Rural Development

UNIT 1 DEVELOPMENT — AN OVERVIEW Experiences — An Asian

Perspective

Structure
1.0 Objectives
1.1 Introduction
1.2 Concept of Development
1.3 Indicators of Development
1.3.1 Characteristics of Underdevelopment
1.3.2 Dissatisfaction with the Conventional Indicators of Development
1.4 Theories of Development
1.4.1 Rostow’s Stages of Growth
1.4.2 The Lewis Theory of Development
1.4.3 International Dependence Theories
1.4.4 Gandhian View of Development
1.4.5 Marxian Concept of Development
1.5 Major Issues in Development
1.5.1 Growth vs Distribution
1.5.2 Agricultural vs Industrial Development
1.5.3 Capital vs Labour Intensive Technologies and Development
1.5.4 Centralization vs Decentralization
1.5.5 Urban vs Rural Development
1.5.6 Respective Roles for the State and the Market
1.6 Planned Development and Shifts in Strategies in India
1.7 Let Us Sum Up
1.8 Key Words
1.9 References and Suggested Readings
1.10 Check Your Progress – Possible Answers

1.0 OBJECTIVES

After studying this unit, you should be able to:

• Identify the components of development;
• List the indicators by which it is possible to evaluate development;
• Describe some of the leading issues in development theories;
• Critically comment on the importance of planning for development; and
• Describe the Indian development experience since Independence.

1.1 INTRODUCTION

The primary purpose of this unit is to help you understand the concept of development,
which is a multi-faceted and includes a variety of economic as well as non-economic
dimensions. We will describe the leading issues in development as well as specify
some indicators of development by which you can differentiate areas/regions/countries
that are less developed from those that are relatively more developed. The process
of development itself is a complex one, with multiple trajectories, and we have a
range of theories, according primacy to different sets of economic and social factors
in facilitating development. To illustrate these, this unit will introduce you to some of
the important theories of development and some of the critical issues in the trajectories
of development. The last substantive section which is a brief account of India’s 1
Rural Development — development experience since Independence will also give you a feel of the theoretical
Concept, Strategies and issues covered in this unit.
Experiences

1.2 CONCEPT OF DEVELOPMENT

You know that some countries are considered to be more developed than others. It
is not uncommon to come across references to the Less Developed Countries (LDCs)
as compared to the Developed Countries (DCs). Similarly, within out own country,
some states are said to be more developed than others. Clearly, development therefore
involves making relative comparisons.

Development implies on overall positive change in the physical quality of life. This
positive change for the better encompasses economic as well as social aspects.
Therefore, development not only calls for economic growth but also the equitable
distribution of the gains made from economic growth. In other words, development
implies growth with justice. It means an improvement in the quality of life through
better health, education, housing and overall material and social welfare. The basic
elements of development are the following:

i) Removal of inequality and poverty;

ii) Increase in material welfare of the people;
iii) Increase in social well-being (education, health, housing, etc.);
iv) An equitable distribution of the gains of development among different groups of
people in a region or country;
v) An enhancement in technology and the capacity to produce a wider range of
goods and services in the economy leading to a better quality of life;
vi) Building institutional structures which permit participation in decision-making
at all levels, equalization of opportunities for development and removal of
disparities.
For a long time, it was assumed that development depends primarily on economic
growth and would automatically occur if economic growth took place. This view of
development has, however, been criticized on the ground that it ignores the distribution
of the gains from growth; and also, how the growth has been achieved and at what
costs. An increase in production in a country does not automatically mean that there
has been better distribution of what has been produced. For instance, though the
production of food-grains has grown almost four-fold since Independence, this does
not imply that every Indian gets enough to eat. This has meant that the question of
distributive justice has assumed greater importance. Also, the composition of the set
of goods produced is important.

It is necessary to understand the difference between the concepts of economic

growth and development. Economic growth means an increase in the value of all
goods and services produced in an economy. The sum total of all goods and services
in an economy is termed as the Gross Domestic Product (GDP). Growth is, therefore,
a sustained expansion in the productive capacity of an economy leading to
sustained rise in its GDP. Development, on the other hand, is a sustained
improvement in material welfare, particularly for those who are poor and afflicted
by poverty, illiteracy and poor health conditions. Development is, therefore, a
qualitative concept involving a qualitative improvement in the general standard of
living in a country or economy.

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 Table 1.1: Some Social Indicators in Selected Developed and Developing Countries

Unemployment Annual Life Expectancy GDP Per Capita Adult Literacy Infant Mortality
Rate Population 1995 US Dollars Rate Rate per 1000
Growth Rate

1992-1999 1975- 2000- 1960 1980 2000 1980 2000 1985 1992 2000 1970 1980 2000
2000 2015

Developed
Countries

United States of 6.7 1.00 0.8 70.6 74 77.7 21529 29870 99 99 99 20 13 7

America

United Kingdom 2.5 0.2 0.1 69.9 74 77.0 14205 20337 99 99 99 18 12 6

Japan 10.2 0.5 0.2 67.9 76 81 27672 42381 99 99 99 14 8 4

Developing
Countries

Morocco 15.4 2.2 1.5 68 58 67.6 1114 1400 33.5 40.6 48.9 119 99 41

Kenya 28.0 3.3 1.8 65 55 51 337 330 63.8 74.5 82.4 96 75 71

Bangladesh - 2.4 1.9 51 59.4 63 220 350 32.0 36.4 41 140 132 60

Malaysia 2.5 2.4 1.5 57 67 73 2348 4552 76.4 81.5 87 45 30 8

Sri Lanka 11.3 1.3 0.8 63 67 73 452 830 87.1 89.3 92 53 34 17

Peru 8.2 2.1 1.5 55.4 - 69.4 2777 2700 - 85.5 90.2 115 - 30

Source: a) Human Development Report, 1997, 1995, 1992, 2002, 2002.

b) World Development Report, 2003, 1980
c) World Development Indicators, 2000.
Perspective
Experiences — An Asian
Rural Development

3
Rural Development —
Concept, Strategies and
Check Your Progress I
Experiences Note: a) Use the space provided for your answers.
b) Check your answers with the possible answers provided at the end of
this unit.
1) What are the basic elements of development?
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2) Distinguish between the concepts of economic growth and development.

