SLrucLural consLralnLs and

developmenL sLraLegy
SLrucLural consLralnLs and
developmenL sLraLegy
O Accordlng ChakravarLl Lhe underlylng causes of
sLrucLural backwardness were percelved as follows
O llrsL Lhe baslc consLralnL on developmenL was seen
as belng an acuLe deflclency of maLerlal caplLal
whlch prevenLed Lhe lnLroducLlon of more
producLlve Lechnologles
O Secondly Lhe llmlLaLlon on Lhe speed of caplLal
accumulaLlon was seen Lo lle ln Lhe low capaclLy Lo
save
O 1hlrdly lL was assumed LhaL even lf Lhe domesLlc
capaclLy Lo save could be ralsed by means of
sulLable flscal and moneLary pollcles Lhere were
sLrucLural llmlLaLlons prevenLlng converslon of
savlngs lnLo producLlve lnvesLmenL
O lourLhly lL was assumed LhaL whereas agrlculLure
was sub[ecL Lo secular dlmlnlshlng reLurns
lndusLrlallzaLlon would allow surplus labour currenLly
underemployed ln agrlculLure Lo be more
producLlvely employed ln lndusLrles whlch operaLed
accordlng Lo lncreaslng reLurns Lo scale
O A flfLh assumpLlon was LhaL lf Lhe markeL mechanlsm
were accorded prlmacy Lhls would resulL ln excesslve
consumpLlon by Lhe upperlncome groups along wlLh
relaLlve underlnvesLmenL ln secLors essenLlal Lo Lhe
acceleraLed developmenL of Lhe economy
O SlxLhly whlle unequal dlsLrlbuLlon of lncome was
consldered Lo be a bad Lhlng" a preclplLaLe
LransformaLlon of Lhe ownershlp of producLlve asseLs
was held Lo be deLrlmenLal Lo Lhe maxlmlzaLlon of
producLlon and savlngs ln oLher words Lhere was a
Lolerance Lowards lncome lnequallLy provlded lL was
noL excesslve and could be seen Lo resulL ln a hlgher
raLe of growLh Lhan would be posslble oLherwlse
W lven all Lhese percepLlons lL was felL
LhaL economlc Lheory lndlcaLed LhaL Lhe
baslc quesLlons relaLlng Lo how much Lo
save where Lo lnvesL and ln whaL forms
Lo lnvesL could be besL handled wlLh Lhe
help of a plan
W lL wlll be observed from Lhe above LhaL
Lhe lndlan planners subscrlbed Lo a
baslcally supply slde vlew of Lhe plannlng
problem
O 1here were 3 ma[or posslblllLles whlch could
be expecLed Lo balance supply wlLh demand
along a growlng Lrend llne
O llrsL publlc lnvesLmenL would be
concenLraLed ln Lhe area of lnfrasLrucLure
O Secondly publlc lnvesLmenL could be
dlrecLed prlmarlly Lowards agrlculLure
O 1hlrdly publlc lnvesLmenL could be dlrecLed
prlmarlly Lowards lndusLrlal developmenL
O lndlan planners obvlously dld aLLempL all
Lhree as any reasonably planner can be
expecLed Lo do ln such slLuaLlons
O 1he 1
sL
llve ?ear lan focused on Lhe flrsL
Lwo Lypes of lnvesLmenL
O AL Lhe Llme 2
nd
llve year lan however a ma[or change
was broughL abouL lndlan planners operaLed on Lhe
assumpLlon of a nearly closed economy
O ln such an economy lf savlngs were Lo subsLanLlally ralsed
from a low lnlLlal level around 3 ln 1930 Lo 20 ln 1973
lnLer secLoral conslsLency over Llme would demand LhaL
producLlve capaclLy of Lhe caplLal goods secLor would
demand LhaL Lhe producLlve capaclLy of Lhe caplLal goods
secLor would have Lo rlse aL an acceleraLed raLe Lo converL
growlng savlngs lnLo addlLlonal real lnvesLmenL
