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Ec104: Asia study notes
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Revision notes with content from lectures and seminars for EC104 topic 9: Asia 1945-79
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Asia: 1945-79India in the planning era
● Rothermund (1993) - hope on independence - industrialisation would lead to
agricultural development
● 1950 - planning commission established
○ 1st plan (1951-6) - modest. 31 billion rupees spent
■ Involved private investment in consumption, import bans and
high tariffs
■ Growth of 18% - successful
○ 2nd plan (1956-61) - 46 billion rupees.
■ ⅓ to investment
○ 3rd plan (1961-6) - public sector investment of 86 billion rupees
■ Eased bottlenecks in transport and communication
■ Modest for agriculture
○ Large focus on industry and little on agriculture
■ Terms of trade decreased
■ government wanted low food prices
○ Rise in industrial protection (nearly 3x the 1950 level in 1964)
○ Heavy industry did well
○ Little growth in rural incomes
Price, deficits, trade, aid
● Rothermund (1993) - government had deficit spending and expansion of the
money supply, causing high inflation
● Sterling reserves exhausted by 1956
○ Wheat Loan with the US allowed the sale of wheat in rupees rather
than $
● Nearly $8.5 billion of foreign aid in the 3 plans
○ 30% of public investment in the last 2 plans
● Industrial growth was forced and financed by aid / deficit spending
○ Led to a recession where there was underutilisation of resources
● 1950-80 - trade deficit
○ Gap met by foreign aid and remittances
● 1980s - overvalued currency
The Green Revolution
● Rothermund (1993) - Green Revolution discusses selective breeding creating
high yielding varieties of crops
○ Wheat and rice introduced to India in the late 150s
, ○ India became self-sufficient in food grains - wheat yields increased
from 780-1410 kg/ha (1955-1975)
○ Yields depend on irrigation and fertiliser
● Foster and Rosenzweig (1996) - higher returns for farmers with primary
schooling
○ Increased investment in primary schools
● Rothermund - increased regional inequality
○ Gains in Punjab, Haryana
○ Few gains in Bihar
○ Raised incomes for rich peasants but made food expensive for the
poor
The License Permit Quota Raj
Kotwal et al (2011) - shorthand for licences/quotas that were major in policy pre-
1991 in order to achieve self reliance. Pre-regime included:
● Average tariff of 55% and licences needed for imports
● Prohibitions on FDI, investment licensing, caps on foreign ownership, price
controls
● Nationalised banks, compulsory investment in government securities
● Public sector monopolies - 18 industries reserved for the public sector
China in the Maoist era
Reconstruction and the 5 year plans
● Lardy (1987) - Communist Party of China takes power following 2 decades of
war
○ Priority of reconstruction
○ Within 6 months - centralise finance, creates a unified fiscal system,
expands tax for price stability
○ Government revenue doubles (1950/1)
○ Inflation decreased to 20% (following hyperinflation)
○ Land reform - ½ of land changes hands
○ Income per capita grew at 6.5% pa (1953-7)
○ Elimination of the private sector and state ownership of industry
■ Agricultural Producers Cooperatives remove private property in
land - collective farming
○ Investment rate rises to 20%
■ ½ in industry - capital intensive consumer goods
○ Industrial growth > target - steel, machinery. Slow in consumer goods
○ Agricultural growth is below the 5-year plan target
The great leap forward
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