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1.3 INDICATORS OF DEVELOPMENT

As mentioned earlier, development is a relative concept. Thus, Region A may be

more developed than Region B, but less developed than Region C. What are the
yardsticks by which comparisons between one region and another can be made?
Table 1.2: Income Distribution in Selected Developed and Developing Countries

Country Survey Poorest Poorest Richest Richest Gini

year 10% 20% 20% 10% Index

Developed Countries
USA 1997 1.8 5.2 46.4 30.5 40.8
UK 1995 2.2 6.1 43.2 27.7 36.8
Japan 1993 4.8 10.6 35.6 21.7 24.8
Developing Countries
Morocco 1999 2.6 6.5 46.6 30.9 39.5
Kenya 1997 2.4 5.6 51.2 36.1 44.9
Bangladesh 1996 3.9 8.7 42.8 28.6 33.6
Malaysia 1997 1.7 4.4 54.3 38.4 49.2
Sri Lanka 1995 3.5 8.0 42.8 28.0 34.4
Peru 1996 1.6 4.4 52.3 36.6 46.2

Source: Human Development Report, 2002.

Note: Gini Index measures the extent to which the distribution of income among individuals or
households within an economy deviates from a perfectly equal distribution. The value of a Gini
index that is close to zero denotes closeness to perfect equality in income distribution while a
value close to 100 denotes closeness to perfect inequality.

4
The above two tables give you a set of commonly used indicators of development Rural Development
for a selected group of countries and you will notice that in some respects the Experiences — An Asian
contrast is quite telling. Perspective

1.3.1 Characteristics of Underdevelopment

Most developing countries are characterized by the following conditions:

i) Mass poverty;
ii) Low levels of income and concentration of incomes in a few hands;
iii) High levels of unemployment and under-employment;
iv) Poor nutrition, health, housing, literacy and welfare status;
v) Preponderance of primary sector and low levels of industrialization; and
vi) Lower status of women and that of a variety of social groups such as scheduled
castes in India.
These characteristics of underdeveloped countries will help in generalizing some of
the problems that one finds common to most of them. This will enable us to also
grasp the key issues that affect the developing societies.
i) The poverty levels are very striking in the developing countries. In India, over
26 per cent of people are below the poverty line as per the recent official count
conducted in 1999-2000. However, many experts have questioned the official
figure, mainly on the ground that the methodology used to collect the relevant
data in 1999-2000 was different from that of the earlier surveys, and have
argued that the incidence of poverty could be substantially higher than the
official estimates. The single biggest section affected by poverty are the landless
agricultural workers in rural areas. Close to half the number of such households
in India were below the poverty line. Poverty alleviation continues to be the
single biggest problem facing Indian planners.
ii) Low levels of income for large sections of the masses and high inequalities in
the distribution of income are very apparent in India. Most developing countries
have this problem because assets are unequally distributed. This perpetuates the
problem of low incomes for the poor. The existence of mass poverty amidst
glaring inequalities is among the most important symptoms of inadequate
development in the low-income countries.
iii) Low levels of productivity and backward technology are the other major
problems of the developing countries. Increased productivity is an indication of
greater efficiency. Improvements in technology and better management and
organization are necessary for this purpose. For instance, in the agricultural
sector greater use of fertilizers, improved varieties of seeds, better ploughs, etc.
can lead to increase in output from the same unit of land. Generally, crop yields
per hectare in the developed world are far higher than those in developing
countries. The need to improve technology and the overall input package in
agriculture is obvious.
iv) High levels of unemployment and underemployment are characteristic of
developing countries. Since the level of industrialization is low and the agricultural
sector cannot absorb the entire work force, the problem of unemployment and
underemployment continues to grow. As per the Report of the S.P. Gupta
Committee (2002), which was set up by the Planning Commission, there are
more than 27 million people unemployed in India currently. At the present rate
of labour absorption, this number is likely to increase to a whooping 70 million
by 2012. Obviously, the problem is much greater if one takes into account the
problem of pervasive underemployment particularly in rural areas. Rapid
industrialization and modernization of the agricultural sector will obviously go a
long way in creating more employment. The pressure of unemployment also 5
Rural Development — perpetuates the problem of low wages as employers take advantage of surplus
Concept, Strategies and labour and pay low wages; workers are not able to bargain because there are
Experiences thousands willing to do the same work at the prevailing rates.
v) Poor health, nutrition, illiteracy and poor housing are also characteristic
features of developing countries. The low levels of income obviously play a
central role in perpetuating these problems. As earnings are low, people are not
able to consume a balanced diet providing the requisite number of calories and
nutrients. The most vulnerable are the children in the developing countries.
Compared to standards prevailing in the developed countries, the death rates are
still very high in the developing countries. The problem of nutrition will have to
be tackled if developing countries are to make advances in the field of health.
Similarly, there are huge gaps between the developed and developing countries
in the field of education. It is particularly striking that the major problem is with
respect to female illiteracy. As mentioned earlier, inadequate growth and low
levels of income are obviously the reasons that perpetuate such deprivations. It
must be stressed, however, that public policy has to play a critical role in
addressing these problems. In fact, the history of development experience shows
without any ambiguity that in the early and middle stages of modern economic
growth process there is no substitute for government intervention in areas such
as health, education, etc., and that growth in itself is no answer to these problems.
Moreover, even in the countries that are advanced in terms of standard economic
growth parameters, inadequate public policy can lead to situations of serious
deprivation for particular groups. For instance, in the United States, African
Americans as a group have lower life expectancy than people born in the
immensely poorer economies of Sri Lanka, Jamaica, Costa Rica or Kerala in
India, amongst several others. Within United States, according to a recent study,
African American men and women in the age groups 35 and 54 years had
almost twice and thrice the mortality rates, as compared to white men and
women respectively. Similarly, in India the gaps between different social groups
with reference to the standard socio-economic indicators are disturbingly huge.
To redress these gaps, carefully designed public interventions are of utmost
importance.
Table 1.3: Sectoral Employment in Selected Developed and Developing Countries
Agriculture Industry Services
1965 80 90 2000 65 80 90 2000 65 80 90 2000
Developed Countries
USA - 3.5 3.0 2.0 - 31.1 25 27 - 65.5 72 81
UK - - 2.0 2.0 - - 28 31 - - 68 69
Japan - 11.0 7.0 5.0 - 34.0 34 33 - 54.4 59 62
Developing Countries
Morocco 61 56 46 42 15 20.2 25 27 24 23.8 29 33
Kenya 86 82.2 81 75 5 6.3 7 9 9 11.5 12 16
Bangladesh 84 72.6 59 55 5 8.7 13 16 11 18.7 28 29
Malaysia 58 40.8 26 22 13 18.8 28 30 29 40.5 46 48
Sri Lanka 56 51.9 49 43 14 17.8 21 22 30 30.3 30 35

