By Prof. K. V. RAO, M.A., M. Litt.


India is busy now with a pre-natal examination of the second Five Year Plan. The first has succeeded, in spite of some of its shortcomings. It has succeeded in the sense that it has achieved some of our targets, though even then it was pointed out that our targets were low compared with our requirements and possibilities of achievement. But let us not forget that it was after all an essay and an experiment in planning. We were then in a very unenviable position. We succeeded to an economy that was shattered by war, the departing British, and lastly by the partition of the country. We had no facts, not much of resources, and almost none at all of knowledge of planning and experience of administration. We had, in short, nothing but our enthusiasm of the newly-won freedom and a sheer determination to pull through. The capitalisation of our national will has not gone in vain and the ship of our national economy is now definitely on an even keel, as testified by many experts, Indian and foreign.


Compared with the first Plan, we start with certain advantages for the second. We have facts and figures, some experience in planning, and, thanks to our foreign policy of dynamic neutrality, the technically advanced countries are more ready to help us now, irrespective of their political complexion. Above all, we have the success of the earlier Plan to give the necessary incentive for the part the people have to play in the second. But, at the same time we have also a disadvantage compared with the first. The Plan lacked a ‘philosophy’–blessed are the countries and individuals without philosophy–while the second has. The first was leap in the dark. We only aimed at greater production in agriculture and industry, and we had nothing else behind it–and we have admirably achieved our objectives. But now we have philosophy for the Plan, and this has let loose a big controversy. We want to bring about a socialistic pattern of society; and, except in some minor quarters, this has been broadly accepted as the common goal. But differences crop up when we come to its meaning and the best way to achieve it; and, though we have not yet realised it, these differences are fundamental, and are bound to have some serious consequences for the future. In, the previous article we tried to understand the meaning of the socialist pattern. To the author of the idea, Pandit Nehru, it is not a new policy, but only a restatement of the old; and also there is no difference between ‘socialistic pattern’ and ‘socialist pattern’. But others are not understanding it to be so simple. The concept is best understood by stating what it does not mean. It is not the same as Communism or its methods; it is not the same as Capitalism, not even of the latest American brand; and it is neither merely the old ‘mixed economy’ nor the higher and more noble Sarvodaya. It is ‘socialistic’ in its pattern. Put in concrete terms, as far as the second Plan is concerned, it means: (1) the raising of the national income by 25 per cent; (2) providing jobs for at least 10 to 12 million people more; and (3) redressing inequalities of income so that the highest will not be more than 30 times the average income of an Indian: But the question is: what is the way to reach the targets? And it is here we meet with serious differences.




Compared with the first, the second differs also in its method of planning the Plan. The first was in a way prepared from above, and the people were asked to co-operate with it. Now it is going to be more a People’s Plan, in the sense that the people have been asked to formulate schemes which will be integrated in the general framework. Secondly, experts have been brought together to prepare and discuss the Plan, and we have therefore three important documents before us dealing with the Draft: the statistical framework of the Plan prepared by the Statistical Adviser to the Government, Prof. Mahalanobis; the joint explanatory Note drawn up by the Economic Division of the Finance Ministry and the Planning Commission; and the Memorandum prepared by the Panel of Experts (economists) appointed by the Planning Commission, including the Minute of Dissent by Prof. Shenoy. The second and the third are based on the first. Behind them is the voluminous Report of the Taxation Enquiry Commission. The Planning Commission–an extra-constitutional body–has done well in trying to associate both the people and the experts with its Plan; but it has some constitutional implications which we will examine later on.


We have to start with the Draft prepared by Prof. Mahalanobis. According to him, our objectives should be:


1. To attain a rapid growth of the national economy by increasing the scope and importance of the public sector, and in this way to advance to a Socialist pattern of society;


2. to develop basic heavy industries for the manufacture of producer goods to strengthen the foundations of economic independence;


3. to increase the production of consumer goods as much as possible through the household or hand industries, and to provide an adequate market for the products;


4. to develop factory production of consumer goods in a way not competitive with hand industries;


5. to increase productivity in agriculture; and to speed up agrarian reforms with an equitable distribution of land to peasant cultivators, so as to stimulate the increase of agricultural production and of purchasing power in rural areas;


6. to provide better housing, more health services, and greater opportunities for education, especially to the poorer sections of the population;


7. to liquidate unemployment, as quickly as possible and within a period not exceeding ten years; and,


8. as a result of such measures, to increase the national income by about twenty-five per cent over the Plan period, and achieve a more equitable distribution of income.


This is followed by a number of statistics and details of planning based on this statistical framework. This Draft of the Plan has received both bouquets and brickbats in the matter of both the objectives and the manner of achieving them. While the Panel of economic experts have approved of it in general (the Memorandum of the Economic Division being only a sort of an explanatory Note), there is a lot of criticism in some other important quarters, some even going to the extent of saying that the whole scheme is totalitarian in conception, smacking of even Communism. The ‘Eastern Economist’, an influential weekly of Delhi, has had an easy gibe at the Panel of Experts, for, it seems, the experts had only three days to consider the voluminous reports, and it wonders how it was possible to give their ‘considered opinion’ within such a short time. If that is true, it is really a matter for regret, for, after all, the Planning Commission must have expected from the experts a genuinely considered opinion, and not merely dittoing what the author of the Draft has said.


