In this chapter…

In the last two chapters we have studied how the leaders of independent
India responded to the challenges of nation-building and establishing
democracy. Let us now turn to the third challenge, that of economic
Stamps like these, development to ensure well-being of all. As in the case of the first two
issued mostly between challenges, our leaders chose a path that was different and difficult. In
1955 and 1968,
this case their success was much more limited, for this challenge was
depicted a vision of
planned development. tougher and more enduring.
Left to right, top to In this chapter, we study the story of political choices involved in some
bottom: Damodar
Valley, Bhakra
of the key questions of economic development.
Dam, Chittaranjan • What were the key choices and debates about development?
Locomotives, Gauhati
Refinery, Tractor, Sindri • Which strategy was adopted by our leaders in the first two
Fertilisers, Bhakra Dam, decades? And why?
Electric Train, Wheat
Revolution, Hirakud • What were the main achievements and limitations of this strategy?
Dam, Hindustan Aircraft
Factory • Why was this development strategy abandoned in later years?

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 chapter 3
pOLITICS OF PLANNED
DEVELOPMENT
As the global demand for steel increases, Orissa, which has one of
the largest reserves of untapped iron ore in the country, is being
seen as an important investment destination. The State government
hopes to cash in on this unprecedented demand for iron ore and
has signed Memorandum of Understanding (MoU) with both
international and domestic steel makers. The government believes
that this would bring in necessary capital investment and proivde a
lot of employment opportunities. The iron ore resources lie in some
of the most underdeveloped and predominantly tribal districts of the
state. The tribal population fears that the setting up of industries
would mean displacement from their home and livelihood. The
environmentalists fear that mining and industry would
pollute the environment. The central government feels
that if the industry is not allowed it would set a bad
Orissa villagers protest
example and discourage investments in the country. against POSCO plant
Can you identify the various interests involved in this Staff Reporter
case? What are their key points of conflict? Do you think BHUBANESWAR: People facing
there are any common points on which everyone can displacement by the proposed
agree? Can this issue be resolved in a way which satisfies POSCO-India steel plant in
all the various interests? As you ask these questions, you Jagatsinghpur district staged
would find yourself facing yet bigger questions. What a demonstration outside the
kind of development does Orissa need? Indeed, whose Korean company’s office here on
need can be called Orissa’s need? Thursday. They were demanding
cancellation of the memorandum of
Political contestation understanding signed between the
These questions cannot be answered by an expert. company and the Orissa government
Decisions of this kind involve weighing the interests of one year ago.
one social group against another, present generation More than 100 men and women
against future generations. In a democracy such major from the gram panchayats of
decisions should be taken or at least approved by the Dhinkia, Nuagaon and Gadakujanga
people themselves. It is important to take advice from tried to enter the office premises
experts on mining, from environmentalists and from but the police prevented them.
economists. Yet the final decision must be a political Raising slogans, the protesters
decision, taken by people’s representatives who are in said the company should not be
touch with the feelings of the people. allowed to set up its plant at the cost
After Independence our country had to make a series of their lives and livelihood. The
of major decisions like this. Each of these decisions could demonstration was organised by the
not be made independent of other such decisions. All Rashtriya Yuva Sangathan and the
these decisions were bound together by a shared vision or Nabanirman Samiti.
model of economic development. Almost everyone agreed The Hindu, 23 June 2006

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 46 Politics in India since Independence

that the development of India should

mean both economic growth and
What is Left and what is Right? social and economic justice. It was
In the politics of most countries, you will always also agreed that this matter cannot
come across references to parties and groups be left to businessmen, industrialists
with a left or right ideology or leaning. These terms and farmers themselves, that the
characterise the position of the concerned groups or government should play a key role
parties regarding social change and role of the state in this. There was disagreement,
in effecting economic redistribution. Left often refers to however, on the kind of role that the
those who are in favour of state control of the economy government must play in ensuring
and prefers state regulation over free competition. The growth with justice. Was it necessary
Right refers to those who believe that free competition to have a centralised institution to
and market economy alone ensure progress and that plan for the entire country? Should
the government should not unnecessarily intervene in the government itself run some key
the economy. industries and business? How much
importance was to be attached to the
Can you tell which of the parties in the 1960s were needs of justice if it differed from the
Rightist and which were the Left parties? Where requirements of economic growth?
would you place the Congress party of that time?
Each of these questions involved
contestation which has continued
ever since. Each of the decision
had political consequence. Most of these issues involved political
judgement and required consultations among political parties and
approval of the public. That is why we need to study the process of
development as a part of the history of politics in India.

