In the context of the Mahalanobis strategy adopted in India's Second Five Year Plan, why was the capital goods sector identified as the lead sector, and what economic trade-offs were implicit in this prioritization?
Show answer & explanation
Correct answer: C
Explanation
Solution: The correct answer is Due to its ability to build internal capacity for self-sustaining industrial growth, despite the short-term sacrifice of consumption and employment.
Explanation:
☛ India's Second Five-Year Plan (1956–1961) was based on the Nehru-Mahalanobis model, formulated by the statistician Prasanta Chandra Mahalanobis.
☛ The strategy prioritized the capital goods sector (heavy industries such as steel, heavy machinery, power, and chemicals) over consumer goods.
☛ The rationale was that producing "machines to make machines" would create the domestic productive capacity necessary for long-term, self-reliant industrialization.
☛ The primary trade-off was that capital goods industries are highly capital-intensive and generate relatively low employment in the short run, requiring a sacrifice of immediate consumer goods production and employment creation to secure higher long-run economic growth.
Extra Exam-Relevant Facts:
☛ P.C. Mahalanobis founded the Indian Statistical Institute (ISI) in Kolkata in 1931.
☛ Target vs Actual Growth: The Second Five-Year Plan set a growth target of 4.5% and achieved an actual growth rate of approximately 4.27%.
☛ Under this plan, three major public sector steel plants were established with foreign collaboration: Bhilai (Soviet Union), Rourkela (West Germany), and Durgapur (United Kingdom).
☛ The Industrial Policy Resolution of 1956 (IPR 1956) was adopted during this plan, establishing a socialist pattern of society and assigning the public sector the "commanding heights" of the economy.
Important One-Liners for Upcoming Exams:
☛ Which Five-Year Plan in India was based on the Mahalanobis Model? → Second Five-Year Plan (1956–1961)
☛ On which date is National Statistics Day celebrated in India to commemorate P.C. Mahalanobis's birth anniversary? → 29 June
☛ With which country's assistance was the Bhilai Steel Plant established during the Second Plan? → Soviet Union (USSR)
☛ Which economic policy resolution served as the economic constitution of the Second Five-Year Plan? → Industrial Policy Resolution of 1956
☛ What was the primary focus of India's First Five-Year Plan (1951–1956)? → Agriculture and irrigation