Indian Development Constraints

Indian Development Constraints A Theoretical Analysis 04-Mar-16 IIFM RAJU KUMAR (1432)

Introduction Development is not mere a terminology that could be defined in a narrow manner, moreover it’s a broad term and it inculcates so many dimensions in itself that could be itself a matter of discussion or a single subject. According to business dictionary “Development is the systematic use of scientific and technical knowledge to meet specific objectives or requirements or it is the process of economic and social transformation that is based on complex cultural and environmental factors and their interactions or it is the process of adding improvements to a parcel of land, such as grading, subdivisions, drainage, access, roads, utilities or it is an extension of the theoretical or practical aspects of a concept, design, discovery, or invention”. In Indian perspectives development is not entirely different from universal view however there are few constraints that is pulling the chariot of development in backward direction. According to Chakravarti "The underlying causes of structural backwardness were perceived as follows: First, the basic constraint on development was seen as being an acute deficiency of material capital, which prevented the introduction of more productive technologies. Secondly, the limitation on the speed of capital accumulation was seen to lie in the low capacity to save. Thirdly, it was assumed that even if the domestic capacity to save could be raised by means of suitable fiscal and monetary policies, there were structural limitations preventing conversion of savings into productive investment. Fourthly, it was assumed that whereas agriculture was subject to secular diminishing returns, industrialization would allow surplus labour currently underemployed in agriculture to be more productively employed in industries which operated according to increasing returns to scale. A fifth assumption was that if the market mechanism were accorded primacy, this would result in excessive consumption by the upper- income groups, along with relative under-investment in sectors essential to the accelerated development of the economy. Sixth, while unequal distribution of income was considered to be a 'bad thing', a precipitate transformation of the ownership of productive assets was held to be detrimental to the maximization of production and savings. In other words, (here was a tolerance towards income inequality, provided it was not excessive and could be seen to result in a higher rate of growth than would be possible otherwise."

Political Governance and administration are huge subjects. They clearly affect all dimensions of economic and social life. Due to political imbalance, India could not be able to rise as fast as it was expected. Governance started around the agriculture sector and less on industrial sector in post independence. Government started “five years plan” to improve social and material condition of the country. Over time, politics has become more of a “business” and less about public service and ideological commitment. Huge sums are raised and spent on campaigning for office and “politicking” between elections (mostly under the table), which have then to be paid off by various subversions of the public policies, government regulations and the decisions. “Crony capitalism” has increased greatly, especially in resource sectors, such as mining, land allocation/use, telecom spectrum and large government contracts. It is generally agreed that the quality and probity of civil services have worsened over time for many reasons, including: the quality of entrants; the ramping up of caste-based reservations or quotas since 1990, which has severely diluted the meritocracy principle; the increasing “politicization” of public administration at all levels and the growing spread of bribery and corruption in government-citizen transactions. Taken together, the entropy in governance is likely to hurt future development. Another constraint, “the subsidy culture” like Electricity subsidies (especially for agriculture), Food grain subsidies, subsidy on urea fertilizer, and massive diesel subsidy has a longer history and continues to undermine the economic viability of key sectors. Even government has made it a political game to conquer their own self interests.

Figure 1: Political Instability

Economical Due to loot of more than 200 years by British umpire, Indian economy that was major contributor in the World’s GDP has come down significantly. Today it has come down to 2.6 % which was once 10% in 1900. Economy, however improved in 2nd five year plan because of heavy emphasis on industries. Public sector played important role in the industrialization by investing heavily. Government intervened in private sector through fiscal policy and licensing. Growth rate of MS increased from 4 to 6 % during 1940-1980. LPG was introduced in 1991 at removing monopolies and restrictive trade practices. Agriculture sector which was a boon to our country’s spinal cord but over the period of time it has downfallen drastically. And today’s scene is- About 60% population involved in this very sector and their contribution in national GDP is less than 20%. However service sector has gain significant rise due to inculcation of Information Technology and Software Development. As a whole1951-1965: Establishing Industrial base 1965-1976: Slow Growth 1976-1990: Industrial recovery 1991 onwards: Globalization

