The Hindu rate of growth is a controversial and derogatory expressionused to refer to the low annual growth rate of the socialist economy of India before 1991, which stagnated around 3.5% from 1950s to 1980s, while per capita income growth averaged 1.3%
Policy ignored the sphere of consumer goods and focused on building industrial equipment. As a result, the Indian consumers had few goods to buy and had no choice.The Licence Raj was a result of India's decision to have a planned economy where all aspects of the economy are controlled by the state and licences are given to a select few. Up to 80 government agencies had to be satisfied before private companies could produce something and, if granted, the government would regulate production
Before the 1990s most of theindustrial sector was dominated by a select band of family-based conglomerates that had been dominant historically. Post 1991, a major restructuring has taken place with the emergence of more technologically advanced segments among industrial companies. Nowadays, more small and medium scale enterprises contribute significantly to the economy
Indian economy pre-1991 reforms with globalization
India : The Beginning
Pre Colonial : Refers to the economic history of
India since Indus Valley Civilization to 1700 AD.
During Indus Valley Civilization Indian economy
was very well developed.
India had very good trade relations with other parts
of world, which is evident from the coins of various
civilizations found at the site of Indus valley.
Before the advent of East India Company, each
village in India was a self sufficient entity. Each
village was economically independent.
The arrival of East India Company in India
ruined the Indian economy.
During this phase India's share of world
income declined from 22.3% in 1700 AD to
3.8% in 1952.
Two-way depletion of resources.
British bought raw materials from India at cheaper
Then, the finished goods were sold at high price in
Indian economy after
Indian economy was influenced by the colonial
experience, which was seen by Indian leaders as
Domestic policy tended towards protectionism, with
a strong emphasis on import substitution,
industrialization, economic interventionism, a large
public sector, business regulation and central
planning, while trade and foreign investment
policies were relatively liberal.
Jawaharlal Nehru, the first prime minister of
India, along with the statistician Prasanta
Chandra Mahalanobis, formulated and
oversaw economic policy during the initial
years of the country's existence.
First five year plan for the development of
Indian economy came into implementation in
The rate of growth of the Indian economy in
the first three decades after independence
was derisively referred to as the Hindu rate of
growth by communists.
Since 1965, the use of high-yielding varieties
of seeds, increased fertilisers and improved
irrigation facilities collectively contributed to the
Green Revolution in India, which improved the
condition of agriculture by increasing crop
productivity, improving crop patterns and
strengthening forward and backward linkages
between agriculture and industry.
Concentration and emphasis on heavy industries
and subsidizing manual, low-skill cottage
Tough Controls for private sector
Refusal to change policy with changing time
India followed the same policy over the years and
this degraded India’s situation in the world even
India first felt Globalization in the 1990s when Dr
Manmohan Singh, then finance minister under
the government of P V Narsimha Rao, initiated
the economic liberalization plan.
Before the 1990s, India’s economy focused on
equity over growth.
In 1991, India began liberalizing its economy by
decreasing government control over many
domestic industries and increasing its openness
to the rest of the world. Combined, these actions
sought to increase competitiveness and
Opening up to Privatization
Inflation control measures
Opening up to foreign investments
Reinforced focus on Agricultural
Need for Reforms
Govt not being able to repay debts
The biggest reason : Unsustainable govt expenditure
Foreign exchange reserves had hit the bottom.
Continual expenditure on development programmes of
the government did not generate additional revenue,
thus government had to overshoot its revenue to meet
problems like unemployment, poverty and population
Tax revenues insufficient
Exports not enough to pay for growing imports
Reasons for Globalization
To resolve revenue crisis, India took a loan of $7
billion from the World Bank and the International
In leau of the loan, they expected India to
liberalise and open up the economy by
Removing restrictions on the private sector
Reduce the role of the government in many areas
Remove trade restrictions.
India agreed to the conditions and announced
the New Economic Policy (NEP).
Announcement of the devaluation of Indian currency
by 18-19 percent against major currencies in the
international foreign exchange market.
Under the privatization scheme, most of the public
sector undertakings have been/ are being sold to
India’s major steps towards
Group Members : Seencha Bhutia, Shivani Sharma,
Srimoyee Dasgupta & Yasmin