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National Development Policies for Developing Countries
Purnendy Mandal
and
Eric F. Wolstenholme
University of Bradford
ABSTRACT
The work described in this paper is an extension of earlier work by the same
authors on analysis of national development planning. A brief description
is presented here of the system dynamics model developed for this earlier
work as a basis for explaining its recent application to development policy
design. A taxonomy of development policies is presented and the results
of analysing seven policies, within an adaptive model framework, are pres-
ented, which are aimed at improving and achieving both growth and equity.
Each policy is examined under conditions of continuous proportional control
and discrete control based on a sector criticality.
INTRODUCTION
The governments of developing countries today are in no better a position in
real terms than they were half a centruy ago in dealing with the control of
the development process. In spite of a considerable success in generating
economic growth for developing economies, the picture on income distribution
remains as gloomy as it was in the 1950s (Chenery, et al, 1981). One
apparent reason for this uneven economic and social development, arguably
the most difficult one, suggested by the planners, has been the difficulty
in "the determination of the weights to be assigned to growth of income on
the one hand and to creation of employment and attainment of a more equit~
able distribution of income on the other" (Meier, 1976, p.802). There are
severe problems associated with finding suitable methods which can provide
an insight into the appropriate weights to be attached to growth and equity
to achieve balanced development. This requires a multidimensional and
holistic approach to development, and the formulation of suitable quantit-
ative methods of policy analysis.
The work presented in this paper is related mainly to the development of
methods of achieving more comprehensive and quantitative analysis of develop-
ment than has been achieved in the past. Here, an attempt is made to throw
light on the issue of maintaining growth and equity, under various exogeneous
influences, in a typical developing economy. To build up a clear understand-
ing of the experimental results, some background work has been presented.
This includes a brief presentation of the underlying model used in the work
and a classification of various policy options to be analysed by the model.
THE SYSTEM DYNAMICS DEVELOPMENT MODEL
A search of the huge literature on development (Myrdal, 1972 ; Meier, 1976;
Chaudhuri, 1976; Chenery et al, 1981) leads to the following generalisat-
ions about development in Third World countries.
a) Agriculture is the single largest sector contributing
to the national income.
b) The majority of the population depends on agriculture
for a livelihood.
c) There is widespread rural poverty.
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d) Income sharing patterns are highly skew, acting against
a@ vast majority of the rural population.
The model building exercise described in this section of the paper attempts
to capture these characteristics of developing economies. The activities
which can be considered as representative of a typical developing economy
are presented in Fig.l. These activities which form the basis of the system
dynamics model used for the investigation were, in fact, selected on the
basis of the Indian development situation (Mandal and Wolstenholme, 1984).
However, since the pictures in the developing cowmtries are broadly similar,
the model may be considered as a fair representation of the major activities
common to most of the developing countries.
Since agriculture is defined as being the major concern in national develop-
ment, the Agriculture Sector in the current work has been modelled in great
detail. Non-agriculture (anything except agriculture) has been modelled to
take care of mainly those aspects which affect or are affected directly by
agriculture. To tie together these two sectors of the model it has been
necessary to develop a Finance Sector in some detail to represent the
economic activities of development (such as investment generation , alloc-
ation by fiscal policies, export- import balances) and, most importantly,
to facilitate growth and equity calculations.
The underlying mechanisms by which the activity of these three sectors of
the model are interrelated have been discussed by the authors in their earlier
work. However, the major influences of the model are reviewed here. A
simplified overall influence diagram (Fig. 2) is presented for this purpose.
The influence diagram can be divided into two parts (along thé dotted line)
which contain feedback loops of two different kinds: loops related vith growth
(Part I) and loops related with equity fPart II).
- Feedback loops Influencing Growth.
