(Please scrol down to check the new post “Public Finance in Independent India”

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As Theodore Zeldin said, “to have a new vision of future, it has always first been necessary to have a new vision of the past.” So now let us have a new vision of the policies enacted and implemented in the last six decades of Independent India before we embark upon taking a vision of India’s future.

 

INDIA AT THE DAWN OF INDEPENDENCE

 

When British left India in 1947, India had already experienced the drain of its resources through unequal exchange for more than two centuries. It was this drain of wealth which became the ’cause of all causes’ for the launch of the national movement. Through taxation, the large part of the economic surplus was siphoned off from agriculture without any quid pro quo, thereby subjecting it to an integral drain of capital. In the absence of change in its technological base or its productive technique and inputs the productivity of Indian agriculture stagnated.

Industry too, was equally underdeveloped. The process of industrialization began in later half of the 19^th century, in cotton and jute textiles. The iron and steel industry developed after 1907 while the sugar, cement and paper industries and a few engineering firms came up in the 1930. A very important feature of India’s industrial structure was the virtual absence of capital or producers goods industry. Similarly, modern banking and insurance were grossly underdeveloped.²

Foreign trade and the construction of railways were geared towards meeting the demand of the metropolis. Till the late 1930s, foreign capital dominated the industrial and financial fields and controlled the foreign trade network as also part of the international trade that fed into exports. British firms dominated coal mining, jute industry, shipping, banking, insurance and tea and coffee plantations. Moreover, through their managing agencies the British capitalists controlled many of the Indian-owned companies. Another important feature was the entry, after 1918, of giant multinational corporations such as Unilever, Imperial Chemical Industries, Dunlop and General Motors through their branches or subsidiary companies. Despite all these foreign investments, there was net transfer of capital from India to metropolis. Ultimately foreign capital contributed to ‘the guided underdevelopment’ of India, first by condemning India to concentrate on the production and export of raw materials and food stuffs. Second, foreign capital went into sectors which catered to foreign markets and not to India’s home market. Third, ‘the multiplier effects’ in terms of income, employment, capital, technical knowledge and the growth of external economies of these investments were largely exported back to developed countries.³

That is how India kept bleeding for two centuries so that others can fatten on the blood of Indians. Hence the capital problem at the dawn of independence was how to overcome stasis and embark upon steady and stable growth path. The prime task of the independence phase was to change the colonially given international division of labour by going for the policy of ‘import substitution’. The economic development of the developed world has followed a definite pattern and that pattern has been modernization of agriculture and surplus generation which was invested in industrial capital and finally the cumulative accumulation of capital of the last two industrial cycles are getting invested in services sector now. So, the developed world’s trajectory of development has been first agriculture, followed by textile revolution, which has been called first industrial revolution. Textiles were followed by heavy goods industries and finally the explosion in the ’services sector’. India on the other hand, following Soviet Union, embarked upon the project of modernization of its economy which bypassed agriculture and textile.

The fundamental perceptions of the policy makers about the Indian economy were the following:⁴

1.      First, the basic constraint on development was seen as being an acute deficiency of material capital, which prevented the introduction of more productive technologies.

2.      Secondly, the limitation on the speed of capital accumulation was seen to be in the low capacity to save. So, the problem was to raise the savings.

3.      Thirdly, it was assumed that even if the domestic capacity to save could be raised by means of suitable fiscal and monetary policies, there were structural limitations preventing conversion of savings into productive investment. This was the problem of foreign exchange.

4.      Fourthly, it was assumed that whereas agriculture was subject to secular diminishing returns, industrialization would allow surplus labour currently underemployed in agriculture to be more productively employed in industries which operated according to increasing returns to scale.

5.      A fifth assumption was that if the market mechanisms were accorded primacy this would result in excessive consumption by the upper-income groups along with elative underinvestment in sectors essential to the accelerated development of the economy. This is called the market failure argument.

