The chapter Introduces students to the development that took place in structuring Indian Politics. It talks about the planned development and the establishment of the Planning Commission. The chapter explains the five year plans and the 'Green Revolution'.
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Introduction
As the global demand of the steel increased, the state of Orissa was seen as an important investment destination due to the largest reserves of the untapped iron ore in the country. A 'Memorandum of Understanding' was also signed between the Orissa government and with both international and domestic steel makers.
The major aim of Mou was to bring in necessary capital investment and provide a lot of employment opportunities.
The iron ore resources lie in some of the most underdeveloped and predominantly tribal districts of the state. Hence, the major fear that the tribal population and environmentalists had was that the setting up of industries would get them displaced from their livelihood and the mining and the industry would cause major harm to the environment.
On the other hand, the central government felt that if the industry is not allowed, it would set up a bad impression and discourage investments in the country.
Political Contestation
On a political note and in a democracy, such major decisions should be taken or at least approved by the people themselves. It is important to see all the aspects of the affecting nature of the decision. Thus, the final decision must be political.
There was a series of major decisions that took place just after the Indian independence. All of the decisions were bound together by a shared vision or model of economic development. The majority was in favour of India's development in both economic and social sense.
It was also agreed that this matter cannot be left to businessmen, industrialists and farmers. Hence, the government played a key role in ensuring growth and justice. There were several disagreements as well.
Critics also questioned the centralised institution model of the country. Every step that the government took has several issues and political consequences.
Ideas of Development
What were the Ideas of the development?
‘Development’ has different meanings for different sections of the people.
The development would mean different things for example, to an industrialist who is planning to set up a steel plant, to an urban consumer of steel and to the Adivasi who lives in that region.
Any discussion on development is bound to generate contradictions, conflicts and debates. The very first decade after independence witnessed a lot of debates around this question of development. In general, being developed was all about being like 'West'.
Modernisation
It was believed that to be modernised, every country would go through the process of modernisation as in the west, which involved the breakdown of traditional social structures and the rise of capitalism and liberalism.
Modernisation was also associated with the ideas of growth, material progress and scientific rationality. Also, this kind of idea of development allowed everyone to talk about different countries as developed, developing or underdeveloped.
The models of modern development that India had at the time of Independence were the ‘Liberal-Capitalist model’ and ‘Socialist model’ as in Europe, the US and the USSR respectively.
Hence, a broad consensus was developed during the national development. The Soviet model impressed many of the Indian leaders, not just the Communist Party of India, but also those of the Socialist Party and leaders like Nehru within the Congress.
The American style capitalist development had very few supporters.
Economic Development
The nationalist leaders were clear that the economic concerns of the government of free India would have to be different from the narrowly defined commercial functions of the colonial government.
The task of poverty alleviation and social and economic redistribution was being seen primarily as the responsibility of the government.
Industrialization seemed to be the preferred path for some but for others the priority was agricultural development and alleviation of rural poverty.
Planning
The planning of the development models is the crucial task that should be done with respect to all sections of the society, country and taking into consideration all the strata of the economic sphere.
The need for the government to design or plan the development occurred. The idea of planning as a process of rebuilding the economy earned a good deal of public support in the 1940s and 1950s all over the world.
The experience of the Great Depression in Europe, the inter-war reconstruction of Japan and Germany, and most of all the spectacular economic growth against heavy odds in the Soviet Union in the 1930s and 1940s contributed to this consensus.
The Planning Commission
The Planning Commission was established on 15 March 1950 with the aim of planning the development modules. The commission played a major role in formulating the five-year plans.
As per the formulating principles, the Prime Minister heads the responsibility of the chairperson of the planning commission. Also, Jawaharlal Nehru became the first ever chairperson of the planning commission.
Over the time the commission became the most influential and central machinery for deciding what path and strategy India would adopt for its development.
What was the Bombay Plan?
The Planning Commission was not a sudden or an overnight invention. It is commonly assumed that private investors, such as industrialists and big business entrepreneurs, are averse to ideas of planning: they seek an open economy without any state control in the flow of capital.
