Block 4

UNIT 13 DEVELOPMENT: GOALS
AND ISSUES
Structure
13. 0 Objectives
13.1 Introduction
13.2 Meaning of Development: Various Related Concepts Distinguished
13.2.1 Economic Growth versus Economic Development

13.2.2 Economic Development A Wider Concept
13.3 Goals of Indian Development: Objectives of Planning in India
13.3.1 Relation among Goal Setting
13.4 Development Goals and Time-Horizon
13.4.1 Development Target, Time-Horizone and Required Resources
13.5 Factors Determining Goal Setting
13. 5.1 Historical Factors and Goal Setting

13. 5.2 Socio-economic Problems and Goal Setting
13. 5.3 Political Process and Goal Setting
13.6 Let Us Sum Up
13.7 Key Words
13.8 Some Useful Books
13.9 Answers and/or Hints to Check Your Progress/ Exercises
13.0 OBJECTIVES
By the time you complete the study of this unit you should be able to do the following:
explain the meaning of the term economic development;

distinguish between "economic development "and "economic growth",
pinpoint the objectives of planned economic development in India;
analyse the nature of relationship among various objectives which is complementary as well as
conflicting,
indicate the necessity of achieving the objectives within a given time horizon; and
describe how the development goals are decided and set and who sets them.
13.1 INTRODUCTION
In an earlier unit you learnt about various types of resources a country has. It is on these
natural, capital, energy and human resources that the development of the course economy
depends. Here first we must ask: What is development? This is of course a difficult
question to answer because there is no particular definition of development acceptable to
everybody. Some say development means growth; some others say it means progress;
still others would like to call it modernization Development does involve growth,
progress and modernization but these terms are too broad and may mean different things
to different people.
13.2 MEANING OF DEVELOPMENT:

VARIOUS RELATED CONCEPTS
DISTINGUISHED
Development is not just a descriptive word. It must stand for something that we consider
worthwhile. In order to get some idea let us discuss this proposition in some detail. First,
development defined is as growth and progress. You may have observed a sapling
growing into a tree when it begins to give fruits or a she-caff growing into a heifer and
then into a cow giving milk. Both are examples of growth with such outcome as you and
I desire an everybody else desires. It is this sort of desirable growth that can be called
development. Let us follow on these two examples further. As you raise more and more
cows, output of milk grows. It is this type of output growth that is defined as
development. If, however, the poor mother and her child are priced out of the milk
market, even this kind of growth becomes ambiguous from the development point of
view.
Another example can be given from which you will see that there may be growth, but no
development. Think of yourself as a development planner who has a certain area of land
and other resources Suppose you have two options before you: raising of rabbits for meat
or raising of cows for milk. Which of the two options will you choose? You know that
rabbits breed faster than cows. If you firmly believe that just growth is development and
faster growth means better development, you will apparently choose the first option. It
surely will give you higher growth rate of output (rabbit meat) compared to the output
(milk) growth possible from the second option. But if very few people in the society are
prepared to eat rabbit meat, your achievement of high growth will be of little use. Since
for most people in the society the outcome of this growth is undesirable, it cannot
properly be called development.
13.2.1 Economic Growth versus Economic

Development
Thus, development is that type of growth which has desirable outcome, which is
consistent with the preferences of the people, and which satisfies human wants. This type
of growth also means progress. Indeed it means material progress. In other words,
increasing availability of goods and services needed in the society may indicate
development.
This increasing availability of goods and services must, at the same lime, be seen in
relation to the population growth. If the total population is growing faster than the total
availability of goods and services in the society, you can easily see that availability per
capita will be declining. When such a situation holds, growth or development is
retrogressive. In the second possible situation when the total availability of goods and
services grows at the same rate at which the population is growing, development is
stagnant. And finally, when total availability of goods and services grows faster than the
population we have the case of progressive development.
The availability of goods and services in a society is measured by its national income. So
development as growth is reckoned as growth of income and of per capita income of a
country. Many people, however, argue that this is purely a quantitative and summary way
of measuring development. Instead, development should be judged by the improvement it
makes in the quality of life of the people. Quality of life depends on many things health,
hygiene, nutrition, life-expectancy, education, housing and general living conditions. It is
indeed difficult to measure quality of life. This difficulty apart, it is the improvement in
quality of life that indicates progress rather than the growth of per capita income.
Let us now try to understand development viewed as modernisation. Sociologists use the
word modern as opposed to traditional. Traditional means old, that may have come down
from ancient times. Caste in India, for instance, is an ancient traditional institution.
Similarly, simple bullock drawn wooden plough is a very ancient traditional device for
land cultivation in India. Modernisation means giving up the traditional and adopting the
new and newer ways of methods, techniques, devices and institutions. In short,
modernisation means increasing application of science and technology to the production
of goods and services in the management of the economy. However, modernisation
does not mean just imitating advanced western countries. Even science and technology,
particularly the latter, have to be adapted to the natural and human environment of a
country.
13.2.2 Economic Development: A Wider Concept

Modernisation as defined above promotes growth and development. It promotes growth
by improving the efficiency of production processes. How does it improve efficiency? In
two possible ways. First, new technologies of production incorporating scientific
advances make it possible to produce higher level of output from the same level of
inputs. Second, where new technologies require higher levels of inputs they make it
possible to produce far higher levels of output compared to the old technologies in either
case, you can see, the inputs per unit of output would be lower compared to the old
production process. This is what we mean by improvement in the efficiency of
production. This saving in inputs, in turn helps in achieving higher growth of output of
goods and services in the economy. We may thus conclude by saying that modernisation
is a means of promoting growth of desired goods and services satisfying human wants
and needs. This is indeed what we mean by development.
Development as growth and carried beyond a point thoughtlessly, or by way of imitation

of. Western experience only, begins to produce adverse consequences for human health
and well being. All over the world, and particularly in the developed countries of the
West, it has caused ecological degradation and environmental pollution. You may have
heard about acid rains in Germany destroying forests, flora and fauna. These are
industrial acidic pollutants in the atmosphere which come down with the rains. In India,
far away from the Western levels of development there has been considerable ecological
degradation due to massive deforestation. Due to excessive use of nitrogen fertilizers in
some parts of Central Punjab, there has occurred nitrate pollution of underground water
to a level where it has become unfit for human and animal consumption. Examples of
such adverse consequences of development are numerous and you could try to give a few
yourself.
Such adverse consequences have led ecologists, naturalists, scientists and planners to
point to "limits to growth" and to plead for what is called 'Sustainable Development".
You will agree with me that development viewed as growth and modernisation ultimately
leads to exploitation of nature by man. When this exploitation surpasses the unbearable
limit, nature gives way and begins to affect development itself adversely. If you do too
much of logging, you will be left with little forest for future logging. Your growth of log
production will decline. Besides, deforestation will cause soil erosion, flooding and falI
in the intensity of rainfall, all affecting agricultural production adversely. Similarly, if
you have mined all your oil reserve, there will be nothing left for supporting development
in future. It is this sort of phenomena which lies behind the idea of sustainable
development. It is a process of development which is not destructive of the life cycle of
natural resources Thus, sustainable development is one which conserves and preserves
natural ecology and environment.
Check Your Progress

Note:
i) Use the space given below for your answer.
ii) Check your answer with that given at the end of the unit.
Circle the correct answer
1) Economic Growth is:

a) the same as economic development
b) the enhancement of a nation's capacity to produce new kinds of output
c) the expansion of a nation's capacity to produce goods and services
d) maintenance of a standard of living
e) characterised by all of the above.
2) Which of the following does not characterise economic development?

a) a high level of saving
b) an inequitable distribution of income
c) a high per capita income
d) a large middle class.
e) a low rate of population growth.
3) Economic growth is desirable because:

a) it maintains the absolute standard of living.
b) it improves the absolute standard of living for some people but not
necessarily all.
c) it improves the absolute standard of living for everyone.
d) it causes lower rates of saving and hence higher economic growth over
time.
e) it causes lower rates of investment and hence higher economic growth
over time.
4) Which of the following statements about economic development is true?

a) Economic development is the development of new technologies
b) Economic development means maintaining the existing level of wealth
and income in a country
5) From the following list select factors which are among the keys to economic
development.
ecology, population growth a decline in profits, high wages for workers, high
levels of savings and investment, sufficient quantity and quality of labour.
6) Indicate whether the following are true (T) or false (F):

a) An economy can have economic development without economic growth,
but not vice
versa. ( )
b) Slow rates of economic growth allow poverty to increase and continue. (
)
c) income and population growth are inversely related. ( )
d) One of the biggest obstacles to economic development is low levels of
investment.
e) Economic development leads to modernisation in the economy.
7) Write five lines on what you know about economic development.
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13.3 GOALS OF INDIAN

DEVELOPMENT: OBJECTIVES OF
PLANNING IN INDIA
Let us now see what the development goals of a developing country are. Following
independence, India has opted for planning its development. The successive Five Year
Plans starting from the First Plan in 1951 are, in fact, the means through which this
development has so far been carried OUT. And it is in these plans in which you will find
the development goals of India. Briefly stated, these are:
1) Growth of national income;
2) Reduction of income inequality among different classes and regions;
3) Reduction of inequality in the private ownership of the means of production,

including land, so as to prevent concentration of wealth and assets in fewer
hands;
4) Increase in employment,
5) Removal of poverty;
6) Provision of basic minimum needs;
7) Ecology conservation and environment protection;
8) self-reliance of the national economy.
These goals, you will see, recur in every Five Year Plan except the goals No. 5 and 6
which were introduced with particular emphasis in the Fifth Plan (1974-79) and goal No
7, which was introduced in the Seventh Plan (1985-90). All these goals or objectives fall
into four broad categories: (a) growth, (b) distribution or social justice, (c) conservation
protection of natural resources and environment, and (d) self-reliance.
In the preceding section, we discussed in detail development viewed as growth. But

growth by itself does not ensure a fair distribution of benefits of development. On the
other hand, building a just and equitable social order requires that basic minimum needs
of every citizen are fulfilled and benefits of development are so distributed as to reduce
inequality of incomes and assets. Therefore, "growth with social justice" is the dual goal
of Indian development programme. In the list of goals given above goal Nos. 2 to 6 fall
within the broad category of social justice. Environment protection and conservation of
natural resources, as discussed earlier, ensures condition for sustainable growth.
Self-reliance of the national economy has been an important goal since the First Five
Year Plan. It means that the country should export more than is required to pay for its
imports so that it is kept free from external debt and dependence. Looking at it from the
import side, self-reliance also means replacing necessary imports specially of capital
goods, machinery etc., by domestic. This is what is called Import substitution. Thus there
is a two-pronged approach to self-reliance: export promotion as well as important-
substitution.
What about the relevance of these objectives for the future'? There is little doubt that
these will remain relevant for the future development also in fact, the less these
objectives have been realised in course of the actual development in the past, the more is
their relevance for the future.
13.3.1 Relation among Goals: Conflicting and

Complementary Goals
Among the various goals of development there may be either a complementary or a
competitive relationship. Take any two goals. There is a complementary relationship
between them, when a development plan makes a positive contribution to one of the
two objectives, and there occurs simultaneously, a positive contribution to the second
objective also. On the other hand, between any two goals, or objectives, there exists a
competitive relationship when a positive contribution to one objective leads to a
negative or no contribution to the other at the margin in other words, it means that
development may help achieve one objective a little more marginally, sometimes only
at some sacrifice of the other. again marginally
You can easily see that there exists complementary relationship between employment
generation for the poor and poverty removal. As you give employment to the poor,
income of the poor goes up and their poverty is reduced. Thus, you make positive
contributions to both employment generation and poverty removal simultaneously. In
contrast, there may be conflicting relationship between growth and income distribution
objectives A higher growth of income requires higher rate of savings and investment out
of a given income. But a better distribution of this income invariably means more of it
going to the poor, who have less capacity to save leading to a relatively lower overall rate
of saving, investment and growth of income. On the other hand, a better distribution of
income may lead to higher productivity of labour, less of social tensions which may lead
to stabler and higher growth in this case you see that, income distribution may or may not
be in conflict with the objective of growth of income. Depending on circumstances, you
can have a little more of one, only by having a little less of the other. There could
similarly be a conflict between growth and conservation objectives. As for the objectives
of social justice (Goal Nos. 1 to 6 in section 11) these may not always be complementary
such that while fulfilling one goal others are automatically fulfilled. Let us illustrate
this point by considering two such goals: poverty Removal and income Distribution.
Suppose A and B represent the poor and not-so-poor strata at society at the beginning of
a development plan. Suppose further that their initial monthly incomes are Rs.50 and
Rs.200 respectively. The poverty line income given to us is Rs. 76 per month per person
at constant prices. Poverty elimination program me under the plan if A's income is
indicated raised to more than Rs.76 per month. He would cross the poverty line and
become a non-poor like B.
Consider now two possible growth patterns of income. First, when income of both A and
B may have grown at the same rate. Second, when A's income may have grown faster
than that of B's. The table below (13.3.1) gives the initial and final positions in respect of
poverty and income distribution under the conditions described above. The final position
I is obtained when incomes of both A and B have risen at the same rate i.e. both doubled
over the plan period. The final positions II and III are obtained when income of A has
risen faster than that of B, the only difference being that while in the former case A's
income has increased four-fold, it has increased six-fold in the latter case.
Table 13.3.1: Showing Relation between Poverty Removal and Income Distribution
Goals.
Description Initial Position Final Positions I II III

1. A's Income 50 100 200 300
2. B's Income 200 400 400 400
3. Poverty Line Income 76 76 76 76
4. Income Disparity 50 300 200 100
(Difference Between
A's and B's Income)
Now let us analyse the results achieved. You can see from the table that in every case A
has crossed the poverty line. The goal of poverty elimination has thus been achieved.
What about the goal of reducing disparity in incomes? Compared to the initial position,
disparity- in absolute terms has increased in final position I and II but reduced in III. Our
conclusion: poverty may get eliminated while disparity in incomes may increase or
decrease depending on the relative growth of incomes of the poor and not-so-poor. Only
when the incomes of the poor grow very much faster (position III) disparity will get
reduced simultaneously with elimination of poverty. Now a question: Is the relationship
between the goals of poverty removal and reduction in income disparity complementary
or conflicting?. Certainly, it is not conflicting, because for reducing a little more of
poverty you do not have to have a little more of income disparity. But they are not fully
complementary either in the sense that if you try to achieve poverty elimination you will
automatically reduce income disparity. On the other hand, if you try to achieve reduction
of income disparity you may be able, at the same time to reduce poverty (position III). It
is however possible to distribute poverty also if, for instance, incomes of A and B were to
remain constant at their initial positions at say Rs. 50 for A and Rs. 100 for B, we could
achieve absolute removal of income disparity by dividing their total income (As. 150)
equally at Rs.75 each. That would push both A and B below the poverty line, though A
would be a little better off. When such a relationship holds between objectives we call
them 'partially complementary
Check Your Progress 2

Note. i) Use the space given below for your answer.
1) What are the four basic objectives of planning in India?
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2) Fill in appropriate word or words in the blanks choosing them from the brackets
given below.
i) Growth by itself ----------------------------------- ensures a fair distribution

of development benefits. (does/does not)
ii) Building a just and equitable social order -----------------------------basic

minimum needs of every citizen fulfilled (requires/does not require)
iii) "Growth with social justice" is the -------------------------------goal of

India's development (single/dual)
iv) The objective of self-reliance------------------------------------- import of

goods and services from broad. (includes/does not include)
3) Indicate which of the following statements are true (T) or false (F):
i) A complementary relationship exists between employment generation

and poverty removal objectives
ii) The less the development objectives have been realised in course of the
actual planning in the past, the more is their relevance for the future.
iii) Self-reliance means replacing all imports by domestic manufacture,
iv) Increase in employment does not fall within the broad category of social
justice
4) Are the objectives of planning in India conflicting? Write your answer in about
100 words.
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13.4 DEVELOPMENT GOALS AND TIME