O lL ls Lherefore Lhe need Lo ralse Lhe real savlngs raLe led Lhe
lndlan planners Lo accord prlmacy Lo a fasLer raLe of
growLh ln Lhe caplLal goods secLor alLhough doubLless
Lhere could have been oLher conslderaLlons such as
bulldlng up defence capablllLy
W lndlan planners lgnored Lhe Lrade opLlon as
a ma[or source of growLh
W 1he lssue was posed aL Lhe Llme of second
llve ?ear lan was formulaLed A pro[ecLlon
of Lhe balance of Lrade was aLLempLed ln
Lhe plan documenL and Lhe planners
conclude LhaL no slgnlflcanL lncrease ln
exporL earnlngs ln Lhe shorL run could be
expecLed Powever Lhey recognlzed LhaL 'lL
ls only afLer lndusLrlallzaLlon has proceeded
some way LhaL lncreased producLlon wlll be
reflecLed ln large exporL earnlngs
W 1he argumenL brlefly was follows Lhe
developmenL of a heavy caplLal goods base
over a perlod Llme would lead Lo Lhe
dlverslflcaLlon of Lhe exporL baskeL ln Lhe
dlrecLlon of manufacLured goods lncludlng
machlnery and equlpmenL whlle Lhe
lncrease employmenL leadlng Lo an
expanded demand for consumer goods
would be meL by pursulng 'caplLalllghL'
meLhods of producLlon
ole of SLaLe as vlsuallzed ln Lhe llfLles
O ln Lhe early 1930s lL was belleved LhaL sLaLe could
play a slgnlflcanL role boLh ln ralslng Lhe domesLlc
raLe of savlngs and ln puLLlng lL Lo more producLlve
use
O relndusLrlal economles are predomlnanLly rural
and agrlculLural ln characLer
O Land reforms LaxaLlon of agrlculLure
O malnLalnlng law and order
O deflnlng and proLecLlng properLy rlghLs
O rovldlng elemenLary educaLlon
O 8aslc healLh care
O Safe drlnklng waLer
O dlrecL sLaLe lnLervenLlon ls necessary and [usLlfled
O lnfrasLrucLural pro[ecLs whlch call for lnvesLmenLs
by Lhe govL
O SLaLe regulaLlon
O CreaLe condlLlons Lo lnduce people Lo save more
O ubllc moblllzaLlon ldle labor for creaLlng
producLlve asseLs llke roads lrrlgaLlon land
lmprovemenL schools rural hosplLals eLc
O ole of publlc expendlLure
O Soclal [usLlce
O revenLlng concenLraLlon of power
O 1he above 2 are lncorporaLed among Lhe dlrecLlve
prlnclples of sLaLe pollcy
O ln addlLlon Lo Lhls Lhe dlrecLlve prlnclples lay
emphasls on
1 Securlng Lo all clLlzens Lhe rlghL Lo an
adequaLe means of llvellhood
2 Lnsurlng LhaL dlsLrlbuLlon of ownershlp and
conLrol of maLerlal resources ls regulaLed ln
a manner whlch besL serves Lhe common
good
3 revenLlng Lhe concenLraLlon of wealLh and
means of producLlon and
4 roLecLlng chlldren from belng forced Lo
work or belng explolLed on accounL of
economlc necesslLy
1hough Lhese provlslons lacked legal
sancLlon Lhey do reflecL Lhe lmporLance
aLLached Lo soclal [usLlce and have shaped
Lhe scope and naLure of sLaLe lnLervenLlon
O AlLogeLher as Lhe llrsL lan puL lL wheLher one
Lhlnks of problems of caplLal formaLlon or of Lhe
lnLroducLlon of new Lechnlques or of Lhe
exLenslon of soclal servlces or of Lhe overall
reallgnmenL of Lhe producLlve forces and class
relaLlonshlps ln socleLy on lnevlLable comes Lo
Lhe concluslon LhaL a rapld expanslon of Lhe
economlc and soclal responslblllLles of Lhe sLaLe