6.      Sixthly, while unequal distribution of income was considered not desirable, a precipitate transformation of the ownership of productive assets was considered to be detrimental to the maximization of production and savings. In other words, there was a tolerance towards income inequality, provided it was not excessive and could be seen to result in a higher rate of growth. And thus-having ruled out the juridical changes in the status of productive assets the state was thinking only in incremental terms.

7.      Indian planners assumed that the domestic demand would not be a constraint on the growth process. What mattered most was growth in the aggregate level of investment and that the growth process was unlikely to lose steam so long as public investment was growing at a fast pace. This is nothing but the soi disant supply side view of the planning problem.

8.      Trade was not considered seriously as an engine of growth precisely because planners concluded that no significant increase in export earnings in the short run could be expected because of low elasticity of export demand.

 

Keeping above mentioned constraints in view, Indian policy makers worked with the “Einsteinian law” of economic development called “Harrod-Domar” model which is mathematically expressed as

g = s/c

where,              g = rate of growth

s = savings rate

c = capital-output ratio, i.e.  productivity of capital

The aforementioned formula has essentially two parameters: the rate of investment and the productivity of capital. For policy purposes the capital-output ratio was largely treated as ‘given’, and therefore the problem centered on the raising of the rate of investment. Ex-hypothesi in such an economy, to raise savings substantially from five percent to fifteen to twenty percent, intersectoral consistency over-time demanded that the productive capacity of the capital goods sector must rise at an accelerated rate to convert growing savings into additional real investment. It was this obligation to raise the real savings rate that led Indian planners to accord primacy to a faster rate of growth in the capital goods sector. The structure of logic is simple: if in an economy the magnitude of investment is constrained by the capacity of the investment goods producing sector then a higher rate of growth can be achieved only by stepping up the allocation of investment in favour of investment goods sector itself. Moreover, planning as a possible instrument of resolving conflict in a large heterogeneous sub-continent was considered to be a categorical imperative. Thus came into being the Nehru-Mahanalobis model which was based on the Feldman’s model of Soviet industrialization. It was thought that this could be done only by centralized planning. Mathematically, the model can be described like this: if investment is denoted by ‘I’ and consumption by ‘C’, the (constant) output-capital ratios of the two sectors capital and consumption goods by ?k and ?c respectively, and the allocation of investment between the two sectors by ?k and ?c respectively (?k+?c = 1), then it follows that

C(t+1) = C(t) + I(t).?c.?c and I (t+1) = I(t) + I(t).?k.?k. While the |3s are technologically determined, ?k can be altered by planners.⁵ The whole point of producing capital goods was that since one cannot eat steel it was bound to get reinvested wholly - tout a fail. This is what has been called the policy of import substitution which hinged on the argument that comparative advantage is colonially determined and hence it is not given once for all and is subject to change. To change the given order protection to Indian industries was imperative. The structure of reason is very simple: it was argued that as the race between a child and a grown up man is ‘unequal’ and hence not fair, so is the case with the race between infant industries and matured industries. Hence it was argued that the third world industries in general and Indian industries in particular were to be protected because they were “infants” whereas metropolis industries were “matured”. It was the ‘grand strategy’ of import substitution, which was followed by the majority of the newly decolonized countries.

The argument of the planners ran like this: The development of a heavy capital goods base over a period of time would lead to the diversification of the export basket in the direction of manufactured goods, including machinery and equipments, while the increase in employment leading to an expanded demand for consumer goods would-be met by pursuing ‘capital-light’ methods of production.⁶ The capital goods industries had to attain the ‘commanding heights” of the economy and usher in a socialistic pattern of society. To realize this lofty idea industrial policy resolution of 1956 divided industries into three groups, (i) The first consisted of “commanding heights” industries - those related to defense, heavy industries, most mining, aircraft, air and rail transport, communications and power. There was no mandatory nationalization. But all the future projects were to be in the Public Sector, (ii) The second category of industries were open to both private and public initiative, (iii) And the third category included most consumer goods industries which were to be left to private enterprise. In order to realize the avowed objective of ushering in a socialistic pattern of society, a complex edifice of industrial licensing, foreign exchange, price and distributional controls were erected.⁷

