ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY

ECONOMIC DEVELOPMENT AND WELFARE

SUMAN CHAKRABORTY
Basic characteristics of developed economies:Our previous discussion implies that a
country can gradually become a developed country from the state of underdevelopment if
some of the features of the underdeveloped economy are phased out in the process of
economic growth. Thus, we can now briefly point out some of the basic characteristics of
developed economies. These are as follows :i)Developed countries have relatively higher per
capita income in comparison with less-developed countries .ii)Dependence of the work-force
on agriculture remains at a very low level,and the maximum portion of the work-force
depends on the service sector.iii)Rate of growth of population remains at a very low level.
(iv)Maximum portion of the Gross Domestic Product (GDP) is contributed by the service
sector followed by the industrial sector .(v)Standard of living of the average people remains at a
high level.(vi) The quality of human capital also remains at a high level because of better
health, nutrition, education and housing facilities. The HDI index remainsvery close to unity
in these countries.(vii)Modern techniques of production are applied in all the sectors of the
economy.(viii)Factor-productivity remains at a high level, both in the agricultural
and(ix)Industrial sectors.Exportable manufacturing items and service goods contribute the
most to the export-income of these countries.(x)Adequate infrastructural facilities are also
available in these countries (xi)Developed and well-organised money and capital markets
are found in these economies.(xii) Disguised or seasonal unemployment are not found in
the rural sectors of developed countries. Unemployment in developed countries arises
mainly due to lack of effective demand during recession and depressionary phases of the
business cycle.(xiii) Absolute poverty is not found in developed countries. However, there
may be relative poverty in the sense that a substantial part of the national income may be
concentrated in the hands of a few people, while a large part of the total people may have a
small share in national income. Thus, there may remain inequality in the distribution of
income and wealth.(xiv) Developed countries do not suffer from inadequacy of domestic
savings and capital formation.
CHARACTERISTICS OF UNDERDEVELOPMENT ECONOMY:Underdevelopment is a stage of
economic development where natural resources of the es coun-
remain un-utilised, capital formation is at low level and
the quality of human resource is very tor. Prof. Ragnar Nurkse defined underdevelopment in terms of scarcity of capital
which restrictedthe utilisation of human and natural resources.
It is not proper to explain underdevelopment only in terms
of underutilisation of resources. Even
developed countries, resources remain underutilised at times of recession and
depression. Theoblem with underdeveloped countries is that resources remain un-utilised for a long time and due
vicious circle, it is not possible to provide a minimum thrust to bring underdeveloped countries
povertyout
and
deprivation.
Characteristics of Underdevelopment:(i) High level of poverty.In underdeveloped countries, people, have
low purchasing power as a result of which they are unable to meet over their basic physiological needs like hunger,
cloths and sh e lter. In India, 40% of the population are not even getting food grains to meet the 2400 calories
y per
requirement, which is necessary for leading a healthy life. Still a large section of the population
s to go without proper
shelter.(ii) Major proportion of people dependent on agriculture. Lack of job opportunities in secondary and
tertiary sectors compel people to depend on primary sector even though income derived m agriculture is very low.
Increase in population leads to subdivision of land, thereby decreasing
productivity in agriculture. Low average size of
land per family makes it impossible to use moderntechnology like harvesters, tractors, etc. Lack of alternative source
of livelihood compels people to grate to urban areas which leads to creation of slums. Low income level in
agriculture creates difficulty is allocating resources for investment purpose to modernise the methods of farming.
Lack adequate investment in agriculture keeps the average productivity at low level.(iii)
Lack of adequate capital
formation.Due to high rate of growth of population, the rate consumption
of (i.e percentage of income devoted to
consumption) is very high. Average productivity labour is very low. These factors keep the rate of capital formation
at a low level. Even the capital available is not used efficiently. Defects in planning mechanism, wrong choice of
technology and selecting projects with long gestation time lead to high capital-output ratio which is undesirable for

