. Course Objectives Course Content Evaluation Class Quiz 10 % Best of three quizzes One quiz a week (2x5), at the end of the second session of the week, based on lectures and an assigned reading Third quiz based on an assigned reading will be part of end-term examination (1x5) End-Term 30 % Two short notes (2x5=10%) One essay (20%)
Please ensure that come to class in time your laptops are down and mobile phones in silent-mode while the class is in progress you have your name boards in front of you
Sessions I The Impact of Planning on Economic Growth
II The Consequences of Command & Control
III Liberalization in the Eighties
IV The Economic Crisis of 1991 I The Impact of Planning on Economic Growth . The Rationale for Planning Nehrus consolidation of power and its impact on economic policy The objectives of planning Why plan? The three assumptions underlying the planning process: o the basic constraint on development was the deficiency of capital o Industrialization provided the means for surplus labour to be productively employed o Government needed to control investment because if market forces operated concentration of investment (both location and holding) would continue and investment would flow to non-essential sectors The Three Pillars of Planned Economic Growth
The Industries (Development & Regulation) Act of 1951
The Licensing System
Progressive Taxation
The Industries (Development & Regulation) Act, 1951 The most complex and comprehensive system of control and regulation of private sector enterprise devised worldwide Objectives: o regulation of investments according to plan priorities and targets o prevention of concentration of holding o balanced industrial development to reduce disparities in levels of development o protection and encouragement of small-scale industries
. Delegated vast powers to the bureaucracy All existing industries had to register Licenses were required for new investments, capacity addition or over- production Industries were subject to regulation that included the power to: o investigate the operations of a firm o assume management control if necessary o control supply, distribution and prices of products . The Act initially covered 42 industries and 150 articles of manufacture The list was expanded in 1956 to include an additional 26 industries and by the mid- sixties it covered all industries Negotiating the System We needed to import steel and copper, and had to make the payments to an English company. So that meant we had to: one, get an import license; two ask the RBI to release the foreign exchange; three get the payment released; four get the permission to manufacture.
For foreign collaboration, like we had between TVS and Lucas, we had to prove it was justified: how much it would cost, how long it would last, whether expatriates were needed, then how much they would be paid, how many days travelling would be required. Each stage each permission took us six months to a year. We had to set up a large office in Delhi in order to apply to the ministries. Twice every month, my father had to fly from Madras to Delhi
Gopal Srinivasan quoted in Patrick French, India: A Portrait (Allen Lane/Penguin: 2011) Progressive Taxation Taxation was related not just to economic policy but to social strategy as well Income tax rates were hiked both to collect additional revenue and reduce disparities in income New Taxes were introduced Estate Duty (1953) Capital Gains Tax (1956) Wealth Tax (1957) Gift Tax (1958) The Impact of Planned Development Growth rates remained high during the 50s Industry grew at an average of about 7% during this period Agricultural production increased by an average of 4 percent Planned economic development was seen as a success
Problems of the licensing system Delays in clearances Large number of applications, inadequate infrastructure for review Sequential consideration of applications Designed to prevent unnecessary investment, but restricted competition Absence of criteria for selection Arbitrary decisions, opportunities for corruption