In 1944, a section of the big industrialists got together to draft a joint proposal for setting up a planned economy in the country which eventually became known as Bombay Plan.
The Bombay Plan wanted the state to take major initiatives in industrial and other economic investments.
What were the early initiatives of the Planning Commission?
As in the USSR, the Planning Commission of India opted for five year plans (FYP). The whole idea was very simple: the government of India was supposed to prepare a plan for all its income and expenditure for the next five years.
Then the budget of the central and all the State governments was divided into two parts according to the plan; ‘non-plan budget that is spent on routine items on a yearly basis and ‘plan’ budget that is spent on a five year basis as per the priorities fixed by the plan.
A five-year plan has the advantage of permitting the government to focus on the larger picture and make a long-term intervention in the economy.
The Plan Holiday
The draft of the First Five Year Plan and then the actual Plan Document, released in December 1951, generated a lot of excitement in the Country. People from all walks of life-academics, journalists, government and private sector employees, industrialists, farmers, politicians etc.- discussed and debated the document extensively.
The excitement with planning reached its peak with the launching of the Second Five Year Plan in 1956 and continued somewhat till the Third Five Year Plan in 1961.
The Fourth Plan was due to start in 1966, but due to the miserable failure of the 'third five year plan' the Indian government was forced to declare a 'Plan Holiday'. There were three different yearly plans that were during this period.
Though many criticisms emerged both about the process and the priorities of these plans, the foundation of India’s economic development was firmly in place by then.
The First Five Year Plan
The First-Five Year Plan (1951-1956) sought to get the country’s economy out of the cycle of poverty. The plan was majorly drafted by a young economist K.N Raj, he majorly argued that India should 'hasten slowly' and for the development in the initial decades as the faster growth might endanger democracy.
The government identified the major problem in the agricultural sector of the country which needs urgent attention. As a part of the plan huge allocations were made for large scale projects like the Bhakra-Nangal Dam'.
Key Characteristics of the Plan
Land reforms were identified as the key to the country's development. The plan identified the pattern of land distribution in the country as the principal obstacle in the way of agricultural growth.
One of the basic aims of the planners was to raise the level of national income, which could be possible only if the people saved more money than they spent.
The planners sought to push savings up which was difficult as the total capital stock in the country was rather low compared to the total number of employable people. The people’s savings did rise in the first phase of the planned process until the end of the Third Five Year Plan.
The rise was not as spectacular as was expected at the beginning of the First Plan. Later, from the early 1960s till the early 1970s, the proportion of savings in the country actually dropped consistently.
The Second Five Year Plan
The Second FYP stressed heavy industries. It was drafted by a team of economists and planners under the leadership of P. C. Mahalanobis.
The aim of the ‘Second FYP’ was to bring about quick structural transformation by making changes simultaneously in all possible directions. The Congress party declared its goal of ‘Socialist pattern of society’ at the ‘Avadi Session’ near Madras city. This was reflected in the Second Plan.
The government imposed substantial tariffs on imports to protect domestic industries. Such a protected environment helped both public and private sector industries to grow.
As savings and investment were growing in this period, a bulk of these industries like electricity, railways, steel, machinery and communication could be developed in the public sector.
Such a push for industrialisation marked a turning point in India’s development.
Problems
India spent its precious foreign exchange to buy the technology from the global markets as India was technologically backward.
That apart, as industry attracted more investment than agriculture, the possibility of food shortage loomed largely. The Indian planners found balancing industry and agriculture difficult.
Third Five Year Plan
The Third Plan was not significantly different from the Second. Critics pointed out that the plan strategies from this time around displayed an unmistakable “urban bias”. Others thought that industry was wrongly given priority over agriculture.
Some wanted to focus on agriculture-related industries rather than heavy ones.
Decentralised Planning
The Kerala Model
Planning is not always about big industries and large projects; nor is it that planning always has to be centralised.
The ‘Kerala model’ is the name given to the path of planning and development chartered by the State of Kerala. There has been a focus in this model on education, health, land reform, effective food distribution, and poverty alleviation.
