Planning and Economic Development | PSIR Optional for UPSC (Notes) PDF Download

Planning and Public Sector

Planning is a key aspect of socialist countries, with the aim of determining priorities and optimizing resource usage for higher growth and better development. This approach led to the state achieving commanding heights in the economy, with public sector units (PSUs) and other public sectors as major service providers. However, several structural issues emerged, including overmanning, low work ethics, low capacity utilization, excessive expenses, fiscal deficit, lack of rational pricing policies, and negative rates of return.

• These issues became unsustainable, and India faced both fiscal and trade deficits, leading to a financial crisis. The country had insufficient foreign exchange reserves to cover import bills, resulting in a sovereign debt crisis. Consequently, India was forced to change its approach.
• Bimal Jalan, former RBI governor, compared PSUs to old family silver that required more spending to maintain its shine.

Nehruvian and Gandhian Perspectives

Gandhian Perspective on Development

• Gandhi, though not an economist, provided a blueprint for development in his book Hind Swaraj. He criticized the Western model of development and advocated for a development approach based on Non-Violence and Swaraj. The three pillars of the Gandhian approach were economic growth, redistributive justice, and moral regeneration.
• Gandhi's concept of the 7 sins provided a framework for his approach to life. These included wealth without work, pleasure without conscience, knowledge without character, commerce without morality, science without humanity, worship without sacrifice, and politics without ethics.
• The Gandhian Plan, proposed by SN Agarwal and Sriman Narayan, focused on reforming agriculture and reviving cottage industries to fulfill basic needs. Gandhi was not against machines but was against imitating the Western model in India. He aimed to make Indian villages self-sufficient entities and revive the village republic. The neglect of the Gandhian approach has led to unsustainable development and widening gaps between urban and rural areas.

Nehruvian Perspective on Development
Nehru, though not an economist, was a modernist and was impressed by the achievements of the USSR. He wanted to make India a modern and scientific society and described his philosophy as progressive socialism, aiming for a society based on a socialistic pattern. Nehru's real approach to development can be understood from the 2nd Five Year Plan, which was based on the Nehru-Mahalanobis model.

Comparison of Gandhian and Nehruvian Perspectives

1. Approach to Development

• Gandhian: Focus on non-violence, Swaraj, and self-sufficient villages.
• Nehruvian: Focus on modernization, socialism, and scientific society.

2. Economic Growth

• Gandhian: Emphasis on agriculture and cottage industries.
• Nehruvian: Emphasis on industrialization and modern technology.

3. Redistributive Justice

• Gandhian: Land reforms, cooperatives, and rural credit.
• Nehruvian: Socialistic pattern of society.

4. Moral Regeneration

• Gandhian: Based on the concept of 7 sins.
• Nehruvian: Aimed towards a progressive and ethical society.

5. Industrialization

• Gandhian: Against imitating the Western model, focus on human-centered development.
• Nehruvian: Inspired by the USSR, focus on modern technology and industrial growth.

6. Rural-Urban Divide

• Gandhian: Aimed to bridge the gap by making villages self-sufficient.
• Nehruvian: Focused more on urban development, leading to a widening gap between urban and rural areas.

The Gandhian perspective on development emphasizes self-sufficiency, non-violence, and moral regeneration, while the Nehruvian perspective focuses on modernization, socialism, and industrial growth. Both perspectives have their merits, but the current developmental model in India has led to imbalanced growth and a widening gap between urban and rural areas. Adopting principles from both perspectives could help create a more sustainable and inclusive development model for India.

Green Revolution: Impact and Outcomes

The Green Revolution began in 1961 as an Intensive Agricultural Development Program (IADP) in India. Initially, 14 districts were selected for experimentation, which later expanded to 114 districts under the Intensive Agricultural Area Program in 1965. The primary purpose of the Green Revolution was to make India self-sufficient in food grain production. It adopted a production-centered approach based on capitalist philosophy, leading to the use of high-yielding variety seeds, fertilizers, pesticides, and agricultural implements. This approach was capital-intensive and involved the intensive use of land.

