Concept of Planning for Economic Development

Nehru believed in effective planning through the democratic process for extensive land reforms, industrialisation, and

development of various infrastructural facilities like power plants, transport projects, irrigation dams, etc. In his ideas on economic development, he was not in favour of Gandhi’s ideas. So he envisaged the State intervening in the economy, and guiding its growth and acting directly to promote the welfare of the population. Nehru, together with several national leaders, were fascinated with the success of economic planning in the Soviet Union in the 1930s and 1940s. The genesis of the Planning Commission could be traced to the National Planning Committee established in 1938 by Congress, and the Bombay Plan of 1944.

The Planning Commission, an extra-constitutional body, was set up in March 1950 by a simple resolution of the Government of India. The body was assigned the task of economic planning in the form of five-year plans. The prime minister, himself, was the ex-officio chairman of the commission. The National Development Council (NDC), which was to give final approval to the plans, was established on August 6, 1952.

The First Five Year Plan (1951-1956), based on Harrod-Domar model, sought to get the nation’s economy out of the cycle of poverty. It addressed, mainly, the agrarian sector including investments in dams and irrigation. Huge allocations were made for large-scale projects like the Bhakhra Nangal Dam. It also focused on land reforms.

The Second Plan, drafted under the leadership of P.C. Mahalanobis, stressed on heavy industries. The Plan reflected ‘socialistic pattern of society’, as the government imposed substantial tariffs on imports in order to protect domestic industries.

The Third Plan was not significantly different from the Second. However, the plan strategies, according to critics, from this time around displayed an unmistakable ‘urban bias’ as well as the industry was wrongly given priority over agriculture.

Under the guidance of Nehru, who believed in ‘democratic socialism’, India opted for a ‘mixed economy’, i.e., elements from the capitalist model and socialist model were taken and mixed together. Much of the agriculture, trade and industry were left in private hands. The State controlled

key heavy industries, provided industrial infrastructure, regulated trade and made some important interventions in agriculture. However, a mixed model like this was open to criticism from both the left and the right.

According to the critics, the FYPs didn’t provide the private sector with enough space and the stimulus to grow. Further, the systems of licenses and permits for investment discouraged private sector and gave rise to corruption and red tapism. On the other hand, the sympathisers of the socialist model alleged that the State did not spend significant amounts on public education and healthcare. The State intervention ended up creating a new ‘middle class’ that enjoyed the privileges of high salaries without much accountability, according to critics.

Despite criticism of the shortfalls in plan targets, none can deny that a solid industrial base and infrastructure facilities were created under the plans.

Bhakhra-Nangal, Damodar Valley Corporation and Hirakud mega-dams were constructed for irrigation and power generation. Some of the heavy industries in the public sector—steel plants, oil refineries, manufacturing units, defence production, etc., were started. The Hindustan Machine Tools, Sindri Fertiliser, Chittaranjan Rail Factory, Integral Coach Factory, Hindustan Antibiotics, etc., proved to be of great help to the new nation.