Despite low per capita incomes and a relatively weak industrial base, Kerala achieved nearly total literacy, long life expectancy, low infant and female mortality, low birth rates and high access to medical care.
The government launched the ‘New Democratic Initiative’ between 1987-1991, this involved campaigns for development (including total literacy especially in science and environment) designed to involve people directly in development activities through voluntary citizens’ organisations.
Initiatives were also taken to involve the people at the Panchayat, block and district levels.
Key Controversies
Agriculture versus Industry
There was a tussle between the two sectors of the country for the allocation of the resources, which sector should attract more resources.
Many thought that the Second Plan lacked an agrarian strategy for development, and the emphasis on industry caused agriculture and rural India to suffer.
Gandhian economists like J. C. Kumarappa proposed an alternative blueprint that put greater emphasis on rural industrialisation.
Chaudhary Charan Singh, a Congress leader who later broke from the party to form Bharatiya Lok Dal, forcefully articulated the case for keeping agriculture at the centre of planning for India. He said that the planning was leading to the creation of prosperity in an urban and industrial section at the expense of the farmers and rural population.
Others thought that without a drastic increase in industrial production, there could be no escape from the cycle of poverty.
They argued that Indian planning did have an agrarian strategy to boost the production of food grains.
The state made laws for land reforms and the distribution of resources among the poor in the villages.
It also proposed programmes of community development and spent large sums on irrigation projects.
The non-implementation of the policy caused the failure because the landowning classes had a lot of social and political power. Besides, they also argue that even if the government had spent more money on agriculture it would not have solved the massive problem of rural poverty.
Public versus Private Sector
India did not follow any of the two known paths of development- it did not accept the capitalist model of development in which development was left entirely to the private sector, nor did it follow the socialist model in which private property was abolished and all the production was controlled by the state.
Elements from both these models were taken and mixed in India. It was described as a ‘mixed economy.
Much of the agriculture, trade and industry were left in private hands and the state-controlled key heavy industries, provided industrial infrastructure, regulated trade and made some crucial interventions in agriculture.
Critics argued that the planners refused to provide the private sector with enough space and the stimulus to grow.
The enlarged public created enough hurdles for private capital, especially by way of installing systems of licences and permits for investment.
Moreover, the state’s policy to restrict the import of goods that could be produced in the domestic market with little or no competition left the private sector with no incentive to improve their products and make them cheaper.
The state-controlled more things than were necessary and this led to inefficiency and corruption.
Then some critics thought that the state did not do enough. They pointed out that the state did not spend any significant amount on public education and healthcare.
The state intervened only in those areas where the private sector was not prepared to go. The state helped the private sector to make a profit. Also, instead of helping the poor, the state intervention ended up creating a new ‘middle class' that enjoyed the privileges of high salaries without much accountability.
Poverty did not decline substantially during this period; even when the proportion of the poor reduced, their numbers kept going up.
What were the major outcomes?
The three objectives that were identified in independent India, the third objective proved most difficult to realise.
Land reforms did not take place effectively in most parts of the country; political power remained in the hands of the landowning classes, and big industrialists continued to benefit and thrive while poverty did not reduce much.
The early initiatives for planned development were at best realising the goals of economic development of the country and the well-being of all its citizens. The inability to take significant steps in this direction in the very first stage was to become a political problem.
Those who benefited from unequal development soon became politically powerful and made it even more difficult to move in the desired direction.
Foundations
In the early phase of planned development, the foundation of India’s future economic growth was laid. Some of the largest developmental projects in India’s history were undertaken during this period.
These included mega-dams like Bhakra-Nangal and Hirakud For irrigation and power generation.
The heavy industries in the public sectors- Steel plants, oil refineries, manufacturing units, defence production etc. were started during this period.
Infrastructure for transport and communication was improved substantially. Much of the later economic growth, including that by the private sector, may not have been possible in the absence of these foundations.
What were the various ‘Land Reforms’?
The agrarian sector witnessed a serious attempt at land reforms. Perhaps the most significant and successful of these was the abolition of the colonial system of zamindari.
