PANDIT JAWAHARlAl NEHRu INITIATED TO FORTIFy INDIAN ECONOMy AND TO MAKE IT sElF – RElIANT

Jawahar 20lal 20nehru Fri, 16 Dec 2016

PANDIT JAWAHARlAl NEHRu INITIATED TO FORTIFy INDIAN ECONOMy AND TO MAKE IT sElF – RElIANT

  PANDIT JAWAHARlAl NEHRu INITIATED TO FORTIFy INDIAN ECONOMy AND TO MAKE IT sElF – RElIANT
After independence, under the leadership of the first prime minister of India Pandit Jawaharlal Nehru, the Congress government started to rebuild the country. Pandit Nehru through his visionary policies and inspiring leadership not only overcame serious challenges but also successfully put India on the path of progress. Under the leadership of Pandit Nehru Five – Year Plan was started in 1951. These plans were formulated for centralised and integrated national development.

Pandit Nehru got the blueprint of the First Five – Year Plan (1951 – 1959) prepared. It was very important since it played an important role for the development of the country. This plan provided much needed push to the agriculture sector and also for the establishment of industries. This plan also initiated the system of Mixed Economy which emphasised the development of both the sectors – public and private. The role of public sector was going to be important keeping in view of India being a welfare state.
 
The Congress government under the leadership of Pandit Jawaharlal Nehru allocated Rs 2378 crore for the first Five – Year Plan. It comprised provisions for 7 main sectors in the following manner – irrigation and power (27.2%), agriculture and community development (17.4%), transport and communication (24%), industry (8.4%), social services (16.4%), land reforms (4.1%) and other sectors and services (2.5%). The critical situations of that era itself needed an active participation of the state in all the areas of the economic activities because immediately after freedom, India was facing acute crisis of capital. The Congress government under the leadership of Pandit Jawaharlal Nehru very efficiently accomplished all the tasks.
 
This plan aimed at a growth - rate of 2.1% in GDP but the efficiency of the Congress government increased it to 3.6%. NDP also increased 15%. Due to good monsoon and outstanding agricultural policies, food grain production increased significantly. Food grain stock swelled and per capita income increased at the rate of 8% per year. Per capita income increased more than the average income per person. During this plan, the Congress government started several important irrigation projects which included Bhakhara Nangal and Hirakund dam projects.
 
The Congress government with the active participation of World Health Organisation (WHO) took child – health as a mission that yielded outstanding results in terms of child – health and infant – mortality rate. At the end of this plan, five IITs had already been started as the premier institutes of science and technology. To strengthen higher education, UGC was formed. During this plan, memorandum of understanding was signed for establishing five steel plants though the work could be started only in the second Five – Year plan. On the whole, the first Five – Year plan was very successful in terms of the objectives set by the Congress government. 
 
Encouraged by the success of the first Five – year plan, the Congress government under the leadership of Pandit Nehru continued it. The second plan was dedicated primarily to the public sector. Mahalanobis model was adopted in this plan. The Congress government decided to invest more in production so that the country may see long term economic development. In this plan, the Congress government started to adopt and implement the model based on extensive research and put forward by Indian Statistical Institute. The concept of this plan was a closed economy in which business and commerce was limited to industrial output. 
 
 During the second Five – Year plan, apart from hydro – electric projects, five steel plants including Bhilai, Durgapur and Roorkee were started with the cooperation of Russia, Britain and Germany respectively. Mining activities especially of coal also increased. Rail tracks were laid across the country particularly in the north – east region. During the second Five –Year plan, the Congress government led by Pandit Nehru formulated an industrial policy for the country. Tata Institute of Fundamental research was established. To augment India in the field of science and technology especially in atomic power, talent search examinations and scholarship schemes were started with an aim to select meritorious students. For the second Five –Year plan, Rs 4800 crore was allocated and it reinforced industrial development, education and research, communication and other social welfare programmes. The estimated growth – rate was 4.5% but the country realised a little less at 4.27% during the second Five –Year plan.
 
