indian economic planning 3 lecture

7/31/2019 Indian Economic Planning 3 Lecture

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WEL-COME

INDIAN ECONOMIC

PLANNING

Date: 19/01/2012


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Mahalnobis Model

The basic character of the Indian industry wasinfluenced by the Mahalanobis model of economic

development.

The crucial factor which led to the adoption of Mahalanobis

model was the low level ofcapital-stock formation in the

economy.

The emphasis was on those capital goods which could lead to

the production of other capital goods.Scientist inPhysics but formedIndian Statistical

Institute India


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1. The implementation of Mahalanobis model required

centralised control and planning. In 1956 Govt. categorisedIndustries for control

2. The first category was the monopoly of the government.

3. In the second category, the industries meant for progressive

takeover by the state were enlisted.

4. The third category of industries was left open for the

operation of the private sector

5. As a follow-up to the policy, the second plan placedemphasis on industrial growth in crucial sectors like oil,

steel, coal, power and machine tools.

What did model suggested?


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In the initial stages of the industrialisation of

India, when the private capital did not flow into

infrastructure areas, the government's

investments in infrastructure such as basic

industries, transport, roads, railways, miningof coal and iron ore, steel mills, heavy

machinery etc. were considered essential for

providing momentum for industrial progress.


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Planning and Control Govt. of India style!

a) Control of growth and the industrial

composition of output and capacity,

b) Control over foreign exchange utilization,

c) Control of monopoly and restrictive practicesin trade and commerce,

d) Control over investments in certain

consumption goods industry to encouragesmall industrial units,

e) Control over the location of the industry.


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Rest is history

To quote Tapas Majumdar, "one major drawback of

the public sector undertakings inIndia is that the three levels of decision-making(the investment policy decisions, the capacityutilisation decisions and the pricing policy

decisions) are either left simply un-coordinated orat best co-ordinated only partially and haphazardlythrough a process of fitful trials and errors."1


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Case of our Five Year Planning and Indian Economy

(i) A high rate of growth with a view to improvement instandard of living;

(ii) Economic self-reliance;

(iii) Social justice and;

(iv) Modernization of the economy;

(v) Economic stability;


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i) Fiscal Discipline: While fiscal stabilization is not just an essential

precondition for the success of economic reforms, in India achieving it wasthe urgent priority, which resulted in initiation of the reform process.

ii) Industrial and foreign investment and trade policy: Industrial and trade

policies of India were witness to the most radical changes brought about by

the reform process by way of dismantling of most central government

controls existing in the economy.

iii) Agriculture reforms: The sector, however, benefited from the policy

change incorporated in the industrial and trade policy by way of

favourable prices of agricultural products and spurt in the level of

agricultural exports in the economy.

iv) Infrastructure development: A proper and developed infrastructure iscrucial for overall economic development. During the pre reform period

basic services like electric power, road and rail connectivity,

telecommunication, air transport and ports were provided by the public

sector monopolies. PPP MODEL

PLANNING AND REFORMS POST 1991


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Social sector development: India significantly lagged behind

emerging and south east Asian economies with respect to the

key social indicators. Development and creation of a firm social

sector infrastructure is essential in improving the welfare of the

poor and increasing their earning capacity. The central

government expenditure on social services and rural

development increased from 7.6 per cent in 1990 91 to 8 per cent

in 2000 01 and 10 per cent in 2004 05.


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WHAT IS CAPITAL FORMATION

Definition of 'Capital Formation :

A term used to describe net capital accumulation duringan accounting period. Capital formation refers to netadditions of capital stock such as equipment, buildings

and other intermediate goods. A nation uses capital stockin combination with labour to provide services and

produce goods; an increase in this capital stock is knownas capital formation.


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NEXT SESSION WOULD BE ON PPP

indian economic planning 3 lecture

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