This bold act not only released land from the clutches of a class that had little interest in agriculture, it also reduced the capacity of the landlords to dominate politics.
Attempts and consolidation of land- bringing small pieces of land together in one place so that the farm size could be viable for agriculture- were also fairly successful; other two components of land reforms were much less successful.
Though the laws were made to put an upper limit or ‘ceiling’ to how much agricultural land one person could own, people with excess land managed to evade the law. The tenants who worked on someone else’s land were given greater legal security against eviction, but this provision was rarely implemented.
It was not easy to turn these well-meaning policies on agriculture into genuine and effective action. This could happen only if the rural, landless poor were mobilised. But the landowners were very powerful and wielded considerable political influence.
Therefore, many proposals for land reforms were either not translated into laws, or, when made into laws, they remained only on paper.
This shows that economic policy is part of the actual political situation in society. It also shows that in spite of the good wishes of some top leaders, the dominant social groups would always effectively control policymaking and implementation.
The Green Revolution
In the face of the prevailing food crisis, the country was clearly vulnerable to external pressures and dependent on food aid, mainly from the United States.
The United States pushed India to change its economic policies. The government adopted a new strategy for agriculture in order to ensure food sufficiency.
Instead of the earlier policy of giving more support to the areas and farmers that were lagging behind, now it was decided to put more resources into those areas which already had irrigation and those farmers who were already well-off.
The argument was that those who already had the capacity could help increase production rapidly in the short run.
Thus the government offered high-yielding variety seeds, fertilisers, pesticides and better irrigation at highly subsidised prices.
The government also gave a guarantee to buy the produce of the farmers at a given price.
This was the beginning of what was called the ‘green revolution.
The rich peasants and the large landholders were the major beneficiaries of the process.
The green revolution delivered only moderate agricultural growth, but increased polarisation between classes and regions.
Regions like Punjab, Haryana and western Uttar Pradesh became agriculturally prosperous, while others remained backwards.
The green revolution had two other effects: The stark contrast between the poor peasantry and the landlords produced conditions favourable for leftwing organisations to organise the poor peasants.
Secondly, the green revolution also resulted in the rise of what is called the middle peasant sections.
These were farmers with medium size holdings, who benefited from the changes and soon emerged politically influential in many parts of the country.
The story of development in India took a significant turn from the end of the 1960s. Explain?
After the death of the Congress leader and the PM Jawaharlal Nehru, Indira Gandhi emerged as a popular leader. She decided to further strengthen the role of the state in controlling and directing the economy.
The period from 1967 onwards witnessed many new restrictions on private industry. Fourteen private banks were nationalised.
The government announced many pro-poor programmes. These changes were accompanied by an ideological tilt towards socialist policies
The consensus for a state-led economic development did not last forever. Planning did continue, but its salience was significantly reduced. Between 1950 and 1980 the Indian economy grew at a sluggish per annum rate of 3 to 3.5.
Lack of public faith led the policymakers to reduce the importance of the state in India’s economy from the 1980s onwards.
The White Revolution
There is a successful history of cooperative dairy farming in India behind Amul products.
Verghese Kurien, nicknamed the ‘Milkman of India’, played a crucial role in the story of Gujarat Cooperative Milk and Marketing Federation Ltd that launched Amul.
A town in Gujarat named Anand, Amul is a dairy cooperative movement joined by about 2 and a half million milk producers in Gujarat.
The Amul pattern became a uniquely appropriate model for rural development and poverty alleviation, spurring what has come to be known as the White Revolution.
The rural development programme called Operation Flood was started in 1970. It organised cooperatives of milk producers into a nationwide milk grid, with the purpose of increasing milk production, bringing the producer and consumer closer by eliminating middlemen and assuring the producers a regular income throughout the year.
Operation Flood was, however, not just a dairy programme. It saw dairying as a path to development, for generating employment and income for rural households and alleviating poverty.
The number of members of the cooperative has continued to increase with the numbers of women members and Women’s Dairy Cooperative Societies also increasing significantly.
