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P LANNING P ARADIGM
sectors which are pillars of growth, name-
ly the capital goods producing industries
(Bhagwati and Desai, 1970). The policy of
stressing more the capital goods and basic
goods industries showed up in increased
share of these sectors in the industrial
structure during the twenty fi ve years
from mid-fi fties to eighties. But this pe-
riod also witnessed one of the worst indus-
trial recessions which is believed largely
due to demand side constraints- a mis-
match between the rapid growth of capital
and basic goods whose market did not rise
that fast due to slower growth in the sec-
tors which used them. Indian economy
recovered from this, and in the long run
proved the believers in the low level equi-
librium trap wrong. But the increasing
transaction costs due to the rent seeking
behaviour ingrained in the license permit
raj made the whole policy of state control-
led industrialisation inconsistent with the
need of the hour.
The larger issue which bothered the
average Indian was the slow rate of
growth of the Indian economy during
1950-80, which averaged a paltry 3.5 per-
cent per annum. The offi cial statistics did
show reduction of both urban and rural
poverty, but a slowly growing economy
could not expect a dramatic change in
income distribution, especially when the
trickle down strategies are always subject
to heavy skepticism. Nonetheless, India
succeeded in staving off a possible food
crisis through the much acclaimed green
revolution. However, over the years agriculture
sector faced more misery, while
126 THE IIPM THINK TANK
the infrastructure in the economy got increasingly
neglected. The public sector
increasingly got overshadowed by the
private sector in the gross capital formation
of the nation. We will take up these
issues in the next sections to highlight a
desirable future road map for the plan-
Economy recovered from this, and in
the long run proved the believers in
the low level equilibrium trap wrong
ning process in India.
Policies to Resurrect a Crisis
Prone Agriculture Sector
Speaking of agriculture, the fi rst twenty
years of planning in India was primarily
geared towards ensuring food security
among other goals. The per capita availability
of cereals increased from 334.2
grams per capita per day in 1951 to 419.1
grams in 1972. One could not minimize
the importance of green revolution in this
regard. However, over the years public
investment in agricultural gross capital
formation has declined steadily over the
years. The agriculture in India still depends
heavily on good monsoon, but the
allocation on irrigation and fl ood control
in the government budget has steadily
declined over the years and now hovers
around 0.1 to 0.2 percent annually compared
to around seven to eight percent
in the 60s to 80s. This is the major area
where the government involvement
was perceptible in historical backdrop.
The rest of the inputs were
more or less privately provided except
fertilizer. The paradox is that in
India, as in elsewhere, public investment
in rural infrastructure acts as
a major complementary factor to
private capital formation (World Bank,
2003).
One of the net results of this apathy
towards agriculture is a fall in the total
factor productivity (TFP) in agriculture in
the last two decades. TFP measures the
quality and effi ciency of the inputs (including
managerial effi ciency) and not
the quantity. Incidentally, TFP growth
was around 1.39 percent in the 1970s and
1.99 percent in the 1980s compared to
-0.59 percent per year in the fi rst half of
the 1990s (Srinivasan, 2000). The per
capita per day cereal and pulse availability
also do not show any promising trend
in recent years although some claim the
change in food habits might reduce the
need of cereals and pulses over time. The
overall scenario does not look promising
as the agricultural growth has fallen signifi
cantly over the years and lately turned
negative for some years.