ii. Development strategy in the sixties;
iii. Development strategy in the seventies and eighties; and
iv. New development strategy.
During the early phase (1951-60) the emphasis was mainly on growth, that is, to raise the level of output in the economy. There were three main aspects such as (i) developing sound base for initiating the long term growth of the economy, (ii) a comparatively high priority to industrialisation, and (iii) emphasis on the development of capital goods. You may recall that at that point of time India was emerging from the imbalances created first by the Second World War and subsequently by the partition of the country.
In such an economic environment the top priority was to: (i) overcome the food shortages, (ii) the development of infrastructure like energy, transport and communication, and (iii) provision of irrigation facilities so that agricultural productions increase.
The Second Five Year Plan was built on a strategy of long term development of the economy. Since the draft of this Plan was prepared by PC. Mahalanobis and Nehru was the Prime Minister of the country this strategy is often called Nehru-Mahalanobis growth strategy which emphasised on industrialisation of the economy, particularly heavy industries.
The rationale for such a strategy was that in an industrially backward economy with low productivity, the agricultural sector could not provide more employment. It was argued that development of the industrial sector is a precondition for development of agricultural and other sectors.
Hence during this phase of planning, capital goods industry like iron and steel, heavy engineering, machine tools and heavy chemical industries were given high priority. Secondly, it was visualised that heavy industries will induce development of small scale industries and growth will ‘trickle down’. In other words, as a result of the growth in heavy industries, growth will percolate below.
This strategy, however, had its limitations as it put more emphasis on capital goods, which resulted in scarcity of essential commodities. The problem became acute in the later years of the Second FYP when there was food scarcity due to bad harvest. Consequently, in the subsequent Plans greater attention was given to agriculture.
As opposed to the emphasis on the role of capital goods, the emphasis was on the role of consumer goods. Moreover, the strategy visualised that the current consumption needs of the people would be adequately met through already available productive capacity and if some shortages arise, the problem would be overcome by introducing ‘state level controls.
However, Government intervention, proved to be inadequate and the country had to import food grains in large quantities. It put pressure on the already difficult ‘balance of payment position of the country. Secondly, this strategy visualised full employment by realising 5% annual increase in national income, which was not translated in terms of actual projects, and expectations did not materialise.
The strategy did not result in ‘trickle down effects’ and there was no reduction in income inequalities. A supporting institutional framework was required to be adopted as a policy measure to redistribute the existing assets. Therefore, land reforms legislation was enacted for the redistribution of surplus land. The success of such institutional measures, however, is a debatable issue.