Positive Outcomes

1. Self-sufficiency in food grain production: The Green Revolution significantly increased India's food grain production, resulting in self-sufficiency. Agricultural growth rates increased from 3-5% per annum, a significant improvement from the colonial period.
2. Economic benefits: According to economists GS Bhalla and GS Chaddha, the Green Revolution led to increased agricultural wages, a fourfold increase in total income, and strengthened bargaining power for agricultural workers.

Negative Outcomes

1. Social and political costs: VKRV Rao argued that the Green Revolution came at a substantial social and political cost, increasing the gap between rich and poor, increasing rural indebtedness, and reversing the process of land reforms.
2. No increase in real wages: Some economists, such as Hansra and GS Grewal, argue that there was no increase in real wages due to inflation in food grain prices, leading to a decline in living standards. They also claim that mechanization displaced labor, resulting in migrant labor and social unrest.
3. Destruction of traditional relationships: The Green Revolution disrupted traditional relationships between farmers and laborers, leading to tensions and conflicts.
4. Rise of bullock capitalists: According to Rudolph & Rudolph, the Green Revolution led to the emergence of rich farmers (bullock capitalists) and strengthened the role of caste in Indian politics.
5. Poor distributive aspect and unrest: Scholars like TK Oommen, Usha Patnaik, and Pranab Bardhan focus on the Green Revolution's poor distributive aspect, contributing to frustration and unrest in rural areas.
6. Environmental and social impacts: Vandana Shiva, in her book "Violence of the Green Revolution" (1993), highlights the negative impact of the Green Revolution on society and the environment.
7. Risk of counter-revolution: Former President RK Narayanan warned that neglecting land reforms could lead to a counter-revolution, potentially giving rise to a "red revolution" amid the ongoing Green Revolution.

While the Green Revolution successfully made India self-sufficient in food grain production and provided some economic benefits, it also led to several negative social, political, and environmental consequences. Therefore, it is crucial to address these challenges while continuing to improve agricultural productivity and ensure food security for India's growing population.

Land Reforms Post Independence in India: An Overview

The purpose of land reforms in post-independence India was to eradicate rural poverty and hunger by redistributing land and wealth. These reforms were needed due to the concentration of land ownership that resulted from British colonial policies. Land reforms were one of the promises made by the Congress party during the national freedom movement.

I. Constitutional Provisions for Land Reforms
The Indian constitution includes Directive Principles Art 39(b) and 39(c), which obligate the state to address the concentration of wealth and economic resources. The 44th Amendment Act of 1978 removed the Right to Property as a fundamental right, and the 9th Schedule introduced by the 1st Amendment Act contains numerous land reform legislations.

II. Types of Land Reforms in India
1. Abolition of Intermediaries (Zamindars, Jagirdars, etc.)

• This was the most successful aspect of land reforms, aiming to establish a direct relationship between cultivators and the government.
• However, it failed to address rural poverty, inequalities, and agrarian relations.

2. Tenancy Reforms

• Aimed at providing security to tenants, tenancy reforms were comparatively successful, with Kerala and West Bengal being the most successful models.

3. Land Ceiling

• This crucial aspect of land distribution was weak due to loopholes in the law, leading to people protecting their land through various means.

4. Distribution of Surplus Land

• This important aspect of land reforms aimed to address poverty. However, limited distribution took place, and the government has not distributed all the land it has acquired.

5. Consolidation of Land Holdings and Establishment of Cooperatives

• This was the next logical step, but the cooperative movement has also been a failure.

