Some Reflections on Development Strategies with Special Reference to the Indian Government Policies

Abstract

This paper essentially tries to analyse and evaluate from a purely economic point of view the means and areas of governmental assistance in the economic development of a country. Economic growth here means growth of G. N. P. per capita. The principle of assistance itself is not discussed here. Three approaches in government assistance strategy can be differentiated: a) import-replacement, b) export promotion, and c) export-import neutrality. The vast majority of governments have relied upon the first, some upon the second, and only Singapore has chosen the third, although the concept of import-replacement policy is based on very simple but publicly accepted foundations. It should be clear that any economic activity has the capacity of either foreign-exchange-saving or foreign-exchange-earning. There is no good reason to prefer one over the other. Thus, the only criterion in the choice of industries for assistance should be the profit return obtainable to the society. In view of these theoretical premises, the author comes to the conclusion that the theory and practise of India's economic policy - especially during the first and second plan - have not been able to promote an economic development contributing substantially to a higher standard of living. Emphasis was laid upon an import-replacing industrialisation at all costs with its supposed many-sided trickle-down effects in order to gain self-sufficiency for the country. But the compulsory means (levies, taxes, fixed prices for agriculture products leading to unfavourable domestic terms of trade) for transfering a surplus from agriculture to the modem centrally planned sectors of the economy proved to be relatively unsuccessful because of social and economic conditions in Indian villages. Rather, Indian agriculture has on the whole remained poor, thus not providing a growing market for manufacturing goods. Agricultural output has grown only moderately due to a lack of incentives. The prerequisites for a sound economic development in India, incorporating an increasing output of agriculture, are discussed in the conclusion: reversement of domestic terms of trade, assistance of export industries, removal of trade barriers and a large devaluation.