Model Answer
0 min readIntroduction
The period between 1965 and 1980 witnessed a significant slowdown in India’s industrial growth, characterized by both deceleration – a reduction in the rate of growth – and structural retrogression – a deterioration in the composition and efficiency of the industrial sector. Following the initial post-independence push towards industrialization, this era saw a marked departure from earlier trends. This was largely a consequence of the inward-looking economic policies adopted by the government, aimed at achieving self-reliance, but ultimately resulting in stifled innovation, reduced competitiveness, and a drag on overall economic progress. The period is often viewed as a lost opportunity for India to establish a strong industrial base.
The Context: Post-1965 Industrial Policy
Following the 1965 Indo-Pak war, India shifted towards a more protectionist and self-reliant industrial policy. This was driven by a desire to reduce dependence on foreign aid and technology, and to build a strong domestic industrial base. However, the implementation of these policies had unintended consequences.
Key Reasons for Deceleration and Structural Retrogression
1. The License Raj and Bureaucratic Controls
The Industrial Licensing Policy of 1952, further tightened in subsequent years, required firms to obtain licenses for almost every aspect of their operations – from establishing new capacity to expanding existing production, diversifying into new products, and even relocating plants. This created a complex and cumbersome bureaucratic system, leading to delays, corruption, and rent-seeking behavior. The License Raj stifled private investment and innovation.
2. Import Substitution Industrialization (ISI)
India adopted an ISI strategy, aiming to replace imports with domestically produced goods. While intended to promote self-reliance, this led to several problems. Domestic industries, shielded from foreign competition, lacked the incentive to improve efficiency or innovate. High tariffs and quotas raised the cost of imported inputs, making Indian products uncompetitive in international markets.
3. Dominance of the Public Sector
The public sector was assigned a dominant role in key industries like steel, coal, power, and heavy engineering. While intended to drive industrialization, many public sector units (PSUs) were inefficient, overstaffed, and plagued by political interference. They often operated at a loss, requiring substantial government subsidies. This crowded out private investment and hindered overall industrial growth.
4. Technological Stagnation
The emphasis on self-reliance and restrictions on foreign investment limited access to advanced technology. Indian firms were slow to adopt new technologies, leading to a widening technological gap with developed countries. The lack of competition further reduced the incentive to invest in research and development.
5. External Shocks: Oil Crises
The oil crises of 1973 and 1979 significantly impacted India’s industrial sector. Rising oil prices increased the cost of energy, a crucial input for many industries. This led to a decline in industrial production and a worsening of the balance of payments. The government’s response – increased borrowing and further restrictions on imports – exacerbated the problems.
6. Weak Infrastructure
Inadequate infrastructure – including power, transportation, and communication – posed a significant constraint on industrial growth. Frequent power outages, poor road and rail networks, and unreliable communication systems increased production costs and hampered efficiency.
Statistical Evidence (as of knowledge cutoff 2023)
Industrial growth rates, which averaged around 7% in the 1950s and 1960s, decelerated to around 4-5% during 1965-80. The share of manufacturing in GDP remained stagnant at around 17-18% during this period, indicating a lack of structural transformation.
| Period | Average Industrial Growth Rate (%) |
|---|---|
| 1950-1965 | ~7% |
| 1965-1980 | ~4-5% |
| 1980-1990 | ~6-7% |
Conclusion
The period 1965-80 represents a critical juncture in India’s industrial development. The combination of restrictive policies, bureaucratic controls, public sector dominance, and external shocks led to a significant deceleration in industrial growth and a deterioration in the sector’s structure. This period highlighted the limitations of an inward-looking, protectionist approach to industrialization and paved the way for the economic reforms of the 1990s, which aimed to liberalize the economy and promote greater integration with the global market. The lessons from this era remain relevant today as India strives to become a global manufacturing hub.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.