Chapter 3 Politics Of Planned Development

This chapter delves into how independent India addressed its third major challenge: achieving **economic development** to ensure the well-being of all citizens. Like the challenges of nation-building and establishing democracy, India chose a path that was distinct and often difficult. This challenge proved to be particularly tough and enduring, with achievements being more limited compared to the other two areas in the initial phase.

The chapter examines the political considerations behind key decisions in economic development, including major debates and choices made by India's leaders, the development strategy adopted in the first two decades (1950s and 1960s), its achievements and limitations, and why this strategy was later modified.

These postage stamps, issued between 1955 and 1968, visually represent the vision of planned development in India, showcasing key projects like dams, factories, and agricultural advancements, reflecting the government's focus on building a modern industrial and agricultural base.

Political Contestation

The increasing global demand for steel has made Orissa, with its large iron ore reserves, an attractive investment destination. The state government aims to capitalize on this by signing agreements (MoUs) with international and domestic steel companies, anticipating significant capital investment and job creation. However, the iron ore deposits are located in predominantly tribal, underdeveloped districts, leading to complex conflicts of interest.

In this scenario, various interests are involved:

• State Government: Interested in attracting investment, generating employment, and boosting the state's economy.
• International and Domestic Steel Makers: Interested in accessing iron ore reserves for steel production and profitability.
• Tribal Population: Concerned about displacement from their homes, loss of livelihoods, and disruption of traditional ways of life due to industrial projects.
• Environmentalists: Concerned about the potential environmental damage, pollution from mining and industry, and destruction of ecosystems.
• Central Government: Concerned about creating a favorable investment climate across the country and avoiding actions that might discourage future investments.

The key points of conflict lie in the clash between the state's desire for industrial development and the concerns of local communities and environmental protection. While everyone might agree on the abstract idea of 'development', its practical implementation has different, often conflicting, meanings for different groups. Resolving such issues raises fundamental questions: What kind of development is truly needed for Orissa? Whose needs should be prioritized?

This news clipping from 2006 reports on villagers protesting against the proposed POSCO steel plant in Orissa, illustrating the on-the-ground conflict between industrial development projects and the rights and concerns of local, often tribal, communities facing displacement and loss of livelihood.

Such complex questions cannot be answered solely by experts. They involve weighing competing interests and values, including those of different social groups and across generations (present vs. future). In a democracy, major decisions of this nature should ideally be taken or approved by the people's representatives, who are expected to be in touch with public sentiment. While expert advice from miners, environmentalists, and economists is valuable, the final decision is inherently a political one.

After independence, India faced many such interrelated decisions that required a shared vision or model of economic development. There was broad agreement that development should encompass both **economic growth** and **social and economic justice**, and that the **government must play a key role**. However, disagreements existed regarding the specific nature of the government's role – whether planning should be centralized, if the state should own key industries, and how to balance the demands of justice with economic growth. Each of these decisions involved political contestation and had political consequences, necessitating consultation and public approval. This highlights why the history of development policy in India is deeply intertwined with its political history.

Ideas Of Development

The debate over development in independent India often involved differing conceptions of what 'development' meant. It was common to view development through the lens of the 'West', equating being 'modern' with becoming like the industrialized countries of Europe and the US. This perspective assumed a linear process of modernization for all countries, involving the breakdown of traditional social structures and the rise of capitalism and liberalism, associated with ideas of growth, material progress, and scientific rationality. This allowed countries to be categorized as developed, developing, or underdeveloped.

On the eve of independence, India had two major models of modern development available:

• The **liberal-capitalist model** prevalent in much of Europe and the US.
• The **socialist model** followed by the USSR.

Influenced by the Cold War ideologies, many Indian leaders, including those from the Communist Party, Socialist Party, and prominent figures within the Congress like Nehru, were deeply impressed by the Soviet model, which emphasized state control and planning. Support for the American-style capitalist model was relatively limited.

This preference for a state-led approach reflected a broad consensus forged during the national movement. Nationalist leaders agreed that the economic role of the independent Indian government must be vastly different from the limited commercial focus of the colonial administration. They saw the crucial tasks of **poverty alleviation and social/economic redistribution** primarily as the **government's responsibility**. While debates existed regarding the priority between industrialization and agriculture, there was fundamental agreement on the need for the state to actively guide development.

Information on Left and Right:

In political discourse, 'Left' and 'Right' are terms used to describe ideologies regarding social change and the state's role in economic redistribution. The **Left** generally supports policies favoring the poor and disadvantaged and government intervention for redistribution. The **Right** typically favors free competition, market economy, and limited government intervention in the economy.