HORIZON
Development goals are set to be achieved, but achieving them requires time. Even a race
runner requires time to reach his goal. You reach your goal in shorter or longer time
depending upon the energy you can put into your running activity. You may fall short
of the goal if your energy fails you, or something unexpected happens on the way. In a
similar manner, development is a race in time, often with time to stay in time same place,
you have to run very fast.
Look back at the list of Indian development goals have in section II. You will notice that
none of the goals is time bound nor are they given in the form of a fixed or definite
target. In contrast to this in the race runner's case the goal is fixed in the form of a
definite target, let us say 800 meters away to be reached in the shortest possible time.
What can we say about these development goals vis-a-vis time? They are general
statements of what the country desires and as such they have figured in every successive
development plan. More so, to the extent they remain unfulfilled, they will continue to be
the goals of future plans also. But in the form in which the goals are stated in the list,
they have no time dimension.
Like in the race runners case, only when a development goal is set up in a definite fixed
form, time enters into the picture. Take for instance, the objective of growth of national
income. Only when the rate of growth of national income is fixed, say at 5 or 6 per cent
per annum the objective takes a definite time bound form. Similarly, poverty removal is
the general goal. And only when the development planner says that the percentage of
poor people in the country will be reduced from 37 per cent as of 1985 to say I per cent
by 1997, this goal or objective takes on a time bound frame .
13.4.1 Development Target, Time-Horizon and

Required Resources
Achieving a given target over a fixed time-horizon implies that adequate or required
amount of resources will be put in or will be forthcoming towards that end. Resources
are like the energy in the race runner's case which takes him to the target. What will
happen if the adequate amount of resources are not forthcoming? Obviously, the target
will not be achieved over its presumed time-horizon. When a development planner
anticipates such a situation he can do the following. He can scale down the target,
keeping the time-horizon fixed. Alternatively, he can keep the target fixed and lengthier,
the time-horizon. To see it concretely, let us go back to the target of poverty reduction
from 37 to 10 per cent over the time horizon of 12 years between 1985 and 1997. If, for
some reason, the resources available are inadequate for meeting this target the planner
can do two things. He can scale down the target: setting for instance 25 or 20 instead of
10 to which the percentage of population below the poverty line will be brought down by
1997. Alternatively, he can keep the target of such reduction to 10 per cent but extend the
time horizon for achieving it to, say, 2000 A.D.
You thus see that development goals, targets, time-horizon and resources are related to
each other. General development goals, when given a definite, fixed form, become
targets. A target has a time-horizon over which it is sought to be achieved. Depending
upon the availability of resources a target and its time-horizon are finally decided.
13.5 FACTORS DETERMINING GOAL

SETTING
How are the development goals of a country decided and set, and who sets them? Who
has, for instance, decided the list of Indian development goals as given in section 13.37.
Is it the government or the planning commissioner or the electorate of the country?
The process of goal setting is not so simple that a single agency or institution does it.
There are three major factors which govern the development goals of a nation: the
historical circumstances of the time, the socio-economic problems, and the political
processes and institutions of the nation. Let us see how each of these factors plays its
role.
13.5.1 Historical Factors and Goal Setting

You know that, following the Second World War most of the third world countries,
specially in Asia and Africa, attained their political independence from Western colonial
rule. This historical circumstance motivated them to adopt economic self-reliance as a
major goal of their development. Why? Because, they feared that, if they did not pursue
economic self-reliance, their economic dependence on ex-colonial powers may
endanger their political independence again. Jawaharlal Nehru, the architect of Indian
developing planning used to say, "political independence is not complete until India
attained economic independence". Economic self-reliance or independence as a
development goal, thus, arose out of the historical circumstances in which the third
world countries found themselves prior to and after their political independence.
Stagnation of their economies during the colonial rule and the drain of their resources to
imperialist countries again turned them to adopt growth as another major goal, now that
they had control on their own resources.
13.5.2 Socio-economic Problems and Goal Setting

Apart from historical circumstances the development goals of a country are determined
by its specific socio-economic problems. In a country like ours where population and
labour force have been growing at a fast rate, employment generation becomes an
obvious goal of development. Similarly, vast number of people being poor, how can a
third world country overlook poverty removal as a goal of development? But once
poverty and unemployment problems are solved, these will no longer remain desirable
goals of development.
13.5.3 Political Process and Goal Setting

Political processes and institutions are the means through which development goals are
articulated and crystallized and finally adopted as national goals. Political processes and
institutions are not the same in every country. In the socialist countries such as the former
Soviet Union and China, with their single party system of government, goals of
development emerge through debate and discussions in the vast net-work of the party
organs. In a multi-party parliamentary democracy like the process begins with elections
to parliament and state legislatures. Party manifestoes and electioneering debates on
these occasions indicate the development goals each party will like to pursue if voted to
power. The goals of that party which actually gets voted to power then become the goals
of the government, but not yet of the nation. To do so the government asks the planning
commission to prepare a development plan for attaining those goals.
This plan is then presented to and approved by the National Development Council (NDC)
with minor adjustments and alterations. The is comprised of the cabinet ministers of the
central government, the chief ministers of the states and the members of the Planning
Commission. The plan is supposed to reflect national consensus. Finally, when this plan
is adopted by the Parliament, it becomes a national document and the development goals
of the plan become national goals.
You have seen in section 11 the Indian development goals. These do not change every
five years, or from plan to plan. Only the relative importance or priority among goals
varies.

Note:
i) Use the space given below for your answer.
ii) Check your answer with that given at the end of the unit
1) For each item, determine whether the statement is true (T) or false (F).
i) Objectives are set to be achieved but achieving them require time

ii) None of the objectives of planning in India is time bound nor is it given
in the form of
a fixed or definite target.
iii) Indian planning objectives are general statements of what the country
desires and as
such they have figured in every successive plan.
iv) To the extent the objectives remain unfulfilled they will not continue to
be the goals
of future plan also.
2) Complete the following. choosing the correct word/ words given in brackets:
i) India is characterised by ---------------- (low/high) per capita income and a more--

------------------- (equitable/ inequitable) distribution of income.
ii) The problems of India stem from ------------- (over-population/under

population)
iii) There are ……………….(a number of/only two) pre-requisites for
setting the objectives of development planning.
3) Write five lines establishing the interrelationship between target, time-horizon

and resources.
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4) Discuss the importance of the political process in goal setting in about 80-100
words.
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13.6 LET US SUM UP

Let us gather together what we learnt in this lesson. We began by noting that to give a
precise definition of development acceptable to all was rather difficult. Growth, progress,
modernisation are all aspects of development. We also saw how sustainable development
depends upon environmental protection and ecological conservation. We listed out the
goals of Indian development and discussed their relevance in the past and for the future.
We then went into the analysis of conflict and complementarity among goals and of the
relationship between a goal and its time-horizon. In doing so we saw the relationship
between general development goals, time bound targets and resources. Finally, we saw
what forces operate in determining the development goals of a nation and the political
processes through which the development goals of our own nation are articulated.
In the next lesson we discuss the need for planned development.
13.7 KEY WORDS

At the Margin: The additional cost or benefits of a specific change in the current
situation, i e., the difference between the existing situation and a proposed change,
measured in terms of the last unit change.
Capital Goods: Goods produced for use in producing other goods over more than one
production period
Capital Resources: Capital resources include durable machinery, buildings, roads, and
other construction, in fact, any durable increase in productive capabilities created with
labour and other resources.
Deforestation: Indiscriminate felling of trees for commercial purposes, large scale

degradation of forests to meet the needs of fuel wood in the neighbourhood.
Economic Development: The process through which an economy achieves long-run

economic growth: it involves capital formation, the development of markets, growth in
productivity and the improvement of entrepreneurial ability and labour skills. It refers to
economic growth and change in a direction desirable for the great majority of a nation.
Economic Growth: A sustained increase in the overall productive capacity of an

economy over time Measurement of economic growth is usually done by the rate of
growth of the Gross National Product (GNP). GNP is a measure of the economy's total
output of goods and services.
Economic Planning: Systematic state intervention in the economy with the objective of
improving coordination, effficiency and growth with social justice. Decisions regarding
production are made by planning, which includes assessment of resources, formulation of
a Plan for the most effective and balanced utilisation of the country's resources and fixing
priorities.
Energy Resources: An essential input for economic development and for improving the
quality of life. Such resources are usually divided into two groups: renewable and
nonrenewable ones. Coal and lignite, oil and gas and uranium are the non-renewable.
Important among renewable energy resources are fuel wood. agricultural wastes, animal
and human wastes, solar and tidal energy.
Equitable Social Order: The way in which society's income or wealth should be divided
among society's members. It refers to the fairness of the division when judged against an
ethical standard.
Important Substitution: Import substitution refers to the development of domestic
sources of supply of goods previously imported.
Income Distribution: A quantitative summary, of how society's total income

(production is divided among the members of society.
Modernisation: A variety of structural and institutional changes in the framework of

economic and cultural activity, consistent with unleashing the creative capabilities of
human beings-individually as well as collectively. A shift in the sectoral composition of
production, diversification of activities, advancement of technology and culture and
institutional innovations have all been part of the drive to change a feudal and colonial
economy into a modern and independent entity.
National Development Council (NDC): An apex institution for arriving at a consensus

among the Union and the States on the various matters relating to planning and
socioeconomic development it was set up in August, 1952 to strengthen and mobilise the
efforts and resources of the nation in support of the Five Year Plan, to promote economic
policies in all vital spheres and to ensure the balanced and rapid development of all part
of the country. The Council is composed of the Prime Minister of India, the Chief
Ministers of all States and the members of the Planning Commission, and it makes
recommendations to the Central and State Governments.
Natural Resources: Anything that can be used as a productive input in its natural state
such as farm land, building sites, forests, mineral deposits, biotic resources like fish,
animals and plants, water resources, and climatic characteristics.
Planning Commission: An advisory body to make recommendations to the Union

Cabinet. It acts in close understanding and consultation with the Ministries of the Central
Government and the Governments of the States. The broad functions of the Planning
Commission include assessment of material, capital and human resources; formulation of
a plan for their most effective and balanced utilisation, determination of priorities and
allocation of resources for completing each stage of the plan; determination of machine
for securing successful implementation of the plan; appraisal of progress and
recommending adjustments in policies and measures during the execution of the Plan,
and making of interim and ancillary recommendations on current development policies,
measures, etc.
Poverty Level of income: is the official figure used to determine whether or not a
particular individual is poor.
Resources: Those material resources which are used to produce goods and services.
These include land, minerals, energy, raw materials etc.; human labour knowledge and
skill a human resources. Resources arc also called factors of production when they are
brought into economic use by agents owning or controlling them .
Self-reliance: implies the ability to acquire all the goods and services that the country
requires without being dependent on others for the resources needed to acquire them.
Self-reliance implies the capacity to generate sufficient income to buy what the country
needs. It allows for imports from rest of the world and emphasizes the existence of the
required capacity to pay for them.
Self-sufficiency: implies the ability to produce all the goods and service that the country
needs without being dependent on the rest of the world through trade. It refers to the
capacity to produce all the goods the country needs and does not allow for imports.
Technology: in general, technology is a resource composed of all know-how, processes,
inventions, and innovations that help us get more from scarce resources. Finer
distinctions also can be made. Technology is knowledge of production methods which
indicate how resources can be combined in productive ways. An improvement in
technology implies that we produce more with a certain amount of inputs. Existing
technology is the outcome of many inventions, some of which were the discovery of new
resources-such as aluminum, radium, petroleum etc. Hybrid plants, electricity and
synthetic chemicals and products like plastics are inventions of man-made new-
resources. All inventions that increase the productivity of labour and capital can be
thought of as improvements hi-technology. Innovation is the application of technology
to the production of goods and services. Technology then is a resource that helps
enhance the efficiency and productivity of other natural and human resources and may
also throw up altogether new resources which are man-made.
13.8 SOME USEFUL BOOKS

Meier, Gerald M (1984), Leading Issues in Economic Development, 4th Ed., Chapter 1,
(pp.5-19) New York, O.U.P.
Nafziger, E. Wayne (1984), The Economics of Developing Countries, Chapter 2,

Belmont, Wadsworth.
Todaro, Michael P. (1987), Economic Development in the Third World, 3rd Ed. Chapter
3 (PP.84-91), New Delhi, Orient Longman Ltd.
13.9 ANSWERS AND/OR HINTS TO

CHECK YOUR PROGRESS EXERCISES
1) 'c'
2) 'b"
3) "c'
4) "a"
5) Technology, a high level of savings and investment and a sufficient quantity and
quality of Labour.
6) a) F, b) T, c)'T, d) T, e) T.
7) See section 13.3 and write your answer.
1) Rapid Economic Growth, Modernisation, Self-Reliance and Social Justice are the
four major objectives of our plans.
2) i) does not;
ii) requires;
iii) dual;
iv) includes;
3) i) T
ii) T
iii) F
iv) F
4) Go through Sub-section 13.4 2 and frame your answer.

1 i) T
ii) T
iii) T
iv) F
2) i) low, inequitable
ii) overpopulation
iii) low
iv) a number of
3) Prepare Sub-section your answer on the basis of matter given in Sub- section 13
5.2.
4) See Sub-secton 13.6.2 and try your answer.

UNIT 14 NEED FOR PLANNED ECONOMIC
DEVELOPMENT
Structure
14.0 Objectives
14.1 Introduction
14.2 Planning in Different Economic Systems
14.3 Historical Experience Favouring Planning
14.3.1 Example of the former USSR

14 3.2 The Great Depression and New Deal
14 3.3 The War Economy
14 3.4 The Welfare State
14.4 Market Failure
14.5 Transforming Under-development
14.5.I Structural Features of Under-Development

14.5.2 Relative Factor Endowment
14.5.3 Assets Ownership and Income Distribution Pattern
14.5.4 Saving, Investment and Capital Accumulation
14.5.5 Science and Technology
14.6 Planning and the Role of the State
14.7 Let Us Sum Up
14.8 Key Words
14.10 Answers and or Hints to Check Your Progress/ Exercises
14.0 OBJECTIVES
This unit introduces you to the concepts of development planning for countries which choose the path of
economic development. Having gone through this, you would be in a position to understand and explain
the following:
Planning in Different Economic Systems
Historical Context of Planning
Planning as the Corrective for Failure of the Market Mechanism
Planning as the Means of Overcoming Under-development through State Intervention.
14.1 INTRODUCTION
In this unit we shall be concerned with the question as to (i) why the need for planned economic
development arises at all; and (ii) what were the historical circumstances which favoured adoption of
planning as a means for carrying out economic development.
14.2 PLANNING IN DIFFERENT ECONOMIC

SYSTEMS
Economic planning as conscious design of development for any society or nation is invariably an activity or
function of the state. This is because the state is sovereign and above al. individuals, households, firms,
corporations or associations or institutions that there are in society: By virtue of this position the state alone
is supposed to have a comprehensive view of the economy and its problems of development. The role of the
state in economic planning however, differs from country to country. This is because different countries
have different political and economic systems.
You may be aware, for instance, that socialist countries of the world do not have a multiparty parliamentary
democracy unlike many other countries. Furthermore, in the socialist countries most means of production
are under public or state ownership. In such a political and economic system, the role of the state in
economic planning is very comprehensive and direct At the other extreme you have the industrially
advanced capitalist countries of the West and also of Japan, whose economies are based on private
enterprise. There, most means of production are privately owned, and political systems are multiparty based.
The role of the state is limited to what is called indicative planning'. From its comprehensive overview of the
economy, the state, in these countries gives signals about the health of the economy, stimulates private
enterprise and indicates the direction in which ought to move and develop. For example, in 1960 the state in
Japan adopted a 10 year income doubling plan and pen formed precisely this type of role towards achieving
the goal.
Between the above two groups of extreme cases we have the vast majority of the third world developing
countries of Asia, Africa and Latin America, which have adopted the course of planned economic
development. They adopted this course in the post-war years when many of these countries became free
from colonial rule and came to have their own national state and government. The scope of economic
planning and the planning system in this group, of course, vary from country to country. But in every one of
them the state plays an active and direct role in planning the development of the national economy. Their
economic system is, what is called, the mixed economy type, where public and private sectors of economic
activity co-exist. Along with planning, the market also plays an important role, specially in the regulation of
the private sector decisions regarding investment and production. Economic development in these countries
is, therefore, both planned as well as induced and directed by the market forces.

