Date of Submission


Date of Award


Institute Name (Publisher)

Indian Statistical Institute

Document Type

Doctoral Thesis

Degree Name

Doctor of Philosophy

Subject Name

Quantitative Economics


Economic Research Unit (ERU-Kolkata)


Maity, Pradip (ERU-Kolkata; ISI)

Abstract (Summary of the Work)

At the time of India’s independence the need of the hour was to develop the economy at a fast pace so as to achieve a reasonable standard of living for the masses within a short period of time. India’s first Industrial Policy Resolution was adopted in 1948 which put emphasis on the expansion of production of both agricultural and industrial goods to satisfy the basic needs of the masses, a large proportion of whom lived well below a subsistence level of living. Hence, emphasis was given on agricultural expansion in the First Five Year Plan and on building up the industrial sector in the Second Five Year Plan. The Second and Third Five Year Plans sought to advocate and also promote the establishment of core and basic industries; the underlying objective was to expand the industrial base of the economy in order to facilitate its rapid growth as early as possible.Policy makers were also in favour of promoting cottage and small scale industries to meet demands for the relatively cheaper industrial goods coming particularly from the lowerend consumers (Little, Mazumdar and Page, 1987, pp. 22-23). Thus cost rather than quality of the product appeared to be the main concern at that time. In this way a quality compromising mind set-up, with relatively less concern for competitiveness of the Indian industries in the international market, had its beginning in India around the mid-fifties.11 In addition to the policy of promoting small scale industries which might even produce poorer quality output, the tariff policy of the government was also so designed as to prevent (the so called) unfair foreign competition and promote utilisation of India’s own resources. In other words, the desire to develop a socialistic pattern of society became the guiding principle behind social and economic policies of the government at that time.However, a healthy expansion of cottage and small scale industries depended upon a number of factors like adequate availability of raw materials, cheap power and technical advice, efficient and organised marketing of their produce, and wherever necessary, protection from intensive competition from large scale manufacturing. (This last aspect, needless to say, would restraint large-scale industrial units from attaining their optimal scales of operation (Ahluwalia, 1985, pp. 160)). However, in view of the urgent need for planned and rapid economic development, industries which were of basic and strategic importance and/or in areas of public utility services, were sought to be developed under the public sector. Of course, state’s declared policy was to give fair and non-discriminatory treatment to private and public enterprises when both operated within the same industry. (But such efforts, to a large extent, had remained inoperative in practice.) In addition, having realised the economic rationale of existence of big industries, the government wanted to take steps so that some such industries could coexist with small industries.2


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