Economy Policy

Economic Policy for Balanced Growth

The broad objective of economic policy in India is to bring about rapid economic growth of the country. Economic growth to be meaningful, in a large country like India, should be balanced, regionally, locally, sectorally and temporally. Economists have made a distinction between the two terms, economic growth and economic development. While the term economic implies a quantitative increase in the volume of productions of goods and services in the country, as reflected by an increase in the real gross domestic product and real per capita gross domestic product and real per capital gross domestic product of the country over the years, the phrase economic development has a qualitative connotation besides its quantitative aspect. Economic development of a country implies not only a quantitative increase in the volume of production, but also a qualitative improvement in its distribution. The distributive criterion of economic development can be subdivided into four sub aspects and they are: the regional aspect, the local aspect, the compositional aspect and the temporal aspect.

Regional aspect: The regional aspect refers to the fact that in a large country like India, economic development should bring about a balanced growth of the different regions of the country. A mere growth of the gross national product of the country, even at a high rate, will not satisfy this criterion if a few regions of the country or states of the country advance economically in terms of economic activity and per capita income while many other regions remain backward.

Local aspect: The local aspect of distribution implies a balance among the different localities, cities, their hinterlands and the rural areas of a region. Left to itself, economic activity has a tendency to cluster in certain localities which gradually become industrial centers and cities and they develop leaving the villages and rural areas backwards, thereby giving rise to local imbalances.

Compositional aspect: The compositional balance of economic development implies that the different sectors of the economy producing different goods and services should expand in a balanced manner. The economy is usually divided into three sectors, the primary sectors, the secondary sector and the tertiary or services sector. Since these sectors are complementary, it is essential that they should grow more or less in a balanced order to sustain a high rate of economic development of the country, though the relative shares of the three sectors in the economy may vary depending upon their relative capacities to contribute to production, employment and human aspect. Besides, it is also necessary that there is a balanced expansion in the production of the different types of goods and services required by the people so that scarcities of necessary articles of general consumption do not emerge in the face of an abundant availability of the goods and services consumed by the richer classes of society.

Temporal aspect: The temporal aspect of distribution means that as a country develops economically, its capacity to withstand temporal fluctuations in economic activity called trade cycles, should steadily increase so that wide fluctuations in economic activity over the years with severe adverse effects on employment, income and economic welfare do not arise.

Taking the different states/ union territories as different regions, their rates of growth over the years from 1980-81 to 2000-01 are studied by analyzing the treand of growth in per capita net state domestic product at current prices for which comparable data are available as published in the annual economic survey reports of the Government of India. The statistical tool of analysis used is the coefficient of variation in per capita net state domestic product in the different years taken for the study, an increase in the value of the coefficient of variation implying an increase in regional imbalance in economic growth and decrease in its value indicating a decrease in regional imbalance in economic growth as among the different regions of the country.

The period from 19880-81 to 2000-01 is chosen since it includes a decade of active state-intervention from 1980-81 to 1990-91, and a decade of the recent economic reforms characterizing what is popularly called economic liberalization, so that it is possible to highlight the impact of economic liberalization on balanced regional development, whether economic liberalization has promoted balanced regional development or whether regional economic imbalance has got aggravated in the wake of economic liberalization.

The data pertaining to the per capita state domestic products at current market prices used for the analysis are presented in Table -1

The data presented in Table-11 which contains summary statistics based on the data in Table-1, shows that the average state domestic per capita product at current prices has been steadily arising since 1980-81. IT was Rs. 1,932.32 in 1980-81 and rose to Rs. 3,012.36 in 1985-86, recording a rise of 55.89% over the five year period. IT stood at Rs. 5,764.86 in 1990-91, recording a rise of 91.37% over that in 1985-86, and at Rs. 11,304.26 in 1995-96, marking a rise of 96.09% during the five year period from 1990-91. The average state domestic per capital product at current prices was Rs. 19,208.08 in 2000-01 which marks a rise of 69.92% over the figure recorded in 1995-96.

These figures show that the rate of growth of average net state domestic per capita incomes has been steadily on the rise. This comparison is not strictly scientific since national / state domestic products measured at current prices are highly inflation dependent and hence will not reveal real economic growth. The figures, however, indicate the broad trend of economic growth and have to be relied on in the absence of the availability of per capita state domestic product based at constant prices.

Though the different states have recorded steady economic growth over the period 1980-81 to 2000-01, the rates of growth have not been uniform