wlll alone be capable of saLlsfylng Lhe leglLlmaLe
expecLaLlons of Lhe people 1hls need noL lnvolve
compleLe naLlonallzaLlon of Lhe means of
producLlon or ellmlnaLlon of prlvaLe agencles ln
agrlculLure or buslness and lndusLry lL does
however mean a progresslve wldenlng or Lhe
publlc secLor and a reorlenLaLlon of Lhe prlvaLe
secLor Lo Lhe needs of a planned economy
LvoluLlon of SLraLegy and rlorlLles
O 1
sL
plan provlded an lnclslve general analysls
of Lhe naLure of Lhe counLry's developmenL
problem and varlous opLlons for moblllzlng
resources and achlevlng developmenL wlLh
more equal dlsLrlbuLlon
O 1here was speclal emphasls on Lhe role of
mass moblllzaLlon of ldle rural labour and
land reform ( 36 percenL of savlngs
lnvesLmenL ln Lhe early 1930s Lo 20 by
196869 and aggregaLe lncome was
expecLed Lo double ln 20 years and Cl ln 27
years)
O Second plan provlded an analyLlcal
foundaLlon for lL wlLh a closed economy
growLh model wlLh Lwo secLors one of
whlch produced consumer goods and oLher
lnvesLmenL goods
O 1he fundamenLal lnslghL of Lhls model was
O reaLer Lhe proporLlon of lnvesLmenL
devoLed Lo lncreaslng Lhe capaclLy of Lhe
lnvesLmenLgoods secLor
O Labour lnLenslve Lechnlques
O ollLlcal consLralnLs
O ole publlc secLor
O 1936 l
O SoclallsL paLLern of socleLy
O 1he domlnanL growLh orlenLaLlon ln Lhe Mahalanobls
sLraLegy of Lhe second plan conLlnued lnLo Lhe Lhlrd
plan
O Lconomlc growLh was expecLed Lo Lake place Lhrough
Lhe modern lndusLrlallzaLlon
O elaLlve emphasls was on Lhe longLerm growLh ln an
lmporL subsLlLuLlon orlenLed sLraLegy requlred a
modlflcaLlon ln Lhe lndusLrlallzaLlon process
O 1hls conslsLed of a sLrong accenL on Lhe creaLlon of
domesLlc capaclLy ln Lhe dlrecLlon of produclng
caplLal goods Lo produce more caplLal goods ln Lhls
sLraLegy Lhe publlc secLor expecLed Lo play a dual
role
O (a) promoLlng Lhe growLh of lnfrasLrucLural faclllLles
and creaLlon of capaclLy ln Lhe baslc and heavy
lndusLrles
O (b) reduclng Lhe concenLraLlon of economlc power
Lhrough expanslon of publlc ownershlp of means of
producLlon
O An aLLempL was made wlLh a reasonable success
ln lmplemenLlng Lhe longLerm growLh
maxlmlzlng Mahanalobls sLraLegy durlng Lhe 2
nd
and 3
rd
flve year plans 1here was a conslderable
acceleraLlon ln publlc secLor lnvesLmenL ln
lnfrasLrucLure and lndlrecLly producLlve
lnvesLmenLs ln unlversal lnLermedlarles llke sLeel
coal power and heavy elecLrlcal machlnery
O AlLhough encouragemenL Lo Lhe coLLage vlllage
and SSl as a means of provldlng employmenL as
well as expandlng Lhe supplles of consumer goods
were concelved as a parL of Lhls sLraLegy very
llLLle was achleved ln Lhls regard
O Slmllar was Lhe faLe ln regard Lo Lhe pollcles
Lowards Lhe reducLlon of lnequallLles
O 1he acLual pollcy reglme LhaL lndla followed
ln lLs early days of lndependence was a
mlxLure of Lhe Lwo compeLlng vlslons
O A SovleL sLyle plannlng was developed buL
wlLhouL Lhe sLaLe havlng a monopoly of
conLrol over Lhe resources
O CaplLallsm was allowed Lo flourlsh buL a
large bureaucracy was nurLured