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underdeveloped countries.
(iv) High rate of growth of population.
In the underdeveloped countries, usually both birth
s and death rate were high leading to low rate of growth of population. But due to advancementdical technology
in me
in developed countries, which has also been made available to underdeveloped ntries,cou
death rate has decreased
rapidly. Birth rate decline has not kept pace with the decline in death rate, thereby creating problem of rapid population
growth in underdeveloped countries. M ore ources
res have to be devoted for consumption purpose and less resources
are left for investment pose.(v)O verdependence on natural resource. U nderdeveloped countries have low
proportion incom e generated from service sector and high proportion of incom e generated from prim ary
sectors like agriculture, m ining , etc. M ost of these natural resources are non-renew able ploitation
and their ex
can reduce the incom e earning capability of the people dependent on natural future
resources
tim e. Cutting of
forest for using as fuel is the case in point. This is leading to de-forestration and reducing the incom e earning
capability of people dependent on forest. Som e of the natural resources are not fully utilised because of lack of
technology like w ater, land, etc. which otherw is could provide lot m ore benefit for theInequality
country.(vi)
of incom e.Inequality of incom e is higher in the case of underdeveloped countries as com pared to developed
countries. The main reason for this is because underdeveloped countries depend m ore on tangible w ealth to
generate incom e, like land or capital where as developed countries depend m ore on intangible wealth like
hum an capital to generate w ealth. H um an capital is m ore equitably distributed in the econom y as com pared to
land or capital.
(vii) Underdeveloped infrastructure. In case of underdeveloped countries, infrastructure like
transportation, com m unication, energy, education system s are underdeveloped. Thislem creates
s in the
prob
sm ooth functioning of the econom y. Even, w hat ever infrastructure is available is under
the control of government, w hich create further inefficiency in providing (viii)
services.
Export of traditional
products.Underdeveloped countries export prim ary products like agricultural products and m inerals. They
depend on only one or two products to generate foreign! exchange. Generally, the dem and elasticity and
incom e elasticity of such products is lessone,!
thanW hen underdeveloped countries try to increase the quantity
of exports, their export revenue declines!
because of decrease in price by larger percentage than the increase in
quantity of export.(ix) D ualistic econom Even
y. though underdeveloped countries rem ain backward, but
som e! part of the econom y m ay becom e successful in developing, w hich creates dualism. This creates a!
situation of co-existence of developed and underdeveloped sectors together D ualismlem creates
of itsprob
own. For example, we have modern textile companies like Reliance using latest as technology!
well as lakhs of
handicraft units using outdated technology. G overnm ent faces problem s of form ulating policies in a dualistic
econom y giving due im portance to both the sectors. There is a possibility that one sector m ay contradict the
other sector and both sectors end up working atroads. cross-
( x) H igh level of illiteracy.
U nderdeveloped
country has a high rate of illiteracy as a result*
which, it is difficult to develop the hum an resources.
(xi) Lack
of entrepreneurial initiative.
Lack of social security system com pels people tofor look
security
j and stability
in life. Socially also, entrepreneurs enjoy low respect. In order to develop economthe;y, it is necessary to
broaden the entrepreneurial base.(xii) Outdated culture.People are oriented towards past tim e and are not
willing to adopt new ideas. This creates problem or religious fundam entalism , com m unalism and regional
chauvianismIn . order to develop, people should adopt m odern outlook. Money market and capital
market:Tthe money market is usually defined as the market in which short-term debt
instruments are transacted.In contrast, the capital market is defined as the market in which both long-
term debt instruments and equities are transacted. How long is 'long-term' Although there is no hard and fast
distinction between short-term and long-term it is .The usual practice to treat a loan for a period of
time less than or equal to one year as a short-term loan. Loans for longer periods a re c a lle d lo n g te rm lo a n s
Both debt instruments and equities transacted in the capital market: It should also be noted that, while
banks and other money market institutions deal only with (short-term) debt instruments, capital market
institutions deal with both. (long-term) debt instruments and equities (i.e., shares). Moreover, the debt
instruments here are issued not only by the financial institutions on the
Government but by companies. Debt instruments issued by companies are called
bonds or debenture.