Source: a) Human Development Report, 1995, 2000, 2002.

b) World Employment Report, 1998.

vi) Classical development paradigms had stressed the importance of a shift from
primary to secondary and then towards the tertiary sector as the countries
develop and mature. The developing countries are in a situation where most
people are involved in agriculture and allied activities. In India, close to 60
6 per cent of the labour force is still engaged in agriculture and about 24 per cent
 of the Gross Domestic Product (GDP) emanates from this sector. In sharp Rural Development
contrast to this, only about 2 per cent of the labour force is engaged in agricultural Experiences — An Asian
activity in the USA. More importantly, after mechanization and technological Perspective
changes in the developed countries, industry has been able to absorb those
released from employment in the agricultural sector. The two tables (1.3 and
1.4) given below are very instructive in this regard. You will notice that particularly
on the employment front the structural transformation is very sluggish.

Table 1.4: Sectoral Contribution to GDP in Selected Developed and Developing Countries
Agriculture Industry Services
1977 92 2000 77 92 2000 77 92 2000
Developed Countries
USA 3 - - 34 - - 63 - -
UK 3 - 1 37 - 25 60 - 74
Japan 5 2 2 41 42 36 54 56 62
Developing Countries
Morocco 21 15 13 31 33 33 48 52 54
Kenya 35 27 23 20 19 16 45 54 60
Bangladesh 55 34 26 13 17 25 32 49 49
Malaysia 26 - 12 29 - 40 45 - 48
Srilanka 39 26 21 21 25 27 40 49 52

Source: a) Human Development Report, 1995.

b) World Development Report, 1997, 2000.

vii) In underdeveloped countries, the women are much more vulnerable than their
counterparts in the developed countries. On most development indicators, they
rank lower than males in their own country. Their health and nutrition status is
not at satisfactory levels for large numbers. Female illiteracy is fairly widespread.
They also have to put up with both covert and overt forms of discrimination and
the barriers regarding their roles in the society. Women are often paid lower
wages even though they perform the same work, and therefore work participation
rates of women in census data are shown much lower than one would expect.
Improving the status of women is, therefore, an important development objective.
The social pressures on women are also a major impediment to development
in large parts of the third world. The crudest and the most gruesome form of
discrimination against women in many parts of the world is reflected in the
terrible phenomenon of what has come to be known as ‘missing women’
caused by practices such as female feticide, infanticide, etc. resulting in excessive
mortality among them. It is medically well acknowledged that if there is
symmetrical care for both the genders, women would outnumber men, as is
indeed the case in most advanced countries. For instance, in countries such as
USA and UK, the ratio of women to men exceeds as 1.05, whereas in India
and Pakistan it is as low as 0.93 and 0.90 respectively.

These are some of the more important characteristics of development. Using these,
you should be able to roughly differentiate between developed and developing countries.

1.3.2 Dissatisfaction with the Conventional Indicators of

Development

You may note here that traditionally growth was taken as the single most, if not the
only, indicator of development. The use of Gross National Product (GNP) or the
Gross Domestic Product (GDP) as the indicator of development has been criticized
on several counts. One of the chief arguments against its use is the contention that 7
Rural Development — GNP as an average level of income (per capita) ignores the inequality in the distribution
Concept, Strategies and of national income. It also ignores the availability and utilization of goods and services
Experiences and has nothing to say on availability or otherwise of a whole range of basic needs
such as health, education, water, shelter, etc. It tends to conceal the lower than
average condition of the deprived.

Given these deficiencies of GNP/GDP as an indicator, several alternative contending

indicators of development have been suggested at different junctures by social scientists.
In the recent literature, the Human Development Index (HDI), which goes well
beyond the income criterion and includes other indicators of well being, has acquired
a prominent place. United Nations Development Programme (UNDP) has been
publishing Human Development Reports for almost a decade-and-a-half now and
these reports rank countries in terms of a composite indicator by aggregating
heterogeneous components such as life expectancy, infant mortality, literacy, etc., by
assigning weights to each one of them. Each indicator is on a scale between 0 to 1,
the latter being indicative of “best performance” and the former that of “worst
performance”. Given that such an operational measure requires some prior judgement
about what weights to assign to each of the heterogeneous criteria while aggregating
them, as well as what criteria to have in the first place, there is bound to be a
multiplicity of perspectives and operational measures. Thus no one composite measure
can be said to be perfect, but generally speaking these can be considered a significant
advance over the conventional measure of development. For this reason, UNDP’s
human development rankings are obviously a welcome development.

As one may expect, in the case of advanced countries, there is a high, although not
perfect, correlation between per capita income ranking and HDI 2003. The second
richest country in the world, namely the USA, loses just five places in terms of
human development ranking. When it comes to developing countries, however, the
association between the two becomes quite topsy-turvy and there are countries that
lose heavily in terms of human development ranking as compared to the ranking in
terms of per capita income only. For example, Botswana loses by 65 places and
Equatorial Guinea by 78 places, and there are countries that gain heavily, such as
Tajikistan by 41 places. The explanations behind such a scenario are complex, but the
centrality of public policy, and its pre-eminence over other causal variables, in promoting
human development is beyond doubt.

