‘Rao - Manmohan Model of Growth is different from Gandhian Model of Growth.’ Critically evaluate this statement.

‘Rao - Manmohan Model of Growth is different from Gandhian Model of Growth.’ Critically evaluate this statement.

In India efforts to remove poverty and inequality in rural areas have failed although growth in production and income has been achieved. The reason for this is that strategies for rural development were aimed primarily at raising production without any understanding of social and class structure and their relation to production and its distribution. A new approach to development policy is therefore required. Renewed attention has recently been paid to the Gandhian approach to rural development in the centre and in the northern states. This approach is examined, in the context of the present agricultural situation in India, in anticipation of its implementation. Aspects discussed include: characteristics of the model, ideals of development, concept of development, main aspects and sources of development, historical realities, and changing agrarian structure. It is concluded that the Gandhian model of rural development cannot succeed in providing social justice without the existence of the Gandhian type of rural economy. The prevailing agrarian situation indicates that this cannot be brought about in the context of India's present stage of development and of development in the world in general. In the present state of socio-politico-economic affairs, the model would benefit the dominant class of the rural population at the cost of the rural poor. Some aspects of the Gandhian model e.g. expansion of village and cottage industries, decentralization of production and wealth, and the institution of trusteeship by state confiscation of excess wealth, may be implemented under present conditions.
The economy of India is the twelfth largest economy in the world by nominal value and the fourth largest by purchasing power parity (PPP).In the 1990s, following economic reform from the socialist-inspired economy of post-independence India, the country began to experience rapid economic growth, as markets opened for international competition and investment. In the 21st century, India is an emerging economic power with vast human and natural resources, and a huge knowledge base. Economists predict that by 2020,India will be among the leading economies of the world. India was under social democratic-based policies from 1947 to 1991. The economy was characterised by extensive regulation, protectionism, and public ownership, leading to pervasive corruption and slow growth. Since 1991, continuing economic liberalisation has moved the economy towards a market-based system.A revival of economic reforms and better economic policy in 2000s accelerated India's economic growth rate. By 2008, India had established itself as the world's second-fastest growing major economy. However, the year 2009 saw a significant slowdown in India's official GDP growth rate to 6.1% as well as the return of a large projected fiscal deficit of 10.3% of GDP which would be among the highest in the world.
India's large service industry accounts for 54% of the country's GDP while the industrial and agricultural sector contribute 29% and 17% respectively. Agriculture is the predominant occupation in India, accounting for about 60% of employment. The service sector makes up a further 28%, and industrial sector around 12%. The labor force totals half a billion workers. Major agricultural products include rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes, cattle, water buffalo, sheep, goats, poultry and fish. Major industries include telecommunications, textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, information technology enabled services and software.
India's per capita income (nominal) is $1070, ranked 143th in the world, while its per capita (PPP) of US$2,780 is ranked 130th.Previously a closed economy, India's trade has grown fast. India currently accounts for 1.5% of World trade as of 2007 according to the WTO. According to the World Trade Statistics of the WTO in 2006, India's total merchandise trade (counting exports and imports) was valued at $294 billion in 2006 and India's services trade inclusive of export and import was $143 billion. Thus, India's global economic engagement in 2006 covering both merchandise and services trade was of the order of $437 billion, up by a record 72% from a level of $253 billion in 2004. India's trade has reached a still relatively moderate share 24% of GDP in 2006, up from 6% in 1985. Despite robust economic growth, India continues to face many major problems. The recent economic development has widened the economic inequality across the country. Despite sustained high economic growth rate, approximately 80% of its population lives on less than $2 a day (PPP). Even though the arrival of Green Revolution brought end to famines in India, 40% of children under the age of three are underweight and a third of all men and women suffer from chronic energy deficiency. The economic liberalization in India refers to ongoing reforms in India. After Independence in 1947, India adhered to socialist policies. In the 1980s, Prime Minister Rajiv Gandhi initiated some reforms. His government was blocked by politics. In 1991, after the International Monetary Fund (IMF) had bailed out the bankrupt state, the government of P. V. Narasimha Rao and his finance minister Manmohan Singh started breakthrough reforms. The new policies included opening for international trade and investment, deregulation, initiation of privatization, tax reforms, and inflation-controlling measures. The overall direction of liberalization has since remained the same, irrespective of the ruling party, although no party has yet tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labor laws and reducing agricultural subsidies.
