India’s Business History – 1950s

by Andrew Bailey, Dona Davis, Karl Jenner, Sudipa Kadam, Darren Lee, Claire Lewis, Utsav Sharma

After India’s independence, all economic activities were under central control. For example, companies would need to pursue a license, issued by the central government, in order to set up a venture.

Prior to independence, there were a group of wealthy Indian businessmen such as the Tata and Birlas families who were advantaged by the new regulations as the licenses created a barrier to entry for new businesses.

There was cause for concern with the legislation as it allowed businesses to acquire licenses in order to effectively thwart competitors from acquiring them.

Another concern was that it would expose government officials to corruption. During the 50s, the first five-year plan was drafted. This then became the platform for economic planning for India in the following years.

As an example of such thinking, in 1949 the government introduced the Reserve Bank Enactment to nationalise the Imperial Bank of India. In 1951, this then became the State Bank of India. In 1955, subsidiary banks for the regions were established.

Further legislation such as the Industry Policy Resolution 1956 was later implemented with the objective of removing regional inequalities and disparities. As such, industries were classified into 3 categories:

Category 1: 17 industries exclusively under the domain of central government. These included railways, air, arms and ammunition, iron, steel, and atomic energy.
Category 2: 12 industries envisaged to be state owned but being supplemented by the private sector.
Category 3: All other remaining industries where the private sector would initiate development of these industries.

However, these would remain open for the state as well. This brief summary indicates that the 1950s was characterised by consolidation of the integral structures, legislation, and platforms to propel India’s economic growth as well as the prioritization of economic activities in line with the overarching national development agenda.