Note: i) Use the space given below for your answer.
1) Mark True (T) or False (F) .

i) Planning is comprehensive only in a socialist state. ()
ii) In indicative planning, the stale stimulates private investment and has an
advisory role as to the direction in which to move for development. ()
iii) A mixed economy has both socialist and capitalist pans ()
iv) Public sector is that area of activity which is owned and controlled by the state. ()
v) Market has little role in a mixed economy ()
2) Write in about five sentences what are the basic differences between planning in a socialist,
capitalist and a mixed economy.
14.3 HISTORICAL EXPERIENCE FAVOURING

PLANNING
During the 19th century and, specially, in the years prior to the Second World War, a number of
developments occurred in the Western World, the experience of which convinced the developing countries
of the need to follow a course of planned economic development in the post-war years. Let us describe these
for you one by one.
14.3.1 Example of the former USSR

The single most important event was the successful adoption of development planning in the Soviet Union
for the first time in the world, following the socialist revolution in Russia in 1917. Private ownership of the
means of production was abolished. With that went away private enterprise and the free market mechanism
as vehicles for economic development. Planning and public enterprise were instituted in its place. The
results were remarkable. The state mobilised high rates of public savings and investment. Capital
accumulation and national income grew at unprecedented rates. By the end of the Second World War, the
Soviet Union emerged as the second big power in the world. In about four decades, from a situation of
under-development and backwardness, Soviet Union became a developed country. This was, thus, a very
successful example of planned economic development for the countries developing later to learn from and
emulate. Developing planning strategy of the third world countries was greatly influenced by the Soviet
experience.
14.3.2 The Great Depression and New Deal

You may have heard about the Great Depression of 1929, also called the "World Economic Crisis". What
happened was that the market system, especially in the industrial countries of the West, grinded to a halt.
There was overproduction; stocks of unsold goods piled up; factories were shut down; share markets
collapsed; unemployment soared up. All this meant a complete mismatch between production and market
demand it had been known earlier that the free market system did not ensure smooth development of an
economy based on private enterprise. But the Great Depression made it crystal clear for every-one to see.
incidentally, one should also note that the Soviet economy, being a planned economy, remained unaffected
by the Great Depression. How was the crisis of the Great Depression met? By state intervention .The states
in the badly affected countries of the West intervened to push up market demand by undertaking public
works and financing them by money creation (printing currency notes; also known as Deficit Financing).
This step generated additional income and employment. Market demands for goods and services gradually
picked up as a result of this policy. In course of time, normalcy was restored and development resumed .This
course of state intervention is also known as the 'Keynesian solution' of the economic crisis, after the name
of the famous English economist, J.M. Keynes, who had provided the economic theory on which this
solution was based. In the United Stated this course of state intervention came to be known as the "New
Deal".
The experience of the Great Depression had, apart from other things, one very major effect .The faith in a
laissez faire state, a fence-sitting state not actively intervening in the economic life to control the functioning
of the market, was shaken Since then, state intervention in the market system, wherever and whenever
necessary, has become a normal feature of the capitalist countries. So far, this was occasionally practised in
a war economy in emergency. Secondly, as noted earlier, the state in these countries oversees the economy
and engages in indicative planning. Finally, it plans for and undertakes public works, specially in the field of
social infrastructure. Such developments in the developed capitalist countries, following the Great
Depression, had a lesson for the developing countries. The lesson was: economic development could not be
left wholly to private enterprise based on the free market and the state had a role to play in it.
14.3.3 The War Economy

Soon after the experience of the Great Depression came the Second World War. This was a long (1939-45)
and total war it necessitated not just state intervention in the capitalist and fascist countries like and
production planning for meeting the war needs. This is what is known as 'Planning of the War-Time
Economies'. After the war, rehabilitation and reconstruction required the active role of the state. This is the
third type of historical experience favouring planning of development.
14.3.4 The Welfare State

Alongside the above developments, there arose the notion of 'welfare state' which finally came to be
accepted in practice in all market economies after the war. Apart from its interventionist role, a welfare state
has also to correct the negative aspects of market based development, and be concerned with the wider issue
of social welfare. In the developed countries of the West, the state takes a sizeable expenditure on old-age
security, unemployment benefits, health, education and such other social services. All these are called
'Social Security', or welfare measures. Provisions for all these requires planning. Lately, a major negative
effect of market based development, which has come to the surface, is environmental pollution, and
ecological degradation. The welfare state is required not only to protect environment and ecology, but also
to conserve and plan for restoration and development of the natural resources. The free market mechanism,
based on the accounting of private profit, does not provide for these. This is another historical experience
justifying the necessity for planned development.

Answer in about five sentences.
1) What in your opinion was the most important event influencing adoption of planned development ?
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2) The New Deal lifted the Western economies from the Great Depression. What was the New Deal
and how did it work?
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3) What does the welfare state mean ?
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14.4 MARKET FAILURE

The foregoing narrates to you the historical circumstances which favoured adoption of developing
planning. These experiences were there for the third world developing countries to draw upon. Now, let us
go into the weaknesses and distortions from which the market-mechanism suffers and why, therefore,
development cannot be left to be solely guided by it. We discuss this question keeping the third world
countries in mind. The weaknesses and failures of the market mechanism may be summed up as follows:
i) One major problem of development is optimum allocation of society's resources among socially
desirable alternative uses and lines of activity so as to achieve the social goals. Economists in the neo-
classical tradition have argued that, in a free market private enterprises economy, such an allocation is
achieved, provided that markets are competitive. But, in point of fact, experience shows that, markets are
usually non-competitive, be they markets for factors of production, or for goods and services. This being
the case, market mechanism is unable to achieve socially optimum allocation of resources. For this reason,
market-determined prices do not correctly reflect the real social scarcity, or value, of either factors of
production, or of goods and services.
ii) Even when market system is competitive market equilibrium, supply equating demand, may be attained at
a level where society's resources are not fully employed or utilised. During the Great Depression
unemployment soared up and labour remained idle. Even in normal situations, persistent labour
unemployment is a common feature of the market economies. Apart from its social consequences for the
unemployed individuals, this feature of the market system prevents the realization of the potential
contribution to development implicit in the unutilised resources.
iii) Free market mechanism fails to capture and put a price on 'external economies or diseconomies', also
called external effects of economic activities. Such external effects are important and ought to be taken into
account from the social angle External economies are of two types: (a) technological, and (b) pecuniary.
Environmental pollution arising out of industrial effluents (gases, chemicals and other wastes let out from
plants) is an example of technological external diseconomy. The operating cost of irrigation tube wells in
an area goes down when that area becomes a part of the command area of a canal irrigation system. This
happens because, canals bring the underground water-table up. This is an example of external economy
(technological). In the first case, society's health suffers, but the market mechanists fails to charge the
industrialists for this. In the second case, tube wells owing farmers benefit without paying for it.
Let us now illustrate the pecuniary external economies which arise but which individual producers fail to
anticipate in the market system. You are a tea producer and I am a sugar producer. Following an increase in
demand for tea you increase your scale of production. Without your knowing or anticipating it, this decision
of yours will have an effect on me. Since sugar demand will also go up with increase in tea demand, I will
raise the scale of sugar production. My unit cost of sugar production will get reduced and I will, thus, derive
a pecuniary- benefit (external economy of your decision). In the other case of demand decrease I will
obviously suffer a pecuniary loss (external diseconomy). Such pecuniary external effects are widespread in
an economy. But the market mechanism fails to signal the private producers in advance to help them in
making their decisions.
iv) With private ownership of the means of production, income disparity, in fact, vast income differences, is
a common fact of life. Free market for a particular good and service excludes altogether those income-group
people in the society who cannot pay the supply price. And this can happen in respect of essential items of
consumption as well, in a situation of scarcity. In this sense, the free market system operates with a bias
against the lower income groups.
v) Private individuals, depending upon their own welfare considerations, allocate their current income
between consumption and saving. Market system fails to guide them as to what should be their optimal rate
of saving. Take the case of an exhaustible resource, let us say, petroleum, of which a country may have
known, definite amounts of reserves. Market based private exploitation of petroleum, guided as it is by
private profit, has no way by which to decide how much of the reserve should be saved for future in the
interests of society. It would be solely guided by the current consumption demand of petroleum. Ecological
degradation arises from a similar myopic vision of the market forces, endangering the conditions for future
development.
vi) Finally, there are a number of important and essential areas of social life, critical for economic
development, where private enterprise propelled by market forces and motivated by profit, fails to enter A
whole lot of social services-education, health, drinking water supply etc., conservation and development of
natural resources can be given as examples of such failure.
The above list of market failures is not exhaustive if you think, you could add more. What about. for
instance, product advertising and, through it, psychological manipulation of consumer choices'? The
justification for state intervention and planning of development arises, inter alia, from market failures.

1) in your own words define in three sentences what you mean by external economies and
diseconomies ?
2) Mark True(T) or False (F):

i) Free markets discriminate against people with lower incomes.( )
ii) Free markets always imply a perfectly competitive market.( )
iii) Free markets lead to reckless exploitation of resources, which leads to harmful
consequences for future development. ( )
iv) Private enterprises, guided by profit motive can deliver all the goods and services that
society requires.( )
v) The market mechanism can manipulate the market though advertising.( )
14.5 TRANSFORMING UNDER-DEVELOPMENT

Economic development is nothing but changing or transforming the situation of underdevelopment and
backwardness of a country. Faster is this change, faster is economic development. The economic situation of
today's developing countries was initially characterised by under-development What the causes of this
under-development were, is a wider question of history, often colonial history; we are not concerned with
here. Here we discuss the chief characteristics of under-development when a country begins to move on the
path of development. Of course, each country's situation is to some extent unique to itself. But the chief
characteristics of under-development have been found to be common in the third world countries. Let us see
what these are.
14.5.1 Structural Features of Under-development

An underdeveloped economy is predominantly agricultural. Typically, upto 80 per cent of the labour force is
engaged in agriculture. Production in agriculture, based on age old technology, is largely for subsistence and
carried out under feudal relations. Feudal landlords live an ostentatious life and make little or no investment
in agriculture. Within the industrial sector, traditional household crafts preponderate. Modern industry, if it
exists at all, is limited to a few lines for instance, jute and cotton textiles in India prior to the Second World
War. Infrastructural services like transport and communications are extremely poor and limited.
14.5.2 Relative Factor Endowment

As is implicit in the structure of an underdeveloped economy, its relative factor endowment pattern is
dominated by land, or by land and labour together. Relative availability of capital is extremely low. Capital
goods are mainly those which are turned out by the traditional crafts. In countries like India and China
marked by high population pressure, the relative factor proportion between land and labour is itself adverse,
with a low landlabour ratio. Additional labour due to population growth, stays back in agriculture since little
opportunity of other employment exists. As a result, a substantial proportion of labour in agriculture remains
under-employed. Labour, the human capital resource, is thus poor in quality.
14.5.3 Asset Ownership and Income Distribution Pattern

Asset ownership, particularly of the most important factor of production, land, is very unequally distributed
in an underdeveloped economy. It may so happen that a handful of feudal lords own most of the land and the
rest of the rural population worked as tenants or landless labourers, including bonded labourers. Disparity in
incomes follow from disparity in land ownership, with 50 to 70 per cent of the produce going to a small
class of land owners. The rest of the population lives at subsistence level under acute poverty. Furthermore,
in large countries such as India, there also exist disparity of incomes between different regions as the relative
factor endowments as well as the levels of development vary from region to region.
14.5.4 Saving, investment and Capital Accumulation

Since an underdeveloped economy is characterised by stagnation in production and operates at a low level
equilibrium, savings are low, and so is investment. A kind of vicious circle operates: Low income - low
savings - low investment - low income. Low saving and low investment keep capital accumulation at a low
rate. The vast majority of the people, living at subsistence level have no capacity to save Landlords and
renters have the capacity to save but engage in conspicuous consumption. Merchants and traders do
accumulate some money capital. But they lack in enterprise and do not invest it in industry. The other reason
for this failure is the large size of capital required by modern industrial units which individual holders of
money capital are unable to provide.
14.5.5 Science and Technology

Under-development is also characterised by low levels of scientific and technical knowledge. Due to
illiteracy and lack of education, the quality of human capital is poor. On the other hand, an underdeveloped
economy dependent on the traditional means and methods of production, has little scope for technological
innovation.
These are then the chief characteristics of an underdeveloped, backward economy. Development, precisely
requires changing these characteristics. How can this change be effected in the shortest possible time'? And
this is necessary because the common urge is to develop fast, to catch up with the developed countries.
Apart from the market failures noted in the preceding section, you can see from these characteristics that, in
an underdeveloped economy the market system is itself underdeveloped. This is primarily because
production in such an economy is motivated by subsistence and family consumption rather than for sale
and exchange in the market. State initiative in the transformation of under-development, therefore, becomes
necessary. State initiative takes the form of planning development and executing it through successive plans
of medium-term duration.

Note: i) Use the space given below for your answer
Answer in five sentences
1) What are the basic characteristics of under-development?
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2) What is the vicious circle that operates in an underdeveloped economy ? Explain.
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14.6 PLANNING AND THE ROLE OF THE STATE
The planning process can be viewed as a sequence of formulation, implementation and performance
appraisal of a development plan. The core of a plan is a statement giving the allocation of investment in
various sectors of the national economy during the plan period, its division between the public and the
private sectors and also between the centre and the states, in a federal political system. The allocation of
investment among the sectors of the national economy like agriculture and industry to guided by three
considerations: (1) goals of development, (2) the long-term strategy of development, (3) intersectoral
balance or consistency. We have already learnt about the goals of development. You will learn about the
strategy of Indian development in the next lesson. Here you may simply note that the strategy indicates
which particular sectors should receive relatively more investment so that the economy develops faster.
Inter-sectoral balance is required because output from one sector is used as input in some other sector. For
instance, coal output is required as input in steel production; or for that matter agricultural output (food
grains, cotton, oil seeds) is used as wage-goods or input in industry
The planning process is naturally organised by the state. Plan formulation, as we all know, is done in India,
through the executive wing of the state, the central government ministries and the state governments. The
state is also helped in plan formulation by a technical body like the Planning Commission. The Draft Five
Year Plan, thus prepared, is presented to the National Development Council (NDC) for its approval. After it
has been approved by the NDC it is presented to Parliament, the legislative organ of the state. When finally
voted by the Parliament, it becomes the National Development Plan, ready for implementation. Plan
implementation is the responsibility of the bureaucracy, another organ of the state. Appraisal of the plan
performance is done by the Planning Commission, The Mid-term Appraisal, as it is called, is done after the
plan has been implemented over half its period. This is necessary because the work on the next plan
formulation starts at this time. The final appraisal is done at the end of the plan period and is included, by
way of review of development, in the next plan document.
The state's role in a mixed economy is not limited to the planning process described above. Development
plan requires to be supported by a number of appropriate policies and institutional reforms. These are too
many to be enumerated here. As an example of supporting policies for the plan, take the case of monetary
and fiscal policies. The state designs and executes such monetary and fiscal measures as would help
mobilise private savings and channelise them into investment according to plan priorities. Similarly,
ceilings on land holdings and land redistribution are examples of institutional reforms that support the plan
goal of agricultural growth with equity. Lastly, one must not forget that in a mixed economy of planned
development, market-mechanism plays an important role in guiding the production and investment
decisions in the private sector. Particularly, the plan itself creates conditions for markets to emerge and
develop by building up infrastructural facilities, like transport, communication, power, etc. At the same
time, it tries to overcome the failures of the market-mechanism noted earlier. The resultant outcome of
development is, therefore determined both by the plan and the market in a mixed economy.

