Planning Theory and Techniques

Bhagwati, Jagdish N.; Sukhamoy, Chakravarty

The formulation of the successive Five-Year Plans in India has led to a steady evolution of economic thinking on questions relating to planning theory and techniques. However, the interplay between plans and economic thinking has often been tenuous. At times there may even have been post-facto rationalization of investment decisions taken on political grounds by ingenious designing of suitable models. At other times, model building and analysis have inevitably gone ahead of the plans. However, it is possible to identify with each plan certain basic model-types, which have provided the intellectual backbone to that plan and were the object of extensive economic debate. It is indeed surprising that while the true cost of labor came in for a good deal of discussion, the associated concept of the true cost of capital did not figure much in the Indian discussion. It was, of course, mentioned from time to time that the market rate of interest did not reflect the true scarcity of capital but it was not quite clear what was meant by such an expression.



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American Economic Review

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November 13, 2012