Soon after achieving independence, the control over India was swiftly taken over by the political class from founding members and leaders. Politicians had many opportunities to transform our country progressively; there were significant developments, such as the establishment of educational and research institutions, space research centers, and tremendous agricultural growth. From 1947 to 1990, India followed a policy framework called License and Permit Raj. This policy framework is also known as planning-based policy, inspired by the USSR (then Russia). The policy states that the government’s permission is mandatory for any and every action. 

It was during this period that the first five-year plan started (1951). The primary concern was to mitigate hunger and reduce severe poverty because 80-90% of the population’s livelihood depended only on agriculture. India could attain these goals but only partially. In this phase, people’s choices were strictly controlled.

The progress in agriculture resolved the hunger crisis. The green revolution played an instrumental role in this crisis resolution. However, the policymakers could not see the fact that poverty is a multifaceted phenomenon; to alleviate it, we need quality of work, quality of living, a reduction in malnutrition level, and an increase in income level. Therefore, working towards increasing the income level alone was not enough to uplift the people from below the poverty line. But the population was growing at a high rate, and GDP stagnated; the annual average was at the rate of 3-4%, and the government too was unable to meet the needs of the poor. Resultantly, poverty levels skyrocketed further. 

During this period, entrepreneurs did not want to establish businesses because of massive taxes, and most industries were established and run by the government. For example, there was only one car company, and the government manufactured the cars. The public sector alone was unable to provide jobs, and thus unemployment increased. All these factors led to a crisis in India, resulting in liberalizing our economy, with the government’s withdrawal of control on markets and private entities taking over. The year 1990 marked the beginning of Liberalization. 

In the following chapter, we shall take a glimpse into the post-liberalization era.