O Puge lnvesLmenLs was made ln baslc
lndusLrles buL aL Lhe same Llme several
secLors were proLecLed as belonglng Lo small
scale secLor
O CaplLallsm was crlLlclzed buL lL was also
relled upon
O Soclallsm was never pracLlced
O Powever ln Lerms of aggregaLe performance Lhls
phase recorded a falrly susLalned 8 Lo 10 per cenL
compound growLh raLe of lndusLrlal ouLpuL
O 33 of compound growLh ln food gralns
O 173 growLh raLe ln Cl
O All Lhese growLh raLes represenLed a sharp
acceleraLlon over Lhe prelndependence pasL
O 1hus Lhe flrsL phase spannlng roughly over Lhe flrsL
Lhree flve year plan perlods was characLerlzed by
falrly susLalned growLh ln Cl dlsLlncL acceleraLlon l
publlc secLor lnvesLmenL and ln Lhe growLh of
lndusLrlal ouLpuL 1hls phase was domlnaLed by Lhe
growLh orlenLed developmenL sLraLegy
Changlng ercepLlons
O 30's and 60's were marked by relaLlvely sLrong and sLable
governmenLs as well as a clear commlLmenL Lo and supporL
for plannlng from Lhe leadershlp
O 1he plannlng commlsslon wlLh lLs vlslon and dlrecLlon
provlded a framework ln whlch lnvesLmenL allocaLlons could
be declded and Lhe [usLlflcaLlon for parLlcular pro[ecLs and
programmes could be evaluaLed
O WhaLever success LhaL had been clalmed for Lhe growLh
orlenLed developmenL sLraLegy of Lhe flrsL phase could be
aLLrlbuLed Lo Lhe credlblllLy of Lhe plannlng process
O 1hls aLmosphere changed dramaLlcally afLer Lhe droughL and
Lhe forelgn exchange crlsls of Lhe mld slxLles
O 1he sudden lncrease ln defence expendlLure
O 1he sharp deLerloraLlon of Lhe economlc slLuaLlon and Lhe
securlLy envlronmenL hlghllghLed Lwo maln weaknesses of
Lhe exlsLlng sLraLegy namely Lhe relaLlve neglecL of
agrlculLure and a crlLlcal dependence of forelgn ald
O 1he Lwoyear perlod 1963 and 1966
wlLnessed Lhe worsL droughL ln recenL
memory and consequenL famlnes ln large
parLs of norLh lndla
O AL Lhe same Llme all ald was cuL off Lo lndla
by Lhe donor counLrles on accounL of Lhe
lndo ak war of 1963 lncludlng food ald
O 1hls LraumaLlc experlence broughL food
securlLy lnLo Lhe forefronL of our pollcy
lmperaLlves
O 1he 4
Lh
plan was concelved afLer 3 years plan
hollday
O 1he 3
Lh
plan recognlzed LhaL growLh and
lndusLrlallzaLlon would noL necessarlly lmprove Lhe
llvlng condlLlons of Lhe people parLlcularly Lhe poor
O 1he concepLs of mlnlmum needs and dlrecLed anLl
poverLy programmes were lnnovaLlons of Lhls plan
O 1he 3
Lh
plan also marks Lhe beglnnlng of a perlod of
sLeady lncrease ln Lhe growLh raLe of Lhe economy
whlch conLlnued rlghL Lhrough Lo Lhe 8
Lh
plan
O 1he 6
Lh
plan for Lhe flrsL Llme recognlzed LhaL Lhe
success of Lhe Mahanalobls heavy lndusLrlallzaLlon
sLraLegy ln ralslng Lhe savlngs raLe of Lhe counLry had
creaLed a slLuaLlon where excess capaclLles were
becomlng evldenL ln cerLaln lndusLrles
O A shlfL ln Lhe paLLern of lndusLrlallzaLlon wlLh lower
emphasls on heavy lndusLrles and more on
lnfrasLrucLure beglns here
O 1he 7
Lh
plan represenLs Lhe culmlnaLlon of Lhls
shlfL lL ls also known as lnfrasLrucLure plan
O ln Lhe same plan Lhere was a reappralsal of Lhe
