Plan Models in India: Omissions, Drawbacks and Usefulness

Let us make an in-depth study of the omissions, drawbacks and usefulness of plan models in India.

Omissions of the Plan Models:

Ashok Rudra found some of the omissions by Indian Plan Models.

1. Neglect of Institutional Factors:

These plan models completely fail to take into account the social framework of political and historical conditions and the regime of institutions inside which the process of economic development takes place.

Technological relations themselves are not immune to influence by organization and conditions of work.

These neglect factors which are quite significant for modern industries in advanced countries. Moreover, plan models in India fail to reveal in any one of their structural characteristic the important fact that it is an economy with the greater part of the population dependent on the backward agriculture with wide-spread prevalence of tenant farming.

Being mixed economy, Indian economy belongs to the private sector and in most of the cases, targets are mere paper targets and defy any means of implementation.

2. Neglect of Natural Resources:

The models do not possess any means of taking due account of the scarcity or abundance of the various resource endowments of the country. In other words, the crucial problem is to determine the optimal level of its utilization but these models cannot tackle this problem at all.

3. Neglect of Natural Resources:

Plan models for India have almost ignored the constraints arising from the limited availability of human resources. Generally, the argument is given that labour surplus economy is one where labour does not give rise to any constraint. But it is only true in the case of unskilled labour; it is untrue for skilled labour and for managerial personnel and its neglect amounts to a serious lacuna in these models.

4. Neglect of Overhead Capital:

These plan models do not have the capacity of dealing endogenously with investment in any of the infra-structure of any economy like (a) education, health (b) scientific and technological research, explorations for natural resources (c) roads, buildings, bridges, ports, airports, shipping, air-ways, commerce and communications (d) defence (e) civil administration and (f) residential housing and civic and municipal constructions.

5. Exogenous Treatment of Final Demand:

The sectors which have been recognised in a plan mode, it is only partially that output, input, investment etc. are determined by the internal logic of the model. But the distribution equations that constitute the core of such models leave out large chunks of final demands for exogenous treatment.

Therefore, in all the plan models used in India, the commodity flows to government current consumption and the exports are treated as exogenous. Considering the strategic role played by the overall volume of export earnings, it is a serious shortcoming of these models that they cannot help in their determination.

6. Neglect of Behaviouristic Pattern:

The plan model fails to take proper account of such aspects of the economy which reflect the behaviouristic propensities of the consumers who are assumed to be sovereign. Thus, it deals in a very rough manner with the proportions that have to be observed between the supplies of different consumer goods and the relation between domestic savings and the level of distribution of income.

Drawbacks of Plan Models:

The plan models have the following drawbacks:

1. Course Sector Classification:

The foremost limitation is the broad sector classification and Leontief assumptions of one to one correspondence between sectors and commodities which these models involve. Whether the country is to import or to produce domestically a commodity and the choice of technique require an economy-wise process analysis of model. But there are not many such models for developing country like India.

2. Linearity:

A serious limitation in the India models arises out of the assumption of linearity. Incidentally, these models have been linear models. The arguments for and against the Leontief fixed coefficients assumptions, their restrictiveness, limited applicability in certain areas are well known.

At the same time, introducing the linear model and preventing some of the obvious absurdities produced by it are well known. Therefore, the additively of different inputs is not much acceptable.

3. Treatment of Technological Change:

These models provide arbitrary treatment of technological change. It is well known fact that technological change occurs with the passage of time but the makers of these models have not made any change in any sensible manner. However, if they have changed, it is only arbitrarily in the light of whatever trends they can discover in the world of technology. Therefore, in India, these models could not offer any guidance to the official planners.

4. Arbitrary Change of Co-efficient is Objectionable:

Another limitation of these models is that co-efficient changes are arbitrary which is a serious objection.

5. Inadequate Treatment of Temporal Balance:

Technology does not only call for horizontal balance i.e., balance among the sectors at the time, by way of inputs and outputs. But the plan models used in India have not manifested much in the treatment of this sequence.

Usefulness of Plan Models:

In the above cited discussion, we have noted that plan models used in India have not provided satisfactory aids for judging the soundness of plan targets, not instrument for setting of plan targets and satisfactory framework for the evaluation of projects. But this does not constitute the final verdict.

To assess the usefulness of these plan models, it is better to quote Eckaus and Parekh, who observed that, ‘making compromises among conflicting objectives requires political value judgments, which in turn, implies the existence of atleast an ordinarily defined social welfare function embodying these objectives.

Yet, in practice, comprehensive and precisely stated goals for development are rarely created by social-decision processes.

Thus, if economists confine themselves to their conventionally defined role in policy making of analysing the consequences of well defined objectives, they have only narrowly and inexactly defined terms of reference.

In such circumstances, the economists can contribute to economic policy making not only in the conventional manner but also by describing alternative economic policies corresponding to different feasible combinations of objectives.