Q.Despite the increasing size of the services sector, India still is largely an agricultural country. Give reasons.

The colonial experience had left Indian nationalists deeply convinced that political freedom was meaningless without economic self-reliance. For over a century, British rule had systematically deindustrialised India, turning a once-prosperous manufacturing economy into a supplier of raw materials and a captive market for British goods. The drain of wealth, the destruction of traditional crafts, and the deliberate suppression of modern industries had created what nationalists saw as a classic case of underdevelopment by design. When independence arrived in 1947, the new leadership was determined to reverse this legacy through rapid, state-driven industrialisation.

The cornerstone of this effort was the adoption of Five Year Plans modelled loosely on Soviet planning but adapted to Indian conditions. The Planning Commission, established in 1950, became the nerve centre of economic policy. The First Five Year Plan focused primarily on agriculture and infrastructure, but the Second Plan launched in 1956 marked the real industrial push. Influenced heavily by the Mahalanobis model, it prioritised heavy industries—steel, coal, power generation, machine tools, and capital goods. The logic was straightforward: to build a self-sufficient industrial base, India needed to produce the machines that would produce other machines, rather than remain dependent on imports.

The public sector became the engine of industrialisation. Massive steel plants were established at Bhilai (with Soviet assistance), Rourkela (with German collaboration), and Durgapur (with British help). Heavy engineering units, fertiliser plants, and oil refineries mushroomed across the country. The state also invested heavily in infrastructure—power generation, railways, ports—that private capital was either unwilling or unable to finance. This was not merely economic policy; it was a nationalist project to demonstrate that a newly independent nation could master modern technology and build industrial capacity without remaining subordinate to Western powers.

Import substitution formed the second pillar of the strategy. High tariff walls protected domestic industries from foreign competition, allowing Indian manufacturers to grow even if they were initially less efficient. The idea was to nurture infant industries until they matured enough to compete globally. Foreign exchange was scarce and jealously guarded, allocated through strict controls to ensure it went toward importing capital goods and essential raw materials rather than luxury consumer items. This inward-looking approach reflected both economic nationalism and the practical constraints of limited foreign reserves.

The licensing system, or the "Licence Raj" as it came to be known, gave the government tight control over industrial expansion. Any entrepreneur wanting to start a new factory, expand production, or diversify into new products needed government approval. The system was designed to prevent monopolies, ensure balanced regional development, and direct investment toward priority sectors. In practice, it created enormous bureaucratic bottlenecks, but in the early years it was seen as essential to prevent the concentration of economic power and to align private investment with national goals.