Activity I

Using some of the indicators of development outlined in the preceding section,

compare your village/town with another to illustrate how developed or under-
developed your village/town is in comparison with the other. Write your observations
below:
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1.4 THEORIES OF DEVELOPMENT

Development, as we have seen, is a multi-faceted process involving reorganization of

the economic and social system. There are different theories of development and
8 they advocate and stress different sets of economic and social factors that lead to
development. In this section we will highlight some of the important theories of Rural Development
development. Experiences — An Asian
Perspective
1.4.1 Rostow’s Stages of Growth
The transition from underdevelopment to development must proceed along a series
of steps according to Rostow, an American development theorist. The four stages of
growth are:
i) Traditional society
ii) Pre-conditions for take-off
iii) Take-off
iv) Age of mass consumption
The developing countries, it was argued, were still at a stage in which the “pre-
conditions” for “take-off” were not present. The industrialized countries developed
because they had fulfilled the conditions necessary for the “take-off” towards self-
sustaining economic growth. Rostow implied that the developing countries had only
to replicate similar conditions to attain development. They had only to mobilize enough
domestic and foreign savings to finance investment in order to attain the objectives
of development. Rostow even went as far as to suggest that once a country was able
to save 15-20 per cent of its Gross National Product (GNP), it would automatically
reach the “take-off” stage. Events, since the theory was first presented, have clearly
proved its inadequacies. For instance, India has consistently managed a high rate of
saving without being able to solve many of its developmental objectives. Clearly, this
mechanical approach towards development has proved to be insufficient.

1.4.2 The Lewis Theory of Development

During the 1950s Arthur Lewis put forward a different theory of development.
According to Lewis, underdeveloped countries are characterized by the presence of
two sectors:
i) The traditional rural sector, which is of the nature of a subsistence economy,
providing for self-consumption within this sector. This sector also has a surplus
of labour.
ii) The modern urban industrial sector where productivity is higher.
Arthur Lewis argued that labour can be transferred from the rural to the urban sector
without adversely affecting productivity in the rural sector. He thus envisioned a
dynamic role for the industrial sector, which would lead to sustained economic
development. This theory, though correct in its description of situations prevailing in
large parts of the developing world, is found lacking in terms of its ability to suggest
measures leading to development. It, for instance, ignores the fact that unemployment
is also fairly rampant in urban areas as well as rural areas. This means that surplus
rural labour cannot be meaningfully absorbed by the urban industrial sector.

1.4.3 International Dependence Theories

International Dependence Theories gained ground during the 1970s, particularly among
the economists in the developing countries. Essentially, these theories view the problem
of underdevelopment as one arising out of the domination of the poorer countries by
the richer ones. They argue that in an unequal power structure, poor countries lose
out to the richer and more powerful countries. They also note that large multinational
companies are involved in the process by which wealth is transferred from developing
countries to developed ones. Further, it is argued that institutions such as the World
Bank and the International Monetary Fund (IMF) have aligned with the rich countries.
9
Rural Development — This, according to them, has accentuated the problem of inequality, poverty and other
Concept, Strategies and aspects of underdevelopment in these countries. For instance, long-term trends in the
Experiences distribution of income in the global economy show that the income gap distance
between the richest and the poorest country in 1820 was 1 : 3; in 1950 it stood at
1: 35 and by 2003 it had zoomed to 1: 82. To take another indicator, at the beginning
of the 20th century, world’s population was approximately 1.5 billion, which quadrupled
by the end of the century and the absolute number of population trapped in a
narrowly defined notion of poverty was about 1.2 billion, and almost all of them were
in developing countries. Sure enough, such numbers lend credence to the unsavoury
outcomes suggested by the dependency theorists. These theories, however, are too
simplistic and often the mechanisms and processes underlying are either not fleshed
out with adequate care or are not quite robust.

1.4.4 Gandhian View of Development

Unlike the western concept of development, the Gandhian concept of development
attaches more importance to the question of relationships between individuals and
economic micro-groups. According to this theory of development, micro-groups such
as village communities in turn interact with the society at large. The Gandhian view
of development also visualizes a smaller role for the state in the development process.
The village at the local level would be the focal point of economic development in
the Gandhian scheme. In this situation, it was visualized that the role of the individual
would be brought into play thereby leading to overall development of the individual
as well as the society at large. Decision making at the local level through institutions
such as panchayats also plays a key role in the Gandhian scheme.

1.4.5 Marxian Concept of Development

The Marxist view of development, on the other hand, emphasizes the role of classes
and class antagonisms in society. In this system, vested class interests can inhibit
overall development of society. The question of poverty in society is seen as a result
of exploitation of the poor. Property relations in the society create and accentuate the
problem of poverty and development. Since land and other productive assets are
privately owned and concentrated in the hands of a few, the problem of inequalities
remains unsolved. The Marxist view of development is a complex one, allowing for
the possibility of progress, or otherwise, depending on the class structure and conflicts,
the nature and activity of the state, etc. any society, divided into class, is necessarily
an exploitative one as the dominant classes appropriate the surplus produced by the
working class.

1.5 MAJOR ISSUES IN DEVELOPMENT

It must be emphasized that there cannot be a single well defined path towards
development. Different countries and regions will have to take their own specificities
into account in order to develop their societies. This is one reason why development
has been a much debated subject. In this section we will highlight some of the major
issues, which have featured in this debate.

1.5.1 Growth vs Distribution

For a long time it was assumed that economic growth would be an engine that will
lead naturally towards development. Consequently, little or no attention was paid to
the question of distributive justice. One of the major outcomes of this situation was
the “trickle down” theory, which stated that if there was sufficient growth everybody
would benefit from it. India, during the first three plans, made heavy investments of
capital and sought to take the country on to a new growth path. During the early
10
1970s, however, it was realized that the living conditions had not changed significantly Rural Development
for the better. It was then that the question of distributive justice assumed greater Experiences — An Asian
importance. The problem, however, continues to affect the developing countries as Perspective
assets such as land and capital are concentrated in a few hands. This perpetuates
the problem further and the question of distributive justice remains unsolved. The
major result of this debate has been the realization that economic growth alone is not
enough to lead a country towards rapid development. Growth by itself does not
guarantee an improvement in the quality of life for the vast numbers of people.
Therefore the state has to formulate policies and design instruments to ensure that
development benefits flow to those categories of people who need them most.

