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Kerala PSC Indian Economy Book Study Materials Page 128
Book's First Page5.42 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