1.1 Introduction to Volume II
This chapter offers an overview of the current state of key sectors of the Indian economy and Indian society and assesses their prospects. In this chapter, I review the state of Indian agriculture and the challenges it faces. Chapter 2 assesses the key achievements and prospects of the Indian manufacturing sector. Chapter 3 discusses key achievements of India’s services sector and the challenges it faces. Independent India started out as a relatively closed economy but has now radically transformed itself into one of the most open economies in the world, particularly in the area of investment. Thus, Chap. 4 assesses India’s economic relations with the rest of the world in the areas of trade, investment, migration and remittances. Chapter 5 examines increasing regional inequality in India and assesses the role of indirect taxation and vertical fiscal transfers in this context. Chapter 6 assesses India’s performance in the key areas of health and education services whereas Chap. 7 looks at the environment. Chapter 8 discusses issues of female empowerment in India, and Chap. 9 assesses intersocietal relations in India. Chapter 10 evaluates economic prospects for India, particularly in relation to China, and assesses India’s prospects of becoming a high middle-income country in the medium term. It also examines some key social challenges being faced by India.
1.2 Phases of Growth in Indian Agriculture
India’s reform-induced growth acceleration has charted a different path from that of China. China’s economic reforms program began by addressing the agricultural sector so that in the early phase of its economic program Chinese agriculture grew at 7% or more a year. This “bottom up” approach led to very sharp reductions in mass poverty in the rural sector and, hence, a consolidation of support for the economic reforms program. In the case of India, reforms began outside agriculture and percolated down to some extent. This is a “trickle down” model of economic reforms. Whenever agricultural growth was high there would be sharp reductions in mass poverty but this momentum could not be sustained when agricultural growth slackened. This has also meant that political support for the reforms program has not been robust, and policies that interfere with the operation of the market mechanism have often attracted votes and, more problematically, been introduced. Part of the difficulty of devising a cogent reforms policy for agriculture is the fact that under the Indian constitution agriculture is a state subject, so adopting a national policy is problematic.
The development strategy adopted immediately after Independence emphasized industrial growth through central planning and often involved the neglect of agriculture. Between 1951 and 1966 grain production growth at 2.8% per annum was lagging behind population growth. Food deprivation was widespread and the likelihood of severe famine involving a large number of deaths during a drought period was quite high. Indeed, a famine was declared in par...