Ideas of development
Very often this contestation involves the very idea of development. The
example of Orissa shows us that it is not enough to say that everyone
wants development. For ‘development’ has different meanings for
different sections of the people. Development would mean different
things for example, to an industrialist who is planning to set up a
steel plant, to an urban consumer of steel and to the Adivasi who
lives in that region. Thus any discussion on development is bound to
generate contradictions, conflicts and debates.
The first decade after independence witnessed a lot of debate
around this question. It was common then, as it is even now, for people
to refer to the ‘West’ as the standard for measuring development.
‘Development’ was about becoming more ‘modern’ and modern was
about becoming more like the industrialised countries of the West. This
is how common people as well as the experts thought. It was believed
that every country would go through the process of modernisation
as in the West, which involved the breakdown of traditional social
structures and the rise of capitalism and liberalism. Modernisation
was also associated with the ideas of growth, material progress
and scientific rationality. This kind of idea of development allowed

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 Politics of Planned Development 47

everyone to talk about different countries as developed, developing or

underdeveloped.
Are you saying
On the eve of Independence, India had before it, two models we don’t have
of modern development: the liberal-capitalist model as in much of to be western
Europe and the US and the socialist model as in the USSR. You have in order to be
modern? Is that
already studied these two ideologies and read about the ‘cold war’
possible?
between the two super powers. There were many in India then who
were deeply impressed by the Soviet model of development. These
included not just the leaders of the Communist Party of India, but
also those of the Socialist Party and leaders like Nehru within the
Congress. There were very few supporters of the American style
capitalist development.
This reflected a broad consensus that had developed during
the national movement. The nationalist leaders were clear that the
economic concerns of the government of free India would have to
be different from the narrowly defined commercial functions of the
colonial government. It was clear, moreover, that the task of poverty
alleviation and social and economic redistribution was being seen
primarily as the responsibility of the government. There were debates
among them. For some, industrialisation seemed to be the preferred
path. For others, the development of agriculture and in particular
alleviation of rural poverty was the priority.

Planning
Despite the various differences, there was a consensus on one point:
that development could not be left to private actors, that there was the
need for the government to develop a design or plan for development.
Credit: Hindustan Times

Nehru
addressing
the staff of
the Planning
Commission

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 Credit:Ninan 48 Politics in India since Independence

Planning Commission
Do you recall any reference to the Planning Commission in your book
Constitution at Work last year? Actually there was none, for the Planning
Commission is not one of the many commissions and other bodies set up by
the Constitution. The Planning Commission was set up in March, 1950 by a
I wonder if the Planning
Commission has
simple resolution of the Government of India. It has an advisory role and its
actually followed these recommendations become effective only when the Union Cabinet approved
objectives in practice. these. The resolution which set up the Commission defined the scope of its
work in the following terms :
Fast Forward “The Constitution of India has guaranteed certain Fundamental Rights to the
citizens of India and enunciated certain Directive Principles of State Policy,
Niti Aayog in particular, that the State shall strive to promote the welfare of the people
by securing and protecting….a social order in which justice, social, economic
The Government of India and political, shall …….. …. direct its policy towards securing, among other
replaced the Planning things,
Commission with a new
institution named NITI (a) that the citizens, men and women equally, have the right to an
Aayog (National Institution adequate means of livelihood ;
for Transforming India).
(b) that the ownership and control of the material resources of the
This came into existence
on 1 January 2015. Find community are so distributed as best to subserve the common good;
out about its objectives and
and composition from the (c) that the operation of the economic system does not result in
website, http://niti.gov.in the concentration of wealth and means of production to the common
detriment.

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 Politics of Planned Development 49

In fact the idea of planning as a process of rebuilding economy earned

a good deal of public support in the 1940s and 1950s all over the
world. The experience of Great Depression in Europe, the inter-war
reconstruction of Japan and Germany, and most of all the spectacular
economic growth against heavy odds in the Soviet Union in the 1930s
and 1940s contributed to this consensus.
Thus the Planning Commission was not a sudden invention. In fact,
it has a very interesting history. We commonly assume that private
investors, such as industrialists and big business entrepreneurs,
are averse to ideas of planning: they seek an open economy without
any state control in the flow of capital. That was not what happened
here. Rather, a section of the big industrialists got together in 1944
and drafted a joint proposal for setting up a planned economy in the
country. It was called the Bombay Plan. The Bombay Plan wanted
the state to take major initiatives in industrial and other economic
investments. Thus, from left to right, planning for development was
the most obvious choice for the country after Independence. Soon
after India became independent, the Planning Commission came into
being. The Prime Minister was its Chairperson. It became the most
influential and central machinery for deciding what path and strategy
India would adopt for its development.

The Early Initiatives

As in the USSR, the Planning Commission of India opted for five year
plans (FYP). The idea is very simple: the Government of India prepares
a document that has a plan for all its income and expenditure for the
next five years. Accordingly the budget of the central and all the State

governments is divided into two parts: ‘non-plan’ budget that is spent

on routine items on a yearly basis and ‘plan’ budget that is spent on

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 50 Politics in India since Independence

Credit: Sudhir Dar/UNDP and Planning Commission

a five year basis as per the priorities fixed by the plan. A five year
plan has the advantage of permitting the government to focus on
the larger picture and make long-term intervention in the economy.
The draft of the First Five Year Plan and then the actual Plan
Document, released in December 1951, generated a lot of excitement
in the country. People from all walks of life – academics, journalists,
government and private sector employees, industrialists, farmers,
politicians etc. – discussed and debated the documents extensively.
The excitement with planning reached its peak with the launching
of the Second Five Year Plan in 1956 and continued somewhat
till the Third Five Year Plan in 1961. The Fourth Plan was due to
start in 1966. By this time, the novelty of planning had declined
considerably, and moreover, India was facing acute economic
crisis. The government decided to take a ‘plan holiday’. Though
many criticisms emerged both about the process and the priorities
of these plans, the foundation of India’s economic development was
First Five Year Plan
document
firmly in place by then.

