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1.3. Planning Model Adopted in India

The second five year plan was based on the Nehru-Mahalanobis strategy of development, which guided the planning practice for more than three decades until the end of the Seventh Five Year Plan. The draft outline of this plan was based on the Mahalanobis Model which was viewed as a variant of the Soviet Planning model. The basic elements of this strategy can be summed up as:

Raising the rate of investment since the rate of development is dependent on the rate of investment. It involved stepping up domestic and foreign savings also

Rapid growth of the productive capacity of the economy by directing public investment toward development of industries. Simultaneously, promotion of labor-intensive, small and cottage industries

Import substitution for self-reliance

An elaborate system of controls and industrial licensing

Predominance of public sector in capital goods industries