And thus the entire strategy of development hinged on the growth of Public Sector which was to generate reinvestable surplus. Public sector mobilized its resources through public borrowings. Since most public sector enterprises operated as monopolies, without external or internal competition there was no financial accountability or pressure to generate profits. Ultimately the public sector which was supposed to generate resources for the growth of the rest of the economy became gradually a net drain on the society as a whole.

By 1965, five year plan came to a screeching standstill, because it failed to make any dent in agriculture. The result was food crisis and adoption of a new agricultural policy. Industrialization was halted because workers first needed food and then the machine tools. The workability of the model depended on an adequate and effective agricultural policy framework, which was absent from the second Five year plan. This phase of Indian politics, i.e. till 1965, has been called the period of’ command polities’ by Rudolph and Rudolph precisely because the volume and the variety of investment were decided by the leadership. This period was followed by ‘demand politics’, because state was forced to distribute largesse not on the grounds of economic rationality but on the grounds of relative electoral strength of the different demand or pressure groups.⁸       

Response to the Food Crisis: The New Agricultural Policy [NAP]

According to earlier theorizing Indian agriculture was trapped at a low level of

productivity because of obsolete agricultural practices and social structure. And the trap could be transcended; - the position of the libido could be changed only with the radical land reforms. The ‘New Thinking’ under extreme pressure of fighting war against hunger moved in a different dimension - i.e. technological modernization rather than institutional transformation.⁹ The sovereign of the new technology was high yielding variety (HYV) seed. HYV seeds needed fertilizer and water which provided ’space’ to fertilizer to dissolve. The capital attraction of this geneticists’ technology was its scale neutrality. This technology is neutral to land-holding because items such as seed, fertilizers,               

Pesticides and electricity consumption are all in principle divisible. And so to overcome its food shortage India adopted a new package of policies comprising the following set of measures:¹⁰                                          

i)                    A shift in emphasis from ‘major’ irrigation works which implied largely a shift from publicly financed large irrigation projects to small tube wells and energized  pump sets.

ii)                   Adequate provision of ‘credit’ to those who were considered to be credit worthy, which in effect meant the large farmers.

iii)                 An alteration in the input base of agriculture, which meant an increase in the rate of fertilizer consumption along with commercial sources of energy such as electricity and diesel oil,

iv)                And the development of fertilizer sensitive varieties of grains.

 

These measures helped India attain a state of near cornucopia of food but nonetheless NAP brought certain irreversible changes within the Indian economy:¹¹          

i)                    First of all, there was an increase in the use of purchased inputs in the agriculture sector, which meant that agriculture-industry linkages were now two-way to a much greater extent than ever before. In concrete terms this meant that while the input flows from agriculture to industry could be expected to continue, the need to ensure flows from industry to agriculture could no longer be ignored even though in the earlier stages input base of agriculture was largely provided by agriculture itself.

ii)                   Secondly, the monetization of Indian agriculture increased drastically as a far greater proportion of output began to be exchanged against money.

iii)                 Thirdly, introduction of a price support policy on a fairly remunerative basis initially for wheat and later for other crops introduced a downward rigidity in agricultural prices.

iv)                 Greater use of energy and oil based fertilizers not only changed the cumulative capital output ratio of agricultural production in India but also made it far more sensitive to fluctuations in the world market, particularly in oil prices.

v)                  NAP did not lead to the mass displacement of labour from agriculture because much of the capital was Landesque’ rather than Labouresque” i.e. land saving not labour saving.

vi)                 NAP could not be universalized in all crops and in all the regions and among all the classes of the peasantry precisely because.