The success of the first and the second Five –Year plans demonstrated that the policy adopted for the development of the country by Pandit Jawaharlal Nehru was suitable and genuine and should be implemented on a long term basis. The success of the two plans bolstered the government as well as the countrymen. Inspired by it, the Congress government implemented the third Five –Year plan (1961 – 1966). During this plan, river and dam projects continued and several cement and fertilisers factories were built. The agri – sector witnessed tremendous growth and Punjab set new records in wheat production. During this plan, the Congress government established primary schools in a large number in rural areas. Pandit Jawaharlal Nehru started Panchayat elections so that democracy could be fortified up to the country’s hinterland. States were given more responsibility for their own development. During this plan, the responsibility of state electricity boards and middle and higher education boards were once again given to states. During this third Five –Year plan, the Congress government established state transport corporations and also decided that the responsibility to build and maintain local roads will be of state governments. 
 
 Despite outstanding achievements of the first three plans, new challenges posed a serious threat to Indian economy. India achieved several milestones during the period from mid 60’s to mid 80’s. The prime minister of India and a great leader Indira Gandhi played an important role. The country was facing many serious challenges. In 1965 and 1966, monsoon remained below average. Agricultural production and food grain production decreased up to 17% and 20% respectively. The second reason was the wars with China in 1962 and with Pakistan in 1965. It led to a sharp increase in the country’s defence budget. On account of this, the fiscal deficit in comparison to Gross Domestic Product reached to its maximum level. 
 
 On the whole, it can be said that Indian economy was facing serious threats. Some indicators are – high inflation rate, low foreign currency reserve, low food grain stock that triggered famine like situations in some parts of the country, excessive imports and half of the imports in the form of foreign assistance. The US at that time was the biggest country to assist others. In such critical circumstances, America stopped assistance. It disagreed to provide wheat under PL 480. America also began to pressurise India to follow its policies. 
 
 Aptly called as the Iron Lady of India, when Indira Gandhi took the reins, the country was facing the above – mentioned challenges. She accepted these challenges whole heartedly and took some major steps in order to improve balance of payment, to increase foreign reserve, to increase agricultural production so that food grain import could be diminished, to increase food grain stocks. Balance of payment and fiscal deficit are inter – related. For these, tax rates should have been increased. But the step taken was to curtail government expenditure. The policies adopted by Smt. Indira Gandhi were aimed at eradicating poverty and making the country self – reliant. That’s why she gave the slogan, “Garibi Hatao”. On the promises of such socialistic policies, she fought 1971 general elections and the Congress party obtained a landslide victory.
 
 During the tenure of Smt. Indira Gandhi, the fourth, fifth and sixth Five – Year plans were implemented. The policies were prepared keeping in view of the economic and social situations. The country got the leverage from these policies to face the serious challenges. She took India out of economic crisis in a very praiseworthy manner and succeeded in improving the honour of the country among developed nations. It also helped to strengthen our democratic system. 
 
 Attempts were made during the tenure of Smt. Indira Gandhi to improve the situation of balance of payment, to solve the shortage of food grain, to take steps to eradicate poverty and to diminish oil import. Due to these policies India was able to face ill-effects of wars and crude oil problem. India was also able to escape economic slowdown and the crisis of debt as happened in the countries of Latin America. In 1980’s, a number of developing countries including the countries of Latin America had to face the challenges of economic slowdown, high debt and the crisis of balance of payment, though these countries had not witnessed draught for a long time. Even in communist China, a large number of people died due to draught at the end of 1950’s. 
 
 Green Revolution started in the fourth Five – Year plan and it improved the food grain situation. It was possible due to the use of high yielding seeds and fertilisers on a large scale. It improved the food grain situation and also helped to eradicate poverty to some extent. Between 1967 – 68 and 1970 – 71, there was 35% increase in production. The import of essential food grains decreased from 1.03 lakh tonnes in 1966 to 36 lakh tonnes in 1970. During this period, the available food grains increased from 7.37 crore tonnes to 8.95 crore tonnes.  It further increased to 11.25 crore tonnes in 1978 and 12.88 crore tonnes in 1984. In mid 80’s, the buffer stock of food grains touched 3 crore tonnes. So clearly India had sufficient stock of food grains to face any sort of food crisis. For example, during the famine of 1987 – 88, neither the prices of food grains rose sharply nor the country had to import food grains. Surprisingly, the poverty index in rural India showed downward trend. It was because rural employment was guaranteed through government sponsored programmes. These programmes ensured the availability of food grains from the buffer stock. This was the first instance after independence that rural poverty didn’t increase in spite of famines and low production of food grains. 
 