Five prominant influences can be traced out in the Part I portion in Fig. a
Loops ‘a' is a strong positive feedback loop which captures tte mechani ca
increasing agricultural production through investment generation and tiloce
ation in various activities of agriculture (such as livestock, cash crop,
land development and irrigation). A similar type of strong positive loop
"B' can be traced within the non-agriculture sector which reinforces non~
agricultural production through investment. The loops 'A' and 'B’
emphasise cash availability generated by savings rates. However, cash
availability is also affected by the export-import balance. In an agric~
ulture based economy, higher agricultural production is expected to provide
a surplus balance of payments situation and to increase cash availability.
This is shown in the loop 'C’. Food import and export is also taken care of
by this loop. The feedback loop 'D', a negative loop, outlines the
effects of higher imports by the non-agriculture sector, which in turn
reduces the amount of cash available for investment. The general tendency in
in developing economies is to import capital or intermediate goods to
develop industry and this activity depends heavily on agriculture for foreign
exchange earnings. One more important area of inlfuencing growtn is to
alter the composition of the gross national product. Agricultural products
form a major part 6f raw material input to non-agriculture. Again, non-
agricultural production is more expensive than that of agricultural prod-
uction. Both of these two effects are represented by the negative loop 'E'.
Here, any increase in non-agricultural production at a rate higher than
that of agricultural production is expected to increase the capital -
output ratio of this sector and thereby make non-agriculture more cost
intensive.
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AGRICULTURE SECTOR
LAND DEVELOPMENT INCOME DISTRIBUTION
AND ITS DISTRIBUTION
- irrigated and unirrigated * - determination of
land creation - : inequality (GINI
- transfer of land between coefficient}, per
rice and wheat production capita consumption,
- distribution of rice and and solvency of big
wheat land according to and small farmers and
ownership between big and wage earners
small farmers
AGRICULTURAL PRODUCTION
- rice and wheat production
- cash crop production
- livestock production
RURAL POPULATION AND RURAL EMPLOYMENT
ITS DISTRIBUTION
- total rural population growth ~ determination of
- distribution of big farmers, employment levels
small farmers and wage earners in each population
- determination of rural/urban category
migration rate
z
NON-AGRICULTURE SECTOR FINANCE SECTOR
NON-AGRICULTURAL REVENUE CAPITAL
PRODUCTION EXPENDITURE. EXPENDITURE
URBAN ACCOUNT ACCOUNT
EMPLOYMENT - determin- - determination of
ation of investment rate
URBAN POPULATION . government. - generation of
expenditure capital for investment
rate - determination of
- capital foreign borrowing
transfer to rate
capital
expendi ture
account
Fig I: Overview of activities FOREIGN EXCHANGE RESERVE
modelled ‘in each sector - determination of import and
* a export rate
Free aeons devel - determination of borrowing
° to finance import
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+ Land
—— Developed” tana held
y Small
Farmers
taanee share of
ae aN
Syl fereess
income of +
+ y+
Income of
Big RE Small Farmers
F
+ Inputs to
Cultivatio: PART II
> ae SC ~ 7S
+ ~~ Ratio of
*, Agriculture s
eracn’ Capital-
Food PART I tnon Agriculture ourgue
o¢uction ,
\ Pr . Production \- ratio \
wo fe
a: a geekle Non-~Agr feul tural“ -
Production
1 Product
Agricultural
ann a
+
Savings Rate
Agricultural
Activities Non-Agriculteral
+ Activities
=) +) vs
+
Cash available
for investment
Agricultural 7 * /
Investment < 4 hon-egricultural
a Investment
-D
€
Export-Import
4 Belance x
Simplified overall influence diagram of national development model.
Fig.2:
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- Feedback loops influencing Equity
The mechanisms of income distribution, shown in Part II of the Fig.2, are
identified by four feedback loops, F, G, H and I. Both the loops "F" and
"G" reinforce the demand of inputs to cultivation (i.e. fertilizer, pest-
icides) which are dependent on the levels of income by small and big
farmers. However, the sharing of inputs acts against the small farmers.
With higher solvency power the big farmers' share of inputs is expected to
increase, hence curtailing small farmers’ share. With less input the income
of small farmers is likely to decrease. The process, once started, will
reinforce the deteriorating condition in earnings of small farmers from
cultivation. This is shown by the negative "H" loop.