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Structure of the capital market: The capital market can be divided into two constituents :(a)The financial
institutions like Industrial Finance Corporation of India (IFC1),Industrial Development Bank of India(IDBI), etc,
which provide long-term and medium-term credit facilities ;and (b)The securities market where the securities
issued by the firms (shares,,bonds, debentures)can be bought & sold freely.It consists of the new issues
market.i,e, primary market,or the secondary market (stock exchange market)Major distinctions: The major
distinctions between the money and capital markets are as follows : (i)The money market deals only in debts
instruments while the capital market deals in both debt instruments and equities. (The major instruments traded in
the money market are bills of exchange, treasury bills, etc) (ii) While the money market deals mainly in debt
instruments with maturity less than or equal to one year, the capital market deals in instruments with longer
maturities. (In fact, company shares do not have any maturity date ).

(iii)Comrnercial banks constitute the most important part of the money market,while the most important parts
of the capital market are the stock exchange & the term –lending institution.

(iv)The money market caters to the working capital needs of the producers and b usinessmen, while the capital
market caters to the needs of fixed capital.(v)A related distinction, therefore, is that the money market is
concerned with the short-run economic problems of the country, (for example the problems of liquidity
adjustments of firms) while the problems of growth and productivity are the concerns of the capital market.
(vi)Since long-term loans are obviously riskier than short : term loans capital market instruments are usually
riskier than money market instruments. (vii)The money market is usually subjected to a greater degree of
Govt : control than the capital market. (viii) However, the Government does not control the money market
directly. It controls this market through the Reserve Bank of India. In contrast, whatever little control is
exerted by the Government on the capital market is administered by the Government itself.
Importance of the capital market :The importance of the capital market in a modern economy should be
obvious : 1.Growth: The capital market performs the vital function of supplying fixed capital to producers. The
importance of fixed capital in a modern production system can hardly be over-emphasised. In the absence of fixed
capital, only very primitive methods of production can be employed. Modern techniques of production are
mechanised. Hence, the producers must buy machines. Machines constitute fixed capital. Thus, the capital
market helps the process of economic growth by making possible the adoption of modern technology. 2. Stability: In
some crucial respects, the capital market also promotes stability. For instance, the stock exchange is an institution
of the capital market. If the stock exchange did not exist, the sale and purchase of company shares would take place
in an unsystematic manner. This would create economic instability in the country.
3.Reduction in risk:Although long-term debt instruments are intrinsically riskier than short-term
instruments, the existence of the capital market makes the instruments considerably less risky than they,
otherwise, would have been. The daily movement of share prices in the stock exchange help the
shareholders keep track of their investments and to sell off their shares when it becomes unprofitable to
hold on to them.This would not have been possible in the absence of the capital market. 4. Avenue of
productive investment : The very existence of the capital market gives savers an opportunity to put their
savings to good use (for instance, by purchasing shares or company bonds). If there was no capital
market, they would have been forced to keep their savings either in the money market (which, as we
have already said, supplies only short-term liquidity to the producers) or, even worse, in unproductive
lines such as holdings of gold, land, etc.(5)Greater flexibility for borrowers : Borrowers of funds have a
greater degree of flexibility in the capital market than in the money market. For instance, companies
needing funds have a choice between issuing shares and bonds.
Role of capital market in India: The role of capital is self-evident in a less-developed country like India,
which is plagued by the paucity of resources and increasing demand for investments. The role of capital
market in India can be understood from the following points :

(a) Helping the process of the mobilisation of savings and formation of capital :Various types of securities
in the capital market help in mobilising saving from various sections of the population, who often invest their
small savings in purchasing such securities. This also helps in accelerating the pro cess of capital formation
in the country. (b)Helping the companies to raise long-term capital : The capital market also enables
different companies to raise long-term capital for their growth. The investors want to invest for a short-term
but the companies want capital for a long-term. This conflict in their interests can be resolved by the capital
market by offering an opportunity to investors to buy or sell their securities, while the capital flow to the
companies remain unaffected.(c)Creating a continuous and ready market for capital : The stock exchange
provides a convenient place where the buyers and sellers can easily purchase and sell securities. At present,

