Savings and Capital Formation as Constraints on Job Creation and the Strategy of Development in India

When Walter Galenson in the early 1970s bemoaningly asked: ‘What is the point of developing growth-oriented models if they lead to unemployment, social unrest, chaotic cities and the frustration of all progress?’,1 he was only voicing a concern, which was most remarkably shown by many an Indian economist as early as the mid-1950s on issues related to employment and income distribution in less developed countries (LDCs).2 Which is not to say that the Indian economists have not been influenced at all by growth-oriented western models. The Indian planning models — official, semi-official and academic3 — in fact are no less elegant, analytically sophisticated and esoteric than the western ones: they even exude what appears apparently to be transparent relevance to Indian economic realities. Along with growth, questions of employment, poverty and income distribution have been raised and discussed — often with an air of objective detachment — in all the plan documents so far in good detail. Yet there has been a yawning chasm between what was conceived in the plans and what eventually took place in the economy.