Consider the following statements with reference to the Mahalanobis model:
1. The basic character of the Indian industry was influenced by the Mahalanobis model of economic development
2. The implementation of Mahalanobis model required centralised control and planning
Which among the above statements is / are correct?
The basic character of the Indian industry was influenced by the Mahalanobis model of economic development. The Mahalanobis model underlined the importance of basic industries for the production process. In the initial stages of the industrialisation of India, when the private capital did not flow into infrastructure areas, the government’s investments in infrastructure such as basic industries, transport, roads, railways, mining of coal and iron ore, steel mills, heavy machinery etc. were considered essential for providing momentum for industrial progress. The establishment of basic industries by the government was thought essential to evoke a reaction in the development of various spheres of industrial activity. The crucial factor which led to the adoption of Mahalanobis model was the low level of capital-stock formation in the economy. Growth in income was linked to the expansion of capital-stock and investment by the government was thought essential to expand the capital-stock. In a closed economy, the domestic supply of capital goods influenced the investment pattern and hence the production of capital goods by the public sector became essential. The emphasis was on those capital goods which could lead to the production of other capital goods. The implementation of Mahalanobis model required centralised control and planning. The industrial policy resolution of 1956 and the second five year plan (1956-61) gave a practical shape to the Mahalanobis model. The 1956 resolution categorised industries under three headings. The first category was the monopoly of the government. In the second category, the industries meant for progressive takeover by the state were enlisted. The third category of industries was left open for the operation of the private sector.
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