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 Politics of Planned Development 51

The First Five Year Plan

The First Five Year Plan (1951–1956) sought to get the country’s
economy out of the cycle of poverty. K.N. Raj, a young economist
involved in drafting the plan, argued that India should ‘hasten
slowly’ for the first two decades as a fast rate of development
might endanger democracy. The First Five Year Plan addressed,
mainly, the agrarian sector including investment in dams and
irrigation. Agricultural sector was hit hardest by Partition and
needed urgent attention. Huge allocations were made for large-
scale projects like the Bhakhra Nangal Dam. The Plan identified
the pattern of land distribution in the country as the principal
obstacle in the way of agricultural growth. It focused on land
reforms as the key to the country’s development.
Tenth Five Year Plan
One of the basic aims of the planners was to raise the level of document
national income, which could be possible only if the people saved
more money than they spent. As the basic level of spending was
very low in the 1950s, it could not be reduced any more. So the
planners sought to push savings up. That too was difficult as
the total capital stock in the country was rather low compared
to the total number of employable people. Nevertheless, people’s
savings did rise in the first phase of the planned process until
the end of the Third Five Year Plan. But, the rise was not as
spectacular as was expected at the beginning of the First Plan.
Later, from the early 1960s till the early 1970s, the proportion of
savings in the country actually dropped consistently.

Rapid Industrialisation
The Second FYP stressed on heavy industries. It was drafted
by a team of economists and planners under the leadership of
P. C. Mahalanobis. If the first plan had preached patience, the
P.C. Mahalanobis
second wanted to bring about quick structural transformation
(1893-1972):
by making changes simultaneously in all possible directions.
Scientist and
Before this plan was finalised, the Congress party at its session
statistician of
held at Avadi near the then Madras city, passed an important
international repute;
resolution. It declared that ‘socialist pattern of society’ was its
founder of Indian
goal. This was reflected in the Second Plan. The government
Statistical Institute
imposed substantial tariffs on imports in order to protect
(1931); architect of
domestic industries. Such protected environment helped
the Second Plan;
both public and private sector industries to grow. As savings
supporter of rapid
and investment were growing in this period, a bulk of these
industrialisation and
industries like electricity, railways, steel, machineries and
active role of the
communication could be developed in the public sector. Indeed,
public sector.
such a push for industrialisation marked a turning point in
India’s development.

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 52 Politics in India since Independence

It, however, had its problems as well. India was technologically

backward, so it had to spend precious foreign exchange to buy
technology from the global market. That apart, as industry attracted
more investment than agriculture, the possibility of food shortage
loomed large. The Indian planners found balancing industry and
agriculture really difficult. The Third Plan was not significantly
different from the Second. Critics pointed out that the plan
strategies from this time around displayed an unmistakable
“urban bias”. Others thought that industry was wrongly given
priority over agriculture. There were also those who wanted focus on
agriculture-related industries rather than heavy ones.

1. Which of these statements about the Bombay Plan is incorrect?

(a) It was a blueprint for India’s economic future.
(b) It supported state-ownership of industry.
(c) It was made by some leading industrialists.
(d) It supported strongly the idea of planning.n

2. Which of the following ideas did not form part of the early phase of
India’s development policy?
(a) Planning (c) Cooperative Farming
EXERCISES

(b) Liberalisation (d) Self sufficiency

3.
The idea of planning in India was drawn from
(a) the Bombay plan (c) Gandhian vision of
society
(b) experiences of the Soviet (d) Demand by peasant
bloc countries organisations
i. b and d only iii. a and b only
ii. d and c only iv. all the above

4. Match the following.

(a) Charan Singh i. Industrialisation
(b) P C Mahalanobis ii. Zoning
(c) Bihar Famine iii. Farmers
(d) Verghese Kurien iv. Milk Cooperatives

5. What were the major differences in the approach towards development

at the time of Independence? Has the debate been resolved?

6. What was the major thrust of the First Five Year Plan? In which ways
did the Second Plan differ from the first one?

7. Read the following passage and answer the questions below:

“In the early years of Independence, two contradictory tendencies
were already well advanced inside the Congress party. On the one

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 Politics of Planned Development 53

hand, the national party executive endorsed socialist principles

of state ownership, regulation and control over key sectors of the
economy in order to improve productivity and at the same time curb
economic concentration. On the other hand, the national Congress
government pursued liberal economic policies and incentives to
private investment that was justified in terms of the sole criterion of
achieving maximum increase in production. “ — Francine Frankel
(a) What is the contradiction that the author is talking about?
What would be the political implications of a contradiction like
this?
(b) If the author is correct, why is it that the Congress was
pursuing this policy? Was it related to the nature of the
opposition parties?
(c) Was there also a contradiction between the central leadership
of the Congress party and its Sate level leaders?

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