Model Answer
0 min readIntroduction
India’s economic growth experienced a notable acceleration in the 1980s, moving from the ‘Hindu rate of growth’ observed in the preceding decades. The term ‘Hindu rate of growth’, coined by economist Raj Krishna in 1978, described the slow economic growth of India between 1952 and 1973, averaging around 3.5% per annum. This was a significant departure from the relatively stagnant growth rates of the 1960s and 1970s, which were characterized by socialist policies, extensive state control, and a closed economy. The 1980s witnessed a shift towards greater liberalization and a more outward-oriented approach, laying the foundation for the economic reforms of the 1990s.
Factors Hindering Growth in the 1960s and 1970s
The decades of the 1960s and 1970s were marked by several factors that constrained economic growth:
- Heavy State Intervention: Extensive government control over industries through licensing, permits, and regulations stifled private sector initiative.
- Socialist Policies: Nationalization of banks (1969) and industries limited competition and efficiency.
- Agricultural Stagnation: While the Green Revolution (mid-1960s) boosted food grain production, its impact was limited to certain regions and crops. Land reforms remained largely unimplemented.
- Closed Economy: Restrictions on foreign investment and trade limited access to technology and global markets.
- Indo-Pak Wars & Oil Shocks: The 1965 and 1971 wars, coupled with the oil price shocks of 1973 and 1979, created macroeconomic instability.
Acceleration of Growth in the 1980s: Key Factors
The 1980s saw a significant acceleration in growth, primarily driven by the following factors:
- Policy Reforms: Gradual liberalization of the economy began under Indira Gandhi and continued under Rajiv Gandhi. This included easing industrial licensing requirements, promoting exports, and encouraging foreign investment.
- Green Revolution Expansion: The Green Revolution spread to more regions and crops, leading to increased agricultural productivity.
- Financial Sector Liberalization: Reforms in the banking sector, including directed credit programs, aimed to channel funds to priority sectors.
- External Sector Liberalization: Devaluation of the rupee in 1981 boosted exports and improved the balance of payments. Export Promotion Council schemes were introduced.
- Increased Public Investment: Increased investment in infrastructure, particularly in irrigation and power, supported economic growth.
- Sixth Five Year Plan (1980-85): Focused on strengthening infrastructure, increasing agricultural production, and promoting technological self-reliance.
Comparative Analysis: Growth Rates
The following table illustrates the growth rates of India’s GDP during the three decades:
| Decade | Average GDP Growth Rate (%) |
|---|---|
| 1960s | 3.5% |
| 1970s | 3.3% |
| 1980s | 5.6% |
Impact of Technological Advancements
The 1980s also witnessed the initial impact of technological advancements, particularly in the information technology (IT) sector. While still nascent, the seeds of India’s future IT prowess were sown during this period. The government’s focus on scientific research and development, though limited, contributed to this nascent technological growth.
Limitations and Challenges
Despite the acceleration in growth, the 1980s also faced challenges. The fiscal deficit increased significantly due to increased public spending. The balance of payments remained vulnerable, and the current account deficit widened. Income inequality also persisted, and the benefits of growth were not evenly distributed.
Conclusion
The acceleration in national income growth during the 1980s was a result of a gradual shift away from the restrictive policies of the previous decades. While the reforms were incremental, they laid the groundwork for the more comprehensive economic liberalization of the 1990s. The decade demonstrated the potential for higher growth rates when the economy is opened up and private sector initiative is encouraged. However, the challenges of fiscal sustainability and income inequality remained, highlighting the need for continued reforms and inclusive growth strategies.
Answer Length
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