Higher income of big farmers also instigates the transfer of land ownership
from small farmers to big farmers (positive "I" loop). Because of land
transfer, the income of big farmers increases and this undermines further
the rural income distribution situation.
The major influences described above need to be studied in more detail to
understand the behaviour of the national economy. It is possible to control
these influences by various policy options and their implications may be
studied in terms of the major outputs of the model. Growth and equity are
two major outputs of the present model. Growth is measured by the annual
growth rates of agriculture, non-agriculture and overall economy. Equity
measurement is somewhat tricky and it is quantified by calculating the dev-
iation of the actual income sharing of the various groups of population
from the equal proportional share. Rural and national equity positions are
represented by the variables GINI and NEQTY, respectively. An ideal equity
situation assigns O for both GINI and NEQTY, whereas an extreme inequality
will be represented by 1 in the values of both GINI and NEQTY. However,
prior to analysing growth and equity values from specific policy options, it
is necessary to understand the nature of feasible policies for development
control and their classification.
TAXONOMY OF NATIONAL DEVELOPMENT POLICIES
The controls on a national economy may be applied at different levels and
the degree of importance of the policies may vary from level to level.
There are essentially three levels, national, inter-sectoral and sectoral,
in the economy where controls can be exerted and they can be depicted in
Fig.3. This classification of policies at the national, inter-sectoral and
sectoral levels helps to create a visual overview for policy analysis which
stresses the hierarchical nature of the policy process. Performances in the
sectoral level determine the success of policies in the inter~sectoral level
and, ultimately, success at the national level. The control in terms of both
the number of decision points and effectiveness of policy measures increases
as one moves down from the national level to the sectoral level. In terms
of the overall sensitivity of the policies, the decisions made at the
national level will have greater impact than those of policies at lower
level.
The basic aim of the policies, whether to influence growth or equity or
both, are also important in the characterisation of control policies.
The policies associated with growth are mainly concerned with increasing
output or in influencing the pattern of growth by way of investment, or
allocating investment in desired ways among the various activities of the
national economy. The growth policies also influence the availability or
adoption of inputs for economic activities, for example, introduction of
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overall objectives
National Level - Policy Level I
Agric
culture]
jorrAgric
culture
Inter-Sectoral Level - Policy Level II
balancing
Agricultural | Non Agricultural
Activities Activities
\ Sectoral Level - Policy Level III
Fig. 3: Level of Policy Application
new technology in agriculture. On the other hand, equity policies are
mainly concerned with distribution of inputs as well as outputs from econ-
omic activities among the various sections of the population in the society.
On the input side, the equity policies may be designed to distribute
inputs of agriculture, namely, land, fertilizer and labour among the sect~-
ions of rural population. The policy controls may also be applied to
distribute the outputs by way of taxation or any other fiscal policy.
The other major factor which helps the categorisation of the policies is the
system's configuration. Depending on whether a system is 'closed' or ‘open’
the characteristics of the policies will change. For the discussions in this
paper a simple definition of the ‘open’ system may be considered as being
where the major outputs of the model do not feed back information to the
controllable variables of the system. The opposite is the condition for a
‘closed' system where major outputs feed back information to the controll-
able variables. In an open system configuration of the model the decision
concerning the application of a policy is made at the beginning of a simul-
ation run and the policy remains operational throughout the simulation period
irrespective of changes in the states of controlling variables. It can be strongly
argued that this mode of representation is exactly in keeping with how
policy implementation takes place in practice in developing countries.