Applying this to the 1960s context in India: The Communist Party of India (CPI) and Socialist Party would be considered Left. Parties like the Swatantra Party and Bharatiya Jana Sangh would be on the Right. The Congress party of that era, aiming for a 'socialist pattern of society' while allowing a mixed economy, occupied a broad centrist position, incorporating elements that appealed to different ideological leanings.

Planning

Despite internal disagreements on specifics, there was a strong consensus that **development could not be left solely to private actors**; the government needed to design and implement a plan. The idea of state-led planning for economic reconstruction and growth was widely supported globally in the 1940s and 1950s, influenced by the experiences of the Great Depression, post-war reconstruction in Japan and Germany, and the Soviet Union's rapid industrialization.

Planning in India was not a sudden imposition. It had an interesting background, including support from unexpected quarters. In 1944, a group of leading industrialists drafted the **Bombay Plan**, proposing significant state initiatives in industrial and economic investments, indicating that even some in the private sector saw a crucial role for government planning. Thus, planning for development was a widely accepted choice across the political spectrum after independence.

Soon after independence, the **Planning Commission** was established in March 1950 by a resolution of the Government of India (not a constitutional body). The Prime Minister served as its Chairperson. The Planning Commission became the central and most influential body for determining India's development path and strategy. It held an advisory role, and its recommendations became government policy only upon approval by the Union Cabinet.

This image shows Prime Minister Jawaharlal Nehru addressing the staff of the Planning Commission, highlighting the central role of this body and Nehru's personal involvement in shaping India's planned development strategy in the early years.

Information about NITI Aayog:

The Planning Commission was replaced by a new institution called **NITI Aayog (National Institution for Transforming India)**, which came into existence on 1 January 2015. NITI Aayog's objectives and composition reflect a shift from centralized planning to a more advisory 'think tank' role for the government, focusing on cooperative federalism, designing strategic policies, and providing technical advice.

Early Initiatives

Following the Soviet model, India adopted **Five Year Plans (FYP)**. The concept involved the government preparing a document outlining all its projected income and expenditure over a five-year period. The annual budgets were divided into 'non-plan' expenditure (routine items) and 'plan' expenditure (aligned with the five-year priorities). FYPs allowed the government to focus on long-term goals and major interventions in the economy.

The draft of the First Five Year Plan was released in 1951 and generated significant public discussion. The excitement for planning peaked with the launch of the Second Five Year Plan in 1956 and continued through the Third Plan (1961). By 1966, facing economic crisis, the government declared a 'plan holiday', and the initial novelty of planning diminished. However, these early plans laid a firm foundation for India's economic development.

The First Five Year Plan

The **First Five Year Plan (1951-1956)** aimed to lift India's economy out of poverty. Economist K.N. Raj, involved in its drafting, advised a cautious approach for the first two decades to avoid endangering democracy. The plan's main focus was the **agrarian sector**, including significant investment in dams and irrigation projects (like Bhakhra Nangal Dam). Recognizing land distribution as a major obstacle to agricultural growth, the plan emphasized **land reforms** as crucial for the country's development.

Planners aimed to increase national income by boosting savings, which was challenging due to low existing income levels and a low capital stock relative to the population. While savings did increase initially, the rise was less than expected and declined from the early 1960s.

The cover of the First Five Year Plan document symbolizes the beginning of India's ambitious journey towards planned economic development after independence.

Rapid Industrialisation

The **Second Five Year Plan (1956-1961)** marked a shift in focus towards **heavy industries**. Drafted under the leadership of statistician P. C. Mahalanobis, this plan aimed for quick structural transformation through simultaneous changes across various sectors. Inspired by the Congress party's resolution for a 'socialist pattern of society' adopted at its Avadi session (1955), the Second Plan implemented policies like substantial tariffs on imports to protect and encourage domestic industries (both public and private sectors).

Significant investment was directed towards the **public sector** for developing industries like electricity, railways, steel, machinery, and communication. This push for industrialization was a defining moment in India's development strategy. However, it brought challenges: India's technological backwardness required costly foreign exchange for technology imports. The prioritization of industry over agriculture also raised concerns about potential food shortages.

Information about P.C. Mahalanobis:

P.C. Mahalanobis (1893-1972) was an internationally renowned scientist and statistician, known as the architect of the Second Five Year Plan. He was a founder of the Indian Statistical Institute and a strong proponent of rapid industrialization led by the public sector.