1.5.2 Agricultural vs Industrial Development

This has been one of the most important issues at stake in the debate on development.
In India’s own case, it was thought that rapid industrialization would lead the country
to self-sufficiency. In the 1960s, however, the country experienced severe food
shortages that led to the realization that the agricultural sector could not be ignored.
This led to increasing attention to this sector. New varieties of seeds and the use
of fertilizers on a larger scale have led to an increase in agricultural production.
However, it has now become clear that a balance between agricultural development
and industrial growth will have to be maintained for genuine economic development.
If the agricultural sector does not grow there may be sharp increase in the prices of
food-grains that will affect the poor. On the other hand, industrial stagnation will
mean that surplus labour from the agricultural sector cannot be usefully employed.
Therefore, both agriculture and industry will have to grow so that the pace of
development is fast enough to improve the living conditions of the people.

1.5.3 Capital vs Labour Intensive Technologies and Development

You may have heard the term ‘technology’ being used quite often in debates pertaining
to development. What is technology and what is its role in the development of a
country and its people? Technology is the means by which goods are manufactured
in an economy. Any goods, however crude or sophisticated, can actually be
manufactured by several means. The development in technology is the process by
which the manufacture of goods is made cheaper, faster and more efficient. What
is the role of technology in development?

You may be aware of the fact that tractors, harvesters, etc. are being used on a
wider scale now than a couple of decades ago. They are now used to perform many
of the agricultural operations, which were thitherto performed manually using ploughs
and other equipment; this change may be termed a technological change.

Now that you are familiar with this concept you must be able to appreciate that at
any given point of time, we may have a number of technologies to choose from in
order to produce the same goods. Cloth can be woven on traditional looms in your
village or town, or it can be manufactured in the factories located in bigger cities. The
end product is more or less the same, but the process of making it is different. What
are the implications of these facts for the process of development?

An improvement in technology calls for investment to make this change feasible.

Sophisticated technology, when it uses less labour, is termed “labour displacing
technology”. On the other hand, an improvement in technology can also be made
without displacing labour and also less expensively. This is called “labour intensive
technology”. Capital intensive and labour displacing technologies are often
expensive and call for large investments. Labour intensive technologies, on the other
hand, have the advantage of being able to absorb the surplus labour in a developing
country.
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Rural Development — During the late 60s and the early 70s, a new trend of thinking on technology suitable
Concept, Strategies and to developing societies became popular. The question raised was that of “Appropriate
Experiences Technology”. It was said that developing countries should adopt technologies that
were suitable for their own specific needs, situations and socio-cultural framework
rather than copy the western technologies blindly. Thus, it was suggested that countries
like India should use technologies that have evolved over many decades and adapt
them to make the best use of their cost-effectiveness.

The choice between these types of technology, however, is not easy for a developing
country. On the one hand, rapid increase in output is necessary to solve the problems
of the people and, on the other, the problem of unemployment (thus created)
accentuates the problem of poverty. A balance is, therefore, required so that both
technology and living conditions of the people improve.

1.5.4 Centralization vs Decentralization

This has been another major issue in the debate on development. Generally, it is
agreed that development is a long-term phenomenon and, therefore, needs to be
planned. While a certain degree of centralization is necessary to coordinate the
efforts towards development, too much of centralization in the case of decision
making powers can weaken the process of popular participation. It also leads to the
formulation of programmes and projects, which have limited local relevance. In
recent times, the need to devolve decision making powers to the panchayats has
caught the attention of policy makers in India. Important steps, including constitutional
amendments, have been taken since the late 1980s to empower local level institutions.
It is hoped that decentralization of the development process would also lead to
greater accountability of those who are actually involved in the decision making
process. Devolution of powers is very vital for development. This ensures that the
administration is brought closer to the people. Consequently, there is greater
accountability of planners towards those whom programmes and policies are meant
to reach.

1.5.5 Urban vs Rural Development

The vast majority of the population in India and other developing countries live in rural
areas. There is a continuing influx of people into the cities looking for jobs as the rural
economy is not been able to provide employment to them. It needs to be pointed out,
however, that the problem of poverty, poor health and illiteracy is widespread in both
rural as well as urban areas. The problem of rural poverty and unemployment is the
crux of the problem. Without solving it, there cannot be genuine development. Hence,
rural development has come to acquire critical importance. Sustained improvement in
the quality of life in rural areas is likely to slacken the pace of large-scale migration
of villagers to cities in search of jobs.

1.5.6 Respective Roles for the State and the Market

One of the most contentions issues in Economics has been the scope and extent of
government intervention in the economy of the country. During the immediate post-
World War II era, there was a near consensus among economists, for a variety of
reasons, such as important developments in economic theory around the idea of
‘market failure’ (which had several dimensions), that governments have to play major
roles in the economic sphere. Thus around the time India gained independence from
the British, the need for planning had come to have wide acceptance in the developing
countries for them to break free from stagnation and backwardness. The debate in
our country at that time was not about the need for planning but about what kind of
planning and quite a few alternative suggestions and frameworks were widely discussed.
In the recent years, however, government intervention in economic spheres has come
12
under much fire, particularly during the last couple of decades, and a sort of neo- Rural Development
liberal market orthodoxy – which insists that ‘the market knows and does the best’ Experiences — An Asian
– has become dominant. We cannot go into a detailed discussion of the reasons for Perspective
such an extreme swing here, but it may be stressed right away that to a large extent
such a swing is based on shaky theoretical foundations and faulty empirical associations.
This will be briefly discussed, in the next section, with reference to Indian economic
development.

Check Your Progress II

Note: a) Use the space provided for your answers.
b) Check your answers with the possible answers provided at the end of
this unit.
1) Explain briefly in your own words the role that technology plays in the
process of development.
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1.6 PLANNED DEVELOPMENT AND SHIFTS IN

STRATEGIES IN INDIA

Development is a long-term phenomenon. In order to achieve something in the long

run, it is essential to plan keeping in mind the goals that we wish to attain. We have
already seen that there is no single path towards development. Any country will have
several objectives that it may wish to achieve in a given time-frame. Among these
various objectives, it will be necessary to establish priorities. This is what a plan
essentially does. It is a conscious attempt to achieve the set of objective that it has
set for itself. Taking into account the particular set of priorities that it seeks to attain,
a country may have to adopt a particular planning strategy.

