The document discusses the different models of economic growth pursued in India since independence. It begins by describing the Nehru-Mahalanobis model which emphasized rapid development of heavy industry to create an industrial base and self-reliance. This was later supplemented by the Gandhian model focusing on agriculture and small industries for employment. Finally, the Rao-Manmohan model introduced in 1991 focused on liberalization, privatization and globalization.

1. PRESENTED BY :
Aman sharma
Dept. of Business Administration

2.  Indian National Congress had committed that after the
attainment of independence, the country would work on a
planned model of development.
 With this, the Government of India set up the Planning
Commission in 1950 –
 to assess the human and material resources of the country;
 to formulate a plan for their balanced and effective utilization.
 The main goal of planning was to initiate the process of
Industrialization and development which was non existent due
to an alien government.
 The national government was committed to raising the level of
living of the Indian people by pursuing the task of development.
 This task was not possible in short time and needed continuous
and sustained efforts over several plans in long term.
 So to achieve this the concept of five year planning was done.

3. (i)To increase production to the maximum
possible extent so as to achieve higher level of
national and per capita income;
(ii) To achieve full employment;
(iii) To reduce inequalities of income and wealth;
(iv) To establish a socialist based on equality and
socialist justice and absence of exploitation.

4.  “The State shall, in particular, direct its policy
towards securing –
 a) that citizens, men and women equally, have
the right to an adequate means of livelihood;
 b) that the ownership and control of the
resources of the community are so distributed as
best so sub serve the common good;
 c) that the operation of the economic system
does not result in the concentration of wealth
and means of production to the common
detriment.”

5.  The First Five Year Plan stated the long-term
economic goals of planning in the following words :
 “Maximum production and full employment, the
attainment of economic equality or social justice
which constitute the accepted objectives of planning
under present day conditions are not really so many
different ideas but a series of related aims which the
country must work for. None of these objectives can
be pursued to the exclusion of others, a plan of
development must place balanced emphasis on all
of them”: Planning Commission, The First Five Year
Plan, p. 28.

6.  A Complete transformation to socialism in
which all the means of production will be
owned by the state (Society model).
 Total freedom to private enterprise to
undertake the task of national development.
 Mixed Economy Framework – A marriage
between Capitalist and Socialist model.
 Co-existence of private and public sector.

7.  The distinguishing feature of the Indian
mixed economy model was that it
 Emphasized that the private enterprise should
reconcile the element of self-interest with
social interest;
 In case, it fails to do so, the government
would be left with no option but to take over
the control of such sectors of the economy.
 In such areas where either the private
enterprise fails to subordinate its self-
interest, the government would deliberately
extend the area o the public sector.

8.  Profit maximization may not be maximizing social welfare.
For instance, private sector was not willing to invest in
economic infrastructure such as multipurpose hydro-electro
projects, irrigation, roads and communications.
 Similarly, private sector may not provide adequate
investment in education and health facilities so that access
to education and health facilities becomes available to the
poor and deprived sections of the society.
 The state, therefore, decided to undertake the development
of the economic infrastructure - energy, irrigation,
transport and communication – in the public sector. It also
decided to provide social infrastructure in the form of
education and health so that the poor are enabled to
acquire these facilities either free or at a very low and
affordable cost.
 The network of schools colleges, technical training centres,
primary health centres, dispensaries, hospitals etc. had to
be planned in the public sector.

9.  “Securing rapid economic and growth and
expansion of employment, reduction of
disparities in income and wealth, prevention
of concentration of economic power and
creation of values and attitudes of a free and
equal society have been among the objectives
of all plans.”

10.  Since all the objectives cannot be achieved in one
plan, so every plan indicate the priority of the
objectives and specific strategy to achieve that.
Strategy in the First Five Year Plan(1951-56)
 The First Five Year Plan (1951-56) was faced with
three major problems :
 (i) Influx of refugees from Pakistan and their
rehabilitation;
 (ii) Severe shortage of food as a result of the
partition of the country and a major part of irrigated
areas going over to Pakistan; and
 (iii) mounting inflation due to the prevalence of
shortages in economy

11.  The strategy of the First Five Year Plan was to
achieve food self-sufficiency in the shortest possible
time and to control inflation;
 So it focused rapid extension of irrigation so that the
output of food grains and agricultural raw materials
like cotton and jute improves;
 This strategy helped to boost agricultural
production, especially of food grains and, thereby,
control inflation.
 The First Plan, in its strategy, accorded the highest
priority to agriculture.
 The First Plan rightly mentioned : “We are convinced
that without substantial increase in the production
of food and raw materials needed for industry it
would be impossible to sustain a higher tempo of
industrial development.”

12.  The major aim of the strategy of the First Plan
was to rehabilitate the economy ruined by war
and partition.
 The plan did help to remove shortages that
existed in the economy.
 By the end of the Plan, food grain imports
became negligible.
 The general price level declined by 13 per cent,
food prices also fell.
 Consequently the economy was stabilized and
in this atmosphere of confidence generated by
success of the First Plan, it was possible to
move to a programme of rapid Industrialization.

