Mr. Narasimham, Chief of the South Asia Division, is a graduate of Madras and Cambridge Universities. He has been on the staff of the Reserve Bank of India, and has contributed articles to the Reserve Bank of India Bulletin.
For a detailed discussion of the planning process in India and of the First and Second Five Year Plans, see N. A. Sarma, “Economic Development in India: The First and Second Five Year Pans,” Staff Papers, Vol. VI (1957–58), pp. 180–238.
The total outlay in the public sector was Rs 20 billion, the difference between this figure and the figure of investment representing current outlay under the Plan (Rs 4.76 = US$1).
The corresponding total outlay in the public sector was Rs 48 billion.
“Third Five Year Plan of India,” Reserve Bank of India Bulletin, September 1961, pp. 1388–1402. The National Council of Applied Economic Research, a private research organization, in a study of savings in the Indian economy, estimated the marginal savings/income ratio at about 20 per cent for the earlier years of the Second Plan.
See D. R. Khatkhate, “The Impact of Inflation on India’s Economic Development,” Economic Development and Cultural Change, Vol. VII, No. 3, Part I (1959), pp. 363–76, for a good discussion of this point. Extending this argument further, A. Shonfield, in Economic Growth and Inflation: A Study of Indian Planning (Bombay, 1961), has argued for a larger investment effort in the Third Plan by obtaining increased supplies of P.L. 480 foodgrains. The role of food supplies in development is not peculiar to India. See G. Maynard, “Inflation and Growth: Some Lessons to Be Drawn from Latin-American Experience,” Oxford Economic Papers, Vol. XIII, No. 2 (1961), pp. 184–202.
The impact on the balance of payments of a step-up in the rate of investment where export expansion is limited, where imported capital goods form a substantial proportion of the investment, and where the ratio of international trade to national income is as low as it is in India, is well brought out by W. B. Reddaway in The Development of the Indian Economy (London, 1962), pp. 31 and 54–66.
It is interesting in this connection to observe that the goods at present in short supply in India are not so much wage goods as investment goods (such as steel and coal) and services (such as transport and power). The availability of P.L. 480 foodgrains is only part of the explanation.
It would be well to point out that this concept of “backlog of unemployment” is more notional in character, in that it measures the difference between the additions to the labor force and the increase in employment in the past period. The figures for unemployed and underemployed would, of course, be much larger.
Government of India, Planning Commission, Third Five Year Plan (New Delhi, 1961), p. 9.
This is equivalent to Rs 125.3 billion at 1948–49 prices, the base year for comparison used in national income statistics in India.
Government of India, Planning Commission, op. cit., p. 49.
Subsequent estimates place foodgrains production in 1960–61 at 79.3 million tons; on this basis the expansion in foodgrains production envisaged would be 26 per cent.
Some new land, of course, will come under the plow in the areas being opened up in the various multipurpose projects and in the Rajastan Canal area.
With allowance for double cropping, the net area of 20 million acres is equivalent to a gross area of 25.6 million acres.
The corresponding gross areas are 12.8 million acres each from major and minor works.
This is based on the Draft Outline of the Plan; the final version does not spell out the physical content of the targets in this manner, but the value of output is the same as in the Draft Outline for these machine-building industries.
Some amount of competition between road and rail transport will be unavoidable; a Committee on Transport Policy is presently examining the possibilities of greater coordination between these two sectors.
This excludes Rs 3.5 billion to be met by the railways out of their depreciation fund and Rs 0.35 billion needed by the railways for stores suspense account.
In actual fact, Rs 2 billion of the public sector program represents transfer of resources to the private sector; the total of private investment then would be Rs 43 billion and that of public investment Rs 61 billion, against Rs 33 billion and Rs 34.5 billion in the Second Plan.
The figure of Rs 21 billion excludes Rs 5 billion for debt servicing and Rs 6 billion for P.L. 480 imports. The figure of Rs 83 billion excludes Rs 12 billion of current outlay.
Government of India, Planning Commission, op. cit., p. 93.
The Second Plan experience is relevant in this context; although in the final result the Plan involved public sector outlay of Rs 46 billion, against the original target of Rs 48 billion, the individual items of financing showed wide divergences from original expectations.
A figure of a little under Rs 4 billion has been mentioned in the Third Plan for the payment to general revenues of dividends at a rate of 4¼ per cent of capital at charge. This is included under “Balance from current revenues” in Table 5.
In the Second Plan period, the contributions from the public sector enterprises were shown under “Balance from current revenues” and “Additional taxation.”
“There is, however, no escape from the fact that, in a country like India where the bulk of the people are poor, resources on an adequate scale cannot be raised without calling for a measure of sacrifice from all classes of the people” (Government of India, Planning Commission, op. cit., p. 104).
Reserve Bank of India Bulletin, September 1961, p. 1400. The figure here relates to income originating in the entire rural sector and is thus wider than the income from agriculture proper.
Government of India, Planning Commission, op. cit., p. 103.
Reserve Bank of India Bulletin, September 1961, p. 1400.
It may be noted in this connection that the market loan issues in the current fiscal year (1961–62) have been made at higher rates of interest, the increase in the rates ranging up to a little under one half of 1 per cent.
This does not include any Reserve Bank subscription to government debt; it is intended that in the Third Plan there will be no such subscriptions (see section, Loans from the Public and Provident Funds, above).
This includes Rs 6 billion representing P.L. 480 imports and Rs 5 billion representing debt service transactions.
Government of India, Planning Commission, op. cit., p. 113.
The public sector outlay of Rs 75 billion (in 1960–61 prices) is, in terms of constant prices, not more than a quarter as great again as the Rs 48 billion originally proposed for the Second Plan.
This lag is due, apart from procedural delays, to the fact that much of the equipment needed for the investment program has to be fabricated to individual specifications in the supplying countries.
The U.S. (and total) amount might be larger, as the U.S. contribution is conditional on matching contributions and the United States has announced that it would be prepared to increase its contribution by another $65 million (up to a total of its original commitment of $500 million for the second year) in the event that other member countries of the Consortium raise their contributions by an equivalent amount.