Many policy plans are created and implemented with little monitoring of their
effect. This view is confirmed by the literature where most policy anal-
ysis in developing economies are based on non-adaptive assumptions (Holland é
Gillespie, 1963; Saeed,1982; Wolstenholme & Mandal 1984. In the case of a closed
system configuration the policies can be made adaptive and the states of
the controlling variables are used to decide whether a policy should remain
operational or not. This mode of representation is, in fact, often the
mode assumed as normal and existing in system dynamics models. In an
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open system configuration of the present model growth rates and income
distribution do not influence any policy parameters, But in the closed
system configuration there is a lot of scope for the growth rate and income
distribution to influence policy application. Some of these possibilities
can be seen in Fig. 4 where information on the growth rate and equity at
any time are fed back to suitable variables at different levels of the
model.
Target ____._____y» Desired Investment
Growth Rate
Actual Investment.
Agricultural Govt. Policy Non=Agricultural
Investment ~_—» at Inter Sectoral~ _" Investment
_— a Level 7.
ia ~
V2 -~S - a ‘
/ r L \
/ l Growth | Equity \ Non-Agricultural \
ly Policies 1 Policies \ ‘
' 1 Activities I
\ | Agricultural \ [
i} Activities J i
\y ! F
VN
\\ / /
\ ig /
\: Agricultural Rural Non-Agricultural Urban
\Growth Rate Equity Growth Rate Equity 7,
nN Sy Zz
\ Z
oa
S a National ational a
~-~ Growth Rate Equity.
Fig.4: Growth rates and equity information
fed back to policy variables
Finally, the functioning of adaptive governments may be viewed in two ways.
Firstly, the government may decide to change the policies continuously dep-
ending on the situation which evolves as a consequence of its policies. Seconily,the
changes might be incorporated only when the consequent situations within any
sector become critical. However, in the case of criticality the policy
measures are drastic and remain in force so long as the criticality exists.
There is little evidence of any work having been carried out on the analysis
of adaptive government policies - either continuously adaptive or adaptive
to criticality. The work cited in the following section of this paper
highlights the major issues associated with adaptive policies.
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DEVELOPMENT SCENARIOS UNDER ADAPTIVE GOVERNMENT POLICIES
The typical deyeloping economy modelled in this work has been subjected to
seven different adaptive policies and the performances of the scenarios
generated from these seyen policies are analysed in comparison with a
reference mode of behaviour for the model. The reference mode is design-
ated by Policy A in Fig.5. This represents a continuation of past policies
and normal functioning of the economy where 23% of the total investment goes
into agriculture sector and the rest to the non-agriculture sector. Simil-
arly, the other seven experiments corresponding to seven adaptive policies
are marked alphabetically by Policies B to H in Fig.5. A statement on each
of these policy experiments and a section of the major outputs of the
experiments also appears in Fig.5. It must be noted that in all the policy
experiments policy changes are introduced at the year 1985 and the model is
run for the period 1980 to 2010 AD. Amongst the adaptive policies, Policies
B, C and D represent a group of continuous adaptive policies and Policies E,
F, G and H belong to adaptive policy group associated with the concept of
sector criticality. Policies E and F attach high priority to growth object-
ive of development, whereas Policies G and H are concerned with equity
improvements.
In Policy B, agricultural investment is influenced continuously by
observing the national equity situation achieved. If the value of national
equity increases above a target value (0.30 in all the experiemnts) agric-
ultural investment is raised proportionately. The underlying assumption
with this control policy is that the national equity situation can be
improved by rapid development of agriculture. Policy C attacks directly
the equity situation in agriculture. Equity correction policies, such as
fertilizer subsidy to small farmers, imposition of land ceiling, implement~
ation of minimum wage rate or combined measures, are imposed on the agric-
ulture sector depending on the rural income distribution situation achieved.
If rural income distribution value increases above a target level (it is
also chosen to be 0.30 for all the experiments) then a suitable policy or
set of policies are employed. The choice of equity policy(ies) depends on
the degree of departure from the target value. Policy D combines the Pol-
icies B and C. Policies E and F are designed to study the effects of growth
and equity policies which are applied only when the system reaches criticality.