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however, these transactions can also be made through the internet service (using the personal computers at
home). Thus, easy marketability of securities make them more liquid as compared to other assets.
(d)Helping the process of allocation of resource to the most efficient use : An efficient capital market also helps
in the process of proper allocation of investible funds to the most efficient use. The prevailing market price of
securities and their relative yields act as guiding factors for the investors to channelise their funds in the proper
direction.
Conditions for successful working of the capital market
If a capital market is to work satisfactorily, a number of conditions must be fulfilled:(1) Protection of
investors' interests : Since long-term lendings or investments are risky, lenders or investors must be given
protection. For instance, before allowing a joint stock company to issue either bonds or shares, the
Government should scrutinise the plans and the economic soundness of the company.(2) Reasonable long-term
interest rates : In view of the greater risk associated with long-term loans, some lenders (for instance, financial
institutions \\hich give term loans) sometimes charge exhorbitantly high interest rates for such loans. While this
is good for the lenders, it prevents the producers from procuring funds for long-term investments. Thus, the
Government should, by acting as guarantors, try to reduce the riskiness of the loans. (Needless to say, in order to
do this, the Government must satisfy itself about the economic viability of the proposed projects). This would
help in reducing long-term interest rates. (3) Policies conducive to long-term investments : Apart from a high
rate of interest, there are a number of other factors that discourage long-term investments in a less-developed
country like India. If the capital market has to function satisfactorily in such a country, the Government has to
play a much more active role in encouraging long-term investments in such a country than in an advanced
economy (for instance, by giving subsidies and tax benefits to producers, building infrastructural facilities, etc.
ECONOMIC WELFARE:A.C. Pigou's definition : The British economist Arthur Cecil Pigou, in his
book "The Economics of Welfare" has defined economic welfare as that part of general
welfare which "can be brought directly or indirectly into relation with the measuring
rod of money". Economic welfare, in this sense, means the satisfaction derived from
the use of exchangeable goods arid services.
National income and national welfare: National income is usually taken as a good
index of economic development. There are several reasons for this. Among these,
the following two may be mentioned : 1).The higher is the national income of a
country, the greater is the value of goods and services in the country (because
national income equals national product) and economic development primarily
means an jncrease production of goods and services.2). An increase in national
income is also u sually associated with a rise in the over-all standard of living in any
society .This is because a country with a high national income can afford to incur
expenditure on various social projects like education, health, etc. However, modern
economists do not consider the national income or the per capita income as the true
ndicator of national welfare of a country because of the following reasons: a)The
national income or per capita income cannot be regarded as the accurate
measurement of the improvement in the standard of living of the majority of the
people in a society, because the pattern of income distribution among different
sections of people may be quite unequal.Thus, higher level of national income
may not imply reduced income inequalities.b) The national income or the per capita
income cannot also be regarded as.an index of poverty because of some Conceptual
and statistical reasons. Conceptually the standard of living in a society depends more
on the per capita consumption expenditure "rather than national income. Again
Statistically,the per capita income is only a simple arithmetic mean which we
get dividing national income by total population of a country. So it is not a
true reflection of the level of living in a society. Thus, higher level of national
income does not necessarily mean lower level of poverty .(c)National income of any
country does not even reflect the level of unemployment in that country. National
income can be increased by following a technology which is labour-saving in nature.

