DMPQ- What are different types of economic models implemented in Indian economy ? Examine the role of PPP model in India’s economic growth.

Mahalanobis model of Economic Growth

Prof. P.C Mahalanobis prepared a growth model in which he showed that to achieve a self-sustained growth quickly in the country, it would be essential to devote a major part of the development outlay to building basic heavy industry, e.g. steel and the engineering industry for making different types of machines, the multipurpose river valley projects for irrigation and power.

Harrod – Domar Growth Model  

Harrod and Domar analyzed the dynamic nature of investment and demand and showed how variations in capital and in demand were responsible for instability in economic growth.   Therefore, this model suggests that the economy’s growth rate depends on two factors:

  • Level of savings; and
  • Productivity of investment i.e. Capital to Output ratio.

Harrod and Domar arrived at the following relation:

Growth Rate = Investment * (1/Capital-Output Ratio)

The model was primarily based on populace which had high propensity to save and COR remained stable over time. On the contrary, developing economies’ main problrm to increase the propensity to save. Also COR is usually high and fluctuating in these countries.

PPP model in India

A new wave in Public-Private Partnership PPP was felt when a policy was made by the Central government in 1991 and it was decided to allow private participation in the Power sector which opened up the doors for independent power producers. The National Highways Act, 1956 was altered in 1995 to empower private support. In 1994, through a focused offering process, licenses were conceded to eight-cell cellular telephone utility administrators in four metro urban areas and 14 administrators in 18 state circles.

PPP mechanism is a major element of India’s infrastructure creation efforts as there is huge level of investment requirement in the sector. The twelfth plan targets to spend $1000 bn to expand infrastructure. Conventional form of finance – the budgetary allocation by the government is not enough to meet this big investment size. So the government at present is making several efforts to modify and energize the PPP (Public Private Partnership) mode of infrastructure generation.

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