Note: i) Use the space given below for your answer
1) What is inter-sectoral balance ?
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2) When is the mid-term appraisal of a plan'?
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3) What are some of the appropriate policies required to support the development plan ?
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14.7 LET US SUM UP

We have seen in this unit why planning for economic development is necessary. The experience of various
countries, especially the success of planned development in the former U.S.S R.. has shown how state
intervention has helped in economic development.
We have also taken up instances where state intervention takes different forms. In this context, we have also
seen what limitations of the market mechanism are and where it has failed.
Finally, we have seen how in the context of under-development, state intervention becomes all the more
necessary, and what form it broadly takes in the Indian context. In the next unit, you will read in broader
details about the strategy of Indian planning.
14.8 KEY WORDS

Feudal Relations: Where the appropriation of surplus generated in the production process takes place
through extra economic coercion on the part of the landowner over the peasant producer, without the having
to undertake any production obligations.
Free Market: A system where the state does not play any role in regulating the market and where private
enterprise is free to produce and sell any quantity at whatever price it finds appropriate.
Indicative Planning: Where the state does not actively play a role in economic development but merely
indicates the direction in which private enterprise is to move.
Laissez Faire: It literally means 'let it be'. in economic theory it is understood to be the system where the
government does not intervene and gives complete freedom to private enterprise.
Mixed Economy: An economy where both public and private sectors co-exist and participate in
development activities.
Rentiers: A class of people whose basic income is derived from holding assets, including such securities,
stocks (shares) and bonds, which do not involve undertaking the risks and costs of enterprise.

Lewis, W. Arthur (1960), Development Planning. The Essential of Economic Policy, George Allen &
Unwin; London.
Streeten, Paul and Michael Lipton (1972), The Crisis of Indian Planning, Oxford University Press, London.
Chakravarty Sukhamoy (1987): Development Planning -- The Indian Experience, Oxford, Claredon.
14.10 ANSWERS AND/OR HINTS TO CHECK

YOUR PROGRESS/EXERCISES
Check Your Progress I

1) i) T
ii) T
iii) F
iv) T
v) F
2) See 14.2
1) Hint: Planning in former Soviet Union see Sub-section 14.3.1

2) See Sub-section 14 3 2
3) See Sub-section 14.3 4

1) See section 14.4 para (iii)
2) i) ii) F iii) T iv) F v) T

1) See Sub-section 14.5.1
2) Hint: Low income - Low savings - Low investment - Low income

1) Inter-sectoral balance implies that the output of each sector which is used as an input in the other
sectors is sufficient to support the targeted level of output of goods in the economy.
2) Mid-tern appraisal of a plan is done after the plan has been implemented over half its period and the
work on the next plan formulation starts.
3) Appropriate monetary and fiscal policies are some of the policies required to support the
development plan.
UNIT 15 PLANNING STRATEGIES - I
Structure
15.0 Objectives
15.1 Introduction
15.2 Definition of Planning
15.3 Functions of a Planning Commission
15.4 Formulation of Plans
15.5 Strategy of Indian Plans
15.5.1 Industrial Policy

15.5.2 Policy on Agriculture
15.5.3 Employment Policy
15.6 Financing a Plan
15.7 Experience of Indian Planning
15.8 Let Us Sum Up
15.9 Key Words
15.11 Answers to Check Your Progress/ Exercises
15.0 OBJECTIVES
The objectives of this lesson are to introduce you to the concept of economic planning and how this has been
carried out in the Indian context. After this lesson you will understand:
how the planning process has evolved in India

the objectives and strategy of Indian planning
the success and failure of planning
how planning affects us all.
15.1 INTRODUCTION
Before we go into the question of planning strategy, it is necessary to understand why planning in the first
case was felt to be necessary. Here, we shall take up only some of the more salient points. For this, we will
have to look at the structure of third world countries. These economies are heavily dependent on imports.
Exports, on the other hand, comprise primarily of agricultural raw materials and minerals. This structure did
not evolve naturally but was designed and manipulated by the colonial powers to suit their own ends. British
and other industrially developing countries imported raw materials from the colonies under their control,
processed them and exported the finished production back. Even the agrarian economies were in a shambles
with a backward agrarian system supporting a large destitute population along with a large number of
intermediaries (like zamindars in India). The surplus of the agricultural sector supported the colonies,
British administration in different countries and also provided the bulk of exports. Given the colonial legacy,
it was difficult for former colonies to transform themselves into modern economies without active state
intervention. They required infrastructural and basic and heavy industries development. The private sector
could not provide a strong industrial base in the areas either due to lack of resources or its unwillingness to
invert in such segments due to the risks and long gestation involved. Therefore, the political leadership of
these countries realised that in the task of reconstruction of national economies, the state would have to play
an active role. The absence of an entrepreneurial class which could initiate rapid industrialization led to the
state having to initially assume the role of an entrepreneur.
It was of against this background that the example of the former Soviet Union's industrialization strategy by
which the state initiated rapid modernisation of the Soviet economy preceded by a comprehensive planning
process, the Gosplan, emerged as an alternative.
15.2 DEFINITION OF PLANNING

Planning, as a term in itself, implies formulation of a strategy for the future. It can be the immediate future
or a distant one in economic parlance, it implies the assessment of one's resources at present and its
allocation among different uses so as to meet some specific goals in the future. For example, an individual
might plan for a secure income in his old age by allocating his income between present consumption and
saving in various schemes like taking an insurance policy- buying units or simply depositing in bank. A
business firm might also undertake planning to double production in, say, three years time in which case it
has to decide how much resources it can raise internally, how much to borrow, what equipment to buy and
so on. When a nation plans its economy, it is more or less a similar exercise, though on a much larger scale.
The national economy has to assess its resources and allocate these resources among different contending
uses, depending on the specific priority of each use. These resources are of three types-- physical, financial
and human. The planning authority has to assess how much of these resources are available and how they
are to be exploited and further developed for meeting the goals it sets for the economy. The planning
authority has also to fix the time-frame by which these goals are to be met. However, planning in an
underdeveloped economy also attempts to fulfill the objective of transformation of the economy from a low
level of production and productivity to a higher level of self--sustained growth. This is done by planning for
a more effective use of existing resources, developing resources for future use and dismantling institutional
and other constraints which hamper the growth of the resource base of the economy.

1) What are the various types of resources in an economy ?

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2) Briefly define planning in your own words.
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2) Which of the following statements are true ? Mark (T) for true and (F) for false.
i) Planning is a waste of time and money and, hence, it should be scrapped. ( )

ii) Planning authorities only set out the goals an economy is to achieve and not how it is to be
done. ( )
iii) Planning for an underdeveloped economy is necessary to overcome institutional constraints. ( )
15.3 FUNCTIONS OF A PLANNING COMMISSION

The order establishing the Planning Commission could have its specific functions as follows:
To make an assessment of all material, capital and human resources of the country, including
technical personnel, and investigate the possibilities of augmenting such of those resources as are found
to be deficient in relation to the nation's requirement;
To formulate a plan for the most effective and balanced utilisation of the country's resources;
To define, on determination of priorities, the stages in which the plan should be carried out and propose
the allocation of resources for due completion of each stage,
To indicate the factors which are tending to retard economic development, and determine the
conditions which, in view. of the current social and political situation, should be established for the successful
execution of the plan;
To determine the nature of the machinery which will be necessary for securing the successful
implementation of each stage of the plan in all its aspects;
To appraise from time to time the progress achieved in the execution of each stage of the plan
and recommend the adjustments of policy and measures that such appraisal may show to be
necessary; and
To make such interim or ancillary recommendations as appear to be appropriate either for facilitating
the discharge of duties assigned to it; or in consideration of the prevailing economic conditions, current policies,
measures and development programmes; or on examination of such specific, problems as may be referred to it by
central and state governments.

1) In about five sentences describe what are the factors considered by a planning commission before of
a plan is formulated ?
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2) Can a planning commission review its earlier policy ?
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15.4 FORMULATION OF PLANS

The plan formulation process commences much before (3 years in case of India) the ensuing plan actually
comes into operation. First, an approach to the plan is adopted for consideration. This involves an appraisal
of the state of the economy, identification of social, economic and institutional weaknesses and review of
trends in the rate of economic growth. The commission submits its preliminary conclusions on these and
related matters to government. After considering these conclusions, the government indicates the target rate
of growth to be achieved for the plan period as well as the objectives and considerations deserving special
emphasis.
In choosing the targets for growth, the planning process has to ensure that intermediate inputs are adequately
available, from internal and external sources, to support the targets. In case they are not, the planners have to
set aside resources for investing in these intermediate inputs so as to bring about consistency with targeted
outputs of the final products. Finally, the total outlay has to be within the limits set up by the availability of
resources.
15.5 STRATEGY OF INDIAN PLANS

The strategy of plans is based on a number of factors. The first challenge is to modify and change the
institutional factors that constrain growth and development. Among institutional factors are land relations,
concentration of wealth and income on one hand and abject poverty on the other, low level of educational
and technical skills, low level of work-organisations, etc. The second most important factor is the
development of the capital and technological base of the country's productive system. Thirdly, the strategy
has to identify measures to overcome structural bottlenecks which prevent efficient use of resources
including human resources. Finally, an important aspect of the strategy is to identify thrust areas where
direct state intervention through investment and production activities would lead to the economy achieving
self-reliant growth.
Thus, a plan contains the action scheme for industrial and agricultural development. Also it attempts to
provide employment to the manpower in the economy. These three aspects, as can be found in the Five Year
Plans of India, are given below.
15.5.1 Industrial Policy

The Industrial Policy Statements in India announced from time to time broadly define the parameters of
industrial policy. Following the understanding that the state had to play am important role in the
industrialisation process, it was decided to reserve certain industries of basic and strategic importance, or in
the nature of public utility services, for the public sector. The state has a monopolistic control in these types
of industries. The broad categorisation of the industries were as follows:
1) Industries whose future development was the exclusive responsibility of the state;
2) Industries which were to be progressively state-owned, in which case the state was generally to take
initiative in establishing new undertakings, and private enterprise was expected to supplement the
efforts of the state; and
3) All other industries, whose future development was left to the initiative and enterprise of the private
sector.
In addition to the state's monopoly in atomic energy, defense industries, railways and air transport, the first
category included some 13 industries like iron and steel, heavy electrical, coal and lignite, mineral oils,
mining of certain ores and processing of specified metals, aircraft, ship-building, specified communication
equipment, and electricity generation and distribution, etc. However, already approved private units were
permitted to come up and even cooperation with private enterprise was envisaged, subject to official
guidance of their policies and control of their operations. The second category covered some 12 industries,
viz., major minerals and non-ferrous metals not covered above, machine tools, ferro-alloys and tools,
essential drugs, dye-stuffs and plastics, fertilizers, synthetic rubber, chemical pulp, and road and sea
transport. With regard to all other industries, falling in the third category, the role of the state was to
facilitate and encourage their development through the creation and expansion of the requisite
infrastructures, and by appropriate fiscal and other measures. This categorisation was not envisaged to be
water-tight; possibility of overlap between the public and private sector was explicitly recognised. There was
also stress on the role of cottage, village and small scale industries. The aim here was to ensure that the
decentralised sector acquires sufficient vitality to be self-supporting and competitive through improvement
and modernisation of techniques. In this connection, the starting of industrial estates and rural community
workshops was envisaged.
15.5.2 Policy on Agriculture

Agriculture has a major role in the Indian economy, not only in terms of its contribution to the national
economy, but also because of the large proportion of the population it supports. Though the country has
made enormous progress in terms of the volume of agricultural production, its per capita consumption of
food is still one of the lowest in the world.
The government, after independence, passed various legislative measures aimed at bringing about reforms in
the agricultural sector. The foremost was abolition of the zamindari system, whereby, feudal intermediaries
who appropriated a share of the agricultural produce because of the rights conferred on them by the British,
were denied these rights. The second was land reform which aimed at ensuring tenurial rights for cultivators.
Also re-distribution of land among the landless by taking away surplus lands above a ceiling from large land
owners formed a pan of land reform. Another aspect of land reforms was scaling down of rents to one fourth
or one-fifth of the total produce.
The food crisis in the mid-sixties and the subsequent dependence on foreign food aid prompted the
government to go in for a technology-led foodgrains production strategy, leading to the by now well known
Green Revolution. Some selected regions in the country, such as districts in Punjab, Haryana, U.P. and
Tamil Nadu were chosen and a package of inputs consisting of high-yielding variety seeds, dosages of
fertilizers and pesticides and water management was introduced in these areas. This resulted in a significant
increase in food grains production. The country can now claim to be generally self-sufficient at the present
levels of food consumption.
15.5.3 Employment Policy
We have observed on many occasions, able-bodied men and women appearing before us with a begging
bowl pleading for some money or food. These people have no income. They have taken to begging since
they have no employment opportunities. This is the more visible form of unemployment. There are millions
of others who do not beg but remain idle otherwise. In the rural areas, the unemployment problem is
disguised in the sense that far more people are working on the same job than is necessary. There is also a
seasonality aspect to this. Labour finds employment mainly during the ploughing, planting and harvesting
periods while for the rest of the year they may remain without work. In the urban areas, lack of job
opportunities render many unemployed or underemployed. This problem gets compounded by migration
from the rural areas. Unemployment affects the young new entrants to the labour force more severely.
In India unemployment is sought to be tackled by specific employment-oriented schemes, and by rapid

industrialisation, which would directly and indirectly absorb the backlog of unemployed. in the rural areas
some of the employment schemes are the Integrated Rural Development Programme (IRDP), the National
Rural Employment Programme (NREP) and the Rural Labour Employment Guarantee Programme
(RLEGP). These schemes seek to build up infrastructure in rural areas in addition to providing employment
for landless labour in addition, the government offers incentives to industries to be located in backward and
rural areas so that they may absorb a part of the unemployed labour force in these areas. In the urban areas,
stress is on self-employment with incentives like bank loans, vocational training, etc. The employment
strategy also gets linked with the industrialisation strategy. The government has sought to encourage small
scale industries, and cottage industries which are labour-intensive.

Answer in 50 words only.

1) State the main factors involved in the strategy of Indian Planning.
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2) What is the role of the public sector as envisaged by the planning process?
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3) What were the various legislative measures taken immediately after Indian independence to bring
about reforms in agriculture?
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15.6 FINANCING A PLAN

The planning process involves mobilisation of resources for investment in different sectors of the economy
Attempts to find a solution to the financing problem pass through various stages. Stock-taking or assessing
the physical resources available, both actual and potential, precede plan formulation. Given this physical
resource base, financial resources are mobilised for investment. Financial planning involves the assessment
of total resources available for investment through domestic savings and inflow of capital from abroad. The
volumes of domestic savings that could be mobilized depends on how much savings have been generated in
the past by the government, households and business firms and by how much it is expected to go up in the
future. Overall savings can be increased in the economy by additional tax efforts of the government and
offering incentives for private savings. The budgetary resources, apart from taxation and savings of the
central and state governments, include deficit financing, external resources and foreign exchange. These are
the main components of financial planning. Savings may be from government, deficit financing, external
resources and foreign exchange. These are the main components of financial planning. Savings may also be
from the government and the public sector, or net capital inflow from abroad. Financial planning involves
the mobilisation of resources to match the targeted magnitude of physical investment. It also involves the
allocation of the total available savings among major investment sectors according to their respective
requirements. Total domestic resource availability is arrived at through projections of sectoral savings, i.e.,
savings by households, private corporate sector, government and public sector enterprises. Then, given the
investment targets of the sectors and allowing for inter-sectoral transfers from industry to agriculture or
agriculture to the services sector or vice-versa and the expected inflow of capital from abroad, which may
include a certain amount of commercial borrowing from foreign banks and investment agencies, the balance
between the sources and uses of funds is worked out for each sector. This gives the amount of savings that
need to be mobilised and transferred from the surplus to deficit sectors in estimating the total resources
available for plan investment, apart from the public, private and household sectors, there are other sources of
source mobilisation. These are inflow of foreign capital, contributions from public enterprises like railways,
posts and telegraphs and other central and state enterprises, market borrowing, small savings, state provident
funds and miscellaneous capital receipts. Additional inflow of capital for the plan is generated through direct
and indirect taxes, net inflow of capital from abroad and deficit financing,

1) What do you understand by financial planning? Write in two sentences.

