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