Chapter Notes

Politics of Planned Development

After achieving independence and establishing a democracy, India faced its third major challenge: ensuring economic development and well-being for all its citizens. This challenge was complex and long-lasting. The path chosen by India's leaders involved difficult political choices, and their success was more limited compared to the challenges of nation-building and democracy.

Political Contestation

Decisions about development are not simple technical problems that experts can solve. They are deeply political because they involve weighing the interests of different groups against each other.

• The State Government wants to attract investment and create jobs.
• The Central Government worries that stopping the project would discourage future investment in the country.
• Local Tribal Populations fear being displaced from their homes and losing their livelihoods.
• Environmentalists are concerned about the pollution from mining and industry.

Whose need should be prioritized? Is it the need for industrial jobs, the rights of the tribal community, or the protection of the environment? These questions require a political decision, taken by the people's representatives who must balance these competing interests.

After Independence, Indian leaders had to make many such decisions. There was a broad agreement on two main goals:

1. Development should mean both economic growth and social and economic justice.
2. The government, not private industrialists or farmers alone, must play a key role in achieving these goals.

However, there were major disagreements on the specifics:

• Should there be a centralized institution to plan for the whole country?
• Should the government own and run key industries?
• If economic growth and social justice conflict, which should be given more importance?

These debates involved political judgments and have continued ever since.

Ideas of Development

The very idea of 'development' can mean different things to different people. For an industrialist, it might mean setting up a new factory. For a city dweller, it might mean more available steel. For an Adivasi living in that region, it might mean the loss of their home and way of life.

In the years after Independence, 'development' was often understood as becoming more 'modern' like the industrialized countries of the West. This process, called modernisation, was associated with:

• Economic growth and material progress.
• The breakdown of traditional social structures.
• The rise of capitalism and liberalism.
• Scientific rationality.

India had two main models of modern development to choose from:

1. The Liberal-Capitalist Model: Practiced in the US and much of Europe, this model emphasizes private ownership and a market-based economy.
2. The Socialist Model: Practiced in the USSR, this model emphasizes state control over the economy and resources.

Many Indian leaders, including Prime Minister Nehru, as well as members of the Communist and Socialist parties, were deeply impressed by the Soviet model. There were very few supporters of the American-style capitalist model. This preference grew out of the national movement, where leaders agreed that the government of free India had a responsibility for poverty alleviation and economic redistribution, unlike the colonial government which focused only on commercial functions.

Planning

Despite disagreements on the path of development, there was a strong consensus on one point: development could not be left to private individuals and businesses. The government needed to create a plan or design for development.

The idea of economic planning gained worldwide support in the 1940s and 1950s, influenced by:

• The experience of the Great Depression in Europe.
• The post-war reconstruction of Japan and Germany.
• The rapid economic growth of the Soviet Union in the 1930s and 1940s.

Interestingly, even big industrialists in India supported the idea of a planned economy.

• In 1944, a group of leading industrialists drafted a joint proposal for a planned economy called the Bombay Plan.
• The Bombay Plan argued that the state should take major initiatives in industrial and other economic investments.

Soon after Independence, the government established the Planning Commission.

• The Prime Minister served as its Chairperson.
• It became the most influential body for deciding India's development strategy.

The Early Initiatives

Following the model of the USSR, the Planning Commission of India adopted Five Year Plans (FYP).

• How it worked: The government prepared a document outlining all its income and expenditure for the next five years. The budget for both the central and state governments was divided into two parts:
  • 'Non-plan' budget: Spent on routine, yearly items.
  • 'Plan' budget: Spent over five years according to the priorities set in the FYP.
• Advantage: This allowed the government to focus on the bigger picture and make long-term interventions in the economy.

The First Five Year Plan was released in December 1951 and generated great excitement and public debate. The enthusiasm continued through the Second (1956) and Third (1961) Five Year Plans. However, by 1966, when the Fourth Plan was due, India was facing a severe economic crisis, and the government took a 'plan holiday'. Despite later criticisms, these early plans laid the foundation for India's economic development.

The First Five Year Plan

The First Five Year Plan (1951-1956) aimed to pull the country's economy out of the cycle of poverty.

• Chief Architect: K.N. Raj, a young economist, who argued that India should 'hasten slowly' in the first two decades to avoid endangering democracy.
• Main Focus: The agrarian sector, including investments in dams and irrigation. The agricultural sector had been severely affected by Partition and needed immediate attention.
• Key Projects: Large-scale projects like the Bhakra Nangal Dam received huge allocations.
• Core Strategy: The plan identified unequal land distribution as the main obstacle to agricultural growth and focused on land reforms.
• Economic Goal: To raise the level of national income by encouraging people to save more than they spent. While savings did rise during this period, the increase was not as high as expected.

Rapid Industrialisation

The focus shifted dramatically with the Second Five Year Plan.

• Main Focus: The Second FYP stressed rapid structural transformation through the development of heavy industries.
• Chief Architect: A team of economists led by P. C. Mahalanobis.
• Political Context: Before the plan was finalized, the Congress party, at its session in Avadi, declared that a 'socialist pattern of society' was its goal. This was reflected in the plan.
• Key Strategies:
  • The government imposed high tariffs on imports to protect domestic industries from foreign competition.
  • This protected environment helped both public and private sector industries to grow.
  • With rising savings and investment, the government was able to develop key industries like electricity, railways, steel, machinery, and communication in the public sector.

However, this strategy had significant problems:

• Technological Dependence: India was technologically backward and had to spend valuable foreign exchange to buy technology from abroad.
• Agriculture vs. Industry: As more investment went into industry, agriculture suffered, raising the possibility of a food shortage.
• Criticisms: Critics argued that the plan had an "urban bias" and that industry was wrongly prioritized over agriculture. Some believed the focus should have been on agriculture-related industries rather than heavy ones. The Third Plan largely continued the strategy of the Second Plan.