Discuss the three major strategies for development adopted since 1956 in India.
THREE MAJOR STRATEGIES ADOPTED SINCE 1956 IN INDIA ARE:
- Nehru Mahalanobis Model of Development.
- Gandhian Model of Development.
- Rao Manmohan Model of Development
Nehru Mahalanobis Model of Development.
The model emphasized the fast development of heavy industry to create an industrial base of the economy to make it more self-reliant in terms of capital goods.
This plan failed to attain its targets. Land reform progress was also behind target. The major constraints were uncertain monsoons, shortage of food and industrial raw material, non-availability of adequate power and machines, rising prices, a phenomenal growth of population and the consequent addition to labor force. The shortage of foreign exchange was the most crucial constraint. The shortage of capital along with the shortage of other factors like power caused a decline in the planned rate of growth of industrial output. The natural outcome was demand pull inflation, and depressing the growth in real per capita income.
It was necessary to change it in the fourth and fifth plan in ordered to avoid the negative aspects from these plans. In the fourth plan the major objectives of the plan were to achieve stability and progress towards self-reliance, the attainment of annual average growth rate of 5.7%, The regional imbalances got corrected through balanced regional development and dispersal of economic activity. To provide the benefits of development to less privileged classes of society there was a progressive reduction in concentration of income. The fourth plan was a big and bold attempt. The plan had been successful with regard to its achievement of estimated rate of savings and investment.
In the fifth plan four major instruments of policy were laid down in order to achieve the objectives of this plan:
- Appropriate allocation of investment outlays.
- Institutional reforms.
- Measured to help the process of development to be carried in a non-inflationary manner.
- To direct the flow of private investment into preferred uses.
The objectives of fifth plan were poverty removal and economic self-reliance. The strategy of this plan was to develop and promote entrepreneurship, to facilitate fuller utilization of the existing skills and equipment, to improve the production units and to promote small industries. The major purpose to change the planning strategy of second plan in fourth and fifth plan as the achievements of second plan were modest and at time behind the targets. The plan was “overambitious” or “under cautious”.
Nehru-Mahalanobis model of development emphasized the fast development of heavy industry to create an industrial base of the economy to make it more self-reliant in terms of capital goods elements.
Reasons to adopt this strategy were:
- The development of heavy industry was denied by the British rule deliberately.
- Indian industrial structure had a narrow base mainly dependent on consumer goods industries.
- The per capita productivity, to be raised by an industrial economy.
- For the development of agriculture as well as for all other sectors of the economy rapid industrialization was essential.
Role of Public and Private Sector: Since private sector was not willing to invest in heavy industry which required lumpy investment, had long gestation period and low profitability therefore, the responsibility to develop it was given to the public sector.
Role of Foreign Aid: Foreign aid essential for development, but to reduce the burden of foreign aid, it as essential to increase exports so as to pay for the bulk of the imports.
Role of Small Industries: It was essential to encourage the production of consumer goods and generate more employment by making investment in small industry, to mitigate the effects of capital intensive heavy industry.
Role of Agricultural Sector: The model recognized importance of agriculture. It stated: unless we are self-sufficient in agriculture, we cannot have the where withal to advance in industries.
Achievements of Nehru-Mahalanobis Strategy:
- Legitimate pride in the development of capital goods sector via heavy industry.
- In the form of irrigation, energy transport and communications there was an expansion in economic infrastructure.
- There was a. sharp rise in savings and investment.
Shortcomings noticed in the process of implementation:
- Due to insufficient investment in irrigation, electricity, fertilizer, implements etc. agricultural progress was inadequate.
- Small industries and industries producing consumer goods were neglected.
- Failure to absorb rapidly growing labor resulted in unemployment.
- The emergence of a high cost economy was created by the public sector expansion.
- Failure to raise exports commensurate with import requirements lead to balance of payment difficulties.
This strategy was a legitimate pride in the development of capital goods sector. There was an expansion in economic infrastructure in the form of irrigation, energy, transport and communications and there was a sharp rise in savings and investment. But as there are two faces of every coin, there were some shortcomings also over these achievements.
Shortcomings which were noticed in the process of implementation are: Agricultural process was inadequate due to insufficient investment in irrigation, electricity, fertilizer, implements etc. Industries like small industries and consumer goods producing industries were neglected. This strategy failed to absorb rapidly growing labor which resulted in unemployment. The public sector expansion created the emergence of a high cost economy and failure to raise exports commensurate with import requirements lead to balance of payments difficulties.
This model get distorted during the process of implementation because of the following reasons: Despite, three decades of planning, model failed to provide a national minimum level of living. Nearly 40% of the population lived below the poverty line in 1978. Unemployment and under employment remained at high levels and there was always an increase with every successive plan. There was increase in the rural-urban disparities and there was no check on the inflationary pressures.
Gandhian Model of Development
Nehru-Mahalanobis model failed as:
- Despite three decades of planning, model failed to provide a national minimum level of living. Nearly 40% of the population lived below the poverty line in 1978.
- Unemployment and under-employment remained at high levels and increased with every successive plan.
- Rural-urban disparities increased.
- Inflationary pressures could not be checked.
Gandhian Model emphasizes:
- Employment – oriented planning to replace production oriented planning.
- Experience of Punjab and Haryana is a shining example an agricultural as a means of enlarging employment.
- On small-industries as against large industries.
- That heavy and basic industries to be developed by the public sector.
Gandhian model intended to tackle the problem of distribution of income at the production and not at the consumption level.
Rao-Manmohan Model of Development.
The features of Rao-Manmohan Model of Development are:
- Initiated in 1991, it emphasized privatization and globalization of the economy.
- It abolished licensing in all industries except a small list of 18 industries.
- Although the government failed to transfer ownership of public sector undertakings, it did succeed in opening hitherto reserved areas to the private sector.
- MRTP companies were free from the ceiling limit of assets.
- By granting more autonomy and making management more professional, functioning of public sector companies were to be improved.
- Foreign direct investment was facilitated. Automatic approvals upto 51 percent of equity. Proposals requiring more than 51% equity could be considered on a case-by-case basis.
- Reducing import barriers to globalize the economy.
The statement that while the model succeeded on growth by raising the GDP growth rate to more than 6 percent level but it failed on equity as:
Criticism of Rao-Manmohan Model:
- It has by-passed agricultural.
- It has a narrow focus, limited to corporate sector only.
- Generally a highly capital intensive pattern of development because of the indiscriminate entry of multinationals.
- By raising the equity level above 51% multinationals have started the process of swallowing Indian firms.