Economic Plans in India

In this article we will discuss about the economic plans in India.

Visvesvaraya’s Plan:

The engineer-Statesman, Shri Visvesaraya, was the first to advocate the idea of planning for India. In his famous book, “The Planned Economy For India”, published in 1934, he proposed a ten-years’ plan with the aim of doubling the income of the country. His main emphasis was on industrialisation so as to reduce the population dependent on agriculture and to increase the population employed in industry.

However, Sri Visvesvaraya’s plan was more on the lines followed in the U.S.A. and Turkey; its basic policy was to avoid ‘communistic tendencies’ and to encourage collective effort without interfering with individual initiative. In short, his plan was drawn within the framework of a capitalist economy.

The National Planning Committee:

In 1938, the industries ministers of the provinces, where the Congress had formed govts., passed a resolution that “……the problems of poverty and un­employment, of national defence and economic regeneration can not be solved without industrialisation. As a step towards industrialisation, a comprehensive scheme of national planning should be formulated.”

Accordingly, Subhash Chander Bose, the Congress President, appointed the National Planning Com­mittee, under the Chairmanship of Shri Jawahar Lal Nehru, to prepare a com­prehensive plan for India.

The Committee earmarked private enterprise as the main agency of economic development although it recommended nationalisation of defence industries and ownership of public utilities ‘by some organ of the State.’

The Committee further recommended that all banking should be licensed; Insurance should be supervised by a National Board; coal industry should be strictly controlled and a qualified authority should determine the size of a manufacturing unit in every industry.

As for agriculture, individual enterprise was regarded as merely temporary ……to be subordinated to the needs of the community while the transition to collective or cooperative farming was being made.

The Committee was handicapped by lack of data and statistics, cooperation from the Govt. of India, and enthusiasm among important elements in the Congress. These difficulties prevented the Committee from completing its work in 6-12 months as originally planned with the result that the outbreak of the Second World War caught it in mid-stream.

From then on, the Committee ‘languished’. Pandit Nehru’s arrest in 1942 gave it a virtual death blow. It was only in 1949 that the unscrutinised Reports of various sub-committees were placed … “before the National Congress, the Central and Provincial govts. and the people for such use as they deemed fit to make of it.”

Advisory Bodies in U.P.:

In the meantime, planning had been taken up by the govt. itself in response to the exigencies of the war and the anticipated needs of post-war reconstruction. Although the conversion of the bureaucracy to the idea of planning appears to be sudden, there were earlier precedents for official interest in planning. During the World Depression of the 1930’s, two official advisory bodies on planning were established in the U.P.

The First Committee, arguing that planning … ‘a delicate and difficult art’ succeeded better than ‘piecemeal and isolated developmental activities,’ placed the main emphasis on agriculture, rural uplift, sanitation and education.

The Second Committee, called the Industries Reorganization Committee, recommended that the Industries Department of the U.P. Govt. should have a definite programme of work for say a period of 5 years, aiming at a systematic co-relation of various branches of the work in order ‘to achieve certain definite objectives’. These plans, however did not amount to much and, under­standably, failed to attract public notice.

The Planning and Development Department:

The war-time plans of the Govt. of India were, however, in a different category for the war had transformed the whole attitude of the bureaucracy towards the role of the state in economic development. The first step was the creation of an Official Board of Industrial and Scientific Research.

This was followed by the establishment of a Reconstruction Committee with which were associated a number of expert committees. In 1944, a Planning and Development Department, under Sir Ardeshir Dalai, was brought into existence, and simultaneously, the provincial Governments were requested to establish their own planning organisations.

The years 1944-46 saw the publication of a number of reports…… The Kheragat Report on agricultural development, the Gadgil Report on agricultural credit, the Saraiya Report on co-operation.

The Krishnamachari Report on Agricultural Prices, the Nagpur Report on Roads, the Adarkar Report on Sickness insurance for industrial workers, the Bhore Report on public health, the Sergeant Report on education, and a series of reports on irrigation.