As of 2009, about 300 million people — equivalent to the entire population of the entire United States — has escaped extreme poverty.[2] The fruits of liberalization reached their peak in 2007, with India recording its highest GDP growth rate of 9%. With this, India became the second fastest growing major economy in the world, next only to China. An Organisation for Economic Co-operation and Development (OECD) report states that the average growth rate 7.5% will double the average income in a decade, and more reforms would speed up the pace.
Indian government coalitions have been advised to continue liberalization. India grows at slower pace than China. McKinsey states that removing main obstacles "would free India’s economy to grow as fast as China’s, at 10 percent a year".
Period between 1989-91
1989-91 was a period of political instability in India and hence no five year plan was implemented. Between 1990 and 1992, there were only Annual Plans. In 1991, India faced a crisis in [[Foreign Exchange]] (Forex) reserves, left with reserves of only about $1 billion (US). Thus, under pressure, the country took the risk of reforming the socialist economy. [[P.V. Narasimha Rao]])(28 June 1921 – 23 December 2004) also called Father of Indian Economic Reforms was the twelfth Prime Minister of the Republic of India and head of [[Congress Party]], and led one of the most important administrations in India's modern history overseeing a major economic transformation and several incidents affecting national security. At that time Dr. [[Manmohan Singh]] (currently, Prime Minister of India) launched India's free market reforms that brought the nearly bankrupt nation back from the edge. It was the beginning of [[privatization]] and [[liberalization]] in India. Eighth plan (1992-1997) [[Modernization]] of industries was a major highlight of the Eighth Plan. Under this plan, the gradual opening of the Indian economy was undertaken to correct the burgeoning [[deficit]] and foreign debt. Meanwhile India became a member of the [[World Trade Organization]] on 1 January 1995.This plan can be termed as Rao and Manmohan model of Economic development. The major objectives included, containing population growth,poverty reduction,employment generation,strengthening the infrastructure,Institutional building, Human Resource development,Involvement of Panchayat raj,Nagarapalikas,N.G.OSand Decentralisation and peoples participation. Energy was given prority with 26.6% of the outlay. An average annual growth rate of 6.7%against the target 5.6% was achieved. The Government of India headed by Narasimha Rao decided to usher in several reforms that are collectively termed as liberalisation in the Indian media. Narasimha Rao appointed Manmohan Singh as a special economical advisor to implement liberalisation. The reforms progressed furthest in the areas of opening up to foreign investment, reforming capital markets, deregulating domestic business, and reforming the trade regime. Liberalization has done away with the Licence Raj (investment, industrial and import licensing) and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors. Rao's government's goals were reducing the fiscal deficit, privatization of the public sector, and increasing investment in infrastructure. Trade reforms and changes in the regulation of foreign direct investment were introduced to open India to foreign trade while stabilizing external loans. Rao's finance minister, Manmohan Singh, an acclaimed economist, played a central role in implementing these reforms. New research suggests that the scope and pattern of these reforms in India's foreign investment and external trade sectors followed the Chinese experience with external economic reforms.
• In the industrial sector, industrial licensing was cut, leaving only 18 industries subject to licensing. Industrial regulation was rationalized.
• Abolishing in 1992 the Controller of Capital Issues which decided the prices and number of shares that firms could issue.
• Introducing the SEBI Act of 1992 and the Security Laws (Amendment) which gave SEBI the legal authority to register and regulate all security market intermediaries.
• Starting in 1994 of the National Stock Exchange as a computer-based trading system which served as an instrument to leverage reforms of India's other stock exchanges. The NSE emerged as India's largest exchange by 1996.
• Reducing tariffs from an average of 85 percent to 25 percent, and rolling back quantitative controls. (The rupee was made convertible on trade account.)
• Encouraging foreign direct investment by increasing the maximum limit on share of foreign capital in joint ventures from 40 to 51 percent with 100 percent foreign equity permitted in priority sectors.
• Streamlining procedures for FDI approvals, and in at least 35 industries, automatically approving projects within the limits for foreign participation.
• Opening up in 1992 of India's equity markets to investment by foreign institutional investors and permitting Indian firms to raise capital on international markets by issuing Global Depository Receipts (GDRs).
• Marginal tax rates were reduced.
• Privatization of large, inefficient and loss-inducing government corporations was initiated.