In Policy E, national growth and national equity are compared against some
acceptable values (specified as 75% of the target growth rate and 25% above
the target equity, respectively). Agricultural investment is decided on
the basis of whether growth or equity, or both, become critical. In the
case where equity alone becomes critical, 90% of the investment is diverted
to agriculture. If growth becomes critical and not equity, 90% of the
investment goes to non-agriculture. However, it is 50/50 when both growth
and equity are critical. In Policy F, in addition to criticality of nation-
al growth and equity, rural equity is also influenced by equity correction
policies in the agriculture sector. Policies G and H are replications of
Policies E and F respectively, but with emphasis on equity. In these two
policies it is assumed that, if equity value rises above 5% of the target
equity value, then the equity situation will be defined as critical.
The results from the above eight policies are presented here to highlight
the growth scenarios and equity scenarios generated by the simulation of
the economy.
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Policy Growth Outputs Equity Outputs Remarks
Average of 1985-2010
No. Description Domestic Agric. Non-Agric. Ratio of | National Rural
Product Growth Rte Growth Rte Agric/Nor | Equity Equity
(Cr.Rs) % per yr. % per yr. Agric(Prod-|
(at 2010) (1985-2010) (1985-2010) uct (2010) (NEQTY) (GINI)
A. Normal policy - continu-
ation of past scenario 277,280 2.82 2.94 74213 +3461 +5100
B, National equity influences
agriculture/non-agric. 301,955 3.23 3.25 «75861 3397 5073
investment continuously
C. Rural equity influences Only min.wage rate
equity policies in 272,535 2.75 2.86 + 74360 3071 -3903 policy remains act-
rural sector continuously ive after 2003
D. Combination of
Policy B and Policy ¢ 277,243 2.83 2.93 + 74570 +3060 «3903
E. Critical value of nat'l Growth rates drop
growth rates & equity drastically after
influence agric./non~ 228,463 1.89 2.24 69851 +3582 +5134 1994 and pick up
agric.investment. Prior- again by 2005
ity is in growth
F. Policy E along with Growth rates drop
rural equity equal- 195,913 1.14 1.70 + 66352 +3262 +3943 after 1987. Low-
isation policies est growth ach'd.
G. Critical value of nat'l Best growth situ-
growth rate and equity ation.Average
influence agric./non- 378,618 4.25 4.12 «78590 +3139 -4880 agric.growth rate
agric.investment. Prior- is higher than
ity is on equity improve- average non~agric.
ment growth rate
H. Policy G along with rural
equity equalisation 305 ,048 3.20° 3.34 «73847 +2973 +3886 Best equity
policies situation
NOTE: NEQTY,GINI = 0 means perfect
Fig. 5:
Policy experiments with major outputs.
income distribution
NEQTY,GINI = 1 means extremely inequal
income distribution
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- Growth Scenarios
National Product
300. —n Policy B
‘olicy D
on olicy C
| ‘olicy A
Policy E
200. J
Policy F
5 150, —J
a
x
& 100. 4
50. +4
. 1 1 1 i 1 1 4 1 L }
3 980. 1983. 1986. 1989. 1992. 1995. 1998. 2001. 2004. 2007. 2010.
Simulation Time
Fig. 6: National Product with the Policies A to H.
Fig. 6 compares the time series behaviour of the gross national product from
all the eight policies. In general, the continuous adaptive policies
(Policies B, C and D) perform well in terms of growth, even though there
has been slightly poor performance by Policy C compared to the reference
policy (Policy A). The growth improves in Policies B and D by the i
result of the increased investment in agriculture. This is quite possible |
and can be reaffirmed by the simple reasoning that as the agriculture sector
grows rapidly (through investment in agriculture) the raw material available t
for the non-agriculture sector improves and the production in this sector
becomes less expensive. This is consistent with the influences emphasised
by the negative feed back loop 'E' in Fig.2 and is substantiated by the
increasing value of the ratio of agriculture to non-agriculture production
in Fig. 5 for Policies B and D compared with the reference policy. The
development of the non-agriculture sector is greatly dependent on the devel-
opment of the agriculture sector (Wolf, 1978) and higher growth in agric-
ulture is conducive to higher growth to its counterpart. The growth in
Policy D is not as high as in Policy B though the policy of diversion of
investment from non-agriculture to agriculture remains operational through~
out the simulation run. The reason is that most of the equity correction
policies which were active during the simulation period of Policy D (and
also for Policy C) acted counteractively to growth. Equity correction
policies, particularly minimum wage rate, improve consumption expenditure
patterns among the rural population and force down the savings rate.
