Politics of Planned Development

Chapters 1 and 2 dealt with nation-building and democracy. This chapter takes the third challenge: economic development for the well-being of all. NCERT is frank: here success was much more limited, because the challenge was tougher and more lasting. The chapter asks what the key choices and debates were, which strategy leaders adopted in the first two decades and why, and what its achievements and limits were.

• Read with Indian Economic Development Chapter 2 (keec102), which teaches the economics — plan goals, the Mahalanobis model, land reform, the Green Revolution, the Industrial Policy Resolution of 1956 and import substitution. This page keeps to the political choices and debates. keec103 covers why the model was replaced in 1991; India: People and Economy Chapter 6 (legy206) covers planning and sustainable development, including NITI Aayog.
• Links in this book: Chapter 2 (the Avadi resolution as the socialists' dilemma; Swatantra's free-market protest) and Chapter 5 (the 1960s crisis and the politics of the late 1960s).
• UPSC: Prelims on the Nehru model (1982), planning bodies and the Constitution (2004, 2013), NITI Aayog (2015) and early economic chronology (2009); Mains GS1/GS3 on Soviet influence on early policy (2014) and NITI Aayog versus the Planning Commission (2018).

• Development is contested: experts advise, but choices between groups and generations are political decisions for people's representatives.
• Two models in 1947: liberal-capitalist (US, Europe) and socialist (USSR); Indian leaders across parties admired the Soviet model.
• Consensus: growth with justice, and the state must plan — even the industrialists' Bombay Plan (1944) wanted state initiative.
• Planning Commission: March 1950, by a government resolution (not the Constitution), PM as chair, advisory; replaced by NITI Aayog on 1 January 2015.
• First Plan (1951–56): agriculture, dams, land reform, K.N. Raj's ‘hasten slowly’. Second Plan (1956–61): Mahalanobis, heavy industry, public sector, tariffs.
• Costs: foreign exchange, food-shortage risk, ‘urban bias’; crisis by 1966 → ‘plan holiday’.

NCERT opens with a present-day case. With global demand for steel rising, Orissa (now Odisha), with some of India's largest untapped iron-ore reserves, signed MoUs with international and domestic steel makers. The State government hoped for investment and jobs. But the ore lies in some of the most underdeveloped, predominantly tribal districts: tribal people feared displacement from home and livelihood; environmentalists feared pollution; the central government felt that blocking industry would set a bad example and discourage investment. Whose need is ‘Orissa's need’?

Political contestation. Such questions cannot be answered by an expert: they weigh one social group against another, and the present generation against future ones. Advice from mining experts, environmentalists and economists matters, but the final decision must be political — taken, or at least approved, by the people's representatives. After independence India faced a series of such decisions, all tied together by one shared vision or model of development. Almost everyone agreed that development meant both economic growth and social and economic justice, and that it could not be left to businessmen, industrialists and farmers alone — the government had a key role. They disagreed on what role: a central planning body? government-run industries? how much weight for justice when it conflicted with growth? These contests continue, and each decision had political consequences — which is why development belongs in a history of politics.

‘Development’ means different things to an industrialist planning a steel plant, an urban consumer of steel and an Adivasi living on the ore. So every discussion of development produces contradictions and debate. In the 1950s, as often now, people measured development against the West: development meant becoming ‘modern’, and modern meant becoming like the industrialised West — the breakdown of traditional structures, the rise of capitalism and liberalism, growth, material progress and scientific rationality. That is why countries were called developed, developing or underdeveloped.

On the eve of independence India had two models before it: the liberal-capitalist model of much of Europe and the US, and the socialist model of the USSR. Many in India were deeply impressed by the Soviet model — not only CPI leaders but Socialist Party leaders and leaders like Nehru in the Congress; very few supported American-style capitalism. This reflected a consensus from the national movement: free India's economic concerns must differ from the narrow commercial functions of the colonial government, and poverty alleviation and redistribution were mainly the government's responsibility. Debate remained: for some, industrialisation was the path; for others, agriculture and rural poverty came first.

Despite differences, there was consensus on one point: development could not be left to private actors; the government had to design a plan. Planning won public support worldwide in the 1940s and 1950s — after the Great Depression in Europe, the inter-war reconstruction of Japan and Germany, and above all the Soviet Union's spectacular growth against heavy odds in the 1930s and 1940s.

We might expect industrialists to oppose planning and want an open economy. Not in India: in 1944 a section of big industrialists drafted a joint proposal for a planned economy, the Bombay Plan, which wanted the state to take major initiatives in industrial and other investment. So ‘from left to right’ planning was the obvious choice. Soon after independence the Planning Commission came into being, with the Prime Minister as Chairperson; it became the most influential, central machinery for deciding India's development path.

