3.2.

1 Emergence of the State’s Role in the Process of Development

Ideological currents like Fascism, Marxism and Keynesianism asserted the need of state
intervention to ensure proper development for the people and society.

Explanation: Ideologies such as Fascism, Marxism, and Keynesianism focus on the importance
of the state's role in the economy and society to ensure proper development for all. They
believe that the free market is not enough to achieve equity and progress.

What is Free Market?

Free market is an economic system where individuals and companies have the freedom to
decide how to use their resources, such as capital, labor, and technology, to produce goods and
services

The three decades following the end of Second World War and the period of decolonization
and the building of new nation states somewhat demanded the state intervention as the key
agent to promote development of the nations and to expedite the reconstruction work that
was going on in the war devastated European countries.

Explanation: After World War 2 the European country had to rebuild from the destruction of
the war. At the same time, many new states have begun to establish their own governments
during decolonization. These events caused the need for the intervention of the state to help
countries develop and restore their economy.

Not only there was the demand for state intervention, but the state became the ultimate
designer and driver of all development plans and programmes and tried to make it reach all
sections of the population to ensure not only growth, but social justice. These changing roles of
the state have had an impact on developing countries.

Explanation: During this period, the state not only provided aid, but became the planner and
implementer of development programs. . The aim/goal of the state is not only economic
growth, but also the achievement of justice by providing services to society.

What is Social Justice?

The state's goal is to ensure that the benefits of development reach all people, not just the rich.
3.2.2. Decline of the State Intervention in Development

For many newly independent developing countries in the 1950s and 1960s, much faith
abounded in the role of the state as an agent of development.

Explanation: In the 1950s and 1960s, many newly independent countries believed that the
state was the best to raise or promote development. They believe that the state has the ability
to implement programs and policies that will improve the economy and the society.

For example: China's Five-Year Plans whose target is to accelerate industrial development.

It was against the notion of the role of market forces enshrined in the invisible hand of Adam
Smith.

Explanation: this belief about the role of the state is opposite to Adam Smith's idea of the
"invisible hand", where markets are supposed to run the economy. Smith believed that Free
competition would bring about growth and prosperity.

With the apparent lack of economic success of Latin America and in Africa, along with the
collapse of the Soviet Union, in the 1980s and 1990s, there was a gradual decline in the faith on
state as an agency of development. There was a shift in the stress from state to market.

Explanation: In the 1980s and 1990s, the perspective on the role of the state started to change.
The failures of development programs in Latin America and Africa, and the collapse of the
Soviet Union, had limitations on state intervention.Countries began to think of ways to
strengthen market forces.

Soviet Union - what it wanted was equal opportunity or treatment for all. But it collapsed on
December 26, 1991.

At this juncture, nations started to experiment with market as a forceful drive for
development. The market substituted the state as an agency of development in the post
globalization period.

Explanation: Because the state was not successful as an agent of development, countries began
experimenting with using the market as the main power for development. They believe that
Free Competition will bring growth and prosperity.In the era of globalization, the market has
become stronger and has become the main reason for development. Many countries believed
that globalization and Free Trade would bring growth and prosperity.

3.2.3. The Revival of the State Intervention in Development: The Emerging Debate

However, the market also could not achieve full success in accelerating the process of
development.The market could not give equal access to all. Inequalities were triggered under
the market.

Explanation: Although countries have trusted the market as the main force in development, it
has also not succeeded in accelerating development. The market is not sufficient to provide
equal opportunities for all, nor has it solved the problems of poverty and unemployment

For Example: Large corporations have greater market power, making it difficult for small
businesses to compete.

So again there was a worldwide debate whether to roll back to the same type of state
intervention or to bring some reformation in state operational mechanism to ensure balanced
development.

Explanation: Due to the market not being successful, there was another dispute or debate
around the world on whether we should go back to the previous system of intervention by the
state to ensure the balance development.
Ninth Plan (1997- 2002)
This Plan was prepared under United Front Government. It focused on “Growth with Social
Justice & Equality”. Strengthening the agricultural sector, prioritizing rural development,
generating adequate employment opportunities, poverty reduction and ensuring food security,
empowering women, social sector development were some of the important objectives of the
programme. Ninth Plan aimed to depend predominantly on the private sector. Foreign Direct
Investment was encouraged. State was accorded the role of a facilitator than an interventionist.
The ninth plan became successful in increasing investments and savings, in liberalizing the
economy and reducing taxes and tariff rates.

Explanation: The Ninth Plan (1997-2002) Its focus is "Development with Justice and Social
Equity." Strengthening agriculture, prioritizing the development of rural areas, creating
adequate employment opportunities, reducing poverty and ensuring food security,
empowering women, and developing the agricultural sector. society are some of the important
goals of the program. The Ninth Plan aims to rely more on the private sector. Foreign Direct
Investment is encouraged. The state was given the role of a facilitator rather than an
interventionist. The Ninth Plan was successful in increasing investments and savings, in
liberalizing the economy, and in reducing taxes and tariffs.

Tenth Plan (2002 - 2007)

Under the tenth plan, it was decided that economic growth cannot be the only objective of
national plan. Economic growth without adequate social progress hampers the real
development of the nation. Tenth Plan had set ‘monitorable targets’ for few key indicators of
development. The targets included reduction in gender gaps in literacy and wage rate,
reduction in Infant & maternal mortality rates, improvement in literacy, enrolment of children
in schools, access to potable drinking water cleaning of major polluted rivers, ensuring high
quality employment to the people and aforestation etc. Good governance was considered as
essential for development & agriculture was declared as prime moving force of the economy.
The role of the state in planning was decided to be increased with greater involvement of
Panchayati Raj Institutions. State wise break up of targets for growth and social
developmentsought to remove regional disparities in development. This plan could increase the
GDP to a considerable extent fixing it at 7.66%. There was a phenomenal growth in the
agricultural, manufacturing, service sector and construction sector.

Explanation: Tenth Plan( 2002-2007) said that it is not enough for the country to become rich.
People also need to evolve. Economic development without adequate social development is
not real development. Thus, the Tenth plan set targets that could be monitored to ensure the
progress of the people.

Reducing the gender gap in literacy, and wages : They want more women to learn to read and
write, and their wages are higher compared to men.

Reduction of infant and maternal death rate: They want fewer babies and mothers to die.

Improving literacy: They want more people to learn to read and write.

Enrollment of children in school: They want more children to go to school.

Access to clean drinking water: They want to ensure that everyone has clean drinking water.

Cleaning of major polluted rivers: They want to clean the rivers that are polluted.

Ensuring high quality work for people: They want to ensure that everyone has a good job.

Planting trees: They want to plant more trees to protect nature.