India, after Independence, decided to opt for a planned course towards development
and coordinate the process of planning. The Planning Commission was set up in
1950.

It may be useful to view the past half-a-century of Indian economic story as a

chronological sequence of the following phases:
i) the preparatory phase in planning for development (from independence to the
mid-1950s);
ii) the phase of industrialization led by heavy industry (from the mid- 1950s to the
mid-1960s);
iii) the phase of pulling up agriculture (the late 1960s and 1970s);
iv) the phase of pump-priming of aggregate demand (the decade of the 1980s); and
v) the phase of economic liberalization (from July 1991 to the present).
The logic of distinguishing one phase from the other in the above sequence, as
hopefully will become evident from the subsequent discussion, is based mainly on the
shifts in official perceptions regarding the overriding economic issues and problems 13
Rural Development — the country was confronted with at different occasions and the associated policy
Concept, Strategies and thrusts and changes.
Experiences
Let us come to the salient features of the first plan (1951-56). This plan, in terms
of a simple model, emphasized the importance of raising the level of savings in the
economy to accelerate the rate of growth; however, as has been noted often enough,
beyond this simple model, it was a sort of a loose affair to put together a set of
important projects, and not an analytically rigorous formulation in terms of coordinating
investment decisions in different sectors. Projects pertaining to infrastructure and
agriculture, in particular public irrigation, received emphasis. The fact that the increase
in national income during this plan actually surpassed the modest target that the
planners had set must have been a very pleasing and encouraging experience for
them, particularly in the light of the pre-independence long-term record of near
stagnation (for aggregate as well as sectoral pre- and post-independence growth
rates).

According to most commentators, intellectually the most exciting moment in India’s

planning strategy comes with the second five-year plan (i.e. at the beginning of the
second phase in terms of the classification suggested at the outset). This plan (1956-
61) has 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 relevant plan document. ‘If industrialization 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 into the investment goods sector, the higher would be the investment
rate at the margin which would lead to a higher rate of growth of output. In other
words, 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 at
that time, although there were a few dissenting voices. The third five-year plan
(1961-66) 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 these two plans laid the foundation for a well-diversified industrial
structure within a reasonably short period and this was a major achievement.

As the strategy was unfolding, however, some of its key shortcomings were also
becoming evident. The 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 expected, the Nehru-Mahalanobis strategy was subjected
to increasing criticism around this time (and of course thereafter). A variety of
diagnoses relating to the factors that were ailing the Indian economy, and consequently
a plethora of prescriptions were offered. Here one needs to stress the point, however,
that the performance prospects of the development strategy in operation had suffered
during the 1960s not only because of its internal weaknesses, but also because of the
major exogenous shocks that the economy was subjected to. The two military
engagements in quick succession (in 1962 and 1965) had led to severe cut backs in
public investment, contributing to the emergence of significant excess capacities in
the heavy industry sector.

14
The other major exogenous shock came in the form of two successive monsoon Rural Development
failures in 1965 and 1966, leading to drastic reductions in the production food and its Experiences — An Asian
availability, which also had obvious negative consequences for the overall growth Perspective
prospects. The widespread distress due to decline in the availability of food led to a
few starvation deaths and food-riots in some states, and were thus rude reminders
of India’s vulnerability in the area of the most basic need. In fact, even before these
droughts, India had already come to depend partly on ship-to-mouth policy, mainly in
the form of wheat imports from the USA under PL-480, and the droughts were
catastrophic jolts that highlighted the failure in this critical area.

The immediate impact of these exogenous shocks was so powerful that the government
temporarily abandoned the five-year plan in favour of annual plans for the next three
years. These annual plans were too limited in their scope, essentially being budgetary
exercises, and this period (from 1966-1969) is also known as that of a “plan holiday”.
One must note, however, that this period continued to witness sharp cut backs in
public investment with obvious adverse consequences for industrial and overall growth
prospects.

It was mentioned earlier that the Nehru-Mahalanobis strategy came under increasing
criticism during the 1960s and the early 1970s from several quarters. These ranged
from a rejection of the planning process itself to pointing out specific shortcomings,
such as underestimation of the import-intensity of the indigenous industrialization
drive, unnecessary export-pessimism, over-extended regulatory structures, over optimism
as regards the potential performance of the agricultural sector, if not its neglect, etc.

Without going into the merits of the various criticisms here, we may note that the
inadequacy on the agricultural front came to be viewed as one of the most significant
gaps in the past effort. Consequently, formulation of a new strategy of agricultural
development became the overriding objective. The fourth five-year plan, launched in
1969, adopted such a strategy, which in the popular parlance is known as the launching
of the ‘Green Revolution’. Thus, with the fourth plan (1969-74), there is a marked
shift in development strategy from an emphasis on heavy industry to pulling up
agriculture.

This, as per the chronological classification suggested at the outset, is the beginning
of the third phase. It may be recalled that the leftist opinion in India had been quite
critical of the earlier strategy for not taking up thoroughgoing land reforms. As it
happened, the ‘agriculture-first’ strategy, which came into being with the fourth plan
and was also the hall-mark of the fifth plan (1974-79), continued to neglect the issue
of land reforms and focused on technological modernization and ‘betting on the
strong’. A variety of support-mechanisms, including credit and price support, were
devised to this effect. Sure enough, in terms of propping up the agricultural growth
rate, the new strategy, in spite of its distributional limitations, delivered good results;
so much so that the dependence on frequent imports of food became a thing of the
past after the mid-1970s, and the government could claim that finally India had
become ‘self-sufficient’ in this regard.