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2) What are the various sources of funds for a plan?
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3) Decide if True or False. Indicate (T) for true (F) for false.
i) Deficit financing is budgetary resources for the central government. ()

ii) The volume of domestic savings depend on capital inflow from abroad. ()
iii) Additional Taxation can increase the government savings. ()
15.7 EXPERIENCE OF INDIAN PLANNING

Has the economic development in India through planning proved to be a better option? For answers, it will
not be out of place to look into the achievements in respect of the basic objectives on which planning was
initiated. You may recall that Indian planning stressed the need for correcting assets imbalance and
eradicating poverty. Banging about a rapid development of the industrial sector and providing gainful
employment to its labour force have also been set as important targets, Therefore, an assessment of these
problems after execution of eight plans is likely to provide useful information on the performance of Indian
planning.
An examination of Indian situation after 50 years of independence from the British rule gives enough scope
to argue that planning has largely failed to meet the expectations of its proponents. Many countries which
were at the same level of economic development in the early 50s have succeeded in solving their problems
like poverty, unemployment and industrialisation remarkably well in comparison with India. Within the
Asian region, economies of South Korea, Singapore, Hong Kong, Indonesia and Malaysia have become the
important contrasting points to India. All these have overtaken India not only in reducing or eradicating
poverty and achieving a higher level of industrialisation but have also shown remarkable capabilities in
export. The quality of life has improved significantly in all these countries. In contrast, India is still
struggling to tackle some of the basic problems which were identified right at the stage of initial planning.
Some discussion on Indian experience will help drive the point home.
Approximately 30% of the Indian population is still below the poverty line. That means, 30 out of 100
people in India do not have the capability to spend enough for minimum food requirements. The growth of
population continues to exceed the growth of national income. A reflection of this feature is the repudiation
of claims to alleviating poverty. The productivity of labour grows at a low level of 2% only while capital
productivity has been declining. The agricultural sector of the country has failed to witness any major
technological change. Except for a few pockets, such as, Punjab, Haryana and Tamil Nadu, the green
revolution has not been able to spread and transform the agricultural sector into a high productivity
occupation. Moreover, better incentives for raising productivity have not been able to bung about a more
equitable pattern of land holding.
India, in its planning era, has spent significantly more on higher education as compared to that elementary
schooling. Consequently, about half of the population aged 7 and above have remained illiterate upto 1991.
The uneducated labour force available for production could engage itself only in unskilled industrial
activities. More importantly, the lopsided educational policy has led to a cultural divide between a small
group of elite drawn from well-to-do families and the general mass of poor Indians. There is another
discernible trend. The best educated groups leave an impression that they are entitled to all kinds of facilities
from public funds-- from holiday to home, transportation, food rations, children's schooling, health care in
hospitals etc. The semi-literate uneducated mass of people have no effective access to such privileges. A
major building block of Indian planning for industrialisation has been the public sector. It, however, has
failed to register the expected performance. The important segments of the economy such as infrastructure,
capital goods and basic intermediate are under the control of the state. But these do not contribute much to
productivity enhancement. While infrastructure bottlenecks have yet to be overcome, the industrial
undertakings are drawing a large chunk of public funds for their survival. The accumulated loss of public
sector enterprises had already reached the level of Rs. 15,354 crore by 1990-91. Many industries do not run
at full capacity and a large number of them have turned sick. As the sector has failed to keep pace with
technological advancement, Indian goods have lost in terms of competitive advantage. Consequently, India's
share in the world trade is insignificant, at less than one per cent. A related aspect of the Indian way of going
for planned development is the emergence of black markets and corruption. The provision of regulating
economic activities by the state machinery has resulted in providing incentive to enforcement
authorities for indulging in corrupt practices for pecuniary gains. Extra-legal means have been resorted to
supply many commodities which are short in supply. In addition, the public sector enterprises have become
a good channel for distributing favour to friends and relatives of politicians, whose parties are in power. It is
estimated that the public sector is overstaffed to the tune of 25% due to such type of practices. Despite a
massive programme of industrialisation, unemployment in India continues to increase. Even the special
employment generating programmes in rural areas are pointed out to be not very successful.
The service sector has grown more rapidly than industrial and agricultural sectors. However, it is stated that
much of such growth is due to expansion in government service sectors like public administration. The
increased employment of this type has led to an improved purchasing power of a sizeable section of the
population without a corresponding increase in production of agricultural and industrial sectors. A part of
the inflationary pressure in the economy is ascribed to service sector expansion. It is, therefore, apparent that
Indian planning has not been successful in meeting the targets of basic objectives. Poverty, unequal asset
holding, unemployment and inadequate industrialisation persist even after 40 years of planning Realisation
of such a lacuna has prompted India to undertake a massive reform programme in 1991. The emerging
thinking now is on reducing the scope of government interventions in the economic activities. The role of
planning in such a scheme is set to be narrowed down.

Answer in five sentences each

1) What are the failures of Indian industry in the planning period'?
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2) Discuss the failures of planning in the agricultural sector.
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15.8 LET US SUM UP

In this unit we have tried to learn about planning and the Indian Planning strategy in particular. We have
seen how planning strategy came to be adopted as a response to the need for rapid development and
dismantling of colonial institutions and structures which hampered development. The success of the former
Soviet Union's planning strategy was the source of inspiration for planning in most of the third world
countries. Planning, we have seen, implies the formulation of a strategy to achieve certain goals in the
future. In an underdeveloped country, planning also attempts to fulfill the objective of transformation of the
economy from a low level of production and productivity to a higher level of self-sustained growth. In many
developing countries, planning can be broadly summed up as being a vehicle for growth with social justice
and raising the standards of living of the population.
Although the perception of developing the backward economies through the process of planning still
remains a major agenda, achievement of expected results cannot be taken satisfactory until now in most of
the third world countries. Prevalence of wide spread poverty, unemployment and unequal income
distribution are commonly found in these countries. In recent years therefore, changes have been
incorporated in the planning process on the basis of experience from the past.
15.9 KEY WORDS

Ancillaries: Those firms which generally produce for and supply to a large industrial unit, which produces
the main marketable product.
Basic Industries: Those industries whose output is used as an input either directly or indirectly by many
other industries, e.g., steel.
Capital Goods: Those goods that are themselves produced to help the production of other goods, but are not
themselves consumed directly as the raw materials of production, e.g. machinery.
Disguised Unemployment: A situation where people are apparently employed, but withdrawing some of
them from that employment will not result in a fall in output.
Egalitarian: Equality of economic, social and political status among all individuals.
Feudal Intermediaries: Those individuals or class of people who appropriate a portion of the surplus
generated in agricultural production by using extra-economic coercion, without actively participating in the
production process, but coming between the state and the tillers of land.
Inflation: A situation where there is a general and steady rising pressure on paces of commodities
accompanied by a diminishing purchasing power of money.
Intermediate Inputs: Those which go into the production of a final product, e.g., steel which goes into the
production of buses, trucks, etc
Land Reforms: The redistribution of titles to property in land by breaking up large holdings and also
ensuring that the actual cultivator is entitled to a larger share of the surplus from land as opposed to the
intermediaries. It also aims at ensuring tenurial rights for cultivators.
Marketable Surplus: That pan of the production, usually of foodgrains, which exceeds the producer's own
direct consumption requirements and which can be sold in the market.
Poverty Line: It is defined as an income level below which people cannot afford to buy a basket of
commodities that are essential to maintain a minimum standard of living. In India, this minimum standard is
taken to be the income necessary to buy the food necessary for an adult to survive and work. The levels and
definition of poverty line vary from country to country.
Resources: Resources are of three kinds-physical, financial and human. Physical resources are land, water,
coal, iron-ore, cattle etc. Financial resources are savings, taxes, borrowings etc. Human resources would
mean various skills and abilities of the human beings, which make them productive and useful to society.
Socialist State: A state where the major pan of the means of production is publicly owned and controlled.
Structural Bottlenecks: When one sector, or a crucial pan of that sector, restricts the growth of other
sectors, then the economy is said to suffer from structural bottlenecks.

Chaudhary, Pramit, 1985. The Indian Economy, Vani Educational Books, Vikas, New Delhi.
Singh, Tarlok, 1974. India's Development Experience, Macmillan, London.
Gadgit, D. R., 1972. Planning and Economic Policy in India, Gokhale Institute, Poona.
15.11 ANSWERS AND/OR HINTS TO CHECK

YOUR PROGRESS

1) There are three types of resources-physical, financial and human. Physical resources are of two
kinds, living and non-living and include land, water, minerals and animal resources etc. Financial
resources include taxation, savings, borrowings etc. Human resources are manpower with skills.
2) Planning means formulating a strategy for the future by assessing one's resources at present and
allocating it between different uses. This is done so as to achieve certain goals in the future. In the
general case, planning in an economy is done to secure a certain rate of growth of national income,
production etc. But in an underdeveloped economy, planning takes m, a broader meaning. It is a
strategy to counter an inherited legacy of backwardness and institutional constrains which hamper
the transformation of the economy from a low-level of production to a higher level of self-sustained
growth.
2) i) F
ii) F
iii) T

1) Read Section 15.4
2) Hint :Yes

1) Hint: Read first paragraph of section 15.6.
2) The public sector was given the exclusive responsibility of investing and developing certain basic
and strategic industries This was to ensure that the public sector would capture the commanding
heights of the economy and thus play an important role in the industrialisation process.
3) Hint: Read Sub-Section 15.5.2.
4) The Green Revolution was a technology-based food grains production strategy. It led to an increase
in the total food grain production and marketable surplus of India. But at the same time it led to an
increase in regional disparities in rural India since the Green Revolution covered only a few districts
in selected states, while the rest of the country remained unaffected.
5) The problem of unemployment in rural India was sought to be tackled through employment oriented
schemes, like the Integrated Rural Development Programme, National Rural Employment
Guarantee Programme in urban India though no such scheme existed, generally, employment was
sought to be increased through self-employment programmes and promotion of labour intensive
industries.

1) Financial planning involves estimation of financial resources required for investment and assessing
its mobilisation domestically through savings, taxation and aid from abroad-either through inter-
government aids or loans or commercial borrowings from investment agencies and foreign banks.
In other words, it involves a balance between the sources and uses of funds for the plan targets.
2) The various sources of funds for plan investment are taxation, savings of the government,
household and private corporate sector and inflow of foreign capital. Apart from these, there are
also contributions from public enterprises like railways, posts and telegraphs, central and state
enterprises, market borrowings, etc. Finally, the government may also resort to deficit financing.
3) i) T
ii) F
iii) T

See Section 15.7 for your answer.
UNIT 16 PLANNING STRATEGIES - II
Structure
16.0 Objectives
16.1 Introduction
16.2 Agriculture-Industry Interdependence
16.3 Industries
16.3.1 Small Scale Industries

16.3.2 Capital Goods and Consumer Goods Industries
16.4 Public Distribution System (PDS) and Social Welfare
16.4.I Historical Background

16.4.2 Functions
16.4.3 Suggestions for Improvement
16.5 Multi-Level Planning (MLP)
16.6 Let Us Sum Up
16.7 Key Words
16.9 Answers and/or Hints to Check Your Progress/ Exercises
16.0 OBJECTIVES
The objective of this unit is to relate planning strategies to the main sectors and levels of the economy. On
going through this you will be able to:
Indicate the interdependence between agriculture and industry

Explain the sectoral classification and analysis of India's industrialisation and the role of the public sector
Describe the Public Distribution System (PDS) and Social Welfare
Understand why it is necessary to undertake planning for different levels - Multi-level Planning.
16.1 INTRODUCTION
Some of the major aspects of the planning strategies are the sectoral composition of the overall growth
targets, the allocations and linkages across the sectors, such as, agriculture, capital goods and consumer
goods industries, the roles of the public sector and the public distribution system, etc. The planning goals
and allocations have also to be resolved in terms of the various regional levels, from the Centre to the States,
to the Districts and, finally, to the Blocks and Panchayats. These aspects are discussed below.
16.2 AGRICULTURE - INDUSTRY

INTERDEPENDENCE
Agriculture and industry are not two mutually exclusive sectors. There are numerous linkages between them.
The plan strategy recognises this. If you go to the village 'Monday' (or bazar), you can see peasants bringing
loads of rice and wheat to the market. They sell their produce to the traders who in turn may sell them in the
urban areas to the consumers working in the non-agricultural sector, consisting of industrial and services
sectors. In most of the developing countries while about two thirds of the agricultural produce is consumed
within the agricultural sector, one third of it is marketed to the non-agricultural sector. This later amount
constitutes what is called the 'marketed surplus' of the agricultural sector for the non-agricultural sector.
Since the people involved in non-agricultural activities do not produce food, they naturally have to depend
on the agricultural sector for food. Again. there are certain industries, known as agro-based industries,
which buy inputs from the agricultural sector. Thus, cotton-textile industry, requires cotton and sugar
industry requires sugarcane as raw materials.
You may have heard about the Green Revolution of India which sought to usher in a new era in its
agriculture since the mid-60 is by improving agricultural productivity. Such method of crop production
involved increased dependence on pesticides, chemical fertilizers, pump sets, tractors, etc. which are
manufactured by the industrial sector. Thus, we see that agriculture is a supplier of wage-goods (food grains)
and raw materials to the industrial sector. While wage-goods are meant for final consumption by the
workers in the non-agricultural sector, raw materials are intermediate goods in the sense that, they are used
in the production process for the manufacture of final output like refined sugar, vegetable oils, tea, cotton
textiles, gunny bags etc. On the other hand, the industrial sector supplies goods for final consumption to the
agricultural sector (tea, textiles, sugar, transistors, bicycles, soap, etc.) it also supplies inputs (intermediate
goods) like fertilizer, pesticides, etc. to agriculture to facilitate production of grains. We shall now discuss
some other linkages between agriculture and industry .
'You may have noted the stark and grim poverty in the countryside of most of the third world countries and
have asked yourself why it is so One important problem with agriculture is that it suffers from severe
shortage of land. When the rural population increases very rapidly, for a greater part of the year people do
not have any work to do even if they want to work. These people are said to be seasonally unemployed.
Again there are cultivators who are working in their family farm round the year. But, often, the work that 3
persons could have done, is engaging say, 5 people. When five are doing the work of three, we say that two
are under-employed. These unemployed and underemployed people constitute surplus labour. Therefore, a
planning strategy involves steps towards rapid industrialisation involving a shift in the labour force from
agriculture to industry. Thus the agricultural sector can operate as a huge reservoir of surplus manpower to
be employed in industry. Unfortunately, not much success has been attained in this direction. The percentage
of population depending on agriculture has hardly undergone a change in the planning era.
Now we shall discuss the linkages between agriculture and industry from the stand point of mobilisation of
financial resources. Here we shall specifically discuss the issues of savings and taxation. You must have
noted the commercial banks operate with a huge net work of banks in the rural areas to mobilise deposits
from the rural areas. This has resulted, at least partially, in the transformation of 'unproductive' saving (in
general non-financial saving) in the form of land, hoarding of gold, jewellery, and money to 'productive'
financial assets which can be easily channelised for planned investment in industry and infrastructure.
While savings are of a voluntary nature, taxes are not. The government imposes taxes on commodities
individuals to mobilise financial resources for meeting its expenditure which is partly of a developmental
nature. The agricultural sector may be taxed and real resources mobilised for industrialisation.
However, sometimes, as in case of India, agricultural income-taxation has been almost ruled out in practice
on socio-political rather than economic grounds. The share of land revenue which could have been a major
component of state revenues has declined to insignificant levels. On the one hand, agriculture receives
subsidies from the government when it buys fertilizers and uses irrigation-water and electricity. There is an
element of inequity- within the agricultural sector as it is the well-to-do sections among the peasantry and
the comparatively more developed rural areas of a country which appropriated a sizeable chunk of the
subsidies. On the other hand, mass consumption goods constitute the major portion of the budget of the
poor. These goods provide a major tax base. Hence, the indirect tax structure when relied on become
regressive for the agricultural population. However, as far as direct taxes are concerned. the rural-urban
differential is more than for indirect taxes.
Taxation may be regarded as a direct instrument of resource mobilisation. The index of relative prices
between agricultural produce and non-agricultural produce is termed the 'Net Baker Terms' of trade between
agriculture and non-agriculture. Resources can be transferred from agriculture to non-agriculture by turning
the relative prices against agriculture. This resource transfer-occurs as, in order to obtain the same amount
of nonagricultural goods than it had to before. However, if the net barter terms of trade continue to move
against agriculture in the long run, this may operate as a disincentive against agriculture with the consequent
upward pressure on agricultural prices so that the transfer of agricultural resources in real terms may
decline. On the other hand, if the relative prices move in favour of agriculture, real income of non-
agricultural workers will fall as the bulk of the budget of the industrial workers is spent on wage goods,
such as food grains. If the workers are organised and can keep their real wages unchanged, industrial profits
fall with an adverse effect on industrialisation. So, perhaps, it is judicious to strike a balance between
agriculture and industry-in terms of both relative prices and quantities-so that an inflation free and steady
growth of agriculture and industry is possible in other words, it is important to maintain a sectoral balance
between agriculture and industry. A planning strategy must recognise this problem.

