Page 39 - DECO303_INDIAN_ECONOMY_ENGLISH

Indian Economy

Notes (c) Rapid industrialisation was a critical condition for the development of not only agriculture
but also for all other sectors in the nation.

Example: You must observe with the expansion of industries and the shifting of labour
from rural to urban areas, the demand for food grains and agricultural raw materials (for
instance jute, cotton, oil seeds, etc.) would increase.
Simultaneously, increased production and supply of fertilisers, agricultural machinery,
pesticides, etc. would assist in the expansion of agricultural production. With rapid
industrialisation, and with rapid expansion of markets, there would be expansion in
transportation, in trade and commerce, in banking and finance, etc.
(d) Productivity of labour is much higher in manufacturing as compared to agriculture. The
growth rates are much higher in industry than in agriculture. Rapid increase in national
and per capita income would be possible only through rapid industrialisation.
(e) The income elasticity of demand for industrial goods was much higher and export
opportunities for manufactured goods were also high.
You must note that it was for all these reasons that industrialisation was highlighted by the
Indian planners.

Heavy Industry vs. Light Industry

An important aspect of the investment strategy for you to note formulated by Professor
Mahalanobis was the focus on heavy industries manufacturing basic machines and basic metals.
Put differently, an increasing proportion of investment should be on machine-building industries.
The Planning Commission assisted this strategy for two reasons:
(a) Investment in the heavy industry assists the Indian economy to construct up a larger
volume of capital stock and at a faster rate.
(b) Heavy industries assist to lay the foundation for a strong and self-reliant economy, partially
through rapid expansion of all the sectors of the economy and partly by eradicating the
dependence of the nation on imports of significant machinery and equipment.
It is essential to identify that the Planning Commission rejected the optional strategy of focussing
light industries producing consumption goods. True, this optional approach would have the
advantage of assisting the Indian economy to manufacture a larger volume of consumption
goods and this would have assisted the people to have a higher standard of living in the short
period and also combat inflationary pressures in the nation. However, this could be attained by
neglecting the accumulation of capital stock in the nation. The Planning Commission denied the
short period availability of consumption goods in favour of production of capital goods which,
in fact, would help, after a certain critical stage, to manufacture a larger volume of consumption
goods. The capital goods approach based on the Russian experience, projected people to sacrifice
in the short period in support of a high level of living in the long period. Additionally, this
approach would enable the nation to have a large volume of the capital goods in the short
period and a large volume of both capital and consumption goods in the long period.

Development Strategy and Employment Objective

The Mahalanobis strategy of planning was substantial to attain the goals of self-sustained long-
term growth through investment in the heavy sector. For rapid industrialisation and
diversification of the economy, the Mahalanobis strategy is regarded as the development of
basic industries and industries which make machines to make machines needed for further

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