in terms of output in 1930.
● Just before the Great Depression, India was ranked as the 12th largest industrialised
country measured by the value of manufactured products.
● The share in the net domestic product (NDP) of the manufacturing sector had barely
reached 7% even in 1946.
● At the time of independence, India had the literacy rate just above 18% and barely 32
years of life expectancy in 1951.
● The Nehruvian model which supported social and economic redistribution and
industrialization directed by the state came to dominate the post- Independence
Indian economic policy.
● The Planning Commission of India carried the five-year plan and the first five-year
plan was carried out in 1951.
● Rapid industrialization of the economy was the cornerstone of Nehru's development
strategy.
● The concept of 'planned modernization' meant a systematic planning to support
industrialization.
● The first Industrial Policy Resolution was made in 1948, it envisaged an expanded
role for the public sector and licensing to the private sector.
● The Industrial Policy Resolution granted state monopoly for strategic areas such as
atomic energy, arms and ammunition and railways.
● In the first three decades after independence (1950-80), India's average annual rate
of growth of GDP - often referred as the 'Hindu Growth Rate' was a modest of 3.5%.
● The strategy for agricultural development in mid-1960s was reliance on institutional
model ie. land reforms farm cooperatives etc. and not much importance was given to
technocratic areas such as research and development, irrigation etc.
● With continuous failures of monsoon, two severe and consecutive droughts struck
India in 1966 and 1967. The agricultural sector recorded substantial negative growth
 and India faced a serious food problem. India had to depend on the United States for
food aid under PL 480.
● The green revolution was materialised by innovative farm technologies, including
high yielding seed varieties and intensive use of water, fertilizer and pesticides.
● The government nationalized 14 banks in 1969 and then followed it up with
nationalizing another 6 in 1980.
● The economic performance during the period of 1965-81 is the worst in independent
India's history.
● The Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 was aimed at
regulation of large firms which had relatively large market power.
● In 1967, the policy of reservation of many products for exclusive manufacture by the
small scale sector.
● These initiatives, spanning 1981 to 1989, practically referred to as 'early
liberalization' were specifically aimed at changing the prevailing thrust on inward-
oriented trade and investment practices.
● This liberalization is often referred to as reforms by stealth' to denote its ad hoc and
not widely publicized nature.
● The average annual growth rate of GDP during the sixth plan period (1980-1985) and
the seventh plan period (1985-1990) were 5.7 and 5.8 percent respectively.
● Based on the real effective exchange rate (REER) the rupee was depreciated by
about 30.0 per cent from 1985-86 to 1989-90.
●
● The budget for 1986 introduced policies of cutting taxes further, liberalising imports
and reducing tariffs.
● LPG had two major objectives:
○ stabilisation measures which were short term measures to address the
problems of inflation and adverse balance of payment and
○ the structural reform measures which are long term and of continuing nature
aimed at bringing in productivity and competitiveness by removing the
structural rigidities in different sectors of the economy.
● The economic reforms in 1991 under the Narshimha Rao government.
● Reduction in reserve requirements namely, statutory liquidity ratio (SLR) and cash
reserve ratio (CRR) in line with the recommendations of the Narasimham Committee
Report, 1991.
● The 'New Industrial Policy' was announced by government on 24th July 1991.
● In 1990-91, the highest tariff rate was 355%.
● At the time of 'New Industrial Policy' rupee was devalued by 18% against the dollar.
● Planning Commission was abolished in 2014 & on 1st Jan 2015 it was replaced by
the National institution for Transforming India (NITI) Aayog.
● The major objective of making (NITI) Aayog was to -
○ 'Spur innovative thinking by objective 'experts',&
○ Promote 'co-operative federalism' by embracing the voice & influence of
states.
