INDIA'S ECONOMIC DEVELOPMENT STRATEGIES
VICIOUS CYCLE OF POVERTY
India at the time of independence was trapped in a ‘vicious cycle of poverty’ owing to historical factors. The immediate concern therefore was how economic development could be speeded up. The vicious cycle of poverty was a concept which was developed by the economist Ragnar Nurkse. This operates at two levels of the economy --- at the demand side and at the supply side. At the demand side, low income of the people means, they will be having only very limited purchasing power, and so the size of the market would be small. Naturally very few entrepreneurs would want to invest and there would be difficulty in mopping up capital as people’s saving would be low. Any industry which is established would rely more on manpower than machine power and hence productivity would be low. This in turn results in low income for the people. On the supply side, low income of the people would mean that people’s savings would be low and naturally there would be very little capital for investment. Without capital or machinery, productivity is bound to be low and this would result in low income of people.
The reason why Indian economy was trapped in the cycle was due to the absence of growth during colonial rule. The import of machine-made goods had displaced traditional industries and this adversely affected the economic life. The problem was further compounded by the fact that no new enterprises came into being, resulting in depressed or non-existent economic growth.
The result of this was that, industrial development was skewed. There was no scope for medium size factories as big business houses and foreign firms dominated the scene. However the vast majority of the people were employed in small factories and household units thereby necessitating a rapid development program for the growth of the economy.
MODELS OF ECONOMIC DEVELOPMENT
To achieve rapid economic growth different types of development strategies were formulated, each being different on the basis its principal focus of concern. Some of the most noteworthy of them are as follows:
- NEHRU-MAHALANOBIS MODEL
This was a model which was conceived by Jawaharlal Nehru, the first Prime Minister of India, and Prof. P.C.Mahalanobis a renowned Indian economist and statistician. This model borrowed heavily from the Soviet plan and placed emphasis on the development of heavy industries. He silenced the critics of this model with the following argument: “there are some who argue that we must not go for heavy industry but for lighter ones. Of course, we have to have light industries but it is not possible to industrialize the nation rapidly without concentrating on the basic industries which produce industrial machines which are utilized in industrial development”.
- GANDHIAN MODEL OF GROWTH
In this model emphasis was on scientific development of agriculture and rapid growth of cottage and village industries. This was intended to raise the standard of living of the vast majority of Indians who live in rural areas.
- LPG Model (LIBERALISATION, PRIVATISATION AND GLOBALIZATION)
This was the model which was adopted following the inadequacies of the Nehru Mahalanobis model of development. It was introduced by the present Prime Minister, Dr.Manmohan Singh in 1991, while he was Finance Minister. The main emphasis was on lesser involvement of state in economic activities and encouraging foreign direct investment in industries, which are export oriented. But the main objections to this by some, was that it bypasses, agriculture and agro based industries and it was pro-big business. It was feared that big transnational companies, would smother small scale industries and focus on capital intensive development with low employment potential. There was also the looming threat of greater export being offset by rising imports.
- PURA (Providing Urban amenities in Rural Areas)
This model can be viewed as a Neo-Gandhian approach to development, which is intended to uplift those living below the poverty line. By initiating integrated action in key areas, it was expected to trigger all round development in the economy. These key areas were:
a. Agriculture and food processing.
b. Reliable and quality electric power
c. Education and health for all
d. Expansion of information and communication technology to rural areas.
e. Development of strategic sectors like nuclear, space and defense technology.
As the objective of development was economic growth tempered by social justice, the Indian experiment was intended to usher in a socialistic pattern of society.