There are a couple of other important features of our third phase that need to be
taken note of. First, while a degree of export pessimism may have been a feature
of early post-independence thinking, things surely started changing during the 1960s
itself as a number of export subsidies came into being, and this process continued in
our third phase as well. Secondly, at the beginning of this phase itself, the dismal
failure of the earlier development strategy on the unemployment and poverty fronts
had started dawning on the planners and policy-makers. Such a realization had
certainly been sharpened by the growing restiveness among the masses expressing
itself in radical movements of different kinds in various parts of the country and
threatening to go out of control.
15
Rural Development — Consequently, an important response from the policy-makers was to start thinking
Concept, Strategies and about the strategies of direct attack on poverty and unemployment, in particular from
Experiences the fifth plan (1974-79) onwards, and gradually a variety of programmes got devised
and put in place to this end. Such programmes gained substantial significance during
the sixth (1980-85) and the seventh (1985-90) five year plans and have continued to
remain an important feature subsequently as well.

Going back to the growth process itself, we have already noted that the strategy of
‘pulling up’ agriculture resulted in an improved performance of this sector. This also
had a positive effect on the industrial and overall growth rates, as these picked up
during the second half of the 1970s, (1979-1980) being an exception as it was a
drought year. The turnaround in the industrial and overall economic performance,
however, was certainly not spectacular. There was a widespread feeling that in terms
of the long-term rate of growth, which stood at around 3.5 per cent per annum
between 1951 to 1983, the performance of the economy was far from impressive.

There are a number of explanations for why the economy was unable to move on
to much higher growth levels than it actually achieved. We may only note that there
are at least two basic causes that must be acknowledged in this story. We have
already referred to one of these earlier, namely limited attention to the agricultural
sector, particularly the institutional issues such as land reforms. Second, economic
growth in the post-independence Indian economy has depended to a large extent on
public investment, and thus the state’s ability to maintain growing productive
expenditures becomes crucial in this regard. As has been pointed out by some
analysts, it is precisely this ability that was getting constrained over time. The attempt
to push up the growth rate in the 1980s, in particular in the second half of the decade,
was based on seeking a way of coming around this problem; in terms of the
classification suggested at the outset, this constitutes the fourth phase.

Essentially the major change in economic policy at this point in time hinged on
substantial increases in government expenditure, in particular revenue expenditure, to
increase the overall level of demand or what is also known as pump-priming the
aggregate demand in the economy. This was done by means of a very irresponsible
borrowing spree by the government, both internally and externally, and much of the
external borrowing was from commercial sources.

Thus the gross fiscal deficit of the government increased dramatically during this
period, as did the external debt and debt-service payments. The increases in government
spending obviously increased the industrial and overall growth rates, and the latter at
well over five per cent per annum for the decade of the 1980s was a distinct
improvement over the continued poor growth rate for the preceding three decades.

The solution, however, was worse than the problem, as the enormous increase in
external debt, a growing portion of it consisting of short-term borrowings, exposed the
economy to the caprice of international lenders and investors, and in particular to the
danger of sudden capital flight due to ‘confidence crisis’. This is precisely what hit
the Indian economy in 1991 when its foreign reserves were depleted to abysmally
low levels and the economic managers of the country turned to the Bretton Woods
Institutions, i.e. the International Monetary Fund (IMF) and the World Bank, for help.
These institutions were too happy to bail out the country from the crisis, but on the
terms that it accepted their conditions, which were what the package of liberalization
or reforms is all about. As is well known, India accepted the conditions and thus,
compared to the preceding four decades, embarked on quite a different policy route
in its economic journey since July 1991. The period since then, that of economic
reforms/liberalization, has been designated as the fifth phase in this narration.

The key phrases in the package of reforms disseminated by the Bretton Woods
16
Institutions happen to be ‘stabilization’ and ‘structural adjustment programme’
(SAP). To put it simply, the first says that the budget deficits are bad and a government Rural Development
should minimize them, whereas the second aims at changing the structure of the Experiences — An Asian
economy through major changes in the functioning of different markets as well as Perspective
through a drastic overhauling of the role of the state. Essentially, the SAP advocates
the case for a free play of market forces in the different product and factor
markets, including the financial markets, and a reduced role of the state,
particularly as a producer and promoter but also as a regulator, in the economy.
Without going into the details here, we may note that in case of the Indian economy,
the policy changes since July 1991 are enough to view it as a case of transition from
the state-led or dirigiste development paradigm, that characterized the earlier four
decades, to a liberalization paradigm.

Let me hasten to add here that the balance of payments crisis of 1991 was an
important input, but certainly by no means the only one, in effecting a sharp break
with the earlier policy regime. We noted earlier that some of the critics of the Nehru-
Mahalanobis strategy, around the late 1960s and the early 1970s, had started questioning
the wisdom of a state-led development paradigm itself. Over time such voices only
grew louder and each one of the basic premises of the said paradigm came under
attack, in particular from the neo-liberal economists.

For instance, it was argued that the idea of autonomous development is a recipe for
backwardness; the public sector, instead of being the flagship of rapid growth, is a
drag on society’s resources, and so on. Such criticisms started to find sympathetic
hearing among India’s policy-makers during the 1980s itself, and also elicited some
responses from them.

Leaving aside the specific points of criticisms, whether from the Neo-liberal, Liberal
or Left perspectives, which constitute subjects of intense debate among economists
working on India, there is little doubt that the neo-liberal wholesale condemnation of
the earlier strategy has little merit. The achievements of the earlier strategy, with
respect to any appropriate benchmark, cannot be dismissed lightly, although they
certainly fell short of expectations. Growth rates of major sectors, and that of the
economy as a whole, achieved during 1950-90 may not have been impressive but
were certainly respectable. Moreover, if one takes into account the size of the
unaccounted economy (the black economy), which according to available estimates,
grew from a negligible proportion of national income in the early 1950s to almost half
of it by the late 1980s, then we have a growth rate that is quite impressive! There
are other notable achievements, such as a great deal of diversification of the economy,
in particular within the industrial structure in a reasonably short period, among others.
It is inconceivable that such successes would have been achieved in India soon after
independence without planning. One of the fundamental problems with the neo-
liberal account is its ahistoricity, as it almost completely ignores the issue of
linkage between the stage of development that an economy is at and the realistic
choices and constraints it faces.