Figure 2: Sector wise Contribution in GDP

Figure 3: GDP comparison with rest of the World

Social Despite its high levels of growth over the last few decades, India remains saddled with high levels of poverty. The country has seen considerable growth, and although poverty has dropped, the proportion of the population living on less than $2 a day (PPP) remains above two thirds. This is a constraint on growth for a number of reasons. 1. Firstly, high poverty can cause major social problems. In a city in which high-paid executives and penniless slum dwellers live side-by-side such as Mumbai, crime is likely to increase, more slums are likely to develop and infrastructure may be put under strain. It also means that a higher proportion of the population are not paying taxes, putting a greater burden on government expenditure. 2. From a theoretical perspective, poverty is more damaging to growth because it reduces the overall level of demand in the economy; richer people tend to spend a lower proportion of their incomes, so if income was more evenly distributed, average levels of consumption would, in theory, rise, fuelling growth. 3. Apart from poverty, Caste system in India is also another roadblock to the development. At the time of independence constitution was constituted to uplift the marginalized and lower backward caste into the main stream development but nowadays it has become a hot and essential recipe for the politicians to digress the people from real challenges. 4. Regionalism, however, not much prime but it’s still there in a small corner of every individual. Each individual is ready to wash their hands with blood if needed for the sake of regionalism. For example- People migrated from northern India to other parts of India in search of livelihood and what happened to them in Assam, Maharastra etc is matter of concern. 5. Poor education system in our society is also another roadblock. Poor people not able to afford the high admission fees in private institutes and government schools are not up to the mark to challenge those private institutions to meet present vast competitions either by quality or infrastructure and hence poor children are either forced to take loans for their education or remain trapped into the vicious cycle of poverty.

Figure 4: Rate of Migration

Poverty alleviation Program 

Pradhan Mantri Gramoday Yojane



Swarnajayanti Gram Swarozgar Yojanae

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Sampoorn Gramin Rojgar Yojane

Urban employment generation Program 

Swarna Jayanti Shahari Rozgar Yojana

Rural employment generation Program 

Swarnajayanti Gram Swarozgar Yojana



Sampoorn Gramin Rojgar Yojana



Mahatma Gandhi National Rural Employment Guarantee Act

Technological Transfer of technology plays a vital role in the process of agricultural development that is major contributor in Indian demography. Transformation necessitates that farmers should be convinced to accept and work for the change. They need to be prepared mentally and emotionally to accept the new agricultural technology with the continuous effort of the government and other extension agencies. Most of the farmers are well informed about the new development in agriculture and they are ready to adopt the new farming technology but are not in a position to adopt the improved technology at full scale due to certain constraints faced by them in day-to-day life. Government is not playing required SARGAM for farmers. Just writing off the loans or giving some subsidy could be a short term solution for the sector but for long term there is many more initiatives are required to be taken. Apart from agriculture sector there are no incentives for the research and development work in different sector. Unless you try and fail you can’t succeed to a victory. However service sector has provided some sort of assistance to the Indian GDP but still manufacturing sector is missing from the main stream and that is necessary to get a look upon.

Figure 5: Overall Constraints Graph

Figure 6: Technological Constraint

Figure 7: Growth in Agriculture

Figure 8: Different Schemes of Government

References http://www.yourarticlelibrary.com/environment/10-major-environmental-challenges-faced-byindia/9862/ http://jocipe.com/jocipe1.html http://www.rediff.com/money/report/slide-show-1-special-the-4-big-constraints-to-indiasgrowth-story/20130614.htm#4 http://www.tutor2u.net/economics/blog/unit-4-macro-growth-and-development-constraintsfor-india http://www.preservearticles.com/2011103116278/essay-on-structural-constraints-and-thedevelopment-strategy-of-indian-economy.html