Planning in India
The Planning Debates
The Bombay Plan
- A small group of influential business leaders in Bombay drew up and published in January 1944, a plan for the economic development of India. The Bombay Plan, as it is now popularly called, did not represent the opinion of the whole business community. But it claimed public attention because it set forth the considered views of some of the front-rank businessmen and captains of Indian industry.
- Mr. J. R. D. Tata and Mr. G. D. Birla were primarily responsible for the initiation of the study. The other industrialists who were part of Bombay plan were P. Thakurdas, Kasturbhai Lalbhai and Sir Shri Ram, Ardeshir Dalal, Mr. A. D. Shroff and Dr. John Matthai.
- Toward the end of March 1944, the Federation of Indian Chambers of Commerce representing all business organizations of the country endorsed the Bombay Plan at its annual meeting, and from then on, the plan came to be regarded as the proposal of India’s business community, if not of India’s big business.
- The Bombay Plan put forward as a basis of discussion, a statement in as concrete a form as possible, of the objectives to be kept in mind in economic planning in India, the general lines on which development should proceed and the demands which planning is likely to make on the country’s resources.
- The principal objectives of the plan are to achieve a balanced economy and to raise the standard of living of the masses of the population rapidly by doubling the present per capita income — i.e. increasing it from $22 to about $45 — within a period of 15 years from the time the plan goes into operation.
- The planners have laid down minimum living standards on the basis of about 2,800 calories of well-balanced food a day for each person, 30 yards of clothing and 100 square feet of housing; and they also outline the minimum needs for elementary education, sanitation, water supply, village dispensaries and hospitals. The plan points out that absolutely minimum needs require an annual income of at least $25; and if the income of the country were equally distributed it would give each individual only about $22.
- The shares of agriculture, industry and services in the total production is to be changed from 53, 17 and 22 percent, respectively, to 40, 35 and 20 percent.
- The plan emphasizes the importance of basic industries but also calls for the development of consumption goods industries in the early years of the plan. Power heads the list of basic industries which are to be developed, followed by mining and metallurgy, engineering, chemicals, armaments, transport, cement and others.
- The plan proposes doubling the present total of 300,000 miles of roads, increasing railway mileage by 50 percent from its present 41,000 miles, expanding coastal shipping and investing $150,000,000 on improvement of harbors.
- The plan offers a comprehensive program of mass education, including primary, secondary and vocational and university schooling. Provision is also made for adult education and scientific training and research.
Sarvodaya Plan (1950)
It was drafted by Jaiprakash Narayan. The plan was mainly inspired by the Gandhian Plan provided by S N Agarwal & the Idea of Sarvodaya presented by another Gandhian leader Vinoba Bhave.
The sarvodaya plan put forward and emphasized the importance of agriculture and village industries especially small-scale textile & cottage industries in the process of economic development. The plan also recommended the Luddite approach and was pessimistic towards the usage of foreign technology.
The most important and well acclaimed part of the plan was its emphasis upon land reforms and decentralized participatory people planning.
The People’s Plan was Authored by M N Roy and drafted by the Post- War Re-Construction Committee of the Indian Federation of Labour.
The object of the Plan is to provide for the satisfaction of the immediate basic needs of the Indian people within a period of ten years. This objective is to be achieved by expanding production and by ensuring an equitable distribution of the goods produced. Therefore, the Plan prescribes increased production in every sphere of economic activity. But its main emphasis is on agricultural development, since its authors believe that the purchasing power of the people cannot be raised unless agriculture, which is the biggest occupation in the country, becomes a paying proposition.
Agriculture, it is argued, forms the foundation of a planned economy for India. Apart from the nationalization of land and the compulsory scaling down of rural indebtedness, the Plan formulates two schemes for increasing agricultural production: (a) extension of the area under cultivation and (b) intensification of cultivation in the area which is already under cultivation.
In the field of industry, the People’s Plan gives priority to the manufacture of consumer goods. It is argued that as a large volume of demand for essential good for the community remains perpetually unsatisfied, the goal of planned economy in industry must be to satisfy it first.