● The key initiatives of NITI Aayog are:
○ 'Life' which envisions replacing the prevalent 'use-and-dispose' economy
○ The National Data and Analytics Platform (NDAP) facilitates and improves
access to Indian government data
 ○ Shoonya campaign aims to improve air quality in India by accelerating the
deployment of electric vehicles
○ E-Amrit is a one-stop destination for all information on electric vehicles
○ India Policy Insights (IPI)
○ 'Methanol Economy programme is aimed at reducing Indiand mumpun ba
greenhouse gas (GHG) emissions, and converting coal reserves and
municipal solid waste into methanol, and
○ 7. "Transforming India's Gold Market' constituted by NITI Aayog to
recommend measures for tapping into the potential of the sector and provide
a stimulus to exports and economic growth
● India has emerged as-
○ world's largest producer of milk, pulses, jute and spices.
○ ✓ largest area planted under wheat, rice and cotton.
○ ✓ 2nd largest producer of fruits, vegetables, tea, farmed fish, cotton,
sugarcane, wheat, rice, cotton, and sugar.
○ ✓ world's 6th largest food and grocery market is the
○ ✓ world's largest cattle herd (buffaloes).
● 47% of India's population is directly dependent on agriculture for living. It contributed
18.80% to the Gross Domestic Product (GDP).
● Food grains production has reached 315.7 million tonnes in 2021-22.
● Agricultural and Processed Food Export Development Authority (APEDA) is
entrusted with the responsibility of export promotion of agri-products.
● Fixing of Minimum Support Price (MSP) at one-and-a half times the cost of
production.
● Setting up of E-NAM-a pan-India electronic trading portal which networks the existing
APMC mandis to create a unified national market for agricultural commodities.
● Pradhan Mantri Fasal Bima Yojana (PMFBY) - a novel insurance scheme for financial
support to farmers suffering crop loss/damage.
● Paramparagat Krishi Vikas Yojana (PKVY) supporting and promoting organic farming
and improvement of soil health.
● Per Drop More Crop (PDMC) scheme to increase water use efficiency at the farm
level.
● Secondary sector contributes 30% of total gross value added in the country and
employing over 12.1 crores of people.
● The industrial sector in India broadly comprises of manufacturing, heavy industries,
fertilizers, pharmaceuticals, chemicals and petrochemicals, oil and natural gas, food
processing, mining, defence products, textiles, retail, micro, small & medium
enterprises, cottage industries and tourism.
● The share of informal sector in the economy is more than 50% of GVA.
● Manufacturing sector accounts for 78% of total production.
● Department for Promotion of Industry and Internal Trade (DPIIT) has a role in
formulation and implementation of industrial policy and strategies for industrial
development.
● GST was first introduced in India on 1st July 2017 as single indirect tax replacing
many indirect taxes.
● India ranks 63rd in the World Bank's annual Doing Business Report (DBR), 2020.
● To become 'Atmanirbhar, the Production Linked Incentive (PLI) Scheme was initiated
in March 2020 for 14 key sectors to enhance India's manufacturing capabilities and
export competitiveness.
● Foreign Investment Promotion Board (FIPB) was abolished in May 2017, and a new
regime namely Foreign Investment Facilitation Portal (FIF) has been put in place.
● Remission of Duties and Taxes on Export Products (RODTEP) 2021 formed to
replace the existing MEIS (Merchandise Exports from India Scheme) to boost
exports. It provides for rebate of all hidden central, state, and local duties/taxes/levies
on the goods exported.
● The National Manufacturing Policy which aims to increase the share of
manufacturing in GDP to 25 percent by 2025 is a step in this direction.
● India has a unique experience of bypassing the secondary sector in the growth
trajectory by a shift from agricultural to service sector.
● The service sector refers to the industry producing intangible goods viz. services as
output.
● The service sector is the largest sector of India & accounts for 53.89% of total India's
GVA.
● The service sector is fastest growing sector in India and has the highest labour
productivity.
● India is among the top 10 World Trade Organization (WTO) members in service
exports and imports.
● Service sector is largest recipient of FDI inflows.
● To ensure liberalisation, the government has permitted 100 per cent foreign
participation in telecommunication services through the Automatic Route.