 India became self – reliant in food grain due to the policies adopted by Smt. Indira Gandhi. The overall economic scenario showed strength and confidence. Fiscal deficit in terms of Gross Domestic Product in percentage point decreased from 7.3 in 1966 – 67 to 3.8 in 1969 – 70. The balance of payment situation also improved due to decrease in import of food grains, increase in exports and foreign currency earned by Indian abroad. In 1978 – 79, the foreign reserve touched the highest point of 7.3 billion dollar. This amount was equal to the import bill for two months in 1965 - -66 or to the import bill for nine months in 1978 – 79. Smt. Indira Gandhi nationalised banks in 1969. It gave very positive results. Between 1969 and 1981, the total number of branches of all commercial banks increased from 8262 to 37707 and in 1992 it touched 60601 branches. Indian banks did their 60% of expansion in rural areas. It led to an increase in savings as well as providing loans to a larger population. So it was possible to give farm – loan a priority and poorer people were given more importance in the second phase of land reforms and “Garibi Hatao” campaign. 
 
 The policies adopted by Smt. Indira Gandhi had far reaching effects. Domestic savings and investments increased. In 1950’s, average savings rate was 10.58% and gross domestic capital formation or investment was 11.84% and they increased to 21.22% and 20.68% respectively between 1975 – 76 and 1979 – 80. In 1980’s and 1990’s domestic savings and capital formation increased further. In this perspective, India can be compared with advance economies of the world.
Annual Average Gross Domestic Gross Domestic
Savings Capital Formation
1950 – 51 to 1959 – 60 10.58 11.84
1960 – 61 to 1969 – 70 13.53 15.63
1970 – 71 to 1975 – 76 18.92 19.06
1975 – 76 to 1979 – 80 21.22 20.68
1980 – 81 to 1989 – 90 20.03 21.99
(Source – Economic Survey, 1996)
 
Under the leadership of Smt. Indira Gandhi, one more outstanding contribution of the Congress government was the steep rise in stock sales. In this way, new source of wealth came up for stock market. Data reveal that the capital market constituted merely 1% of domestic savings in 1981 but at the end of 80’s, this ratio increased seven times. In 1989 new shares worth Rs 6500 crore were sold which constituted 7.25% of Gross domestic Savings. According to another estimate, Indian companies received payments worth Rs 12,300 crore from primary share market in 1990. This capital set a new direction to Indian industries. 
 
Under the leadership of Smt. Indira Gandhi, the Congress government entrusted Oil and Natural Gas Commission 
 (ONGC) to increase domestic production instead of increasing imports. ONGC was a publis sector undertaking. Smt. Indira Gandhi and the Congress government continuously pursued International Monetary Fund which released a huge loan to ONGC. In 1980 – 81, crude oil production was at 1.05 lakh tonnes and 2.06 lakh tonnes had to be imported. The import bill of crude oil was about 75% of the total export earnings. At the end of the sixth Five – Year plan, new oil reserves were discovered at Bombay High. The domestic production went up to 2.9 lakh tonnes. So in 1984 – 85, the import bill of crude oil was less than onethird of domestic consumption. The oil import bill also came down to one-third of the total export earnings. 
 During the tenure of Smt. Indira Gandhi, the growth rate of Indian industries kept on increasing. It was at 3.4% in 1965 – 75 and went up to 5.1% in 1975 – 85. The industrial growth rate was at 7.7% from 1974 – 75 to 1984 – 85 except in 1979 – 80. During 80’s, the growth rate of Indian economy was a healthy 8 %. According to another estimate, Gross Domestic Product remained at 6 % per annum. 
 On the basis of above mentioned facts, it can be concluded that Pandit Jawaharlal Nehru initiated to fortify Indian economy and to make it self – reliant also. The concept of development through planning proved very successful. There was nothing to doubt on the roles played by Planning Commission and Five – Year Plans. When Smt. Indira Gandhi became the prime minister, she not only continued Five – Year Plans but started a new 20 – Point programme also. Their contributions in nation building were outstanding. It is not an exaggeration if we say that Pandit Jawaharlal Nehru was the father of the country’s economy while Smt. Indira Gandhi strengthened its roots through her policies.