Leaving out the vague charge that it is Communist-inspired and totalitarian in concept–both the charges were recently refuted by the Finance Minister, and we can depend upon our Prime Minister to safeguard democracy–the other charges are that medium industries are neglected and that the objective of expanding the public sector was too ‘Socialist’. Critics are alarmed that Prof. Mahalanobis uses ‘Socialist pattern’ but not ‘Socialistic’ as in the, Avadi Congress resolution. But it is forgotten that it is the National Congress that has taken this lead and not the Professor. The Avadi Congress gave the country the socialistic pattern as the goal, and the Berhampore session emphasised on employment through “an adequate, balanced and planned programme of development” and pleaded that “the most important aspects of the second Plan should be the establishment of heavy and capital goods industries and a great development of small-scale and village industries which have to play a role of crucial importance, both in relation to providing fuller employment and for the purpose of ensuring an adequate supply of consumer goods.” The burden of the song of the critics is that the physical planning, as opposed to planning in terms of money and finance, is a technique largely favoured by Communist countries and that planning based on statistics ignores the human aspect of economics. On the latter, here is what a professor says:


“Econometricians, by virtue of their subject itself, tend to think of human beings in terms of tidy little patterns of behaviour that can be fitted into equations and graphs. There is also danger from their tendency to see uniformity where it does not exist, as they are usually willing to enforce it if mere human beings do not conform to their preconceive a notions.”




We should not reject a plan merely on the ground that it is prepared by econometricians, or by experts from the leftist countries. Look, for instance, at the alarmist concern of Sri Jaya Prakash Narain expressed over “this highly centralised totalitarian kind of planning, which Prime Minister Nehru is getting done by the experts of Communist countries in the name of a socialistic pattern of society”, or at the conclusion drawn by Mr. Chinoi, the President of the I.M.C., that “the physical approach must logically lead to a vast authoritarian and bureaucratic control of the social, political and economic structure of the country, destroying ultimately the very principles of democratic and popular planning.” Typical of this attitude is the expert opinion expressed by the professor quoted above, whom we may quote again:


“In physical planning, as understood by the statistician and his group of experts, there is little doubt that there is implied a replacement of the democratic foundations of economic planning by a system or direction of resources which is so familiar to those who have studied the economies of the Communist countries. Destruction of liberty is inherent in this technique of planning.”


Apart from the questions whether experts from leftist countries should advise us or not, and whether it was a technique exclusively used in Communist countries, we must consider if physical planning will necessarily lead our country to totalitarianism, killing all human liberties. I have been myself an advocate of this planning in ‘realistic terms’–which is now called ‘physical planning’–for the last ten years. It takes our existing resources into account, and plans for prosperity based on the maximum use of these resources, instead of using a technique–a false and illusory one–which measures the progress and economic condition of a country in terms of bank rate, adverse balance of trade rates of exchange, movement of funds etc:, suitable to a highly ‘monetised’ country like England. We have resources and we want to build our economy, but we do not have the requisite machinery and tools. These we have to import from abroad with our limited exchange resources. If we use this foreign exchange for purchasing the capital goods needed to produce consumer goods, we will be always doing it. Therefore let us conserve our exchange for developing basic and heavy industries, so that we could in a short time produce capital goods; and meanwhile let us develop our cottage industries to satisfy our consumer needs, and also make the maximum or optimum use of the available mills for the same purpose, avoiding at the same time conflict and competition between cottage and mill goods. Incidentally we will be achieving our other objectives of expanding the public sector, creating more jobs, and reducing inequalities of income,–thus furthering our socialistic pattern of society. This, in a nutshell, is the meaning of this Plan, and one wonders how this necessarily leads to authoritarianism, killing all liberty. All planning involves some control and some direction of consumer behaviour, and to this extent we have government control of production, consumption, and foreign trade even today. To see more possibilities of authoritarian control of life in this Plan, leading to totalitarianism, is to ignore the realities of the situation in India, the country of Gandhi and non-violence, of a free Constitution and the force of leadership of Nehru.


There is no use giving the Plan a bad name and cursing it. Let us be realistic in our outlook. As C.D. Deshmukh pointed out the other day, let us bear in mind that the country has decided on the socialistic pattern of society and is determined to go ahead. We have abolished the Zamindaris, we have increased the rates of income-tax for higher incomes, almost abolished the managing agency system, and nationalised the Imperial Bank. Let us not forget that all this we have achieved in a constitutional, democratic and non-violent way. There is nothing in a name and, as the Finance Minister pointed out, the Government would be prepared to accept any other plan that guarantees the result,–providing 10 million jobs, raising our income by 25 per cent, and reducing inequalities.


