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Economic policies

Nehru implemented policies based on import substitution industrialisation and advocated a mixed economy where the government-controlled public sector would co-exist with the private sector. He believed the establishment of basic and heavy industry was fundamental to the development and modernisation of the Indian economy. The government, therefore, directed investment primarily into key public sector industries—steel, iron, coal, and power—promoting their development with subsidies and protectionist policies. Nehru's vision of an egalitarian society was "a co-operative ideal, a one world ideal, based on social justice and economic equality". In 1928, Nehru had affirmed that "Our economic programme must aim at the removal of all economic inequalities". Later in 1955, he declared that "I also want a classess society in India and the world." He identified his concept of economic freedom with the country's economic development and material advancement.

The policy of non-alignment during the Cold War meant that Nehru received financial and technical support from both power blocs in building India's industrial base from scratch. Steel mill complexes were built at Bokaro and Rourkela with assistance from the Soviet Union and West Germany. There was substantial industrial development. The industry grew 7.0% annually between 1950 and 1965—almost trebling industrial output and making India the world's seventh-largest industrial country. Nehru's critics, however, contended that India's import substitution industrialisation, which continued long after the Nehru era, weakened the international competitiveness of its manufacturing industries. India's share of world trade fell from 1.4% in 1951–1960 to 0.5% between 1981 and 1990. However, India's export performance is argued to have shown actual sustained improvement over the period. The volume of exports grew at an annual rate of 2.9% in 1951–1960 to 7.6% in 1971–1980.

GDP and GNP grew 3.9 and 4.0% annually between 1950 and 1951 and 1964–1965. It was a radical break from the British colonial period, but the growth rates were considered anaemic at best compared to other industrial powers in Europe and East Asia. India lagged behind the miracle economies (Japan, West Germany, France, and Italy). However, this mixed development strategy allowed native industrialisation to gain ground. While India's economy grew faster than both the United Kingdom and the United States, low initial income and rapid population increase meant that growth was inadequate for any sort of catch-up with rich income nations. India saw significant improvements in health, literacy and life expectancy since its independence.