(a)    One was that the necessary capital had to be obtained on the basis of market transaction. Apart from seed, the working capital requirement in traditional agriculture took the form of wage advances along with manure obtained from the farm itself .The working capital requirement per unit of output was higher for the new technology.

(b)    Secondly, given the gross inequalities in the credit delivery system meant that only well to do farmers could make the most profitable use of the package of measures. The machinery of government was not structured to overcome the basic deficiencies from which the small farmers suffered.

(c)    New strategy seems to have worked well where there was ensured supply of irrigation, roads, co-operative credit societies etc., i.e. states like Punjab. Haryana, Western U. P. etc. It is yet to be replicated in all other crops and in all other regions of the country.

 

Limits of NAP and Industrial Sluggishness            

NAP could help India overcome its food scarcity, but in no way it could help       overcome the long drawn industrial sluggishness which had set in since the days of the ‘Plan Holidays’. The culpa principium identified as the cause for sluggishness is
incremental capital output ratio. The rate of gross saving increased substantially from
10% in 1950 to 22% in 1983-4. On the other hand, the rate of growth of GDP has not
displayed a corresponding acceleration. This parallax between the two led to an inference which runs in terms of declining investment productivity.¹² The following reasons have been identified for the rise in incremental capital-output ratio (ICOR).           

                                 i.            Capital-output (k/o) ratio in energy-sector has been quite high in India, partly because of the quality of resources (such as high-ash coal), and partly because of the rising cost of deep mining.

                               ii.            After the introduction of NAP, Indian agriculture has become capital intensive because of its increased consumption of diesel oil, and oil derived pesticides and fertilizers.

                              iii.            A third reason has been that Indian industry did not betray any conspicuous signs of increasing return to scale.

                             iv.            Public investment too has shown erratic pattern of growth leading to emergence of excess capacity in some sector and supply bottlenecks in others.¹³

                               v.            The problem of excess capacity inflicted the private sector also. The rule of thumb based by administrators to allocate imports was based on principle of fair and historic shares, and the installed capacity of the producers. This led to excess capacity, as producers rushed to expand ahead of their requirements, knowing that the licensed capacity determined their import allocation and hence, volume of production.   

                             vi.            The indigenous availability criteria led to complete insulation of domestic production from international competitive pressures. This meant that producers had little incentives to reduce costs.    

                            vii.            The market for final industrial products in India, other than agro based goods, is still relatively small. That is to say there is demand constraint. Purchasing power could not percolate because the terms of trade were unfavorable to agriculture. The protection accorded to industry^- as a whole artificially raised the price of manufactured inputs in the agricultural sector, relative to the price of its output, eo ipso, turning the terms of trade against agricultural sector. In the absence of purchasing power the benefits of ‘economies of scale’ could not be reaped, and therefore the rise in the incremental capital-output ratio.

                          viii.            Imports of capital and intermediate goods were allowed while those of consumer goods were banned, with the consequence that, on balance, effective rates of protection, and hence incentives to invest in indigenous consumer goods industries were higher- an outcome which was contrary to the state policy of promoting heavy industry. And since the effective rates of exchange were much higher for importers than exporters, there was a bias against exports as well. Bias against exports handicapped the Indian industries to compete in the international market. The result was once again the benefits of ‘economies of scale’ could not be harvested. Most harmful of all the structure of effective protection implied a cheapening of capital goods and hence producers had an incentive to choose relatively more capital intensive methods of production at the expense of labour. This is the “cause of all causes” why industrialization in India could not generate employment.¹⁴

                             ix.            A strange fact about industrial licensing system was that it not only prohibited the entry of newcomers but it also proscribed the exit of anemic industries, ad libitum. This provision-too had a deleterious effect on capital-output ratio.

                               x.            Ad hominem protection to Indian industries was stretched too far to the extent that even the import of computers was …not allowed. The end result was that the necessary computing power needed by the corporate sector, the academia, and the research laboratories was not available. And thus a major opportunity to enhance quality and productivity in Indian organisations was lost. In fact, it could safely be said that the lack of access to the computing equipment was one of the reasons why India lost a great opportunity to be on par with China and South-East Asian economies.¹⁵ Since productivity could not be increased, incremental capital-output ratio could not be controlled either.