The People’s Plan attaches great importance to railways, roads and shipping in a planned economy. Therefore, it recommends the rapid development of the means of communication and transport to cope with the increased movement of goods and traffic between town arid country.
The Mahalanobis Strategy
The three main aspects of the strategy of development in the earlier phase of planning was:
The Critique of Mahalanobis Mobel:
The Wage Good Model
Prominent Economist like, C N Vakil and P R Brahmananda advocated Wage Good model for the development of the Indian economy and Industrialisation. Vakil and Brahamanda differed from the Mahalanobis strategy as they believe “At the low level of consumption (this was the situation in India) the productivity of the workers depends on how much they consumed.
According to them, if people were undernourished, they will lose their productivity and become less efficient, at this juncture it is necessary to feed them to increase their productivity. But this is not true for all consumer good; so they differentiated between Wage Good (whose consumption increase worker productivity) and Non-Wage Good (whose consumption did not).
To sum up, Wage Good model says; worker’s productivity depends on not on whether they use machines to produce goods but also on the consumption of wage goods like, food, cloth and other basics. Therefore, the first step towards development is to mechanize agriculture and raise food production; once this objective is reached, one should go for Mahalanobis strategy of Heavy Industrialisation.
Anyway, Vakil and Bharmananda strategies were ignored and India launched heavy Industrialisation in the Second plan without mechanising agriculture. The result was failure of Mahalanobis Strategy and by 1965-66 India was hit by a severe food shortage crisis. Finally, in the wake of the crisis, the government adopted Bharamananda strategy of mechanizing agriculture sector and engineered green revolution.
Changing Objectives of Successive Plans.
|Fourth Five-year plan
|The Sixth plan puts its objective as:
Several anti-poverty programs like IRDP AND NREM was initiated with the aim of removing poverty and unemployment.
|The Seventh plan marks a departure from earlier plan strategies and spelt out new long-term strategy.
|Eighth Five-year Plan
|The new development strategy:
The new approach (Liberalisation, Privatisation and Globalisation) adopted have major policy initiatives:
The new development strategy was a complete reversal form the earlier strategies. The old rigidities of the command economy were dismantled and the strategy of external pessimism was eliminated. The new strategy favoured globalisation and was characterised with Export Led Growth.
|The Ninth plan proposed to achieve a 7% growth rate during the plan period. It introduced fiscal discipline and aimed to control rise in prices through controlling money supply. It aimed at resource mobilization and attracting foreign direct investment. The thrust of the plan was to achieve agricultural growth. The proposition was to broaden the direct tax base for raising resources at the center.
Target Growth: 6.5% Actual Growth: 5.35%
|The Tenth plan laid emphasis on the role of government in the new emerging economic scenario.
The plan mentions specific areas where the state has to play a proactive role.
The 10th Five Year Plan (2002-2007) targeted at a GDP growth rate of 8% per annum. The primary aim of the 10th Five Year Plan was to renovate the nation extensively, making it competent enough with some of the fastest growing economies across the globe.
It intended to initiate an economic growth of 10% on an annual basis. In fact, this decision was taken only after the nation recorded a consistent 7% GDP growth, throughout the past decade.
GDP growth target: 8% (realized: 7.8%), savings rate target: 27% (realized: 31.4%)
|The Eleventh plan emphasised on ‘faster and more inclusive economic growth’.
The eleventh plan aimed at:
|The Twelfth Plan seeks to achieve the growth rate of 8.2 per cent, down from 9 per cent envisaged earlier, in view of fragile global recovery.
The theme of the plan document is “Faster, Sustainable and more Inclusive growth”.
The plan projects an average investment rate of 37 per cent of GDP in the 12th Plan. The projected gross domestic savings rate is 34.2 per cent of GDP.
Besides other things, the 12th Plan seeks to achieve 4 per cent agriculture sector growth during 2012-17. The growth target for manufacturing sector has been pegged at 10 per cent. The total plan size has been estimated at Rs.47.7 lakh crore, 135 per cent more that for the 11th Plan (2007-12).
Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University