Politics of Planned Development

1 Development Is a Political Question

When Orissa’s iron-ore-rich but underdeveloped, largely tribal districts became a target for major steel investment, conflicting interests collided: the tribal population feared displacement, environmentalists feared pollution, and the government wanted investment and jobs. Such decisions weigh one social group’s interests against another’s, and present generations against future ones. In a democracy, the final call must be a political decision taken by elected representatives, informed by (not decided by) experts.

2 Ideas of Development at Independence

India faced two available models of “modern” development: the liberal-capitalist model (much of Europe, the US) and the socialist model (the USSR). Many in India admired the Soviet model: not only CPI and Socialist Party leaders, but Congress leaders like Nehru too; very few supported American-style capitalism. There was universal agreement that development had to mean both economic growth and social/economic justice, and that government, not businessmen and farmers alone, had to play a central role. The disagreement was over exactly what role: a centralised planning body? Government running key industries itself? How much weight to give justice versus growth?

3 The Planning Commission

The Planning Commission was set up in March 1950 by a simple government resolution: it is not a constitutional body. It had only an advisory role; its recommendations became effective only once the Union Cabinet approved them. The Prime Minister was its Chairperson. NITI Aayog replaced the Planning Commission, effective 1 January 2015.

4 Five Year Plans: the Mechanism

Modelled on the USSR, a Five Year Plan (FYP) is a document planning income and expenditure over five years; budgets split into a “non-plan” part (routine yearly spending) and a “plan” part (five-year priorities). The First Plan document was released in December 1951, generating widespread public excitement and debate. Enthusiasm peaked with the Second Plan (1956), continued somewhat through the Third Plan (1961), but by the time the Fourth Plan was due in 1966, planning’s novelty had faded and India faced an acute economic crisis, forcing the government to take a “plan holiday.”

5 The First Five Year Plan (1951–1956)

Economist K.N. Raj argued India should “hasten slowly” in its first two decades, since too-fast development could endanger democracy. The Plan focused mainly on the agrarian sector, dams and irrigation, with huge allocation for the Bhakhra Nangal Dam, since agriculture had been hit hardest by Partition. It identified the pattern of land distribution as the principal obstacle to agricultural growth, making land reforms central to its strategy.

The planners aimed to raise national income by raising savings: difficult, since spending was already at bare minimum and capital stock was low relative to the employable population. Savings did rise through the Third Plan, though less than hoped, then fell consistently from the early 1960s to the early 1970s.

6 The Second Five Year Plan: Rapid Industrialisation

Drafted under P.C. Mahalanobis, the Second Plan stressed heavy industries and sought simultaneous structural transformation, in contrast to the First Plan’s patience. Just before it, the Congress’s Avadi session (near Madras) declared “socialist pattern of society” as the party’s goal: reflected in this plan.

The Third Plan was not significantly different from the Second. Critics said the plans showed an “urban bias”; others argued industry was wrongly prioritised over agriculture, or that agriculture-related industries, not heavy industries, should have been the real focus.