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Unit 1 Vijay Joshi

Chapter 2 of Vijay Joshi's 'India’s Long Road' outlines India's economic journey from independence in 1947 to the early 2010s, detailing key growth phases, policy shifts, and structural changes. It discusses the stagnant growth pre-1980, the acceleration during the 1980s, the 1991 economic crisis and subsequent reforms, and the sustained growth coupled with persistent challenges in the following decades. The chapter emphasizes the need for inclusive growth and sustainable development to address regional disparities and social inequities.

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17 views4 pages

Unit 1 Vijay Joshi

Chapter 2 of Vijay Joshi's 'India’s Long Road' outlines India's economic journey from independence in 1947 to the early 2010s, detailing key growth phases, policy shifts, and structural changes. It discusses the stagnant growth pre-1980, the acceleration during the 1980s, the 1991 economic crisis and subsequent reforms, and the sustained growth coupled with persistent challenges in the following decades. The chapter emphasizes the need for inclusive growth and sustainable development to address regional disparities and social inequities.

Uploaded by

riya singh
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We take content rights seriously. If you suspect this is your content, claim it here.
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Certainly!

Below are detailed study notes based on Chapter 2 of Vijay Joshi’s India’s Long
Road: The Search for Prosperity. This chapter provides a comprehensive overview of India’s
economic trajectory from independence in 1947 up to the early 2010s, highlighting key phases
of growth, policy shifts, and structural transformations.

Chapter 2: India’s Economic Journey (1947–2015)


1. Post-Independence Economic Landscape (1947–1980)

Early Growth Patterns

●​ Stagnant Growth Pre-Independence: Prior to 1950, India’s economy was largely


stagnant, with minimal growth in per capita income.​

●​ Initial Acceleration: Post-1950, national income growth increased to approximately 3%


annually, translating to about 1% per capita growth.​

The ‘Hindu Rate of Growth’

●​ Term Coined: The slow growth rate of around 3% per annum from 1950 to 1980 was
mockingly termed the ‘Hindu rate of growth’.​

●​ Global Comparison: This rate was significantly lower than the global average and
insufficient to substantially reduce poverty levels.​

Policy Framework

●​ State-Led Planning: Emphasis on centralized planning with the establishment of the


Planning Commission and implementation of Five-Year Plans.​

●​ Industrial Focus: Prioritized heavy industries and import substitution to achieve


self-reliance.​

●​ Regulatory Controls: Implementation of extensive controls over prices, investment, and


foreign exchange, which intensified over time.​

2. Economic Liberalization and Growth Surge (1980–1991)


Growth Acceleration

●​ Increased Growth Rate: Between 1980 and 1992, the economy grew at an average of
5% annually, a notable increase from the previous decades.​

Contributing Factors

●​ Investment Rise: Investment rates increased to about 21% of GDP, up from 17% in the
preceding years.​

●​ Policy Reforms: Introduction of modest liberalization measures improved efficiency.​

●​ Expansionary Policies: Aggressive fiscal and monetary policies stimulated demand but
led to macroeconomic imbalances.​

Structural Issues

●​ Fiscal Deficits: The fiscal deficit exceeded 10% of GDP, leading to concerns about
sustainability.​

●​ External Debt: The external debt to exports ratio rose to 250%, indicating vulnerability.​

3. The 1991 Economic Crisis and Reforms

Crisis Triggers

●​ Balance of Payments Crisis: A severe foreign exchange crisis in 1991 necessitated


urgent reforms.​

●​ Political Change: The Congress (I) formed a minority government with P.V. Narasimha
Rao as Prime Minister and Manmohan Singh as Finance Minister.​

Reform Measures

●​ Stabilization: Fiscal consolidation and devaluation of the rupee were implemented.​

●​ Structural Reforms: Liberalization of trade, deregulation of industries, and


encouragement of foreign investment.​
●​ IMF Support: A standby credit from the IMF supported the reform agenda.​

Outcomes

●​ Short-Term Contraction: The economy contracted briefly due to the combined effects of
reforms and external shocks.​

●​ Recovery and Growth: A swift recovery ensued, with growth rates improving and
macroeconomic indicators stabilizing.​

4. Sustained Growth and Challenges (1993–2010)

Growth Trajectory

●​ 1993–2002: The economy grew at an average of 6% annually.​

●​ 2003–2010: Growth accelerated to approximately 8% per annum, marking a period of


robust economic performance.​

Drivers of Growth

●​ Private Sector Dynamism: Liberalization unleashed entrepreneurial energies, leading to


increased investment and innovation.​

●​ Infrastructure Development: Improvements in roads, electricity, and telecommunications


supported economic activities.​

●​ Global Tailwinds: Favorable global economic conditions and low oil prices contributed to
growth.​

Persistent Challenges

●​ Policy Paralysis: Corruption scandals and bureaucratic hurdles led to delays in project
implementation.​

●​ Inflation: Inflation averaged around 10% annually from 2008, eroding purchasing power.​

●​ Poverty and Inequality: Despite growth, poverty reduction was uneven, with significant
disparities across regions and social groups.​
5. Regional Disparities and Social Inequities

Poverty Distribution

●​ Regional Variations: States like Bihar, Uttar Pradesh, Madhya Pradesh, and Rajasthan
accounted for nearly half of India’s poor population.​

●​ Social Groups: Scheduled Castes, Scheduled Tribes, and Muslims experienced higher
poverty rates compared to the general population.​

Measurement Revisions

●​ Tendulkar Committee (2009): Revised the poverty line, leading to higher measured
poverty levels.​

●​ Rangarajan Committee (2014): Further adjustments to poverty estimates highlighted the


need for targeted interventions.​

6. Conclusion and Policy Implications

●​ Economic Evolution: India’s journey from a stagnant economy to one experiencing rapid
growth underscores the impact of policy choices.​

●​ Need for Inclusive Growth: Future policies must focus on reducing regional disparities
and ensuring that growth benefits all sections of society.​

●​ Sustainable Development: Emphasis on education, health, and infrastructure is crucial


for long-term prosperity.​

These notes encapsulate the key themes and insights from Chapter 2 of Vijay Joshi’s work,
providing a comprehensive understanding of India’s economic evolution and the challenges
ahead.

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