lmporL subsLlLuLlon sLraLegy beglns and a
gradual llberallzaLlon of Lhe lndlan economy ls
lnlLlaLed
O 1he Lwo year plan hollday (199092) demanded
a full reappralsal of Lhe plannlng meLhodology
O 1he 8
Lh
plan represenLs Lhe flrsL efforLs aL
plannlng for a markeLorlenLed economy
O N|nth I|ve ear |an Ind|a runs Lhrough Lhe perlod from 1997 Lo 2002
wlLh Lhe maln alm of aLLalnlng ob[ecLlves llke speedy lndusLrlallzaLlon
human developmenL fullscale employmenL poverLy reducLlon and
selfrellance on domesLlc resources
O 1he maln feaLure of Lhe N|nth I|ve ear |an Ind|a ls LhaL aL lLs onseL
our naLlon crossed Lhe flfLy years of lndependence and Lhls called for
a whole new seL of developmenL measures 1here was a fresh need
felL for lncreaslng Lhe soclal and economlc developmenLal measures
1he governmenL felL LhaL Lhe full economlc poLenLlallLy of Lhe
counLry yeL Lo be explored should be uLlllzed for an overall growLh ln
Lhe nexL flve years As a resulL ln Lhe nlnLh llve ?ear lan lndla Lhe
emphasls was on human developmenL lncrease ln Lhe growLh raLe
and adopLlon of a full scale employmenL scheme for all lor such
developmenL one needs Lo promoLe Lhe soclal secLors of Lhe naLlon
and Lo glve uLmosL lmporLance Lo Lhe eradlcaLlon of poverLy
O 1he N|nth I|ve ear |an Ind|a looks Lhrough Lhe pasL weaknesses ln
order Lo frame Lhe new measures for Lhe overall socloeconomlc
developmenL of Lhe counLry Powever for a wellplanned economy of
any counLry Lhere should be a comblned parLlclpaLlon of Lhe
governmenLal agencles along wlLh Lhe general populaLlon of LhaL
naLlon A comblned efforL of publlc prlvaLe and all levels of
governmenL ls essenLlal for ensurlng Lhe growLh of lndlas economy
O 1he @enth I|ve ear |an Ind|a (20022007) alms Lo Lransform
Lhe counLry lnLo Lhe fasLesL growlng economy of Lhe world and
LargeLs an annual economlc growLh of 10 1hls was declded
afLer lndla reglsLered a 7 growLh conslsLenLly over Lhe
lasL decade
O 1hls growLh of 7 ls much hlgher Lhan Lhe worlds average
growLh raLe 1hus Lhe lannlng Commlsslon of lndla
soughL Lo sLreLch Lhe llmlL and seL LargeLs whlch would propel
lndla Lo Lhe super league of lndusLrlally developed counLrles
O ln a nuLshell Lhe @enth I|ve ear |an Ind|a envlsages
O More lnvesLor frlendly flexlble economlc reforms
O CreaLlon of congenlal lnvesLmenL envlronmenL
O Lncourage prlvaLe secLor lnvolvemenL
O SeLLlng up sLaLeofLhearL lnfrasLrucLure
O CapaclLy bulldlng ln lndusLry
O CorporaLe Lransparency
O Moblllzlng and opLlmlzlng all flnanclal resources
O lmplemenLaLlon of frlendly lndusLrlal pollcy lnsLrumenLs
O1he elevenLh plan has Lhe ob[ecLlve Lo
lncrease growLh Lo 10
Olncrease agrlculLural growLh Lo 4 per
year Lo ensure a wlder spread of beneflLs
CreaLe 70 mllllon new work opporLunlLles
AugmenL mlnlmum sLandards of educaLlon
ln prlmary school
Oeduce lnfanL morLallLy raLe Lo 28 and
malnuLrlLlon among chlldren of age group
03 Lo half of lLs presenL level Lnsure
elecLrlclLy connecLlon Lo all vlllages and
lncrease foresL and Lree cover by flve
percenLage polnLs