How plans work. As in the USSR, India opted for Five Year Plans: the Government of India prepares a document planning all its income and expenditure for the next five years. The budgets of the Centre and every State are split into a non-plan budget for routine yearly items and a plan budget spent over five years on the plan's priorities. The advantage: government can focus on the larger picture and make long-term interventions.

The draft of the First Plan and then the Plan Document generated great excitement; people from all walks of life debated them. The excitement peaked with the Second Plan (1956) and lasted somewhat into the Third (1961). The Fourth Plan was due in 1966, but by then the novelty had faded and India faced an acute economic crisis, so the government took a ‘plan holiday’. Despite criticisms of process and priorities, the foundation of India's economic development was firmly in place.

The First Plan (1951–56) sought to get the economy out of the cycle of poverty. K.N. Raj, a young economist involved in drafting it, argued that India should ‘hasten slowly’ for the first two decades, as a fast pace of development might endanger democracy. The Plan focused mainly on the agrarian sector, including dams and irrigation — agriculture had been hit hardest by Partition — with huge allocations for projects like the Bhakra Nangal Dam. It identified the pattern of land distribution as the principal obstacle to agricultural growth and made land reform the key to development.

Savings. A basic aim was to raise national income, possible only if people saved more than they spent. Spending was already very low and could not be cut, so planners tried to push savings up — difficult with a low capital stock against many employable people. Savings did rise until the end of the Third Plan, though less spectacularly than hoped; from the early 1960s to the early 1970s the savings ratio fell consistently.

The Second Plan stressed heavy industries. It was drafted by economists and planners under P.C. Mahalanobis. If the First Plan preached patience, the Second wanted quick structural transformation by changing everything at once. Before it was finalised, the Congress, at its session at Avadi near Madras, declared the ‘socialist pattern of society’ its goal, and this was reflected in the Plan. The government imposed substantial tariffs on imports to protect domestic industry, a protected environment in which both public and private industries grew. With savings and investment rising, much of electricity, railways, steel, machinery and communication was developed in the public sector. The push marked a turning point in India's development.

The problems. India was technologically backward, so it spent precious foreign exchange buying technology abroad. As industry drew more investment than agriculture, food shortage loomed. Balancing industry and agriculture proved really difficult. The Third Plan was not very different. Critics said the strategy showed an unmistakable ‘urban bias’; others thought industry was wrongly prioritised over agriculture; still others wanted agriculture-related industries rather than heavy ones.

Try each first. Q2, Q3 and Q4 are also in the self-check; Q1 is answered here only because its options can be argued.

Numbers

One-liners

• Development choices are political, not merely technical.
• In 1947 ‘modern’ meant ‘like the West’ — NCERT questions that.
• Consensus: growth with justice, and a planning state.
• Even industrialists wanted planning — the Bombay Plan (1944).
• Planning Commission: executive resolution, advisory, PM as chair.
• First Plan = agriculture and land reform; Second Plan = heavy industry.
• Costs: foreign exchange, food shortage, ‘urban bias’; crisis → plan holiday.

Traps to avoid

• The Planning Commission was neither constitutional nor statutory.
• The NDC, not the Planning Commission, finally approved Plans.
• NITI Aayog replaced the Planning Commission, not the Finance Commission.
• Avadi (1955) = socialist pattern; Karachi (1931) = Fundamental Rights resolution.
• The First Plan's final document came in December 1952, though NCERT says December 1951.
• The Bombay Plan wanted state initiative and investment — not wholesale state ownership.
• Liberalisation was not part of early development policy (1991).

Prelims — what UPSC asks

• Planning machinery: no mention of the Planning Commission, NDC or Zonal Councils in the Constitution (2013); NDC as the highest planning body and planning in the Concurrent List (2004); NITI Aayog replaced the Planning Commission (2015).
• Model and chronology: the ‘Nehru model’ = rapid industrialisation with basic and heavy industry (1982); the Banking Regulation Act (1949) came before the First Plan (2009). Plan-wise emphasis and growth figures are tested from keec102.

Mains — where it appears and how to answer

• GS1 2014 — did Lenin's New Economic Policy influence India's early policies? Use this chapter's Soviet-model admiration and planning consensus, the Bombay Plan and the mixed economy (private sector alongside public); note that India's model was democratic, not a command economy.
• GS2/GS3 2018 — NITI Aayog vs the Planning Commission: top-down allocation and Five Year Plans (and Ninan's cartoon) vs think-tank, cooperative federalism, no fund allocation.
• Answer frame: development as political contestation → models and consensus → planning institutions → First vs Second Plan → achievements and critiques side by side → replacement (1991 reforms, NITI Aayog). Present defenders' and critics' views of the Nehru–Mahalanobis model with their reasons.

Tap an option. NCERT's own exercise questions come first; the rest test the figures and common confusions.

Open any question to attempt it in the Question bank — your attempt is saved to your progress.