Evaluate inward looking trade strategy adopted by Government during 1950-91.
Or

Give the outline of Government's trade policy that protected the domestic industry from foreign competition.

Or

Explain import substituting industrialisation during 1950-90.

Inward looking trade strategy : In the first seven plans trade was characterised by what is commonly called inward looking trade strategy. Technically this strategy is called import substitution.

This policy aimed at replacing or substituting imports with domestic production. For example, instead of importing vehicles made in a foreign country, industries would be encouraged to produce them in India itself. In this policy, the government protected the domestic industries from foreign competition. Protection from imports took two forms : 1. Tariffs and 2. Quotas.

1. Tariffs : Tariffs are a tax on imported goods. They make imported goods costlier and discourage their use.

2. Quotas : They specify the quantity of goods that can be imported.

Every society has to answer three questions : What goods and services should be produced in the country? How should the goods and services be produced? And how should the goods and services be distributed between people?

The answer to these questions is to depend on the market forces of supply and demand. The market economy is called capitalism.

Capitalism : The economic system in which means of production are in the hands of private entrepreneurs is called capitalism. The management, ownership and control of productive activities are in private hands. They produce goods and services for the profit motive.

In a capitalist society, the goods produced are distributed between people not on the basis of what people need but on the basis of what people can afford and are willing to purchase.

Socialism : In a socialistic economy the means of production are not in private hands. They are owned, controlled and managed by the government. The government decides what goods are to be produced in accordance with the needs of society. The government decides how goods are to be produced and how they should be distributed. The distribution under socialism is supposed to be based on what people need and not on what they can afford to purchase. In a socialistic society, there is no private property since everything is owned by the state.

Mixed Economy : A mixed economy is a combination of both socialism and capitalism. The government and the market together answer the three questions of what to produce, how to produce, and whom to produce. In a mixed economy the market will provide whatever goods and services it can produce well, and the government will provide important goods and services which the market fails to do.

Major achievements of economic planning:

(a) Increase in National Income : Increase in national income is a sign of economic development. Prior to planning and during British regime, national income of India increased at the rate of 0.5% p.a. During the period of planning, the rate of increase in national income has been 4. percent per annum.

(b) Increase in per capita income : Prior to independence, rate of increase in per capita income had been almost zero but during the period of planning, per capita income increased at the rate of 2% p.a.

(c) Increase in rate of capital formation : Capital formation plays a significant role in the economic growth of a country. During five year plans rate of capital formation has significantly increased. As the rate of capital formation dependes on the rate of saving and investment, there has been considerable increase in the rate of saving and investment.

(d) Institutional reforms in agriculautre and Green Revolution : Plans have contributed to the development of agriculture in two ways:

(a) land reforms have been introduced in agriculture.

(b) Since 1966, stress has been given another technological advancement of agriculture. It resulted into Green revolution. During the period of planning, production of foddgrains has trebled.

(c) Development of industries: Industrial sector has received a lot of encouragement as a result of planning. Basic and capital goods industries like iron and steel, machinery, chemical fertilizers etc. have developed adequately. Public sector has gratly expanded. In the matter of customer goods industries, the country has become almost self-sufficient. Industries have been diversified and modernised industrial production capacity has gone up

considerbly. Indian economy is now ranked as the tenth industrial economy of the world. During the period of planning growth rate of industrial production has been around 6.9 percent per annum industrial production during the First Five Year Plan increased by 8 percent.

(f) Development of Economic Infrastructure : Economic infrastructure mainly includes transport means of communication irrigation facilities and the generation capacity of power etc. During the period of planning economic infrastructure has developed considerly.

(g) Development of Social Infrastructure : During the period of planning, country's social services like education health and medical facilities, family planning etc. also developed appreciably.

(i) Death rate that stood at 27 percent per thousand in 1951 came down to 8 per thousand in 2004.

(ii) Average life expectancy increased from 32 years in 1951 to 65.4 in 2001.

(iii) Several deadly diseases like malaria etc. have been eradicated.

(iv) A charm of National Laborataries and Research Centres have been set up across the country.

(v) Educational facilities were expanded considerbly.

(h) Employment : Serious efforts have beenmade during plans to increase employment opportunities.

(i) Modernisation : It ructural and institutional changes taking place during the period of planning testify to the fad that important itructural changes are—

• Increase contribution of industry in the composition of national income.

• Income in the number of industries using modern technique.

• Increasing use of modern technology in agricultural sector. Institutional changes during the plan are also significant. It includes development of public sector and of late trend towards liberalisation privatisation and globalisation.

The leaders of independent India had to decide among other things on the type of economic system and among them socialism appealed to Jawahar Lal Nehru the most. But he was not in favour of the kind of socialism practised in the erstwhile Soviet Union where all the means of production in the country were owned and controlled by the government. There was no private property. It was not possible in a democracy like India to change the ownership pattern of land and other properties. The thinkers of newly independent India sought an alternative to extreme versions of capitalism and socialism. They had sympathy with the socialist outlook and chose a system, which combined the best features of socialism and capitalism. India would be a 'socialist' society with a strong public sector but also with private property and democracy. The government would plan for the economy with the private sector being encouraged to be part of the plan effort.

The industrial policy resolution of 1948 and directive principles of the Indian Constitution reflected this view.

This system on one hand maintains the incentives and initiatives of the people, on the other it keeps the economy free from exploitation. Mixed economy provides the opportunity to fulfil both the objectives of our planning, rapid economic growth and social justice. It is the most suitable in our present day democratic setup in which mixed economy has all the sectors such as private sector, public sector, co-operative sector coexist and work together.

The failures of economic Planning are:

(i) No Substantial Increase in the Standard of Living : All the five year plans of India aimed at raising the standard of living of the people. But in reality, even the basic necessaries have not yet been provided to the people.

(ii) Rise in Prices: Price stability has been one of the objectives of each Five Year Plans in India. But almost all the plans witnessed considerable rise in price level. First Plan is the only exception when price level come down, in all other plans the prices recorded a steep rise.

(iii) Increase in Unemployment:

Unabated rise in unemployment was witnessed during the period of planning.

(iv) Less Growth in Production : In the Five Year Plans, growth rate of production was slow in many states. Priority should have been given to the development of agriculture in all the plans, but it was not done.

(v) Inadequate Development of Infrastructure : Development of infrastructure like electricity, roads, transport, education etc. remained inedequate during the period of planning.

(vi) Inequality in Distribution of Income and Wealth : Main objective of the Five Year Plan is to minimise inequality in distribution of income and wealth but during the period of planning the problem of inequality further ????

(vii) Inefficient Administration : An expert team of U.N.O. observed that one of the main shortcoming of Indian planning has been with reference to its implementation.

(viii) Lack of Strong Foundation : Despite completion of Nine Five Year Plans, economic base could not acquire strength. Even now use depend havily on rainfall for agricultural production. Due to the failure of monsoon in 1965-66, 1966-67, 1979-80 and 1982-83, the entire economy was thrown out of gear.

(ix) To Ambitious : Indian plans are criticised as too ambitious consequently, there has been a wide gap between that targets of growth rate and their achievements during the period of planning.

(x) Peradox of Saving and Investment : Although during the planning period there has been appriciable increase in saving and investment, yet the growth rate of economy has been very slow. Planning in India has failed to achieve its objectives fully. It is for this reason that since 1991 emphasis has shifted from greater participation of the public sector to greater participation of the private sector in the process of growth and development.