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(d) National income of a country also tells us little about the content of the Gross National
Product (GNP). The GNP may reach at a high level just because of the production of some
high-valued luxury items which satisfy the needs of only a handful of rich persons in a
society.(e)National income of a country may reach at a high level due to greater
industrialisation. Rapid industrialisation, however, brings with it higher pace of
urbanisation, deforestation and environmental pollution. If national income is thus increased
at the cost of ecological imbalance, this cannot be regarded as an indicator of higher
economic welfare.Due to all those reasons stated above, national income or per capita
income of a country cannot be regarded as the true indicator of national or economic welfare.
What are the conditions other than national income which can affect the level of well-
being of the country ? We can classify such conditions into two broad groups :
economic conditions and non-economic conditions.(A) Economic conditions : There are
several economic conditions (other than national income) which affect national
welfare:1.Inequality: First of all, the degree of the inequality of the distribution of income
among the people of the country is an important consideration. It is possible that a
country has a high level of national income but most of the national incomes are
concentrated in the hands of a few. The vast majority lives in poverty. In this case, the
nation's well-being cannot be said to be at a high level despite the high level of national
income.2.Inflation : Again, consider, a situation where real production of goods and
services are stagnant but prices are increasing fast. Since national income is expressed in
money terms, the national income of the country will increase fast. But the real standard
of living (welfare) cannot be said to be increasing. Thus, the degree of price, stability— is
also an important condition affecting national welfare.3.Balance of payments: The
balance of payments situation in the country is also an important consideration in this
respect. A high level of national income can sometimes co-exist with an unfavourable
balance of payments position (where the country must pay to other countries more than
what it receives from them through international trade). Such a situation indicates a high
level of external dependence of the domestic Economy. National welfare cannot be said to
be a high level under such unfavourable balance of payments condition, despite the high
level of national income.(B) Non-economic conditions : National welfare also depends on
a number of non-economic factors. Welfare (i.e., well-being) is not just a matter of
economic well-being. It has many other aspects. 1.Health : Health is one of the most
important non economic conditions
affecting welfare. A country's national income may be high, but the citizens may not be in
goodhealth. 2.Education: National welfare also depends on education, the majority
of the people are illiterate the nation will be bogged down
in irrationality and superstition. Such a nation cannot be happy, however
high its national income may be. 3. Environment : National welfare also depends on the
purityof the environment .Economic development often increases national income at
the cost of environmental pollution. It is doubtful whether such
development increases the nation's well-being. :4. Social tranquility : It is also an important
condition. If a society is torn by unrest & tension (viz, because of criminal activities), it
cannot be said to enjoy a high level of well-being, what ever be the level of national income
may be.5.Political stability : The tranquility of the country also depends on political
stability. If there are frequent changes of Government or political unrest then nation's
welfare is hampered.6.Welfare of the aged or the senior citizen : Aged people constitute a significant
part of a country's population. National welfare, therefore
depends significantly on the welfare of these persons. Rapid
socio economic changes often leave old people unhappy. This detracts
from national welfare even if the changes bring about an increase in
national income. 7. Other conditions : Finally, we should mention the collection of other
conditions which also have a bearing on national welfare. For instance,
treatment of children, degree of religious tolerance, better understanding
between parents and children and between husbands and wives, the
degree of equality of opportunity, etc. Thus, a high level of national income is by no
means a sufficient condition guaranteeing a high level of national welfare. A large
number of conditions determine a nation's well-being.

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Net Economic Welfare : Initially in calculating economic welfare and distinguishing it

from national income, economists had thought only of environmental pollution. They
defined Net Economic
Net Economic Welfare= National Income - Cost of Removing Environmental Pollution..
Modern definition : The modern definition of net economic welfare is the following :
Net Economic Welfare - National Income -All External (or Social) Costs of Producing The
National Income.
Net Economic Welfare (NEW) is not a measure of national welfare which is a much broader
concept and includes all the factors affecting the nation's well-being. NEW is a measure of the
economic part of the nation's welfare.
INDICATOR Economic Welfare:The lowest level of inequalities and high per capita income are the
signs of economic growth and economic welfare. The goods produced in the economy must satisfy the
demand of common people. The luxurious goods for specific class of people do not increase the welfare in
general. Thus, per capita income is not the proper indicator of growth. Which desires are satisfied are more
important than just total output of an economy.
PaulStreeten has given four major points to explain the basic requirements of an economy.
1. To raise the purchasing capacity of poor.2. To increase the amount and quality of goods produced for
poor people.3. That type of commodity should be increased which is useful for the common mass only.
4. It is necessary to take help of poor people to produce the goods for common people.This type of policy
may yield exact results e.g., When the latest Hospital is constructed and latest equipments are installed and
very costly drugs are prescribed then it will not be useful to the common people. Better quality of food, pure
drinking water, nice residential housing facilities etc. should be promoted. On the other hand if five star
hotels, luxurious apartments and big buildings are constructed then it will not be useful for the common
people. The common people will die due to hunger and the rich people will have unnecessary stock of
commodities. This does not lead to welfare of people.