                             xi.            Delays   in   the   completion   of   projects   have   also   contributed considerably to the increase in capital-output ratio. After all, the whole of economics boils down to the economy of time. Reasons for the delay in the completion of projects have been: (a) lengthened   gestation   period   because  of  insufficiency   of  initial allocation of funds, (b) unsatisfactory monitoring of the progress of major construction projects in sectors such as irrigation, power, open cast mining and so on, (c) protracted bargaining that went on with the aid donors, from which technology had to be purchased and (d) on the top of all this, there was an element of politicization of the public investment decisions on matters relating to location which contributed in raising investment costs.¹⁶

All these factors in unison led to lower realised returns on the investments made than would have been possible in their absence. It is the declining productivity of investment, due both to an inefficient pattern of investment and serious under-utilization of the output capacities that has been created (particularly for major non-traded intermediate inputs produced by the public sector), which largely explains the rise inincremental capital-output ratio, eo ipso the sluggishness of industry.¹⁷ To be more appropriate-it is in the interlocking effects of the creation of a vast network of bureaucratic controls (industrial licencing, foreign trade, and price controls, together with an inefficient public sector) and also the stagnation in the productivity of labour, the pincer movement  which killed the prospects for efficiency or growth.¹⁸ Thus the declining productivity of capital was assisted by its twain - the stagnating productivity of labour in keeping Indian economy phlegmatic for decades. The answer to the question why labour productivity stagnated can be known if we listen to Dreze and Sen. They say:  

“The blame for independent India’s past failures is often put on the insufficient development of market incentives… While there is considerable truth in this diagnosis, it is quite inadequate as an analysis of what has gone wrong in this country. There are many failures, particularly in the development of public educational facilites, health care provisions, social security arrangements, local democracy, environmental protection, and so on, and the stifling of market incentives is only part of that larger picture. The failures can, thus be scarcely seen simply as the result of an ‘overactive’ government. What can be justifiably seen as over activity in some fields has been inseparably accompanied by thoroughgoing under activity in others”.¹⁹

 

So India failed not because what it did, did badly, but because it did not even essay certain other things. The failure lies in the act of omission. The prime failure is the failure to create social opportunities.

But why this omission of education and health and the control of the market? The answer to this question has been best captured by Professor Deepak Lal semioticaily. He says:

“The contempt in which merchants and markets have traditionally been held in Hindu society was given a new-garb by Fabian socialism which appealed to the newly westernized but traditional literary castes of India. A more succinct expression of the ancient Hindu caste prejudice against commerce and merchants would be difficult to find. The brown Sahibs, mostly upper caste Hindus like Nehru, found it congenial to adopt these traditional attitudes… ‘Socialism’ now provided them with a modern ideological garb in which to clothe these ancient prejudices. Commercial success, as in the past, was to be looked down upon, and the ancient Hindu disjunction between commercial power and social status, to continue. For socialism in India has merely provided the excuse for a vast extension of the essentially feudal and imperial revenue economy…”’²⁰

 

Education was neglected because Brahmanism does not prescribe for universal education. Health was neglected because in Brahmanical lores what is real is the

Atma, body is the fata morgana. In the Brahmanical model of development, Indian economy-could grow only at the “Hindu rate of growth* of 3.5% per annum till early 1990’s.

