Page 38 - DECO303_INDIAN_ECONOMY_ENGLISH

Unit 3: Planning and Economic Development in the Era of Globalisation

expansion of employment, reduction of disparities in income and wealth, prevention of Notes
concentration of economic power and creation of values and attitudes of a free and equal society.”
In order to achieve these goals, the planners developed a strategy of planned economic
development.

3.2.1 Mahalanobis Model of Growth

You must understand that it was only with the Second Plan that there was a clear expression of
a strategy of development by Indian planners. Prof. P.C. Mahalanobis, who was the real architect
of the Second Plan, was accountable for presenting a clear strategy of development based on the
Russian experience. This strategy emphasised investment in heavy industry to attain
industrialisation which was supposed to be the basic condition for rapid economic development.
For Jawaharlal Nehru, the first Prime Minister of India, the development of heavy industry was
identical with industrialisation. He stated:
“If we are to industrialise, it is of primary importance that we must have the heavy industries which build
machines.”
Again, there are some who argue that we must not go in for heavy industry but for lighter ones.
Of course, you must analyse that we have to have light industries also but it is not possible to
industrialise the nation rapidly without concentrating on the basic industries which produce
industrial machines which are utilised in industrial development. Nehru was, thus, extremely
forthright in pointing out that industrialisation meant development of heavy industries. The
Plan frame of the Second Plan specified this, in unequivocal terms, as follows:
“In the long run, the rate of industrialisation and the growth of the national economy would depend upon
the increasing production of coal, electricity, iron and steel, heavy machinery, heavy chemicals and heavy
industries generally—which would increase the capacity for capital formation. One important aim is to make
India independent as quickly as possible of foreign imports of producer goods so that the accumulation of
capital would not be hampered by difficulties in securing supplies of essential producer goods from other
countries. The heavy industry must, therefore, be expanded with all possible speed.”
Therefore, the core of the strategy accepted by Indian planners for the Second Plan and with
minor alteration for the consequent three Plans (i.e. up to the Fifth Plan)—was rapid
industrialisation via lumpy investment on heavy, basic and machine-building industries.

Need for Rapid Industrialisation

It is important for you to understand that the planners validated their strategy of rapid economic
development through rapid industrialisation.

(a) At the time of Independence, India was considerably agrarian, though the nation with its
vast natural and human resources was preferably suited for industries. The planners felt
that divergence of the use of resources would be in the interest of the nation from the
perspective of employment, production and defence. Resources should, thus, be applied
more towards the development of industry instead to agriculture.

(b) You may already be aware that Indian agriculture was already undergoing from heavy
population pressure on land and productivity of labour on land was quite low–it was even
believed that marginal productivity of labour on land might be zero and even be negative.
One technique of decreasing this burden of population on land and to raise agricultural
productivity was to decrease the percentage of people living on land, and to shift the
surplus population to industries. The setting up and expansion of the industrial sector was
therefore, an essential condition for raising the national product in general and for
agricultural development in specific.

LOVELY PROFESSIONAL UNIVERSITY 33