Modern Times
THE INDIAN ECONOMY
THE NEHRU-MAHALANOBIS STRATEGY Mahalanobis was deeply influenced by the Soviet experience (Karmakar, 2012), Indianizing A G Feldman’s 1928 paper into an inward-looking economic strategy for the Second Five-Year Plan. [In the Feldman model, which was behind the Stalinist model, the output of wage goods and of agricultural commodities was kept constant. This pattern emphasized the network of building heavy industry for erstwhile USSR. This appealed to Jawaharlal Nehru because by modernisation of the Indian economy, Nehru meant industrialization (Karmakar, 2012).] First appearing as essays, the strategy was formally proclaimed in the Industrial Policy Resolution of 1956. It continued to serve as a planning guideline up to the Fifth (Five-year) Plan, which was terminated in 1978 by the Janata government.
EXPLANATION National income and investment were the variables in Mahalanobis’ single model. He then developed a two-sector model (1953) where the entire net output of the economy was to be produced in the capital goods sector(indicating heavy industrial equipment and machinery) and the consumer goods sector. He further gave the ratio in which investments were to be made – one-third of the total investment in the capital goods sector. The rationale behind this allotment is that a higher rate of investment on capital goods in the short run would make available a smaller volume of output for consumption in the short-term, but in the long run, would lead to a higher growth rate of consumption. (Kolawole, 2013; Mitra, 1957)
The model was then further expanded to four sectors – (1) Capital goods, (2) Consumer
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Gautam Kabir Prabhash Protyasha Radhika Sarth