5.42 ndian onom
reforms commenced. The main idea done directly (in different activities in the primary,
here is to prevent the governments from secondary or tertiary sectors) or indirectly (as in
‘crowding out’ the funds and let it flow financial securities, such as shares, debentures,
smoothly towards the private sector—the bonds, mutual funds, etc.). In the case of India,
process of reforms in the financial sector, ‘Investment Models’ are the means and tools by
tax structure, fiscal policies of the Centre which the GoI has tried to mobilise required
and states, etc., come under it. funds (resources) to promote the different goals
4. General Public: Other than the of planned development. Since India started the
government and the private sector, planning process (1951), we see differing models
common people of an economy also being tried by the governments to mobilise
need funds for their general spending and resources—it has been a kind of ‘evolutionary’
investment. The government needs to put process. We may understand them in the following
in place such a fiscal policy which enables ‘phases’.
them (too) to have their access to funds.
The savings common people do is used PhAse-i (1951—69)
as investment provided they are able to This was the phase of ‘state-led’ development in
save. Other than savings people, must get which we see the GoI utilising every internal and
incentive and enough funds which they external means to mobilise required resources.
might directly invest in the primary or The main areas of resource allocations were for
secondary security markets or in financial infrastructure and social sector. The famous
instruments (shares, bonds, mutual funds, Mahalanobis Plan gets implemented during this
pension funds, insurance, etc.). Common period. In this period, we see the whole financial
people are the main drivers of ‘demand’ system, tax system and fiscal policy of the country
in an economy. In the periods of reforms, getting regulated to drive in maximum funds
the government sets twin targets—at the for the government to meet its planning related
one hand promoting private sector so that
financial responsibilities.
‘supply’ can be optimised in the economy
(through ‘structural reforms’) and at the This phase was marred by visible mismatches
other it tries to create adequate ‘demand’ between the need and availability of investible
in the economy (by the process of ‘macro- fund—there always prevailed a lag between the
economic stabilisation’). requirement of funds and their mobilisation.
Thus, investment targets of the government
The government used different ‘means’
got derailed many times (war with China and
to mobilise resources since Independence, in
a limited war with Pakistan also eroded and
order to realise the desired and required kind
diverted the resource allocation mechanism).
of developmental goals. A part of resources are
But overall, the government was able to start the
mobilised for investment purposes (i.e., the
process of industrialisation almost from nothing
creation of productive assets) for which different
by mobilising heavy funds in favour of the
‘investment models’ have been tried by now.
infrastructure sector and infrastructure industries
(the core sector)—education, health care also
InVEStMEnt ModELS
got funds but in a subdued manner as the GoI
Investment is a process of putting money in remained greatly preoccupied with ‘glorification
productive activities to earn income. It can be of the public sector’. This was the age when GoI