Another point also should be remembered. The new Plan has not altogether discarded ‘financial planning’. All that it does is to lay more stress on the need for basing our planning on the physical resources instead of merely on the financial aspect, as we did with the first Plan. Some of the problems raised by our experience of the first Plan have not been solved satisfactorily and, unless they are tackled, the results of the second may not be exactly those we aim at.




Let us here examine some of the constitutional implications of planning. As yet the people on whose behalf we are planning for a socialistic pattern of society have not democratically accepted the ideal,–the only way being acceptance at the polls. But to any student of Indian affairs, it must be clear that if today the issue is placed before the people through the ballot, it would be approved by an overwhelming majority. Still, in the interests of democracy, one would wish that the Government had adopted the socialistic pattern in the democratic way.


In a previous essay in this series, we raised the question of the exact status of the Planning Commission and also asked whether it is a body of representatives or a body of experts. It is no doubt a body doing excellent work, and we should have nothing but admiration for it; but what exactly is its position that it should take decisions on momentous issues, and pass orders of an executive nature, when the Constitution expects the Council of Mnisters to do it? Taking them as a body of experts–because not all of them are elected representatives of the people–to advise the Cabinet who will advise the President, we see that the Planning Commission itself is seeking the aid of some other experts to advise them, and yet another set of experts to scrutinize the Plan, and so on, until a final blueprint is made by the experts. Thus we find clear traces of a trend towards a system of government by experts and commissions. But there is nothing wrong with it, as long as the final decision rests with Parliament.


Another question raised in connection with planning is the tendency towards centralisation. Should the Centre have the power, or should it not, to see whether all the money the Centre is granting to the States in connection with the Plan is being properly spent by the States, as in the case of the money which it is giving to Central Boards like the Welfare Board, the Khadi Board, and the Indian Statistical Institute? Should not Parliament have a greater power of scrutiny into the working of the various State Corporations? Those who think that the Centre is having too much power over the States will have to recall that recently the Punjab Government refused to allow the Centre to look into the accounts of the Bakhra-Nangal Project, and that the Madras Government politely told the Centre that it has no power to compel it to constitute an Electricity Board for the State. Some say that the Constitution should, if necessary, be amended so as to allow the Centre more power, while many constitutional pandits were maintaining from the beginning that ours is a more centralised federation than any in the world. To me the problem seems to be not whether the Centre should have more power or the States, but that there should be a definite line of demarcation and fixity of responsibility. This point requires careful consideration at the hands of the powers that be. The question of institutions like the Boards and Corporations is different and involves a more immediate constitutional question: Can Parliament make block grants, and is not the Auditor-General failing in his constitutional duty if he does not audit all government money?




In this connection we are brought to another point that has been raised recently,–whether the public sector in which wee repose great confidence is after all so much more efficient than the private sector that we should categorically make it one of our objectives, as Mahalanobis does, to expand the public sector? But there is no easy way of comparing the two sectors. It is possible to argue that both the private and public sectors are equally good or equally bad. Look at the vagaries of the sugar industry in recent years in the private sector, and at the working of the nationalised industries in England or in India, especially in West Bengal (10 important State-run schemes of West Bengal resulted in an estimated loss of Rs. 20 lakhs during 1954-55); and look at the success of the Tatas in the private sector and of Sindri in the public sector. But the question involved in nationalisation is not merely one of greater efficiency. There are other important ones, including that of equitable distribution. Even then, the public sector does not get away with all the praise. While it is pointed out that in America, under neo-capitalism the workers are owning more and more share capital and thus earning more and more profits, in England the Conservative Party’s ‘Campaign Guide’ for 1955 made the startling revelation that of all the income of the private sector during 1952-54, wages and salaries took 76 per cent, and personal incomes from rent, dividends, interest, and self-employment took only 24 per cent. Do the nationalised industries result in better distribution? Instead of answering it categorically, let me make some suggestions for a more thorough examination. Take the nationalised industries that run a loss. Who is ultimately paying whom? At the most it means that after investing some crores, the citizen is paying more for the commodity as a consumer, and paying something more to the labourer as a tax-payer, as ultimately the wage-bill decides the cost of production. Take the Railways that are running successfully in India, which pay an annual contribution to the general revenues. But even here, are the Railways paying as much as the Government would have got, had the Government lent Rs. 800 crores–the amount we have invested in Railways roughly–to private Railway concerns plus the income-tax and super-taxes to the Centre, and the sales-tax and other local taxes to the Units? Recent experience has proved that we have reached the peak of our traffic and the Railways are getting monopoly revenues. How could the private investor have managed under these conditions and yet paid the taxes? Obviously, by reducing the wage-bill, and any impartial tribunal would have agreed to it. This means that in India the consumer and the tax-payer is paying more than he would have paid had the industries in India been in the private sector, and that today under nationalisation the labourer is getting more than his due–either compared with his efficiency or with what others are getting. This is a line of thinking that requires a more careful study.