Economic History of India

• Growth and Development – Measurement of growth: National Income and per capita
income – Poverty Alleviation and Employment Generation in India – Sustainable

Development and Environmental issues.
• Indian Economy – Economic History of India - Changes in Industrial and Labour Policy,
Monetary and Fiscal Policy since reforms of 1991 – Priorities and recommendations of
Economic Survey and Union Budget – Indian Money and Financial Markets: Linkages with
the economy – Role of Indian banks and Reserve Bank in the development process - Public
Finance - Political Economy - Industrial Developments in India- Indian Agriculture -
Services sector in India.
• Globalization – Opening up of the Indian Economy – Balance of Payments, Export-
Import Policy – International Economic Institutions – IMF and World Bank – WTO –
Regional Economic Co-operation; International Economic Issues
• Social Structure in India – Multiculturalism – Demographic Trends – Urbanisation and
Migration – Gender Issues – Social Justice: Positive Discrimination in favour of the under
privileged – Social Movements – Indian Political System – Human Development – Social
Sectors in India, Health and Education.
AffairsMind
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India’s Economy before Independence
As per Cambridge historian Angus Maddison, India’s share of world income shrank
from 22.6% in 1700 to 3.8% in 1952. Less than 1/6th of India’s population was
literate and majority of India was under poverty.
India’s Economy after Independence

Economic Programme Committee (EPC) – formed by All India Congress
Committee (AICC) with Nehru as its chairman. The aim of this committee was to
make a plan which could balance private and public partnership and urban and rural
economies. The EPC recommended in 1948 to form a permanent Planning
Commission in India.
In March 1950 in pursuance of declared objectives of the Government, the Planning
Commission was set up.
1st Five Year Plan (1951-1956)
1st Five year plan started from 1951 to 1956 with focus on agriculture
sector including irrigation and power projects. It was based on the Harrod-Domar
model. Which says economic growth can be carried out if we do two things - higher
savings and investment.
2nd Five Year Plan (1956-1961)

Second Five Year Plan duration was from 1956 to 1961 with a focus on heavy industries
and capital goods. It was based on the P.C. Mahalanobis Model. The Mahalanobis model
of growth was based on the predominance of the basic goods (Capital goods or
investment goods that are used to make further goods). It was based on the
premise that it would attract all round investment and result in a higher rate of growth
of output. Second Industrial Policy, 1955 was created which divided industries into three
schedules - with Industries that are of basic and strategic importance and shall be
owned by Government, some partially owned by state and Consumer goods industries
left to private sector this includes agriculture.
Public Enterprise Private Enterprise

No Foreign Investment Foreign Investment
Capital Goods Agriculture
Green Revolution
White Revolution
1965 - 1975
Emergency from 1976 to 1977

Demonetization 1.0
IT Revolution
Making of 1991 Crisis
Many reasons contributed for 1991 Crisis of India
•Rise in Fiscal Deficit – Due to increase in non- development
expenditure fiscal deficit of the Government had been
increasing. This was accompanied by rise in public debt and
resultant interest.
•Fall in Foreign Exchange Reserves – India’s foreign exchange Forex Reserve
reserve fell to lowest in 1990-91 and it was insufficient to pay
for an import bill for 2 weeks.
•Iraq-Kuwait War 1990-91 – which led to rise in petrol prices.
The flow of remittances from Gulf countries stopped.
Rise in Prices – Inflation surged from 7% to 16.7%. attributed 2 weeks import
to rapid increase in money supply
Help for 1991 Crisis
To avert and mitigate the crisis, India approached the International Bank for
Reconstruction and Development (IBRD) (World Bank) and the International
Monetary Fund (IMF) and received $7 billion as loan to manage the crisis. But
conditions to avail the loan from IMF and World Bank were Liberalisation,
Privatisation and Globalisation.
Liberalisation
The term “liberalization” in this context implies economic liberalization. This
policy connotes that greater freedom is to be given to the entrepreneur of any
industry, trade or business and that governmental control on the same be
reduced to the minimum. It simply means removing restrictions on the private
sector
Privatization
Privatization at that time was used as a process under which the state assets were
transferred to the private sector. Another variant of privatization is disinvestment. The
only point of difference between privatisation and disinvestment is that in
privatisation the government divests its shareholding in the company to the tune of
more than 50 per cent wherein the management control is transferred to the private
sector whereas in the case of disinvestment the portion of shareholding that the
government divests is less than 50 per cent so that the ownership and control over the
company remains in the hands of the government.
Globalization
Globalization is termed as ‘an increase in economic integration among nations’. For
the WTO, the official meaning of globalization is movement of the economies of the
world towards “unrestricted cross border movements of goods and services, capital
and the labour force”.
Disinvestment of PSUs
Privatisation of Banks Liberalisation

Banking Reforms
End of License Raj Privatization
Downsizing of the government
SEBI NSE BSE created Globalization

Free rupee convertibility
NITI Aayog
The 65 year-old Planning Commission was relevant in a

command economy structure, but not any longer. India
is a diversified country and its states are in various
phases of economic development along with their own
strengths and weaknesses. In this context, a ‘one size
fits all’ approach to economic planning is obsolete. It
cannot make India competitive in today’s global
economy. Planning Commission was replaced by a new
institution – NITI AAYYOG on January 1, 2015 with
emphasis on ‘Bottom –Up’ approach to envisage the
vision of Maximum Governance, Minimum Government,
echoing the spirit of ‘Cooperative Federalism’.
Chairperson is Prime Minister