This is of course not to endorse uncritically the dirigiste development paradigm of the
first four decades, as it was flawed in important ways and missed on several promises,
in particular to the large section of economically vulnerable segments of the population.
The most glaring failure of India’s development strategy is with respect to poverty-
alleviation; as per the standard estimates, the absolute number of poor people in the
country towards the end of the 1980s was not very much behind the total size of the
population in 1947!

Apart from the raw deal received by the disadvantaged segments, several other
problems of the dirigiste development paradigm, as it unfolded in India, have been
catalogued and analyzed by researchers in great detail. This has been followed by
a range of suggestions for policy reforms, covering a wide spectrum of analytical and
ideological persuasions. However, as already mentioned in the foregoing, policy 17
Rural Development — prescriptions emanating largely from a neo-liberal perspective have been ascendant
Concept, Strategies and for well over a decade now. Without entering into a discussion of the alternative
Experiences policy perspectives, all of which emphasize ‘reforms’ of one kind or the other, we
may note that the neo-liberal paradigm may be on a weak turf, in particular when
it comes to the provision of adequate and sustainable livelihood options for large
sections of the population. In other words, there is a real danger that those neglected
by the dirigiste development regime may get further marginalized by the ascendant
neo-liberal policy regime, and there is increasing evidence to substantiate such a
view.

The performance of the Indian economy during the liberalization era continues to be
a subject of intense debate. As it happens, the period of economic reforms since 1991
does not seem to be doing better, in terms of standard macroeconomic indicators,
compared to the preceding decade, and in some respects, such as employment
generation, the reform period has been a disaster. Moreover, as stated earlier, in
terms of prospects for the poor and other economically vulnerable groups, the
liberalization era seems to be doing much worse.

Check Your Progress III

Note: a) Use the space provided for your answers.
b) Check your answers with the possible answers provided at the end of
this unit.
1) Why is planning important for achieving the objectives of development?
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1.7 LET US SUM UP

Development is a relative concept and involves a systematic and positive change in

the physical quality of life of the people in an area or country. Development, as
distinguished from growth, means a better distribution of the gains from progress. It
encompasses material and social welfare as well as an equitable distribution of
income and opportunities. Development means a qualitative improvement in living
conditions particularly of those affected by poverty, illiteracy and poor health conditions.
The traditional concept of development places more emphasis on economic growth.
Economic growth alone, however, is not sufficient to solve the problems. Better
distribution of the gains of progress is necessary for genuine development to take
place. The problem of inequality continues to be a major problem. Both agricultural
and industrial sectors have to grow so that the problem of low incomes and
unemployment may be solved.

The developing countries have a surplus of labour and scarcity of capital. Therefore
it is essential that large-scale displacement of labour does not take place so that it
does not create further unemployment. These countries have to strike a balance
between these two issues in their solutions.

18
The necessity to decentralize the process of development also has certain advantages. Rural Development
This will lead to greater participation of the people and also to increased accountability Experiences — An Asian
on the part of the authorities. Sustained rural development alone will lead to the Perspective
control of migration of people towards cities seeking employment. The problems of
poverty, illiteracy and poor health are common to both urban and rural life. It is
important to solve the problem of rural development as this will in turn put an end
to the large-scale migration to the cities and towns.

1.8 KEY WORDS

Ahistoricity : Lacking sense of history

Dirigiste : State-led development paradigm.

Gross Domestic : Value of all goods and services produced within a

Product (GDP) country in a year.

Gross National : GDP plus net factor income from abroad.

Product (GNP)

Pump-priming : When State injects demand into economy through its

increased expenditure.

1.9 REFERENCES AND SUGGESTED READINGS

References
Chakravarty, Sukhamoy, 1977: Development Planning: The Indian Experience,
Oxford University Press, Oxford.
Eyferth, H.O.P. and Vermeer, J.E.B. (ed.), 2004: Rural Development in Transitional
China; The New Agriculture, Frank Cass, London.
Indira Gandhi National Open University, 1991: Course Material on “Rural
Development: Indian Context”, Block 2, School of Continuing Education, IGNOU,
New Delhi.
Khanna, B.S., 1991: Rural Development in South Asia, Deep and Deep Publications,
New Delhi.
Sartaj, Aziz, 1978: Rural Development: Learning from China, Macmillan Press
Ltd., London and Basingstoke.
UNDP (Different Years): Human Development Report, Oxford University Press,
New York.
World Bank, (Different Years): World Development Report, Washington, D.C.
Suggested Readings
Chandrasekhar, C.P. and Ghosh, Jayati, 2001: Market That Failed – A Decade of
Neoliberal Reforms in India, Leftword, New Delhi.
Meier, Gerald (ed.) 1987: Leading Issues in Economic Development (fourth edition),
Oxford University Press, New Delhi.
Sen, Amartya, 2000: Development as Freedom, Oxford University Press, New
Delhi.
Todaro, Michael P. 1977: Economics for a Developing World: An Introduction to
Principles, Problems and Policies for Development, Orient Longman: London.
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Rural Development —
Concept, Strategies and 1.10 CHECK YOUR PROGRESS – POSSIBLE
Experiences ANSWERS

Check Your Progress I

1) i) Removal of inequality and poverty;
ii) Increase in material welfare;
iii) Equitable distribution among different groups in a country;
iv) Improvement in technology;
v) Growth of institutional structures that ensure greater popular participation.
2) Economic growth means an increase in the rate of growth of the goods and
services produced in an economy. Development, on the other hand, means a
qualitative improvement in the lives of the people in a country. It also means a
reduction in poverty and an increase in material welfare. Increased growth may
not necessarily lead to development.
Check Your Progress II
1) Technology can have a positive or negative influence on development. When
technology causes large-scale displacement of labour it can retard development.
On the other hand, if met judiciously it can lead to increased productivity levels
in developing countries.
Check Your Progress III
1) Development is a long-term process. Therefore, strategies have to be followed
to achieve the objectives of development. Among the different objectives it may
be necessary to lay priorities for each one of them. A plan in effect does this.
It makes a deliberate attempt to achieve the objectives of development.

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