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Updated on September 8, 2012


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.


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:


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”.


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.


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.


Submit a Comment

  • ram_m profile imageAUTHOR


    6 years ago from India

    All questions you have raised is pertinent and very real. PURA is a Neo-Gandhian model,but it is not getting the kind of support it needs right now. Corruption is indeed an issue, and I think in a democracy that is dismantling its controls and handing it over to the private sector, this would continue until tighter controls are in place. Fortunately the media and the people are quite aware of all this.

    Yes,one of India's major resource is manpower indeed. During the seventies, eighties and nineties, people went abroad to work particularly to Gulf countries. Skilled professionals gravitated to countries like US, Canada and Australia. UK has lost its glitter. But by the first decade of 21st century some of the skilled professionals (like IT etc) are coming back owing to recession in the West. With a vast rural market still untapped, models like PURA could change things. As you rightly said, it is the next step. Thank you for your insightful and thought provoking comments

  • A.A. Zavala profile image

    Augustine A Zavala 

    6 years ago from Texas

    Such a fascinating treatise. I think the PURA model is being used to some effectiveness in India today.

    How effective is it in lifting the general population out of poverty though? I believe the Gandhian model should have resulted in lifting more people out of poverty, allwoing people to generate enough income to stimulate local economies, and strengthen India as a whole. I know PURA is the next step, but has this occurred?

    I believe the countries major resource is manpower. Do Indians travel abroad for work like the Philippinos and Mexicans? Do they send a lot of income back to India?

    How much has corruption stunted India's growth? I know some of the stories are sensationalized, but is it indicative of a bigger issue in your country? I have so many questions. Thank you for sharing this hub.

  • ram_m profile imageAUTHOR


    6 years ago from India

    Very true William. But I think the reason is that media is interested in commenting on sensational news like disasters or terror attacks and not about developmental issues. Added to this if the culture is different, the mystery deepens. So whatever knowledge one may have about a country like India would naturally be scanty.Thank you for commenting and sharing your ideas.

  • William Young profile image

    William Young 

    6 years ago from Eaglle Grove, Iowa

    Excellent article! I think to this day, India remains a very mysterious country with a history of social and economic growth that we haven't fully begun to understand yet.


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