ii) Check your answer with that at the end of the unit.
1) In what ways are agriculture and industry mutually interdependent? (in six lines)
2) Why is a sectoral balance between agriculture and industry necessary ? (in six lines)
3) Cite three examples for each of the following: i) agro-based industries, ii) non-agro-based industries.
4) Point out the correct answer:
a) Marketed surplus from agriculture is i) the produce marketed by agriculture to the non-
agricultural sector, ii) the agricultural produce consumed within the agricultural sector, iii) non
agricultural produce marketed to the agricultural sector.
4) Which is voluntary taxes or saving ?

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Why are certain taxes called 'direct' and certain others indirect? (in six lines)
16.3 INDUSTRIES
The importance of industrialisation as a means for achieving self-sustained growth and development has
been a recognised development strategy in the planning era. The industrialisation strategy in general has had
the following objectives:
i) To increase production and productivity;
ii) To pursue self-reliance through establishing a broad-based industrial production structure;
iii) To encourage small-scale industries with a view to generating employment and fostering
entrepreneurial development. We shall discuss some of these objectives in the context of small
scale industries and capital consumer goods industries.
16.3.1 Small Scale industries

We have noted in the last section that, in the planning era, the percentage of population dependent on
agriculture has remained more or less unchanged in absolute terms, the number of agriculture dependent
population has increased leading to wide-spread unemployment and under-employment, causing mass
poverty.
It has been argued that, small scale industries which can be established even in remote rural areas, can
absorb the surplus manpower from agriculture. Given the structural features of an economy e.g. surplus of
labour, scarcity of capital and underdeveloped infrastructure, village and small scale industries can play a
significant role in the industrialisation endeavour.
16.3.2 Capital Goods and Consumer Goods Industries

A diversified and large-scale capital goods sector often is perceived as a proper route to realise the object of
attaining economic self-reliance. This type of industrialisation is referred to as `Import-Substitution Led
Industrialization'. industrial goods manufactured domestically - were to replace their imported counterparts.
Mobilisation of a huge amount of financial and physical resources as well as creation of a large reservoir of
skilled and technical manpower becomes necessary for this purpose. While the ultimate objective presumes
attainment of economic and technological self-reliance, in the initial stages, however, a large volume of
imports of capital goods, raw materials and technology is necessary as these are not available domestically.
The experience of former USSR and India may be remembered in this kind of a plan strategy.
Take the case of India, as an example. The industrial policy announced by the Government of India in 1956
stimulated the expansion of the capital goods sector consisting of iron, steel, chemicals, heavy engineering
and machine building industries, aluminium, cement, etc. Capital goods industry broadly produces
machines for either consumer goods sector or for capital goods sector. Thus a heavy engineering unit may
produce textile machinery (a capital good) which can be used in manufacturing textiles (a consumer good)
Again, an iron and steel industries unit may produce what can be used in a heavy engineering unit to
manufacture machinery to be used as an input in another capital goods industry (say, in a cement industrial
unit). The capital goods sector produces machinery for agricultural development-tractors, harvesters,
threshers as well as inputs for establishing multi-purpose irrigation projects (like cement, steel, etc.) and a
network of transport and communication. Also, it facilitates export of machinery and enables the country, to
earn scarce foreign exchange. Unlike the capital goods sector, which produces intermediate goods to be used
up in the production process, the consumer goods sector produces final goods for consumption. These
include non-durable goods like pulses, edible oil, sugar and salt, semi-durable goods like clothes, soaps and
shoes, and durable goods like passenger cars and houses. While some of these goods are necessaries or
essential consumer goods and satisfy the minimum basic needs of an individual (rice, salt, cheap cloth, low
cost housing, etc. ) some are luxuries (passenger car, airconditioner, cosmetics, etc.) and are non-essential
consumer goods it is imperative to maintain a balance between the production of the capital and consumer
goods sectors. If the balance is not maintained, the principles of equity and equilibrium get affected. This
may have an adverse impact on productivity and, therefore, on growth. An inflationary situation may
develop if the capital goods sector grows at a faster rate than that of the consumer goods sector.

1) How will you distinguish (in one sentence each):
i) capital goods from consumer goods

ii) durable consumer goods from non-durable consumer goods;
iii) luxuries from necessities; and
iv) large scale industries from small scale industries?
2) Cite three examples for each of the following:
i) small scale industries located in urban areas.

ii) capital goods industries
iii) village and handicraft industries.
iv) consumer goods industries.
3) Which is likely to generate more employment in general, given that each of these industries has
identical amount of capital:
i) a capital goods industry or a consumer goods industry?

ii) a large scale industry- or a small scale industry?
16.4 PUBLIC DISTRIBUTION SYSTEM (PDS) AND

SOCIAL WELFARE
If you live in a town, you may have come across people in a queue waiting eagerly for the ration in front of
a shop (i.e. fair pace shop as it is called) to open. Each individual can buy a fixed quantity of some of the
essential items one needs for one's basic consumption-rice, wheat, sugar, kerosene, etc. at a fixed price
which is below the price prevailing in the open market i.e. in shops which you do not call ration shops. Now
what is rationing all about? Why do we need it? What are its economic implications?
16.4.1 Historical Background

The Second World War (1939-45) witnessed a massive shortage of food grains because of a thriving black
market, so that prices skyrocketed. This resulted in a famine or near-famine condition as the poor could not
afford to buy from the open market. This implies a failure of the market mechanism (refer to unit 15). The
Government introduced public distribution system through which a minimum amount of essential consumer
goods would be distributed among specific social groups at a fixed price-lower than that prevailing in the
open market. Fair price shops were opened for this purpose. Ever since, the PDS has been strengthened and
its coverage widened. But, the rural areas are covered much less than the urban areas. The PDS was to
ensure economic and social justice by satisfying the basic minimum needs even during the period of
shortages. It was to ensure stabilisation of the variation in agricultural prices--prone to seasonal fluctuations
well as to serve as an effective instrument against hoarding, speculation and black marketing by
unscrupulous traders.
16.4.2 Functions
The PDS is supposed to provide two-sided shield to protect the poor: on the one hand, it protects the
interests of the poor producers by ensuring a certain minimum price for their produce. On the other hand, it
protects the poor consumers by supplying essential commodities at reasonable prices. The Government
announces procurement prices and minimum support prices before the commencement of agricultural
production. These administered prices act as signals to the producers which help them take decision as to
which crop to produce and in what quantity. The minimum support prices operate as a floor below which
the market price - determined by the forces of demand and supply- should not fall. Whenever there is a
tendency for the food price to fall below the minimum support price, the government's agents purchase the
commodities at the specified minimum support price The procurement price is the price at which the
government actually procures food grains from the agricultural sector. This procurement price may be either
equal to or greater than the minimum support price. The government also fixes the issue price at which the
fair price shops sell food grains to the consumers (ration card holders), which is lower than the price
prevailing in the open market. Apart from these price control measures, the government's buffer stock
operation aims at stabilising the quantity of food grains available for consumption. In the year of good
harvests the government's agencies buy food grains or raw jute from the producers and stores them in the
godowns and in years of poor harvest, when prices are running high, the government releases the stocks
through the fair price shops to keep the paces in check. For certain commodities like sugar, the PDS in India
works on a dual pricing mechanism. A certain proportion of, say, sugar is procured by public agencies. This
is distributed by the government through the ration shops at a fixed price in specified quantities per head to
the consumers possessing ration cards. The producers sell the rest in the open market at whatever pace the
market can fetch them. In this way the interests of both producers and the consumers are served: the former
can recover their cost of production of sugar and earn profits; while for the latter, basic minimum needs are
satisfied through the public distribution network.
16.4.3 Suggestions For Improvement

The PDS can play a better role in distributing essential commodities if
i) Interruptions in the supply line which create great hardships for the people can be prevented and
supplies made adequate, regular and of standard quality:
ii) It is revamped, strengthened and expanded further to cover all areas in the country, particularly the
backward, remote and inaccessible pans;
iii) It reaches the deprived social groups especially those living below the poverty line, such as landless
rural labour;
iv) Buffer stocks with the government can be increased;
v) Storage and transport problems, which result in large losses, can be overcome;
vi) Management and distribution of ration cards and malpractices in the operation of the PDS at
procurement, stocking, distribution etc. levels can be done away with; and
vii) It is not used as an instrument of political patronage. Besides, it would be necessary to revamp and
strengthen the existing arrangements. In the states where a strong cooperative movement exists, the
apex Consumer Cooperative and Marketing Societies may take up the responsibility of procurement,
storage, movement and distribution of essential commodities. Civil Supplies Corporations are being
established by the State Governments to make the essential items available to the weaker sections of
the community in remote areas. Further, efficient and socially-oriented marketing techniques should
be utilised to reduce the cost of distribution. Mobile fair price shops need be organised at centres
where development of construction works are in progress. Under the plan projects, in tribal areas,
arrangements may have to be made to supply goods to the tribals on barter. As long as poverty
persists and there are problems of scarcity, the PDS is bound to play a significant role in ensuring
social and economic justice, especially for the weaker sections.

1) Explain, in one sentence, each the following terms:
i) minimum support price

ii) procurement price
iii) issue price.
2) How will your relate the public distribution system with the concept of economic justice?
3) What is dual pricing system? How does it protect the interest of both producers and consumers?
4) Suggest five important measures for further strengthening the public distribution system.
16.5 MULTI-LEVEL PLANNING (MLP)

Planning in many countries in its initial stages was conceptualised on two levels only- (a) National and (b)
State. As a result, though some of the fruits of planning have trickled down to the grass roots level, there
has been no substantial change in the conditions of the masses. Hence, of late, there has been a growing
realisation that there should be multi-level planning or planning at different levels-state, district, block and
down to the village level.
If you are from (or have been to) a village, you may have noted that even neighbouring villages may not
have identical soil, access to water and land-gradient. This may call for different techniques for cultivating
different plots of land. So, if a planner - planning from a far away city and unaware of the differences in the
optimum input requirements- prescribes uniform inputs for all plots of land, actual output will fall short of
its potential resulting in a loss for the producers. Hence, in order to optimise production, it is necessary to
have planning at the grass roots level. This is, however, but only one example which shows the necessity,
of having multi-level planning rather than planning only at National and States level. Decentralised
planning enables a better perception of the needs of all areas, makes better informed decision making
possible, gives people a greater voice in decisions concerning their development and welfare, serves to
achieve better coordination and integration amongst programmes, enables the felt needs of the people to be
taken into account and ensures effective participation of the people. It also serves to build up a measure of
self reliance by mobilising resources of the community in kind or money, making development self-
sustaining, helps in better exploitation of local resources for larger social good and facilitates productivity.
Hence, it is imperative to decentralise planning so that fruits of progress reach all sections of the population.
Microlevel planning in may countries has not received the desired attention and support, although its
importance has been emphasised in various official reports. Planning at the grass-root level in regard to the
programmes for rural development may show useful results. Nevertheless, it should be kept in view that the
planning process is not free from complexities and problems. The important handicaps lacunae in the
implementation of multi-level planning could broadly be grouped as follows: i) the decision making
powers/ functions tend to be concentrated confined to the higher levels of the administration: ii)
involvement of the local people with the activities of the development and welfare could be marginal; iii)
district or block level developmental bodies may have little or no autonomy; iv) broad-basing of the
institutional mechanism with the active involvement of local representatives is often ineffective; v)
provision of effective infrastructure to assist the developmental process at various levels in inadequate; and
vi) the objectives of planning as also the need of the national, state, district and local level are often not
clearly understood by each. They fail to operate within the framework that has been allotted to them.

1) What is multi-level planning ? Do you think that it is superior to centralised planning? Give two
reasons.
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2) What are the 'levels' that constitute multi-level planning ? Start from the apex.
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16.6 LET US SUM UP

The unit deals with planning strategies in the specific context of agriculture - industry interdependence,
public distribution system, industrialisation strategy and multi-level planning. We have noted that India's
planning strategy recognises the numerous linkages between agriculture and industry and stresses the
importance of balanced sectoral growth and price stability. Problems encountered in Indian planning have
been discussed. The public distribution system operates as an instrument of ensuring economic and social
justice although there is scope for further improvement. We also noted that India's industrialisation strategy
aims at attaining economic self-reliance by establishing a large scale capital goods base. On the other hand,
small scale industries are supposed to provide gainful employment and alleviate poverty. These can also
facilitate rural industrialisation We have noted that by bringing planning closer to the masses, a greater
involvement of the people will result in a greater momentum in the planning process. Hence the rationale
for multi-level planning.
16.7 KEY WORDS

Capital Goods Industries: Industries which manufacture goods facilitating further production of consumer
and capital goods.
Consumer Goods Industries: Industries which manufacture goods for final consumption.
Direct Tax: A tax for which the burden cannot be shifted by an economic unit on whom the tax is imposed,
e.g. income tax, corporation tax, etc.
Dual Pricing System: A system in which a commodity has two prices - one officially set price prevailing in
the fair price shops and the other in the open market.
Foreign Exchange: Currencies of foreign countries, e. g. U. S. dollar, U.K.'s pound-sterling, Japanese yen,
etc.
Green Revolution: A complete change in agricultural production technology to boost agricultural output
with the help of high yielding variety seeds supported by fertilisers, pesticides and controlled irrigation.
Indirect Tax: A tax for which the burden can be shifted by an economic unit on whom the tax is imposed,
e.g. excise duty, sales tax, etc.
Marketed Surplus: The amount of output sold by farming households after allowing for self-consumption
and input requirements.
Multi-level Planning: Planning at different levels ensuring proper integration and co-ordination among
them so that all sections of the population can participate in as well as receive fruits from the planning
process.
Labour Surplus Economy: An economy where the people willing to work are more in proportion to other
factors like land and capital, so that a segment of the labour force remains unemployed/under-employed.
Real Income: Money income corrected for changes in prices indicating an actual command over goods and
services purchased from the market.
Under-employment: A situation between total unemployment (no job at all) and full employment.
Wage-goods: Goods for mass consumption or necessaries like cereals, cheap clothes etc. comprising the
subsistence need of the workers.