The cover of a later Five Year Plan document (Tenth FYP) shows the continuation of the planning process in India over several decades, evolving from the initial emphasis on foundations to later development priorities.

The Third Plan was similar to the Second. Critics argued that these plans exhibited an 'urban bias' and wrongly prioritized industry over agriculture. Some advocated for focusing on agriculture-related industries instead of heavy industries.

Key Controversies

The development strategy adopted in the early years of independent India sparked several important debates and controversies that remain relevant today. Two significant disputes were:

Agriculture Versus Industry

A major question was how to allocate public resources between agriculture and industry in a backward economy. Critics of the Second Plan argued that its focus on heavy industry neglected agriculture and rural India. Gandhian economists like J. C. Kumarappa proposed an alternative focusing on rural industrialization. Chaudhary Charan Singh, a prominent Congress leader, strongly advocated for prioritizing agriculture, arguing that planning benefited urban and industrial sectors at the expense of farmers and rural populations.

Counterarguments emphasized that rapid industrialization was essential for breaking the cycle of poverty. Supporters of the plan noted that it did include agrarian strategies, such as land reform laws and community development programs, along with investment in irrigation. They argued that the failure to boost agricultural production was due to the lack of implementation of these policies, hindered by the socio-political power of landowning classes, rather than a flaw in the policy design itself.

Public Versus Private Sector

India adopted a **'mixed economy'** model, combining elements of both capitalist and socialist systems. Agriculture, trade, and much of the industry remained in private hands, while the state controlled key heavy industries, provided infrastructure, regulated trade, and intervened in agriculture.

This mixed model faced criticism from both sides:

• From the Right: Critics argued that the state limited the private sector's growth by not providing enough space or incentives. They pointed to the inefficiency and corruption caused by excessive state control, including licensing and permit systems ('License Raj'), and protection from foreign competition, which reduced incentives for domestic industry to improve quality or lower prices. The state, they claimed, controlled more than necessary.
• From the Left: Critics argued that the state did not go far enough. They highlighted insufficient state spending on public education and healthcare. They felt the state intervened primarily where the private sector was unwilling, effectively helping the private sector profit. They also contended that state intervention benefited a new 'middle class' rather than substantially reducing poverty, which persisted and grew in absolute numbers despite some decline in proportion.

Information about Decentralised planning (Kerala model):

The 'Kerala model' presents an alternative approach to development planning that is not necessarily centralized or focused only on large industries. This model prioritized human development outcomes like high literacy, long life expectancy, low mortality and birth rates, and access to healthcare. It also focused on land reforms, effective food distribution, and poverty alleviation. Despite a relatively weak industrial base and low per capita income, Kerala achieved impressive social indicators. The New Democratic Initiative (1987-1991) aimed to involve people directly in development through voluntary organizations and facilitated decentralized planning at local government levels (Panchayat, block, district).

This Shankar cartoon from 1956 depicts prominent political figures 'astride' or dominating the 'Public Sector', suggesting the significant control and political influence exerted over state-owned enterprises in the early years of planned development, potentially hinting at concerns about inefficiency or political interference.

Major Outcomes

Among the three key objectives of independent India (nation-building, democracy, development for all), the third objective of ensuring well-being for all proved the most challenging to fully achieve in the initial phase. Land reforms were largely ineffective due to the political power of landowning classes, and industrial growth primarily benefited big industrialists, with limited impact on widespread poverty. The inability to make significant progress on this objective early on became a persistent political problem, as those who benefited from unequal development gained political power, making further redistributive reforms more difficult.

Foundations

Despite the criticisms and limitations, the early phase of planned development successfully laid the **foundations for India's future economic growth**. This period saw the undertaking of some of the largest development projects in India's history, including massive dams (Bhakhra-Nangal, Hirakud) for irrigation and power, and the establishment of key heavy industries in the public sector (steel plants, oil refineries, manufacturing, defense production). Significant improvements were also made in transport and communication infrastructure. While some of these projects have faced criticism later, they are widely acknowledged as having provided the essential base upon which much of India's later economic growth, including by the private sector, was built.

This Shankar cartoon from 1961, titled "The Leap Upward," likely depicts India aiming for rapid progress or a significant jump in development, perhaps reflecting the optimism associated with the Third Five Year Plan which continued the push for industrialization and growth.

