Gandhian Model of Development
Gandhian model of development was emphasized by the Janata Party. The model emphasized the rapid development of agriculture and small industries. Village and small industries were emphasized from the point of view of production as well as employment. The model necessitated the following changes in the pattern of planning :
- Employment-oriented planning to replace production-oriented planning : Nehru model by over-empathizing a capital-intensive pattern of development failed to generate enough employment. But unemployment and under-employment are at the root of the problems of poverty and inequality.There is a strong need to demarcate areas with high employment potential and investment should be directed in such areas so that the pattern of investment becomes employment-orated and the economy increases its absorptive capacity of labour.
- Emphasis on development of agriculture as a means of enlarging employment : Char an Singh, an ardent advocate of the Gandhian model brought out the hard reality that while in India only 39 workers were employed per 100 acres in 1971, in Japan, South Korea and Egypt, the number of workers employed per 100 acres ranged between 87 and 71.In case, intensive cultivation is done, India can enlarge employment by 50 to 60 million in agriculture alone. It is, therefore, necessary that agricultural development be taken as the foundation of the development process. The experience of the development in the states of Punjab and Haryana also corroborates the view that these states were able to achieve high growth rates via agricultural development and thus bring about a sharp reduction of population below the poverty lien as well as unemployment.
- Emphasis on small industries as against large industries :The Gandhian model emphasised that “no medium or large-scale enterprise shall be allowed to come into existence in future which will produce goods or services that cottage or small-scale enterprises can produce. ” The main aim of following this path was to enlarge employment, have a decentralsied pattern of production which would ensure reduction in regional disparities in income and wealth.
- Heavy and basic industries to be developed by the public sector : The Gandhian model did recognise the need for the development of heavy and basic industries and assigned this role for the public sector. Gandhian model intended to tackle the problem of distribution of income at the production end and not at the level of consumption of fiscal measures. It did emphasize employment as the principal means of providing national minimum and removal of poverty .
Rao-Man Mohan Model of Development Rao-Man Mohan Model of Development was introduced in 1991. It emphasised privatisation and globalisation of the economy.
- Firstly, areas hitherto reserved fro the public sector were to be opened to the private sector. Although the government failed to transfer the ownership of public sector undertakings to the private sector in view of the strong opposition by the workers and left parities, it did liberate the economy and opened areas of heavy industry and economic infrastructure to the private sector – both domestic and foreign.
- Secondly, the government abolished licensing in all industries except a small list of 10 industries. In other words, it removed bureaucratic shackles on investment.
- Thirdly, it free the MRTP companies from the ceiling on assets.This implied that even big business, was allowed to invest without any ceiling being prescribed by the Monopoly and Restrictive Trade Practices (MRTP) Commission. Obviously, considerations of growth dominates more with the government than those of monopoly control.
- Fourthly, foreign direct investment was facilitated. Automatic approvals for direct foreign investment upto 51 per cent in high priority areas were granted. Government was even prepared to consider proposals involving more than 51 per cent equity on a case-by-case basis.
- Fifthly, performance of the public sector undertakings was to be improved by granting them greater autonomy. For this the Memorandum of Understanding (MOU) was devised and PSUs managements and boards were made more professional.
- Lastly, to globalise the economy the government followed a policy of reducing import barriers and also one of encouraging export promotion. Such a course would facilitate the free flow of foreign capital and technology and thus help to modernise our economy. Rao-Manmohan Model of development has also been the subject of criticism.
The main points of criticism are :
- The model was by passed agriculture and agro-based industries which are the major sources of employment generation.
- The model has a very narrow focus since it emphasises the corporate sector growth which accounts for only 10 per cent of GDP. 1.
- Although in the Industrial Policy of 1991, Multinational Corporation (MNCs) were to be permitted in high priority areas, the government has been indiscriminately permitting them even in consumer goods industries. Need it be emphasised that MNCs follow a highly capital intensive pattern of production and have thus restricted the growth of employment.
- MNCs after entry in various joint venture raise their equity to 51 per cent level or even more and thus push out the Indian partners.This has led to the Indian industry asking for protection against the onslaught of multinationals.
MNCs after entry in various joint ventures raise their equity to 51 per cent level or even more and thus push out the Indian partner. This has led to the Indian industry asking for protection against the onslaught of multinationals. To sum up, Rao-Manmohan model has succeeded on growth by raising GDP growth rate to more than 6 per cent level, but it has failed on equity, employment and poverty removal.