Mahalanobis Model

THE MAHALANOBIS STRATEGY The essence of the Mahalanobis strategy lay in the following(a) proposition if the rate of growth of an economy depends upon the rate of investment, and then the virtual absence of a machine building sector in an economy closed to trade, would hinder the transformation of nest egg into investment and thus scuttle the growth process. Mahalanobis accepted the inelasticity of exports as a stylised fact of the Indian economy ; because , he advocated that the machine tool sector should be prioritized in terms of investment allocation as it would facilitate the reality of a capital goods sector. More formally, consider a ii sector closed economy model consisting of capital and consumer goods. swallow further that capital goods are of two fibers C and K type. Further , if we assume that capital is non-shiftable, it is tantamount to assuming that K type capital goods can produce C type capital goods and K type capital goods but C type capital goods can be produce solely consumer goods capital goods are not substitutable across types. If we destine ?
t

as the share of K type machines in the jibe capital stock in period t
k t

i.e.

?t =

K K = c K + Kt Kt
k t

k t

and let ? t , the policy parameter recoil the desired division of investment (the

incremental capital stock) into K and C type machines i.e.





?t =

?K tk ?K tk ?K tk = = . ?Ktk + ?K tc ?K t It

Assuming ? and ? i (i = c,k), the inverse of the capital output ratio in any sector as given in any period, the ladder output levels of capital and consumer goods can be determined. Simplifying notation by omitting the subscript t , we obtain the following output equations : Ct = ?c. ? c = ?c.(1-? t).K , in period t………………………………………(10) It = ?k Kk = ?k.? t.K , in period t……………………………………………….(11) Y t = Ct + It = [?k.? t + ?c.(1-? t)]K , in period t……………………………(12) It / Y t = ?k.? t.K / [?k.? t + ?c.(1-? t)]K In a planned economy,all savings are invested ex ante. Thus, It /...If you want to get a full essay, order it on our website: Ordercustompaper.com



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