In comparative perspective, some of the districts of India stand in the league of the poorest of the countries, sub-Saharan Africa. There is no country in sub-saharan Africa or indeed in the whole of the oukoumenie where estimated infant mortality rates are as high as in the district of Ganjam in Orissa, or where the adult female literacy is as low as in the district of Barmer in Rajsthan. The development experiences of India is one of ‘unaimed opulence’, more like Brazil combining a moderate rate of growth with the persistence of widespread poverty, illiteracy, ill-health, child labour, criminal violence and related social failures. The fundamental difference between the fast growing, East Asian nations, Japan, South Korea, Thailand, and India is that the former countries blended market with public support-system in providing basic education, health, nutrition, etc. which enhanced their productivity. And that became the ’cause of all causes’ for the participation of the citizens in ever widening range of the market. In all these countries land reform too was undertaken successfully which provided the citizens with productive assets to participate in the global market expansion.²¹ According to the World Bank study, approximately two-thirds of the observed growth in these economies can be attributed to the accumulation of physical and human capital. Primary education is the single largest contributor among these factors. The remaining growth comes from Total Factor Productivity growth.²²

Further to come Public Finance in Independent India.

Public Finance in Independent India

Since the economy failed to ‘take-off, the burden of the civilization fell on the I’ homme ordinaire (common people). That is to say, state came to owe its existence to indirect taxation rather than direct. A striking feature of the composition of tax revenues in India is the high ratio of indirect taxes in total tax receipts. Indirect taxes still account for more than 70% of the tax revenue. Personal income tax accounts for only 12% of the total. Only 2% of the urban population in India pays personal income tax²³” Agricultural income is exempted from the tax net, not because of any love for the farmers of India but to provide an outlet for black money generated in a controlled economy. It was this single exemption which made mockery of the direct tax system. In any case, the mass of the farmers could not have been taxed and cannot be taxed even today because they do not earn taxable income. But more than a favour to farmers, it was congress way of converting black money generated in the organised sector into white money - generated in agriculture. While taxing a person, what is more important is the paying capacity of the individual, and not the source of income.   In any case, money does not stink - pecunia-non-olet - no matter what it’s fons et origo is.

The prime instrument of financing plans was ‘deficit financing” as per the Keynesian prescription. Deficit financing is a financial instrument which leads to inflation, and eo ipso transfer of resources from the people to the public authority.²⁴ The centrality of indirect taxes and deficit financing in government’s finance means that it has been unhealthy, iniquitous favoring a rentier class and taxing the hard working masses of India.

By 1980s the gap between revenue receipt and expenditure precipitated to a point where government had to resort increasingly to borrowed funds to finance not only capital expenditure which did not yield adequate returns but also a growing component of current expenditure. The consequent build-up of public debt and the interest burden of the debt, which is now the largest and fastest growing item of expenditure, further propelled the growth of revenue expenditure. This led to a vicious spiral of growing deficits, rising debt, eo ipso rising interest costs and further expansion of the deficits. By 1989-90, the combined fiscal deficit of the centre had risen to grosso modo ten percent of the GDP.²⁵

Burgeoning deficit financing puts a strain on the balance of payments, because a part of public expenditure goes to finance imports. Growing revenue deficits, combined with losses of public enterprises constrained the acceleration of public investment. At the same time, the large public draft on private savings tends to crowd out private investment. This in turn limited the growth of productive capacity on the supply side, while the large deficits continued to drive the growth of aggregate demand. The widening gap between domestic absorption and domestic output led to a growing trade deficit, and thus aggravated the balance of payments problem arising from indiscriminate external commercial borrowing which was necessitated in order to meet the rising oil demand.²⁶  So, in the ultimate analysis the payments crisis of 1990-91 was an energy crisis.

Not only BOP crisis can be averted but also government deficits and public debt can become sustainable if the real rate of growth of GDP is higher than the real rate of interest on public borrowing. But where the interest rate is higher than the growth rate of GDP, in real terms, the financing of deficits by borrowing leads to an explosive increase in the debt - GDP ratio over time. With more and more pressure to service debt, the government also needs to raise the rate of interest to make it attractive to lenders. This upward movement in the interest rate makes the process increasingly unsustainable.

