also been called the Nehru-Mahalanobis strategy of development as it
articulated Nehru’s vision and P. C. Mahalanobis happened to be its chief
architect. The central idea underlying this strategy is well conveyed by
recalling the following statement from the plan document—“If
industrialisation is to be rapid enough, the country must aim at developing
basic industries and industries which make machines to make the machines
needed for further development.”
The Mahalanobis model showed that, given certain assumptions, the
higher the allocation of investment in the investment goods sector, the higher
the investment rate at the margin, which would lead to a higher rate of growth
of output. The emphasis was on expanding the productive ability or power of
the system, through forging strong industrial linkages, as rapidly as possible.
It is worth repeating again that such an emphasis enjoyed tremendous
theoretical/intellectual legitimacy although there were a few dissenting
voices. The third five-year plan was essentially a continuation of the second
plan, in terms of the broad thrust and emphasis on industries such as
machinery and steel.
In terms of the core objective of stepping up the rate of growth of
industrial production, the strategy started showing quick and impressive
results. For instance, the machinery index increased from 192 in 1955-56 to
503 in 1960-61 and the rate of growth of overall industrial production during
this period was also very impressive. To put it simply, the strategy during
those two plans laid the foundation for a well-diversified industrial structure
within a reasonably short period, and this was a major achievement.
However, as the strategy was unfolding, some of its key shortcomings
were also becoming evident.
The latent disproportion between the growth of the heavy industry sector
and other industries and the shortfalls in achievements compared to the target
growth rates for industrial output, both during the second and the third plan,
were among the most obvious indicators of the problems underlying the
strategy in operation. Consequently, as could be respected, the Nehru-
Mahalanobis strategy became a subject of increasing criticism. A variety of
diagnoses relating to what was wrong with the Indian economy and a
plethora of prescriptions were offered.
It needs to be stressed here that the performance prospects of the