13.  The basic element of the strategy of the Second Plan
was to give a “big push” to the economy to build an
industrial base in terms of setting and rapid
expansion of basic and heavy.
 The Second Plan stated : “Investment in basic
industries creates demands for consumer goods,
but it does not enlarge the supply of consumer
goods in the short run; nor does it directly absorb
any large quantities of labour. A balanced pattern of
Industrialization, therefore, requires a well-
organized effort to utilize labour for increasing the
supplies of much-needed consumer goods in a
manner which economizes the use of capital.”
(Planning Commission).

14.  Third Plan emphasized that agriculture
should be expanded as far as possible and
rural economy may be diversified so as to
reduce the pressure of population on
agriculture.
 While giving priority to agriculture, it also laid
equal stress on the development of heavy and
basic industries such as steel, fuel and power,
machine building and chemicals vitally
needed for rapid economic development.

15.  Three major factors seriously jolted the
implementation of the Third Plan.
 They were : (i) The Chinese invasion of India
in 11962,
 (ii) The armed conflict with Pakistan in 1965,
and
 (iii) Exceptionally bad monsoons in 1965-66
leading to serious draught which reduced
food grains production by 20% in a single
year.

16.  The Fourth Plan had two objectives, viz.,
“Growth with Stability” and “Progressive
Achievement of Self-Reliance”.
 To achieve this efforts were to be made to
stabilized prices of food grains and the price
level in general. Use of high quality and
adequate amount fertilizers in agriculture.
 For achieving self-suff. Import of food-
grains and foreign aid was reduced
drastically.

17.  Two major objectives of the Fifth Plan were : “Removal of
poverty and attainment of self-reliance.”
 For this purpose, the main elements of the strategy were
:
 (i) 5.5% growth rate of GDP.;
 (ii) A national programme of Minimum Needs covering
elementary education, drinking water, medical care in
rural areas, nutrition, home sites for landless labour,
rural roads, rural electrification and slum improvement.
 (iii) Emphasis on agriculture, key and basic industries
and industries producing goods for mass consumption.
 (iv) An adequate public procurement and distribution
system for assured supply of essential consumption
goods, at least to poorer sections, at reasonably stable
prices.
 (v) Vigorous export promotion and import substitution.
 (vi) Rigorous restraint on inessential consumption.

18. a) Nehru-Mahalanobis Model of Growth
b) Gandhian Model of Growth
c) Rao-Manmohan Model of Growth

19.  This model Emphasized on the rapid
development of heavy industry with the aim
of creating an industrial base of the economy
as also to make it more self-reliant in capital-
goods sector.
 Self-reliant in capital goods and no import of
capital goods/producer goods.

20.  Heavy Industry in India comprises of the heavy
engineering industry, machine tool industry,
heavy electrical industry, industrial machinery
and auto-industry.
 These industries provides goods and services for
almost all sectors of the economy, including
power, rail and road transport.
 The machine building industry caters the
requirements of equipment for basic industries
such as steel, non-ferrous metals, fertilizers,
refineries, petrochemicals, shipping, paper,
cement, sugar, etc.

21.  1. Due to British deliberate colonial policy heavy
industry not developed and primary reliance on
agriculture sector.
 2. Development of large heavy industry which
would absorb large labour force and minimise
the excessive dependence on agriculture for
livelihood.
 3. labour productivity is higher in industrial than
agriculture sector. Which would enable higher per
capital and national income.
 4. Rapid industrialization was essential for the
development of other sectors.

22.  It assumed that foreign aid can be taken but
the major financing would be done through
domestic savings.
 It did not underestimated the role of small
industries for employment as the heavy
industries are basically capital intensive.
 It did not undermined the role of agriculture
as without progress and development in
agriculture sector industrial progress cannot
be achieved.

23.  Vast expansion of the capital goods through
heavy industry model.
 There was a vast expansion in economic
infrastructure in the form of irrigation, energy,
transport and communications
 There was an expansion of the social
infrastructure in the form of health and
education facilities – schools, colleges,
universities, primary health centres,
dispensaries and hospitals.
 Rise in savings and investment rate

24.  Less allocation of fund for agriculture.
 Neglect of small scale industries (labour
intensive) – consumer goods.
 Inefficiency in public sector
 The value of Import of capital goods

25.  Janata Party Draft Five Year Plan (1978-83)
adopted Gandhian model assuming the
failure of earlier Nehru model – to provide
minimum living to majority people.
 The model emphasized the rapid
development of agriculture and small
industries;
 Village and small industries were emphasized
from the point of view of production as well
as employment.

26.  Employment-oriented planning to replace
production-oriented planning;
 Emphasis on development of agriculture as a
means of enlarging employment;
 Emphasis on small industries as against large
industries;
 It emphasized employment as the principal
means of providing national minimum and
removal of poverty.

27.  Rao-Man Mohan Model of Development was
introduced in 1991.
 New Economic Policy –
 A) Liberalization
 B) Privatization
 C) Globalisation