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Unit 2: Development Strategies in India: Planning in India: Objectives, Strategies and Evaluation

public and in the absence of matching of supply of consumer goods will result in inflationary press. Notes
The Nehru-Mahalanobis model, gave and encouragement to cottage and small indudtries producing
consumer goods. It was asserted that input-output ratio would be low in small-scale cottage industries
and the gestation period was very short and obviously, the small sector was ideal suited to increase
the supply of consumer go Besides, Professor Mahalanobis argued that the co-production in the
cottage and small sector need not higher than that of the factory sector since the sector would also be
making use of modern machines and electricity.
Nehru also gave due importance to small sector of industries and agriculture which were the sources
consumer goods. In his own words, “The test; country’s advance in industrialisation is heavy
industry—not the small industries that may be put. That does not mean that small industries should
ignored. They are highly important in themselves production and for employment.” The framework
the Second Five Year Plan stated : “The strategy requires all-out efforts for the maximum utilisation
of capacity in existing industries and for the development of additional production in the capital
light small sector of industries.”
Place of Agriculture in the development strategy : On agriculture, Nehru stated : “We shall that this
industrial progress cannot be achieved without agricultural advance and progress... Every knows
that unless we are self-sufficent in agriculture we cannot have the wherewithal to advance industries.
If we have to import food, then we doomed so far as progress is concerned. We can import both food
and machinery.”
It is thus clear that the Mahalanobis strategy self-sustained growth based on heavy industries not ignore
or neglect the growth of small and cottage industries for increasing the supply of consumer good.
In spite of many favourable factors for increasing the supply of consumer goods, Professor Mahalanobis
nobis did anticipate shortage in supply of consumer goods and possible rising prices and costs
endangering the planning process. In his strategy of development, therefore, he provided for fiscal
and physical controls including rationing to keep the prices in check.
Role of the Public Sector : The Mahalanobis investment strategy assigned a dominant role to the
public sector. As investment in the heavy sector was very high and as the gestation period was too
long and that too with low profitability, the Government felt that heavy industries should be, by and
large, in the public sector. Except in isolated cases, the private sector too was not keen on providing
infrastructural facilities. Besides, the control of the public sector would vest the control of the
commanding heights with the Government and this would help the development of a socialist
economy. Above all, the public sector would prevent the rise of monopoly ownership and exploitation
which are inherent in the private sector. It was for these reasons that from the Second Plan onwards,
the Government went in a big way for the expansion of the public sector.
The role of the private sector : While giving direct responsibility to the public sector for infrastructure
investment and the development of heavy industry, the development strategy expected the private
sector to develop and expand its activities in a large area of economic activity. In fact, the private
sector was given an important place in the mixed economy of India. But the activities of the private
sector were seen to be essentially complementary to a rapidly growing public sector. The private
sector was also expected to function in harmony with the overall aims and policies of economic
planning. The planners anticipated a growing trend towards concentration of economic power in the
private sector and to counter this trend, the planners provided larger opportunities for new entrants
for medium and small-sized units and also for extensive use of controls and regulations and also use
of appropriate fiscal measures.
Role of foreign trade and foreign aid : Initially, the Planning Commission relied considerably on
foreign aid to meet India’s requirements of capital goods, as our foreign exchange earnings were
inadequate. At the same time, the planners had to provide for foreign aid, since the rate of domestic
savings was inadequate to match the planned higher rate of investment. They also emphasised that
the creation of export surplus and export promotion should go hand in hand with rapid
industrialisation. However, this aspect of the strategy was forgotten in practice even during the first
decade of planning. The Third Plan clearly brought out this point : “One of the main drawbacks in
the past has been that the programme for exports has not been regarded as an integral part of the
country’s development effort.”

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