Although fertilizer subsidisation policies generally act favourably to
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growth (Mandal and Wolstenholme, 1984), this policy was effective only for
one year in Policies C and D over the simulation period.
The growth scenarios with critically adjusted adaptive policies are widely
divergent and yery sensitive to the government priority. The performances
of the Policies E and F, where priority was given to growth, are far from
expectations. Growth is here, in fact, far below the normal policy and
even the equity position is no better than that of Policy D. It is suggested
that this result occurs because of the higher priority that is given to
growth which directs greater emphasis towards the non-agriculture sector
and investments are diverted to this sector. Since it is deprived of invest-
ment the agriculture grows at a slower rate, which in turn makes non-agric-
ulture more cost intensive. The net result is lower growth rate both in
agriculture and non-agriculture. Whereas,higher priority to equity consid-
erations, as modelled in the Policies G and H, forces higher investments
into agriculture. Agricultural development induces non-agricultural
growth and, ultimately, higher national growth.
- Equity Scenario
Fig.5 contains the values for national equity (NEQTY) and rural equity
(GINI) averaged over 1985 to 2010 AD for all the policies, and Fig.7 shows
the time behaviour of rural and national equity situation for some of these
policies. It will be seen that the equity situation improved in all of the
policies, except in Policy E. Amongst the continuous adaptive policies,
Policy D performed best in terms of rural and national equity. The improve~
ments in equity by diverting investment into agriculture in Policy B and
by imposing equity correction measures in Policy C are successfully combined
in Policy D to produce a better national and rural income distribution sit-
uation without sacrificing growth. The diversion of investment into agric-
ulture (as in Policy B) leads to higher growth in agriculture and, thereby,
the share of rural income in the total national income increases. Consequ-
ently, this leads to the improvevements in rural and national equity. The
improved growth in agriculture by investment benefits all sections of the
rural population. But, a favourable treatment to the weaker section of the
rural population can be provided (as in Policy C) by the adoption of the
equity correction policies. These measures either directly transfer income
from economically advantaged group(s) to economically disadvantaged group(s)
across the population stream and/or help economically disadvantaged group(s)
to have higher access to means of production. Equity policies directly re-
distribute rural income and, thus, are more effective than the indirect way
of influencing income distribution by directing investment to agriculture.
Though the national equity improves in the Policies B, C and D, the improve-
ments in the latter two policies are greater because of higher effectiveness
of the equity policies incorporated in them.
The equity scenarios produced by policies associated with sector criticality
are very interesting. The equity situation in Policy E is as bad as in
Policy A, and the national equity situation is even worse. An apparent reason
for this is that, because of a higher emphasis placed on non-agriculture sector,
the investment into this sector becomes more than its normal share. This
paves the way for urban income to increase at a rate higher than rural income,
despite the fact that the final position of national income is far lower
compared with Policy A. Even after the imposition of the equity improve-
ment policy (Policy F) the improvement in equity is not very remarkable.
This is because of the simple fact that substantial income, in excess of
minimum requirements, should be generated before it can be distributed by
government policy measures. Mechanisms have been built into the model to
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o
in
54 Policy H Reference Policy (Policy A)
wee Policy F
ARS Sg
Policy D
National equity
_(dimensionless) (NEQTY)
>
L
om n 1 4 4 si 4 4 n n 4
1980. 1983. 1986. 1989. 1992. 1995. 1998. 2001. 2004. 2007. 2010.
