India's industrial deceleration in the 1960s can be attributed to a complex interplay of various factors. Here's an examination of these factors, segmented into categories for clarity:

1. Exogenous Shocks and External Crises:

Wars and Political Instability:

• Indo-China War (1962) and Indo-Pak Wars (1965, 1971): These conflicts diverted resources and focus from industrial development to defense, leading to disruptions in industrial production and investment.

Oil Crisis (1973):

• The global oil crisis led to skyrocketing oil prices, increasing production costs, and causing widespread economic instability, which negatively impacted industrial growth.

Drought Conditions:

• Repeated droughts in the mid-1960s adversely affected agricultural output, which in turn impacted the supply of raw materials to industries and reduced rural purchasing power, further depressing demand for industrial goods.

2. Structural and Policy-Related Issues:

Reduced Investment:

• There was a significant slackening of real investment in the industrial sector, particularly in the public sector. This reduction in investment led to a slowdown in industrial growth.

Industrial Policies and Bureaucratic Hurdles:

• The period was characterized by complex bureaucratic licensing systems and an inefficient system of controls. Economists like Jagdish Bhagwati and Padma Desai criticized these policies for stifling entrepreneurial initiative and causing delays in industrial projects.

3. Economic and Market Constraints:

Income Distribution and Demand Constraints:

• Extreme inequality in income and wealth distribution meant that the market for industrial goods was limited to the top 10% of the population. Once the consumption needs of this segment were met, further demand stagnated, limiting growth in the industrial sector.

Agricultural Sector Performance:

• Low growth in the agricultural sector not only restricted the supply of raw materials but also constrained demand for industrial goods. Poor agricultural performance led to lower incomes for the majority rural population, reducing their purchasing power and demand for industrial products.

4. Infrastructure and Resource Bottlenecks:

Infrastructural Constraints:

• The growth in infrastructure did not keep pace with industrial needs. There were significant bottlenecks in power supply, transport, and communication, which hindered efficient industrial operations and expansion.

5. Structural Retrogression:

Shift in Industrial Focus:

• During this period, there was a structural retrogression where the focus shifted away from capital goods and basic industries towards consumer goods aimed at elite consumption. This shift led to imbalanced industrial growth, favoring sectors that did not contribute significantly to broad-based industrial development.

6. Macroeconomic Stability:

Inflation and Fiscal Deficits:

• Rising fiscal deficits and inflationary pressures during the late 1960s and early 1970s destabilized the economic environment, making it challenging for industries to plan and invest effectively.

Conclusion:

The industrial deceleration in India during the 1960s was a result of multifaceted issues ranging from external shocks and wars to domestic policy failures and structural economic problems. These factors collectively contributed to a significant slowdown in industrial growth, marking a stark contrast to the high growth phase of the preceding years. Addressing these issues required comprehensive policy reforms, better resource management, and infrastructural improvements to create a conducive environment for sustained industrial growth.