In the words of Dr. Ambirajan, these plans were “Bureaucracy and red-tape governed.”

Besides, as Vakil and Brahmanand point out, they “lacked the necessary integration and coordination…… they misconceived the nature of post­war economic situation. The assumptions behind them were those of deflation, falling prices and free availability of Sterling balances. None of them came to pass nor did the govt. visualize that the post-war period would be characterised by an acute imbalance between food needs and internal agricultural production, and that a large portion of its resources would have to be necessarily devoted for purposes of importing food grains.”

The Bombay Plan:

The most immediate, and in some ways, the most valuable result of this official planning activity was that it encouraged Indians to try to do better. Of the three ‘private’ plans that appeared in 1944, the best known was the Rs. 10,000 crores so-called, Bombay Plan, sponsored by some of India’s top industrialists.

The Plan proposed a trembling of national income and doubling of per capita income within a period of 15 years by giving top priority to industrialisation, especially the production of power and capital goods.

In order to avoid hardships, prevent inflation, provide employment and economise capital resources, the plan proposed the fullest possible use of small-scale and cottage industries in the production of consumer goods.

Out of a total investment of Rs. 10,000 crores, no less than Rs. 3400 crores was to come from ‘created money’. To neutralize the inflationary effects of this deficit-financing, ‘the positive and preventive functions of the State’ were to be so enlarged as to rigorously control practically every aspect of economic life of the country.

Naturally, it implied a ‘temporary eclipse’ of individual liberty and freedom of enterprise. The Plan, characterised ‘as an exercise in economic arithmetic’s’ contained “little more than a statement of ob­jectives.”

The People’s Plan:

M.N. Roy’s people’s plan, however, was a different document. Proposing an investment of Rs. 15,000 crores spread over 10 years, it envisaged an increase of 400% in agricultural and 600% in industrial production so as to satisfy the basic needs of the people in respect of food, clothing, shelter, health and education. It differed from the Bombay plan in several respects.

The Bombay plan was based on the existing capitalist system, the people’s plan assumed the necessity of socialism in the country and proposed a vigorous control of industry and com­merce in the transition period. The Bombay plan’s emphasis was on industrialisa­tion, the people’s plan attached importance to agricultural development.

In Finance, the Bombay plan assigned a major role to deficit-financing while the people’s plan believed that with the extension of public ownership to industry and collective ownership of agriculture, development would become self-financing within six years.

The Bombay Plan assigned a definite place to cottage industries but the People’s Plan, reflecting Marxian contempt for petty production, showed a total lack of enthusiasm for them.

The Gandhian Plan:

No such prejudices inspired the author of the Gandhian Plan. It was a very modest plan involving an estimated investment of Rs. 3,500 crores. Its fundamental feature was to bring about a decentralised economic structure with self-contained villages.

The emphasis was on agriculture than on industry and, in industry also, on small-scale cottage industries rather than the large-scale ones. Essentially, the Gandhian Plan was more of an essay in economic morality than a plan in the real sense of the world.

It preached the virtues of simplicity, manual labour, local self-sufficiency, decentralisation, and independent village community. And yet, it was not without its merits. In its emphasis on popular participation and its insistence that the willing cooperation of the villager must be sought and won, it anticipated the Panchayati Raj.

Also of importance was its attempt to define the objectives in terms of way of life as well as in terms of percentage increase in per capita income.

Despite their obvious limitations and inadequacies, these plans, official as well as non-official, had many useful ideas to offer.

In the words of Prof. A. K. Dasgupta:

“Structurally the First Five Year Plan may be said to be an offspring of the Bombay Plan. The formulation of the growth target and the application of the concept of investment by created money…….. are derived from the Bombay Plan. If, however, the structure was derived from the Bombay Plan, its inspiration is derived from the official Reconstruction Programmes. The later emphasis on socialism may, perhaps, be traced to the framework of the people’s plan.”