Critically analyze the impact of the 1973 oil crisis on the industrial growth of India during the Fifth Five-Year Plan (1971‑1976). Discuss the policy measures adopted and their effectiveness.
Answer
The 1973 oil crisis triggered a 10 % decline in industrial growth; price controls, import substitution, and increased domestic production mitigated the slowdown but could not fully reverse it.
Step-by-step solution
- Explain the sudden rise in oil prices in 1973 and its global economic shock.
- Show how higher energy costs raised production costs in Indian industry, reducing growth by about 10 %.
- List policy responses: price controls on essential goods, promotion of import substitution industrialization, and incentives for domestic production of oil‑related inputs.
- Assess effectiveness: measures slowed the decline but did not stop it, as structural constraints and lack of capital continued to impede growth.
Common mistake: Assuming oil price changes have no effect on domestic industrial activity
Concept tested: Oil crisis impact on Indian industry
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