Therefore, the real problem of debt in India lies in its use in relation to the cost of such borrowing by the government. The difficulties became insurmountable not because the level of expenditure was high but because the productivity of expenditure was extremely low in relation to the higher interest rate at which the government borrowed. So, the root cause of the fiscal crisis is the difference between the growth in output and the rate of interest.²⁷  

Next to come Structure of subsidies

 Notes and References

1.      Zeldin, Theodore, ‘An Intimate History of Humanity’, Penguin Books, New Delhi, 1999, p. vii.

2.      Chandra. Bipin, “The Colonial Legacy”, in Man, Bimai (ed). ‘The Indian Economy: Problems and Prospects’. Penguin Books, India, 1993, pp. 6-8

3.      Ibid, pp. 10-11.

4.      Chakravarty, Sukhamoy, ‘Development Planning: Trie Indian Experience\ GUP, Delhi, 1993, pp, 9-42.

5.      Patnaik, Prabhat, ‘Whatever Happened to Imperialism and other Essays’. Tuiika, Delhi, 1995, p. 108.

6.      Chakravarty, ‘Development Planning’, pp. 16-17.

7.      The alteFnaiveto^Mahanal^bis-model was what has been called The Bombay Plan of C. N. Vakil and P. R. Brahmanand. See, Desai, Meghnad, ‘Development Perspectives: Was there an Alternative to Mahanalobis? In Ahluwalia, Isher Judge and Little, I. M. D., ‘Indians Economic Reforms and Development: Essays for Manmohan Singh’, OUP Delhi 1999, p. 40-47.

8.      See, Rudolph and Rudolph. In Pursuit of Lakshmi’i

9.      Chakravarty, ‘Development Planning’, p. 24.  

10.  Ibid, p. 25.

11.  Iid,, pn. 25-27.

12.  Ibid, p. 53.

13.  Ibid, pp. 56-57.

14.  Lai, Deepak, “The Poverty of Development Economics, OUP, Delhi, 2000, p. 30.

15.  Murthy, N. R. Narayana, ‘Making India a Significant PlayeF in This-Millenium’, in Thapar, Romila, (ed.), ‘India: Another Millenium’, Viking, Delhi, 2000, p. 216.

16.  Chakravarty, ‘Development Planning’, pp. 57-58.

17.  ‘Lai, Deepak, The Unfinished Business: India in the World Economy^r, OUF, Delhi, *999,p31

18.  Bhasrwati, ‘India in Transition’, p. 49

19.  Dreze and Sen, ‘India: Economic Development, pp. 7-8

20.  Lai, Deepak, ‘Unfinished Business^T, p. 36 - 37.

21.  Dreze,   Jean   and   Sen.   Amartya,   India:   Economic   Development and   Social Qprx>rtunitv\ OUP, Delhi, 1999, pp. 29-34.

22.  Kay, Debraj, ‘Development Economies’; OUF, Delhi, 2000, p. 121

23.  Jalan, Bimal, ‘India’s Economic Policy: Preparing for the Twenty-First Century’, Penguin Books, Delhi, 1996, p. 60.

24.  The planners strategy boiled down to the traditional thesis that during the early stages of industrialization it was necessary lor agriculture to contribute to the building up of modern industrial sector by providing cheap labour and also^ cheap food. Along with increasing productivity; this in turn wouid help in maintaining a low “product wage” in the industrial sector. The relationship between maintaining a low product wage and a high level of accumulation was assumed to be strictly positive. See, Chakravarty, ‘Development Planning’, p. 21.

25.  Mundle, Sudipto and Rao, M. Govinda, ‘Issues in Fiscal Policy’, in Jalan, Birnal, ‘The Indian Economy: Problems and Prospects’^ Penguin Books, Delhi, 1993, p. 229.

26.  Ibid, p. 229.

27.  Bbaduri,   Amit   and   Nayyar,   Deepak,    ‘The   Intelligent   Person’s   Guide   to Liberalization’., Penguin Books, India, Delhi, 1996, pp. 23-24.

 

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