Simlation Time
Fig. 7(a): Behaviour of national equity
Reference Policy
Policy B Policy E (Policy A)
4 | a
\ \
Policy G
Rural equity
(dimensionless) (GINI)
+
Policy F Policy H
Simulation Time
Fig 7(b): Behaviour of rural equity
Fig. 7: National and rural equity
under various policies
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|} 2000. 4
1500. Th Per capita expenditure in Indian
; — 6500. 4 Rupees per person per year at
2 fi § 1980 price
1250. — H 2 4000. 4 Policy &
| = (Reference Policy)
1000. 2
c
is
750. TT 3
1 @&
1s
500.
o + 4000. 4 Same priority on growth and equity
1000.-44 3500. 4
ies —~
c $000. +
750. 7 8 Policy F
i
L & 4500. J
500. HS
| ! é 4000. 4 .
Bee 22) - PRIORITY ON GROWTH
3500. 4
7509.
1750. ~+! 1
I Policy H
7000. +
a
4500. 4 ‘| | \
Vou
6099. 4
1999. = +5 5500. 4 _
i meen rte
| H 5009. 4
4
PRIORITY ON EQurty
i
oO
S
S
© iso
4 6 4800. 4
soo. ge
|! a 4099. 4
ts
250 —) E3500. 4
Le
1
3000. i
‘= i ie 1 a n t A ‘ 4
1 "1980. 1983. 1986. 1989. 1992. 1995. 1998. 2001. 2004. 2007, 2010.
i TIME
{ ceege (Rs./person/year) Per cepita expenditure of big farmers
(ese (Rs./person/year) Per capita expenditure of small farmers
m= bere (Rs./person/yeer) Per capita expenditure of wage earners
Fig. 8. Per capita expenditure of the rural populetion in policies A, F and H.
“553+
adjust income sharing depending on the minimum requirements of the various groups
of people. Since there had not been much improvement in income generation in
agriculture, the per capita expenditure did not improve (except for wage earners
for some intermittent periods), see fig. 8. Even it was falling slightly near the
end of the simulation period.
The higher priority to equity in the Policies G end H performed well in terms of
equity. Higher income generation in agriculture helped effective income sharing
by government measures. The per capita expenditure of all sections of the rural
population in Policy H as seen in Fig. 8. exceeded than that in the reference
policy. The overall equity situation improved also due to the lower differential
between rural and urban income.
CONCLUSIONS
The analysis on policy experiments conducted above leads to the following major
conclusions.
Firstly, it is possible to achieve an improvement in income distribution without
sacrificing growth rates. The continuous adaptive policy of adjusting agricultural
investment by observing national equity situation and critical adjustment policies
with priority to equity show better performance both in growth and equity compared
to normal policy.
Secondly, a higher growth in agriculture would appear to be a precondition for
higher national growth and improvement in equity.
Thirdly, depencing on the government strategy, the development scenario may be
completely different. With higher priority on equity significant improvement in
growth and income distribution may be achieved. But high priority on growth mey
worsen and equity situation.
Finally, the impacts from continuous and critical adjustments are not noticebly
different for equity output, though the difference may be significant in growth out-
puts.
The conclusions arrived at in this study answer, to some extent, the issues on growth
with redistribution, currently the most important issue cn development studies.
The stucy has demonstrated an effective alternative means in selecting development
stretegies for the developing countries.
REFERENCES
Chaudhuri, Pramit (1978). The Indian Economy: Poverty anc Development,
St. Martins's Press, New York.
Chenery, et al (1981). Redistribution with growth, Oxford University Press,
London.
Holland, E.P. and R.W. Gillespie (1963). Experiments on a simulated underdeveloped
economy: development plans and belance-of-payment policies, M.I.T. Press,
Cambridge. .
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Mandal, P. and E.F. Wolstenholme (1981). Evaluating Alternative Scenarios in
Agricultural Development in India. In: The 1984 System Dynamics Conference
Proceedings, Oslo, Norway.
Meier, Gerald, M. (1976). Leading issues in economic development, 3rd ed.,
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