Chaudhury, Pramit, 1978, The Indian Economy, Vani Publications, Delhi.
Chakraborty, Sukhomoy, 1987, Development Planning, Oxford University Press, New Delhi.
Kamta Prasad, 1984, Scope and Functioning of the Public Distribution System in India, in Economic Policy
and Planning in India (ed.) Singh, A N, Papola, T.S., and Mathur, R.S., New Delhi, Sterling Publishers, pp.
207-30
Papola, T.S.. 1982, Rural Industrialisation Approaches and Potential, Himalaya Publishing, Bombay
Government of India, 1985, The Seventh Five Year Plan, Planning Commission, New Delhi.
Government of India, 1969, Multi- Level Planning, Planning Commission, New Delhi.
16.9 ANSWERS AND/ OR HINTS TO CHECK

YOUR PROGRESS
1) Hint: In your answer you have to point out the goods that agriculture supplies to industry and vice-
versa see paragraphs 2-6 of Section 16.2).
1) See the last paragraph of Section 16.2.

2) i) agro-based industries: cotton textiles, sugar industry, natural rubber industry.
ii) non-agro based industries: iron and steel industry, petrochemicals industry and cement industry
4) a) i
b) i
5) Saving is voluntary. .
6) If the burden of a tax cannot be forthwith shifted by an economic unit on whom the tax is imposed,
that tax is called Direct Tax. Thus, an individual has to pay an income tax (a direct tax) if his
income exceeds a minimum stipulated amount. If the tax-burden can be shifted, then that tax is
called indirect Tax.
Examples of direct tax: Wealth Tax, Corporation Tax, Estate Duty.
Examples of indirect tax: Excise duty, Sales Tax, Customs Duty.

1) i) See section 16 3.2
ii) Durable consumer goods are those which can be used again and again over a period
of time e.g. houses, non-durable goods can be used only once, and/or get used up
quickly
iii) Luxuries are those consumer goods which an individual can well do without e g.
cosmetics. Necessities satisfy the basic minimum needs of an individual e.g. rice
cheap clothes, etc.
iv) Hint: The distinction is based on 'scale' or the volume of output manufactured by an industrial
unit, besides the amount of capital and the number of labourers it employs.
2) See Sub-section 16.3.2. You are, however, most welcome to cite examples on your own
3) i) A consumer goods industry

ii) A small scale industry

1) See Sub-section 16.4.2 (Ist paragraph)
2) Hint: Stress the role of PDS in facilitating availability of foodgrains at a reasonable pace to a wide
section of the population-especially the weaker sections. Also mention how it helps the producers
of food grains (especially Ist and last paragraph)
3) See Sub-section 16.4.2 (4th paragraph)
4) See Sub-section 16,4.3

1) See section 16.5 (especially the first 3 paragraphs)
2) See section 16.5 (Ist paragraph). Note that there are five levels which constitute multi-level
planning.
UNIT 17 POPULATION AND DEVELOPMENT
Structure
17.0 Objectives
17.1 Introduction
17.2 Over-population and Economic Development
17.2.1 Recent Developments of East Asia and Population Growth

17 2.2 U.N. Agenda for Population Management
17.3 Demographic Transition
17.3.1 Demographic Transition: A Historical Process

17.3.2 Three Stages of Demographic Transition
17.3.3 Demographic Characteristics of Today's Developing Countries
17.4 Some Adverse Consequences of Rapid Population Growth
17.5 Policy to Control Rapid Population Growth
17.5.1 Influence of Development on Fertility (Birth Rate)
17.5.2 Is Economic Development the Most Effective Way of Reducing Fertility?
17.6 Let Us Sum Up
17.7 Key Words
17.9 Answers to Check Your Progress/ Exercises
17.0 OBJECTIVES
After studying this unit you should be able to
judge the relationship between population and development;

examine the idea of over-population state the concept of demographic transition;
comprehend the demographic characteristics of developing countries;
explain the nature of population problem faced by developing countries; and
suggest proper policy measures to be followed by developing countries.
17.1 INTRODUCTION
Perhaps it will take little time for you to agree with the proposition that human beings are a vital resource for
economic development. But to specify the relationship between economic development and growth of
population, it will be difficult to come out with an unambiguous answer. To your surprise, you will find
economies of many third world countries, notwithstanding a higher growth rate of their population, are the
least developed economically. Some of the most developed countries, on the contrary, will give you very
low rate of population growth. Such a scenario of the present-day world, therefore, will compel you to think
seriously in terms of a negative relationship between economic development and population growth.
17.2 OVER-POPULATION AND ECONOMIC
DEVELOPMENT
Essentially, what you are contemplating in the form of a relationship is the phenomena of so-called `Over-
population'. it depicts a situation, where human population has increased beyond the means of subsistence.
Thus a higher growth area in terms of population does not provide the basic needs of life such as food, cloth
and shelter. The third world countries have become the victim of such an eventuality The fear of over-
population is not new. Economist Malthus, as early as 1798, had expressed strong apprehensions on
population growth over-taking output growth. He thought that nature would reduce the excess number by
causing calamities and diseases. However, technological inventions subsequently helped increase
production and the seriousness of the problem was over-looked. The implications of population growth
resurfaced in recent years with the persistence of poverty and hunger in many parts of world .The over-
population perception has given rise to a number of prescriptions that aim at bringing down the growth rate
of population in the third world countries. It is asserted that such a move would allow the benefits of
economic development to reach the poor masses.
17.2.1 Recent Development of East Asia and Population

Growth
In order to convince others that a control of population growth could result in better quality of life, the
policy makers often draw attention to the experience of East Asian countries, viz., Hong Kong, Indonesia,
South Korea, Malaysia, Singapore and Thailand. These countries have been pointed out to be in the group
of third world during the fifties. But rapid economic development has come about there to solve the
problem of poverty, in the meantime. The average annual growth of population has witnessed a much faster
rate of decline in all of them. A comparison of this feature with other countries of Asia and Africa shows a
difference. Look at Table 17.1 it shows the difference in population growth of Asian and sub-Sahara
African countries during 1960-70 and 1980-90. It can be seen from the table that in the East Asian group,
Hong Kong has a growth rate of 2.5% per annum during 1960-70. But it came down to 1.4% per annum
during 1980-90. Similarly, in Thailand, the growth rate declined to 1.8% per annum during 1980-90, from a
higher rate of 3 1% per annum during 1960-70. The declining feature
Table 17.1
Change in Population growth of

Sub-Saharan Africa, South and East Asian Countries
Economy Average annual growth of Population (in %)

1960- 70 1980-90
East Asia
Hong Kong 2.5 1.4
Indonesia 2.1 1.8
South Korea 2.6 1.1
Malaysia 2.8 2.6
Singapore 2.3 2.2
Thailand 3.1 1.8
Sub-Saharan Africa
Ghana 2.3 3.4
Kenya 3.2 3.8
Sierra Leone 1.7 2.4
Tanzania 2.7 3.1
South Asia
Bangladesh 2.5 2.3
India 2.3 2.1
Nepal 1.9 2.6
Pakistan 2.8 3.1
Source: World Bank, 1993, 'The East Asian Miracle "'
similar to Hong Kong and Thailand, was evident in the remaining countries of East Asian group. In contrast
to these, sub-Saharan Africa showed an increase in the rate of population growth. As might have been seen,
Ghana recorded an increase from 2.3% per annum during 1960-70 to 3.4 % per annum in 1980-90. Other
countries of this group also showed the same tendency as Ghana.
In South Asia group, population growth was not uniform. While Bangladesh and India succeeded in
bringing down the growth rate of their population marginally, the remaining two, Nepal and Pakistan,
followed the tendency of sub-Saharan Africa group. Thus, from a growth rate of 1.9% per annum, during
1960-70, Nepal went on to 2.6% per annum in the succeeding decade. Pakistan also followed Nepal, as its
population growth during 1960-70 was 2.8% per annum but increased to 3.1% per annum subsequently.
17.2.2 U.N. Agenda for Population Management

The perception that control of population growth rate is necessary for solving the economic development
has been pursued seriously at important world bodies like United Nations. The World Population
Conference held in Bucharest, 1974, had sent the message in a similar vain. The Plan of Action highlighted
in the conference has been an integration of population planning with economic planning. More recently,
since 1994, the United Nations has organised three conferences - in Cairo, Copenhagen and Beijing -themes
of which are focused on population as a critical input for development. While the international Conference
on Population, held in Cairo in September 1994, emphasised the new thinking on meeting reproductive
health needs, the one held in Copenhagen in March 1995 (viz., World Summit on Social Development)
examined issues of poverty, employment and social integration. The Fourth World Conference on Women
held in Beijing, 1995, explored ways to enhance women's full and equal participation in the present-day
society. A common thread that runs through these conferences is the need for initiating action on population
management which will fit into the development model of industrialised society.
Check Your Progress

Tick mark (9) the correct statement:
1) Rapid increase in population in developing countries has:

a) an adverse impact on the pace of economic development;
b) made better off families smaller than poorer families;
c) accelerated the process of urbanization;
d) all the above features.
2) Write a note on the relationship between population growth and economic development
3) Fill in the blanks choosing suitable word (or words) from the brackets given below:
a) For today's India the ………… faster/slower) population grows, the………… (grimmer brighter)
becomes her struggle to survive.
b) The World Summit on Social Development held in Copenhagen, 1995, examined issues of
poverty, employment an…………(social integration, population planning, women's participation in
society).
c) The relationship between population and development ....... (has become/has not become) an
issue of world wide debate since the 1950s.
d) The United Nations World Population Conference held in ................(Geneva Bucharest) in 1974
adopted a Plan of Action.
4) Why is it believed that the third world countries are over- populated? (write in about 100 words)
5) Indicate whether the following are True (T) or False (F):
a) People who believe that poverty is the result of over-population, often point to empirical
evidence of East Asian countries. ( )
b) population growth should be modified to suit the prevailing economic situation.( )
c) Poor people and high birth rate are not generally related . ( )
d) An initial reaction on the relationship between population and development is likely to have
problems.( )
6) Compare the change in recent years' population growth rate between East and South Asian countries
17.3 DEMOGRAPHIC TRANSITION

The underlying idea behind population growth commensurate to economic development is based on
demographic transition that comes about in an economy. Formulated by Frank Notestein in 1953, the theory
of Demographic Transition makes an attempt to document the experience of developing countries as
effected by the present-day economic growth.
17.3.1 Demographic Transition: A Historical Process

Demographic transition explains a form of relationship between population and economic development. In
the western countries it has been found that they have moved from a condition of high birth and death rates,
to a condition of low birth and death rates which led to a slow rate of growth of population. This
demographic change is known as 'Demographic Transition'. in other words, demographic transition
describes the passage through which countries move from high birth and death rates to low ones. This has
been the experience of countries going through a process of modernizing economic and social development.
However, it must be kept in mind that, the reasons for this change are very uncertain. There is no simple,
continuous and quantitative relationship been economic development and the decline in birth and death
rates.
17.3.2 Three Stages of Demographic Transition

The inter-relationship between population and economic development may be divided into three stages:
i) The first stage is characterized by high birth and death rates. These features give rise to low population
growth. To understand the forces that generate this situation you have to remember a society whose
economy is dominantly agrarian and level of technology is traditional. High death rates in such a society
could be due to chronic malnutrition, famines and epidemics, inadequate medicinal and health services and
poor living condition. High birth rates are influenced by the socio-cultural system (i.e. illiteracy, early
marriage, traditional values, religious beliefs, demand for family labour, etc.). The difference between high
birth and death rates becomes narrow resulting in one percent per annum or less growth rate of population.
Sometimes, it may even tend to stagnate at a particular level.
ii) In the second stage of demographic transition, death rate begins to decline. There is beginning of the
process of economic development. Better nutritional components are included in food and living condition
improves. However, the birth rates continue to remain high. Consequently, there is an increase in the growth
rate of population and it tends to grow quite rapidly.
iii) During the third stage when the country's economy is properly developed, the already low death rates
decline further only slightly. Birth rate, on the contrary, goes down rapidly. The low birth and death rates are
now stabilized resulting in a low population growth rate.
It is expected that today's developing countries, if successful in their development efforts, would also reach
the third stage of demographic transition.
17.3.3 Demographic Characteristics of Today's Developing

Countries
In today's developing countries we find the following features regarding their population growth:
i) High population growth rates, and
ii) Inadequate opportunities for the absorption of manpower.
The high population growth rates are due to high birth rate and fast declining death rates due to better
sanitation and health facilities. However, the capacities to absorb increasing manpower are much weaker.
Furthermore, the process of economic development tends to be more capital intensive under modern
technological conditions, and hence, has less potential of employment generation in the short run. Since the
total size of the population is already large, there is an urgency for speedy achievement of demographic
transition from high birth rate to low birth rate resulting in lower population growth.

1. Fill in the gaps selecting appropriate word/ words given in the brackets.
a) Economic development itself would release forces which would induce…………….

(decline/increase) in population growth rates.
b) Any independent policy of population control in a developing country

is…………….(necessary/unnecessary) and ………..(wasteful/fruitful).
c) Economic development …………(takes/does not take) time and a developing country

…………..(can/ cannot) wait for such a distant possibility.
d) It is very …………..(easy/difficult) to establish a very clear cut relationship between

economic development and population growth.
2. Identify whether (he following statements are true (T) or false (F).:
a) There is a reciprocal or bi-directional relationship between population and economic

development( )
b) Whether a growing population is conducive to or constraint on development would depend

upon a combination of number of factors. ()
c) Theory of Demographic Transition was as developed by Thomas R Malthus. ()
d) The long term historical trend in population is to maintain slow population growth rates.
3 Explain the demographic transition and its three stages in about 150 words.
4 State the demographic features of today's developing countries in five lines
17.4 SOME ADVERSE CONSEQUENCES OFRAPID

POPULATION GROWTH
It may be useful to throw light on some of the problems arising out of the rapid population growth in the
third world. They are:
i) Providing employment to growing population. This is so because in developing economies majority of

the population is illiterate. The burden of school age population has already shown signs of becoming
unbearable. The proportion of children in schools is increasing fast and, vast numbers are still not covered.
The absolute number or illiterate persons increases every year. This is only an indication of the wastage of
human resources for want of appropriate development opportunities.
ii) Problem of utilisation of manpower. Better educated manpower aspires for occupations of greater
prestige, which are opened up by the new development efforts. Because of its capital intensive nature, the
ability, of the new economy for employment generation becomes restricted. Simultaneously, it renders
many of the old occupations out of day and redundant. As a result, under-employment and unemployment,
including unemployment of educated persons, increases. There is thus wastage of even developed human
capital.
iii) Over-strained infrastructure. Facilities such as housing, transportation, health care, and education
become inadequate. The worst symptoms of congestion in every aspect of living conditions are manifested
in the urban areas. In countries such as India, a situation of "over urbanisation" prevails which puts
unbearable strain on urban amenities. Overcrowded houses, slums and unsanitary localities, traffic
congestion and crowded hospitals have become common features in the developing countries.
1) Pressure on land and other renewable natural resources. Common properties such as forest and water
are over-exploited. This results in deforestation and desertification with permanent damage to the renewable
resources.
v) Increased Cost of Production. Human ingenuity and technological advancement makes it possible to
increase production of goods and services. But, it must be kept in mind that, the cost of production of the
basic necessities of life, such as food, increases when the population is growing fast and worse lands are
brought into cultivation with costly irrigation etc.
vi) Inequitable Distribution of Income. Both at the international and national levels income disparities
increase. The increase in gross national product (GNP) is greatly reduced in per capita terms on account of
the rapidly growing population. In the face of a rapidly growing population, the major concern of a
developing country tends to be focused more on economic growth as such. Consideration of unequal
distribution of income are pushed to background. So inequalities within the country tend to widen further.
17.5 POLICY TO CONTROL, RAPID POPULATION

