Politics of Planned Development

The development path chosen by India’s leaders after independence was unique, ambitious, and fraught with challenges. While political and democratic nation-building were critical issues, economic development presented a more persistent and complex problem. In this chapter, we delve deeply into the political decisions surrounding economic growth and examine the trajectory of development policy in India from independence to the following decades. The focus is on the strategies adopted, their successes, limitations, and the reasons for changing these strategies in subsequent years.

Learning Outcomes:

1. Understand the fundamental debates on economic development in independent India.
2. Recognize the adopted strategies and their rationale.
3. Identify the major achievements and limitations of early development efforts.
4. Analyze why the initial development strategy was modified over time.

Key Debates Around Development

After gaining independence, there was widespread agreement that India needed both economic growth and social justice. However, sharp disagreements emerged regarding the role of the state and the precise nature of development. Should the state play an active role in planning, or should development be left to the private sector? Should priority be given to industrialization, or should agricultural development take precedence?

Disagreements About State’s Role

The central question revolved around the extent of the state’s intervention in the economy. Many believed the government should control key sectors to ensure social justice, while others argued for a more liberal economic approach:

1. Role of Centralized Planning: Many leaders advocated for a centralized system where the state would guide national development, while some saw this as overly restrictive.
2. Public vs. Private Ownership: The debate was whether the government should run key industries or allow the private sector to take charge.
3. Justice vs. Growth: A key concern was balancing social justice with economic growth—whether meeting justice needs would slow growth, and how this balance should be maintained.

Important Note: These debates had profound political consequences, as each decision shaped India’s political and economic landscape for decades.

Planning and the Early Five-Year Plans

The Bombay Plan and the Planning Commission

By the time India became independent, a consensus had emerged around the need for economic planning. Industrialists and intellectuals, in 1944, proposed the Bombay Plan, advocating a mixed economy where the government would make major investments, especially in heavy industries. This plan laid the groundwork for the establishment of the Planning Commission in 1950.

Key Features of the Planning Commission:

• Advisory Role: The commission’s role was purely advisory, and its plans became binding only when approved by the Union Cabinet.
• Focus on Social Welfare: The commission’s objectives reflected the Directive Principles of State Policy in the Indian Constitution, focusing on social, economic, and political justice.

The First Five-Year Plan (1951-1956)

The First Five-Year Plan concentrated primarily on the agrarian sector, which was critical for a country whose economy was predominantly rural. The plan emphasized dams, irrigation projects, and land reforms, focusing on increasing agricultural production and improving rural living standards.

1. Agricultural Emphasis: The focus on agriculture was seen as crucial given the country’s rural nature and the devastation caused by the partition.
2. Public Investment in Infrastructure: Significant public resources were directed towards building large-scale infrastructure such as dams.
3. Challenges of Savings: The plan also stressed the need to increase savings, which proved difficult due to widespread poverty.

Important Note: While land reforms were central to the First Plan’s vision, their implementation was uneven, with wealthier landowners often evading redistributive measures.

The Second Five-Year Plan (1956-1961)

The Second Five-Year Plan, led by the economist P.C. Mahalanobis, marked a shift toward rapid industrialization. The idea was to transform India’s economy structurally through state intervention in heavy industries. This plan reflected the Congress Party’s commitment to creating a socialist society.

1. Industrialization Focus: Emphasis was laid on heavy industries, including steel production, energy, and machine-building sectors.
2. Public Sector Expansion: The state significantly expanded its role in the economy by developing large-scale public enterprises.
3. Tariff Protections: Import tariffs were introduced to protect domestic industries from foreign competition.

Key Political and Economic Debates

Agriculture vs. Industry

The agriculture versus industry debate was one of the most contentious issues in early Indian planning. While the Second Plan focused heavily on industrialization, critics argued that neglecting agriculture would deepen rural poverty.

1. Agriculture’s Central Role: Some political figures, like Chaudhary Charan Singh, advocated for prioritizing agriculture, seeing it as essential to reducing rural poverty.
2. Industrial Priority: Others argued that without a significant increase in industrial production, India would remain trapped in poverty.

Public vs. Private Sector

The mixed economy model adopted by India sought to combine the best of both capitalist and socialist approaches, with the state controlling key industries while allowing the private sector to thrive in other areas.

1. Criticism of Excessive State Control: Critics from the Right argued that excessive state intervention stifled private initiative and created inefficiencies.
2. Support for State-Led Growth: On the Left, many believed that without strong state intervention, the private sector would fail to address inequality and social justice.

Important Note: This mixed economy model led to the creation of powerful bureaucratic systems that often resulted in corruption and inefficiency, further deepening the divide between advocates of private-sector-led development and supporters of state control.

Major Outcomes of Early Development Efforts

The early years of planned development in India had mixed results. While certain areas saw significant progress, other sectors lagged behind.

Achievements

1. Infrastructure Growth: Some of the largest public-sector projects in India, including steel plants, oil refineries, and dams, were initiated during this period.
2. Heavy Industries: The focus on heavy industries helped establish steel plants, power stations, and transport infrastructure essential for long-term development.

Limitations

1. Land Reforms: While land reforms were a key priority, they largely remained on paper, as wealthy landlords successfully resisted implementation.
2. Agricultural Neglect: The imbalance between investment in industry and agriculture left the rural sector relatively underdeveloped.
3. Sluggish Economic Growth: Between 1950 and 1980, India’s economy grew at a relatively slow rate, often termed the Hindu rate of growth.

The Green Revolution

In the late 1960s, the Green Revolution marked a turning point in agricultural policy. Facing severe food shortages and famine-like conditions, the government introduced new agricultural practices to boost food production.

1. High-Yield Varieties: The government promoted high-yielding varieties (HYV) of seeds, combined with better irrigation, fertilizers, and pesticides.
2. Focus on Rich Farmers: The strategy concentrated resources on wealthier farmers with access to irrigation, leading to significant increases in wheat production.

Important Note: The Green Revolution, while successful in raising agricultural productivity, also widened class and regional inequalities. Wealthier states like Punjab benefited disproportionately, while poorer regions lagged behind.

Shifting Strategies and Later Developments

By the late 1960s and early 1970s, disillusionment with the state-led development model began to set in. Indira Gandhi introduced further controls on private industry and nationalized key sectors like banking. However, the consensus around state-led development was increasingly questioned.

1. Bank Nationalization: Fourteen private banks were nationalized in 1969, a move designed to provide greater state control over financial resources.
2. Pro-Poor Programs: Indira Gandhi’s government introduced pro-poor initiatives, but critics argued that these policies failed to significantly reduce poverty.
3. Shift to Market-Oriented Reforms: In the 1980s and 1990s, India moved toward liberalization as faith in state-led development eroded due to corruption, inefficiency, and slow growth.

Summary of Phases of Economic Development

Conclusion

MCQ: Which statement about India’s early development policy is incorrect?

• (a) State played a key role in economic planning.
• (b) Agriculture received equal investment as industry.
• (c) Private sector was allowed limited scope in certain sectors.
• (d)

The focus shifted to liberalization in the 1980s.

Answer: (b) Agriculture received equal investment as industry.

The development strategy of India evolved significantly from the early years of centralized planning and state intervention to a more liberalized, market-oriented economy in the later decades.