Land Reforms

In the agrarian sector, there were serious attempts at implementing land reforms. The most successful measure was the **abolition of the colonial zamindari system**, which removed a class of landlords who had little interest in agricultural improvement and significantly reduced their political dominance. Efforts at **consolidation of land holdings** (combining scattered small plots) also saw some success. However, other crucial components like imposing a **land ceiling** (an upper limit on individual land ownership) and providing **legal security to tenants** against eviction were largely unsuccessful due to powerful landowning classes' political influence. Laws were made, but implementation failed, demonstrating how political power dynamics impacted economic policy effectiveness.

Information about 'Government Campaign to Reach the Village' (from Raag Darbari):

This satirical excerpt from Shrilal Shukla's novel "Raag Darbari" critiques the gap between the government's urban-centric campaigns and the realities of rural life in the 1960s. It suggests that official efforts to encourage farmers to 'grow more grain' (part of agricultural policy/planning) were often based on simplistic assumptions and used ineffective methods (posters with idealized images, slogans in languages not understood by many villagers). The satire implies that these government initiatives were detached from the genuine needs and experiences of the farmers, highlighting bureaucratic inefficiency and a lack of understanding of rural life despite well-intentioned policies aimed at agricultural development.

The Green Revolution

By the mid-1960s, India faced a severe **food crisis**, exacerbated by droughts, wars, and a foreign exchange shortage, leading to near-famine conditions in some areas (like Bihar) and dependence on food aid from the US. To achieve food sufficiency, the government adopted a new agricultural strategy called the **'Green Revolution'**. Instead of supporting lagging areas and farmers, the focus shifted to investing resources and technology in areas with existing irrigation and farmers who were already better-off. The logic was to quickly increase production in the short run by focusing on those with the capacity to adopt new methods.

The Green Revolution involved providing farmers with high-yielding variety (HYV) seeds, fertilizers, pesticides, and improved irrigation facilities at heavily subsidized prices, along with a government guarantee to buy their produce at a fixed price (Minimum Support Price - MSP).

The main beneficiaries were the **rich peasants and large landholders**. The Green Revolution led to a moderate increase in agricultural production (especially wheat), improving food availability. However, it also **increased polarization** between classes (rich vs. poor farmers) and regions (prosperous Punjab, Haryana, Western UP vs. others). It also contributed to the rise of the politically influential 'middle peasant' class (medium landholders) and in some areas, the stark inequalities created conditions favorable for left-wing peasant movements.

Information about the Food Crisis (1960s):

The mid-1960s saw India facing a severe food crisis due to stagnant growth in food grain production, compounded by droughts (1965-67), wars (1962, 1965), and a foreign exchange shortage. Bihar was particularly hard hit, experiencing near-famine conditions, drastic drops in food production and calorie intake, and increased death rates. Government zoning policies restricting inter-state food trade worsened the situation in deficit areas. This crisis highlighted India's vulnerability and dependence on foreign aid, forcing planners to prioritize food self-sufficiency and leading to a setback for the general optimism associated with planned development.

Later Developments

India's development trajectory shifted significantly from the late 1960s. Following Nehru's death, political changes occurred (discussed in Chapter Five). Indira Gandhi increased the state's role in controlling and directing the economy. This period saw new restrictions on private industry, nationalization of 14 major private banks, and the announcement of several pro-poor programs, accompanied by a stronger ideological tilt towards socialist policies.

While state-led economic development remained the dominant approach for some time, the consensus supporting it began to weaken. Planning continued but became less central. The Indian economy's growth rate between 1950 and 1980 was relatively slow (3-3.5% per annum). Growing inefficiency and corruption in some public sector enterprises, and perceived negative impacts of bureaucracy on development, led to a decline in public faith in state institutions. This erosion of public trust contributed to policymakers gradually reducing the state's importance in the economy from the 1980s onwards, paving the way for later economic liberalization.

Information about The White Revolution:

The 'White Revolution' refers to India's success in increasing milk production, largely based on the model of cooperative dairy farming. **Verghese Kurien**, known as the 'Milkman of India', was instrumental in establishing the Gujarat Cooperative Milk and Marketing Federation Ltd, which launched the popular 'Amul' brand. The 'Amul pattern', centered in Anand, Gujarat, became a successful model for rural development and poverty alleviation through dairy cooperatives. **Operation Flood**, launched in 1970, organized milk producers into a nationwide network to increase production, streamline distribution, and ensure stable income for rural households. This program demonstrated the potential of cooperative models and became a path for development, including increasing participation of women.