GROWTH: INTEGRATION OF POPULATION
POLICY WITH DEVELOPMENT POLICY
Seen in terms of on-going development models, one of the most serious problems faced by the developing
countries is the control of the rapid rate of growth of population. It has become therefore, necessary to
evolve on appropriate population policy . In such a context a major objective of the population policy has to
be one that takes into account the influence of economic and social development on fertility.
17.5.1 Influence of Development on Fertility (Birth Rate)

Different explanations about the influence of development on fertility can be seen in the following:
i) One explanation is based on the observation or experience of the present-day developed countries.
According to this, higher the level of economic development of a country, the lower is the level of fertility.
It must be emphasized that this explanation assumes that in developed countries children are regarded by
parents as durable consumer goods. With economic development parents become very much
conscious about the economic costs and benefits of raising children. This attitude has a distinct effect on
fertility and the size of the family.
ii) Another explanation regarding the influence of economic development on fertility takes into account the
love and affection which parents have for their children. This is known as 'Affective Aspects of Motivation'
for child bearing. According to this explanation, in limiting the size of their family, the parents are
influenced by their consideration for the future career of their children. Thus, it is not so much the
disincentive of increasing cost resulting in reduced economic returns from having a large family, but the fear
that the large size of the family would reduce their ability to provide adequately for the future of their
children, which is important. This fact discourages parents from having a large family.
It must be remembered that during the early phase of demographic transition, children inherit the social
status of the parents. Because, at that time, family is the unit of production. But with economic development
the economy becomes organized. As a result of the emergence of the organized economy children have to
achieve their social status outside their homes, and parents become very much aware of the new
responsibility of equipping their children for a satisfactory economic adjustment. The problem of
satisfactory economic adjustment tries to ensure that children do not fall below the social status of the
parents. This explanation confirm our general experience that persons coming from a larger family tend to
fare worse than their parents, in their careers. Therefore, parents who are aware of these now tend to have
smaller families because they want to train and equip their children for fulfilling occupational roles outside
their homes.
17.5.2 Is Economic Development the Most Effective Way of

Reducing Fertility ?
It may be emphasized that the above two explanations emphasize the influence of economic development on
the size of the family and fertility. But, since they offer different explanations, we cannot conclude that
economic development will automatically bring down fertility. Hence the view point that economic
development is the most effective contraceptive cannot be taken as the only factor that matters in population
policy. It is as much important for a developing country to deal with its problem of rapid population growth
by integrating population and family planning with development planning.

1) Point out five adverse consequences of rapid growth of population.
2) Fill in the blanks taking word words given in the brackets:
a) Because of capital intensity, the ability of the economy

for……….(employment/unemployment) generation becomes restricted.
b) In India, majority of the population is………… (literate/illiterate), and as such, the burden
of school age population has become………(bearable/ unbearable).
c) A rapidly growing population…………(over-strains/facilitates) the available infrastructure
and opportunities
d) India is facing a situation of …………..over urbanisation/ under urbanization).
e) The children and the elderly are economically………….. (independent/dependent)
3) Select five adverse consequences of rapid growth of population from the following:
i) Increased proportion of non-working population.

ii) Decline in dependency ratio.
iii) Increased per capita availability of food grains.
iv) High level of capital formation
v) More expenditure on maintenance of social services.
vi) Unemployment increase.
vii) Rate of increase in per capital income rises.
viii) Increased pressure on existing services.
ix) Rise in social tensions.
4) Identify the following statements as true (T) or false (F):
i) The rapidly growing population due to high birth and rapidly declining death rates give rise to
distorted age structure. ( )
ii) In a developing economy, where death rate has fallen fast, and the decline in birth rate is very slow,
the percentage of children in the population tends to fall.( )
iii) People in developed countries have much less children than people in developing countries
iv) opportunity Costs of raising many children are much less in developed countries than
indeveloping ones.( )
v) During the earliest phase of demographic transition children inherited the social status of
the parents.( )
5) Is economic development the most effective way of reducing birth rate ? Write your answer
in about 100 words.
17.6 LET US SUM UP

The rapid population growth in many third world countries and persistence of poverty has given rise to the
view of over-population possibility. There is, therefore, a major move throughout the world to bring down
the growth rate of population. Development experience of recent years shows that there is a long run trend
towards slow growth of population in a country. This is secured by balance between birth and death rates.
Before the commencement of modern economic development, countries were in the first stage of
demographic transition. At that time countries had slow population growth because of a balance between
high birth and death rates. But, as a result of economic development, developed countries have again
attained slow growth in their population. Birth and death rates in these have become quite low. Such
features have been noticed during the third stage of demographic transition. However, the balance between
birth and death rates is upset during the second phase of demographic transition because of the death rates
declining faster than the birth rates.
The present-day developed countries faced the problem of explosive increase in population which has been
put under the second phase of demographic transition. It happened more easily because of congenial
circumstances such as vast sparsely inhabited areas existing in those times. But today's developing countries
are experiencing a much faster growth in their population under conditions different than those faced by the
developed countries. Thus they are faced with huge problems of imparting education, employment, urban
development and environmental degradation. The need to tackle these problems has led to the necessity a
clearer understanding of the relationship between population and development.
The major problem faced by the developing countries is to bring down their birth rates, i. e. fertility.
Therefore, understanding of the relationship between development and fertility becomes very significant.
There are experts who think that unless fertility is first restricted, sustained economic development is not
possible. At the other extreme there are others who assume that fertility is dependent upon economic
development. This means that we should concentrate our efforts on development planning, which would, in
turn, reduce fertility. Thus, it seems that the nature of the relationship between fertility and development is
reciprocal. As the exact nature of this relationship is yet to be fully established, the proper course for a
developing country would be to follow integrated policies in regard to both population and development.
17.7 KEY WORDS

Age Dependency Ratio: The ratio of number of persons in the age-groups defined as dependent (under 15
years and over 64 years) to those in the age groups defined as economically productive (15-64 years) in a
population.
Age-group: Part of the population put together because of their age level being comparable with respect to
some characteristics and/or purpose. For instance, an age group could be all persons aged from 0-14 years
or another could be all persons aged sixty-five and more.
Age-sex distribution: The number and percentage of males and the number or percentage of females in
each group of the population.
Age-structure: The number of people or percentage of the population in each age group. In developing
countries proportion of young people below 15 years is high; in developed countries, because of long life
expectancy and low birth rates proportion of old people of 65 years of age, or more, is increasing.
Birth Rate or Crude Birth Rate: The number of births in a year per thousand persons in the total
population. (Not to be confused with growth rate).
Burden of Dependency: Concentration of the population of developing countries in the young, non-
productive ages, a situation which is less favourable to production and proportionately more burdensome
with respect to consumption and social overhead investment. Similar concentration takes place in the
developed countries in the old age-group of 65 years and more, who are also retired from the labour force
and have to depend on the rest of society.
Capital Intensive: A form of production in which the proportion of capital employment is large relative to
labour.
Capital-Labour Ratio: The ratio of capital to labour in an economy, (an industry or a firm).
Death Rate or Crude Death Rate: The number of deaths in a year per thousand persons in the total
population.
Demographic Transition: The historical shift of birth and death rates from high to low levels. The decline
of mortality usually precedes the decline in fertility thus resulting in rapid population growth during the
transition period. It has been devised with particular reference to the experience of developed countries
which have passed through the process of industrialisation and urbanisation.
Demography: (Greek: demos (people) + graphic (study), The scientific study of human populations,
including their size, composition, distribution, density, growth and other demographic and socio-economic
characteristics, and the causes and consequences of changes in these factors.
Dependency Ratio: The proportion of dependents in the population relative to the working population.
Desertification: The spread of like conditions in and or semi-arid areas due either to careless human
interference or to climate change. Often, it is the result of a combination of increasing human pressures and
spell of rainless lean years.
Durable Consumer Goods: Goods purchased by consumer for use over a relatively long period, e.g. cars,
washing machines, television, VCR, furniture etc.
Infrastructure: The underlying structure of services and amenities needed to facilitate industrial,
agricultural and other economic development, called economic infrastructure. It includes the provision of
transport communications, power supplies, water etc. investment in infrastructure is considered necessary
for economic development. There are social infrastructures also, indirectly associated with economic
development, such as health and education facilities.
Labour Intensive: A form of production requiring a high proportion of labour in relation to capital.
Malthus Thomas R (1766-1834) English clergyman and economist famous for his theory (expounded in the
"Essay on the Principle of Population") that the population of the world tends to increase faster than the food
supply and that unless fertility is controlled, famine, vice, disease and war must serve as natural checks on
population.
Occupation Structure: The distribution of economically active population i.e., working population into a
large number of employment or productive activities; Such activities are broadly categorized into primary,
secondary and tertiary sectors representing agriculture industry and services respectively.
Population Explosion: Expression used to describe the 20th century world wide trend of enormous and
rapid population growth resulting from a world birth rate much higher than the world death rate.
Population Growth Rate: The rate at which the population is increasing (or decreasing) in a given year due
to natural increase and net migration, expressed as a percentage of the base population. Natural rate of
population increase is the gap between birth and death rates in India, the combination of still high fertility
and much reduced mortality (death rate) led to population growth rate of around 2 per cent or more a year.
Population growth rate increased as death rate has continued to fall.
Population Increase: The total population increase resulting from the interactions of births, deaths, and
migration in a population in a given period of time.
Population Policy: Explicit or implicit measures instituted by a government to influence population size,
growth, distribution or composition.
Population Problem: For most developing countries, it is largely a problem of rapid growth rates. Rapid
growth rates in population are problematic in two respects: (a) they may slow down economic growth, and
(b) under certain conditions, they may increase income inequalities and worsen the condition of the poorer
groups.
Sex Distribution: The number of males in the population compared to that females.
Subsistence Level: The Standard of living below which human life cannot be maintained.
Under-employment: The employment of a worker in a job that either does not offer sufficient hours of
work to get him his due personal income or the income it fetches is too low for the satisfaction of his basic
needs even though he works full time.
Underdeveloped Countries (Third World or Developing or Less Developed): Those countries which for
some reasons have been slow in developing their economic resources with the result that their peoples have
a much lower standard of living than that enjoyed in the more economically advanced countries of Europe
and North America
Under-development: The lack of self-generating force or dynamic (or the presence of counter-productive
forces) in the economy, also marked by the underdeveloped social conditions of existence.
Unemployment: The difference between total employed workers and the labour force
(persons 15 years older, but less than 65 years, looking for work). This number as ratio of the labour force is
the unemployment rate.
Urbanisation: The process of becoming urban. In general usage urbanisation is associated with the
concentration of population in towns and cities. As a demographic phenomenon, urbanisation is interpreted
as a process involving the absolute and relative growth of towns and cities within a defined area. Usually,
they are identified as centres of social change with different attitudes, values and behaviour patterns. These
places are modified in the particular milieu of the urban place, characterised by its size, its density, and the
heterogeneity of its inhabitants. An urban area is usually supposed to spread its characteristics to the rest of
the society of a country or region by process of diffusion, which, however, may not always happen,
particularly in countries with colonial legacy.
Young Population: A population with a relatively high proportion of children, adolescents, and young
adults, and thus a high growth potential.

Cassen, R.H. (1979): India: Population, Economy, Society, Chapter I (pp 9-32), Chap 4 (pp 221-231, 245-
250, 272-279), Delhi, Macmillan.
United Nations (1982): Population of India: Country Monograph Series No. 10, Economic and Social
Commission for Asia and the Pacific (ESCAP), Chap 5 (pp107-108), Chap 8 (pp 176-187).
17.9 ANSWERS AND/OR HINTS TO CHECK YOUR

PROGRESS /EXERCISES
1) ``d,,
2) See section 17.1 and 17.2 and frame your answer
3) a) 'faster' and 'grimmer' or 'slower' and 'brighter'

b) 'social integration'
c) 'has become'
d) 'Bucharest'
4) See section 17.2
5) a) T
b) T
c) F
d) T
6) See section 17.2 and frame your answer.
1) a) b)
c) takes, cannot
d) difficult
2) a) T
b) T
c) F
d) F
3) See Sub-sections 17.3.1 and frame your answer.
4) See Sub-section 17.3.2 for your answer.

1) i) Pressure on available infrastructure and opportunity
ii) Restricted employment opportunities
iii) Increased burden of dependency ratio
iv) Pressure on land and other renewable resources
v) Worsening of distributional justice.
2) a) employment,
b) illiterate, unbearable,
c) over-strains,
d) over-urbanisation,
e) dependent.
3) i), v), vi), viii), ix).
4) i) T ii) F iii) T iv) F v) T
5) See section 17.5.2 and attempt your answer.

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UNIT 13 DEVELOPMENT: GOALS

13.2.1 Economic Growth versus Economic Development

13. 5.1 Historical Factors and Goal Setting

explain the meaning of the term economic development;

13.2 MEANING OF DEVELOPMENT:

13.2.1 Economic Growth versus Economic

13.2.2 Economic Development: A Wider Concept

Development as growth and carried beyond a point thoughtlessly, or by way of imitation

Check Your Progress

Circle the correct answer

1) Economic Growth is:

2) Which of the following does not characterise economic development?

3) Economic growth is desirable because:

4) Which of the following statements about economic development is true?

6) Indicate whether the following are true (T) or false (F):

7) Write five lines on what you know about economic development.

13.3 GOALS OF INDIAN

1) Growth of national income;

2) Reduction of income inequality among different classes and regions;

3) Reduction of inequality in the private ownership of the means of production,

6) Provision of basic minimum needs;

7) Ecology conservation and environment protection;

8) self-reliance of the national economy.

In the preceding section, we discussed in detail development viewed as growth. But

13.3.1 Relation among Goals: Conflicting and

Description Initial Position Final Positions I II III

Check Your Progress 2

1) What are the four basic objectives of planning in India?

i) Growth by itself ----------------------------------- ensures a fair distribution

ii) Building a just and equitable social order -----------------------------basic

iii) "Growth with social justice" is the -------------------------------goal of

iv) The objective of self-reliance------------------------------------- import of

i) A complementary relationship exists between employment generation

13.4 DEVELOPMENT GOALS AND TIME

13.4.1 Development Target, Time-Horizon and

13.5 FACTORS DETERMINING GOAL

13.5.1 Historical Factors and Goal Setting

13.5.2 Socio-economic Problems and Goal Setting

13.5.3 Political Process and Goal Setting

Check Your Progress 3

i) Objectives are set to be achieved but achieving them require time

i) India is characterised by ---------------- (low/high) per capita income and a more--

ii) The problems of India stem from ------------- (over-population/under

3) Write five lines establishing the interrelationship between target, time-horizon

13.6 LET US SUM UP

In the next lesson we discuss the need for planned development.

13.7 KEY WORDS

Deforestation: Indiscriminate felling of trees for commercial purposes, large scale

Economic Development: The process through which an economy achieves long-run

Economic Growth: A sustained increase in the overall productive capacity of an

Income Distribution: A quantitative summary, of how society's total income

Modernisation: A variety of structural and institutional changes in the framework of

National Development Council (NDC): An apex institution for arriving at a consensus

Planning Commission: An advisory body to make recommendations to the Union

13.8 SOME USEFUL BOOKS

Nafziger, E. Wayne (1984), The Economics of Developing Countries, Chapter 2,

13.9 ANSWERS AND/OR HINTS TO

Check Your Progress 2

4) Go through Sub-section 13.4 2 and frame your answer.

Check Your Progress 3

4) See Sub-secton 13.6.2 and try your answer.

14.3.1 Example of the former USSR