DEVELOPMENT PLANNING.:(i)Growth in national product : We have already indicated that

econon growth meaured in terms of the growth in Gross Domestic Product (GDP has always
remained one of the principal objectives of Indian five ye plans. Table-12 shows that the value of
GDP at factor cost (at 1980-81 prices)! increased from Rs. 42,871 crore in 1950-51 to about Rs. 2,96,845
crore in 1996-1 97. Gross National Product (GNP), Net National Product (NNP) and peri capita
NNP also indicated similar trends. The annual compound growth i rate of NNP (at 1980-81 prices)
and per capita NNP also increased from 3-6J per cent and 1-7 per cent per annum respectively during
First Plan (1951-56)1 to 6-8 per cent and 4-9 per cent per annum respectively during the Eighth 1 Plan
(1992-97).
Growth in GDP, GNP, NNP and Per capita NNP in India during Plan Period (at 1980-81
prices)
G D PYear GNP at factor NNP at factor cost Per capitaat factor NNP
cost (Rs. (Rs. Crore) cost(Rs. Crore) (R s.)
Crore)
1950-51 42871 42644 40454 1126-90
1960-61 62904 62532 58602 1350-30
1970-71 90426 89465 82211 1519-60
1980-81 122427 122772 110685 1630-10
1990-91 212253 208481 186446 2222-20
1996-97 296845 291883 258465 2761-40
Source: Economic Survey (Government of India), 1997-98.

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(ii) Growth in domestic savings and capital formation: At the beginning of the plan period, gross
domestic savings (as a per cent of GDP) and gross domestic capital formation (as a per cent
of GDP) remained only 10-4 per cent and 10-2 per cent respectively in 1950-51. In 1996-97, i.e.,
at the end of Eighth Plan, these rates increased to about 26 per cent and 27 per cent
respectively.(iii) Growth in agricultural and industrial production : In 1950-51, total pro-
duction of foodgrains in India was only 50-8 million tonnes and this increasd to 199-3 million
tonnes in 1996-97. The index of agricultural production (with a base of triennium ending 1981-
82) also increased from 46-2 in 1950-51 to 175-7 during the same period. The average yield of
foodgrains per hectare also increased from 872 kg. to 1,601 kg. during that period. In the case
of wheat, this yield per hectare grew from 851 kg. to 2,671 kg. during the same period, area
under high yielding varieties of seeds was 15-4 million hectares in 1970-71 and it grew to 75
million hectares in 1995-96. The consumption of chemical fertilisers (nitrogenous,
phosphatic, potassic) in Indian agriculture was only 2-2 million tonnes and it became about
14-3 million tonnes in 1996-97. Per capita net availability of foodgrains per day increased from
about 395 grams in 1951 to about 512 grams in 1997.The index of industrial production (with
a base period of 1980-81) also indicated substantial improvement from only about 18-0 in
1950-51 to about 304 in 1996-97. Output of finished steel was only 1-04 million tonnes in
1950-51 and grew to about 23 million tonnes in 1996-97. Similar trends have also been observed
in the production of cement, coal, crude oil, etc. For example, in 1950-51, the productions of
cement, coal and crude oil were 2-7 million tonnes, 32-3 million tonnes and 0-3 million tonnes,
respectively. In 1996-97, these productions grew up to 76-2 million tonnes, 308-2 million
tonnes and 32-9 million tonnes, respectively. Thus, the Sixth Plan document (1978-83), while
appreciating the process of industrialisation, stated : "A major achievement has been the
diversification and expansion of India's industrial capacity with the public sector playing a
leading role. The country is self-sufficient in consumer goods and in basic commodities like steel
and cement, while the capacity of other industries like fertilisers, is rapidly expanding".(iv)
Improvement in economic infrastructure : A strong infrastructural base in the fields of transport
and communications, generation of electricity and its distribution, irrigation, etc. is needed for the
rapid growth, both in industry and agricultural production in India. Indian planners also gave
priority to the development of infrastructural facilities during the plan period. For example,
about 5-1 billion kwh. of electricity could be j in 1950-51 and this figure increased to 376-2
billion kwh. ki 1996-97. road length also increased from 4 lakh km. in 1950-51 to about 30
km. in 1994-95. Currently, 80 per cent of the passenger movement and ( cent of the freight
movement depend on roads. The railway route le expanded from 0-54 lakh km. in 1950-51 to
about 0-63 lakh km. in 19 Substantial improvement has also been achieved in the
telecommunications sector. In April, 1948, India had only 321 telephone exchanges with about
82,000 working connections. In 1997, there were 22,212 telephone exchanges with equipped capacity
of 177-42 lakh lines and 145-43 lakh direct teleph connections. The country's remote areas are
also now linked to the micro wave tele-link through 209 satellite earth stations. With regard to the
expansion of irrigational facilities, we observe that the irrigated area under different crops
increased from about 34 million hectares in 1970-71 to about 63 million hectares in 1994-95.
(v)Remarkable progress towards economic self-reliance : Though India can not be regarded as
a completely self-reliant economy, yet her progress towards self-reliance in foodgrains, capital
equipment, science and techno1ogy is quite significant. India had to import huge amounts of
food from abroad to tackle the problem of food crisis. However, she became s reliant in foodgrain
production since 1977-78. Our country was also able to build up large buffer stocks of
foodgrains to successfully handle the food problem during periods of bad harvest.(vi)Again,
our country has considerably moved towards self-reliance in machinery, plant and other capital
equipment with the establishment of different heavy and medium-scale industries during the
plan period. Improvement in technology plays a crucial role in determining the long-run
growth prospects of an economy. India's competence in industrial technology has reached such
a level that she has now emerged as a leading Third World Exporter of industrial know-how,
technical consultancy services and turn key projects.(vi) Diversification of exportable and
production of import substitutes: With rapid industrialisation during the plan periods, India's

