Heavy Industry vs. Light Industry

An important aspect of the investment strategy for you to note formulated by Professor Mahalanobis was the focus on heavy industries manufacturing basic machines and basic metals. Put differently, an increasing proportion of investment should be on machine-building industries.




The Planning Commission assisted this strategy for two reasons:

(a) Investment in the heavy industry assists the Indian economy to construct up a larger volume of capital stock and at a faster rate.

(b) Heavy industries assist to lay the foundation for a strong and self-reliant economy, partially through rapid expansion of all the sectors of the economy and partly by eradicating the dependence of the nation on imports of significant machinery and equipment.

It is essential to identify that the Planning Commission rejected the optional strategy of focussing light industries producing consumption goods. True, this optional approach would have the advantage of assisting the Indian economy to manufacture a larger volume of consumption goods and this would have assisted the people to have a higher standard of living in the short period and also combat inflationary pressures in the nation. However, this could be attained by neglecting the accumulation of capital stock in the nation. The Planning Commission denied the short period availability of consumption goods in favour of production of capital goods which, in fact, would help, after a certain critical stage, to manufacture a larger volume of consumption goods. The capital goods approach based on the Russian experience, projected people to sacrifice in the short period in support of a high level of living in the long period. Additionally, this approach would enable the nation to have a large volume of the capital goods in the short period and a large volume of both capital and consumption goods in the long period.

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