NITI Aayog
State Government Village level
•To foster cooperative federalism •To develop mechanisms to

through structured support initiatives formulate credible plans at the
and mechanisms with the States on a village level and aggregate these
continuous basis, recognizing that progressively at higher levels of
strong States make a strong nation. government.
Goods and Services Tax
The Goods and Services Tax (GST) is a value-added tax levied on most goods
and services sold for domestic consumption. The GST is paid by consumers,
but it is remitted to the government by the businesses selling the goods and
services.
Goods and Services Tax was 122nd Amendment bill which got an approval in
2016 and was renumbered in the statute by Rajya Sabha as The Constitution
(101st Amendment) Act, 2016.
It is a dual GST with the Centre and the States simultaneously levying tax on
a common base. GST to be levied by the Centre is called Central GST (CGST)
and that to be levied by the States is called State GST (SGST).
Central GST will cover Excise duty, Service tax etc,
State GST will cover VAT, luxury tax etc.
IGST
Integrated GST is to cover inter-state trade. IGST per se is not a tax but a system to
coordinate state and union taxes.
GST Council
Under Article 279A, GST Council to be formed by the President to administer &
govern GST. It's Chairman is Union Finance Minister of India with ministers
nominated by the state governments as its members. The council is devised in
such a way that the centre will have 1/3rd voting power and the states have
2/3rd. The decisions are taken by 3/4th majority.
CGST, SGST & IGST are levied at rates to be mutually agreed upon by the Centre
and the States. The rates are notified on the recommendation of the GST Council.
Initially GST was levied at four rates viz. 5%, 12%, 16% and 28%. The schedule or
list of items that would fall under these multiple slabs are worked out by the GST
council.
Advantages of GST
Creation of common national market by amalgamating a large number of
Central and State taxes into a single tax.
GST mitigated ill effects of cascading or double taxation in a major way and
paved the way for a common national market.
From the consumers’ point of view, the biggest advantage would be in terms of
reduction in the overall tax burden on goods.
Introduction of GST is making Indian products more competitive in the domestic

and international markets owing to the full neutralization of input taxes across
the value chain of production.
Era before IBC
The era before IBC had various scattered laws relating to insolvency and bankruptcy
which caused inadequate and ineffective results with undue delays. For example,
Securitization and Reconstruction of Financial Assets and Enforcement of Security
Interest Act SARFAESI –for security enforcement.
The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI)
for debt recovery by banks and financial institutions.
Companies Act for liquidation and winding up of the company.
Insolvency and Bankruptcy Code, 2016

The Central government introduced the Insolvency and Bankruptcy Code(IBC) in 2016
to resolve claims involving insolvent companies. This was intended to tackle the bad
loan problems that were affecting the banking system. IBC proposes a paradigm shift
from the existing 'Debtor in possession' to a 'Creditor in control' regime.
Insolvency and Bankruptcy Board of India (IBBI)
The Insolvency and Bankruptcy Board of India (IBBI) – apex body for
promoting transparency & governance in the administration of the IBC. It
has 10 members from Ministry of Finance, Law, and RBI.
•Debt Recovery Tribunal (DRT) has jurisdiction over individuals and partnership
firms other than Limited Liability Partnerships.
•National Company Law Tribunal (NCLT), also called The adjudicating authority
(AA), has jurisdiction over companies, other limited liability entities.
Insolvency Professional Agency (IPA)

Insolvency Professionals are the persons enrolled with IPA (Insolvency professional
agency (IPA) and regulated by Board and IPA will conduct resolution process; it will
act as Liquidator/ bankruptcy trustee. They are appointed by creditors and override
the powers of the board of directors.
Information Utilities (IUs)
Information Utilities (IUs) is a centralized repository of financial and credit
information of borrowers, which would accept, store, authenticate and provide
access to financial data provided by creditors.
Time bound manner

The code aims to resolve insolvencies in a strict time-bound manner - the
evaluation and viability determination must be completed within 180 days which is
extendable by 270 days for the Company. For startups and small companies the
resolution time period is 90 days which can be extended by 45 days.
New Provisions
Special Provisions for MSME as now, the promoters of MSMEs are allowed to bid
for their companies as long as they are not willful defaulters and don’t attract
any other related disqualification. This has corrected the anomaly in the section
29A of the existing act which had barred promoters of defaulting assets from
bidding for their assets.
Homebuyers will be recognized as Financial Creditors, giving them due to

representation in the Committee of Creditors (CoC). Thus, now home buyers will be
an integral part of the decision making process.
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• Growth and Development – Measurement of growth: National Income and per capita

income – Poverty Alleviation and Employment Generation in India – Sustainable

India’s Economy after Independence

2nd Five Year Plan (1956-1961)

Public Enterprise Private Enterprise

Emergency from 1976 to 1977

Privatisation of Banks Liberalisation

End of License Raj Privatization

Downsizing of the government

SEBI NSE BSE created Globalization

The 65 year-old Planning Commission was relevant in a

Chairperson is Prime Minister

State Government Village level

•To foster cooperative federalism •To develop mechanisms to

Introduction of GST is making Indian products more competitive in the domestic

Insolvency and Bankruptcy Code, 2016

Insolvency Professional Agency (IPA)

Time bound manner

Homebuyers will be recognized as Financial Creditors, giving them due to

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