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dependence on foreign countries for the import of capital goods has declined to a large extent.
Different types of capital and consumer goods, which were to be imported could be produced
indigenously. This shows the achievement in the field of import-substitution. On the other hand,
India was able to produce me and more non-traditional export items like engineering goods,
jewellery, ready-made garments and other manufactured items. [The traditional export items of
India consisted of jute and cotton, tea, coffee and sugar.](vii) Modernisation : While analysing
the broad objectives of Indian planning, we have already indicated that the term 'modernisation'
connotes a variety of structural and institutional changes in the framework of economic activity.
It not only implies a shift in the sectoral composition of national income but also an
advancement in technology and institutional innovation.So far as the shift in the sectoral
composition of national income is concerned, we observe that the share of the primary sector
(consisting of agriculture, forestry, fishery and mining) in Gross Domestic Product (GDP)
declined from about 56 per cent in 1950-51 to about 28 per cent in 1996-97. On the other hand,
the share of the secondary sector (consisting of manufacturing, construction, electricity, gas and
water supply) increased from 15 per cent in 1950-51 to about 29 per cent in 1996-97. The share
of the tertiary sector (consisting of banking and insurance, public administration and defence,
trade and commerce, etc.) also increased from about 29 per cent to about 43 per cent during the
same period. Thus, the sectoral composition of national income moved in favour of industrial and
service activities. In fact, there has been a spectacular increase in the banking and insurance
activities in the country during the plan periods.Again, modernisation refers to technological
advances, both in agriculture and industry. Technological break-through in Indian agriculture
took place in the form of application of high yielding varieties of seeds, chemical fertilisers,
modernised agricultural implements, etc. since the first half of 1960 and our country
experienced a 'Green Revolution, (i.e., substantial rise in agricultural output, particularly wheat
crop) during 1966-67.In the industrial sector also, increasing application of computers and
sophisticated machines, improvement in fuel efficiency of prime movers and improvement in
the commercial use of non-conventional energy, have enhanced the productive capacity of
different factors during the plan periods.(viii)Progress in health and educational facilities :
Several steps were undertaken by the Government of India to extend health facilities to the
maximum number of people. For example, there were only 725 primary health centres in 1951,
but in 1997 there were 2,619 community health centres, 22,002 primary health centres and 1-
4 lakh sub-centres in the rural areas of India. Further, there were only 2,694 hospitals in 1951
and this number had increased to 13,692 in 1992. As a consequence, the death rate (per 1,000
population) declined from about 23 in 1951 to about 9 in 1991. Though higher than the death
rate, yet the birth rate (per 1,000 population) also declined from about 42 to 27 during the
same period. The average life expentancy at birth increased from 41 years in 1951 to 61 years in
1991.Various programmes were also undertaken by the Government of India to promote
educational facilities. These efforts led to a continuous growth in the number of both
educational institutions and the number of students at different stages of education. For
example, the number of primary schools has increased from about 2-2 lakh in 1951 to about 7-
4 lakh in 1995. The number of students enrolment at the primary level also increased from
about 19 million to 109 million during the said period. In 1951, the average literacy rate was only
18-3 per cent and it had improved to 52-2 per cent in 1991.

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