III. Causes of Land Reform Failure

• Lack of political will
• Dominant caste presence in Congress
• Lack of organized peasant movement
• Lack of land records
• Corruption

IV. Views of Scholars

• Gunnar Myrdal: India is a soft state, leading to failure in achieving land reforms.
• Atul Kohli: Indian state lacks political and organizational capacity to confront the power of the propertied class.
• Francine Frankel: Accommodative politics pursued by the Indian state has jeopardized the radical agenda.
• Sudipto Kaviraj and Pranab Bardhan: The Indian state expresses the interests of the bourgeoisie class, leading to unenthusiastic implementation of land reforms.

In brief, land reforms in post-independence India have largely failed due to various factors such as lack of political will, corruption, and the influence of dominant castes. Despite some success in areas like the abolition of intermediaries and tenancy reforms, overall progress in addressing rural poverty and hunger remains inadequate.

Liberalization of the Indian Economy

India's potential for economic growth was often referred to as a "caged tiger," held back by populist policies. The need for structural adjustments became evident with the Gulf War and the collapse of the USSR. While there is debate among scholars about the factors leading to a change in economic policy, there is consensus on the need for reforms.

Current State of Liberalization
The Economic Survey 2016-17 highlights the transition of India from a closed economy to an open and thriving one. The survey evaluates liberalization based on four standard models: openness to trade, openness to foreign capital, the extent of public sector undertakings (PSUs), and government expenditure.

• Openness to trade: India's trade with the international economy is more significant than expected in comparison to the size of its economy.
• Openness to foreign capital: Despite capital controls, India has received a normal rate of FDI at $75 billion.
• Extent of PSUs: India has significantly rolled back public sector undertakings, contrary to the myth of a large public sector.
• Government Expenditure: India's government expenditure is not higher than normal for a country at its level of development.

The survey concludes that India is a standard emerging market economy, with a 4.5% per capita increase in income since 1980. This has been achieved despite a competitive democratic system and government policy constraints. However, the survey also highlights the need for more effective redistribution and welfare schemes.

Impact of Liberalization: Montek Singh Ahluwalia's Perspective

1. Reform and poverty alleviation: Montek Singh Ahluwalia highlights that while reforms have helped reduce poverty, the number of people living below the poverty line is still significant. In 1983, 44.5% of the population (323 million people) lived below the poverty line. This figure decreased to 21.9% (260 million people) by 2011-12. However, basic services like education, health, sanitation, and clean drinking water are still lacking.
2. Need for sustained economic growth: Ahluwalia argues that to reduce poverty to a marginal level, India needs to maintain an 8% growth rate for the next 20 years. This would be difficult to achieve with an unskilled and unhealthy population.
3. Employment opportunities and quality: The reforms have not significantly increased employment opportunities, and those that have been created are often low-quality and exploitative, particularly in Special Economic Zones (SEZs). Wages are low, and primarily unskilled jobs are available compared to other Asian countries.
4. Challenges of middle-income status: India has achieved middle-income status, but it faces the risk of getting stuck in the "middle-income trap" if reforms are not carefully designed. Ahluwalia suggests the following measures to avoid this trap:
   • Tackle corruption: Addressing corruption is crucial for ensuring fair distribution of resources and maintaining public trust in the system.
   • End red tapeism: Bureaucratic hurdles need to be removed to enable ease of doing business and attract investments.
   • Invest in human capital: Improving education and healthcare is essential for creating a skilled and healthy workforce.
   • Reform factor market: Reforms in land, labor, and capital markets are necessary for promoting economic growth and efficiency.
   • Inclusion by job: Ensuring inclusive growth by creating quality employment opportunities for all sections of society.
   • Rehabilitate state capacity: Strengthening the capacity of the state to deliver public services effectively and efficiently.

Conclusion

India's development has been shaped by various perspectives and approaches, including the Gandhian and Nehruvian perspectives. While the Gandhian approach focused on self-sufficiency, non-violence, and moral regeneration, the Nehruvian perspective emphasized modernization, socialism, and industrial growth. Both perspectives have their merits, but the current developmental model has led to imbalanced growth and a widening gap between urban and rural areas. The Green Revolution played a crucial role in making India self-sufficient in food grain production, but it also led to negative social, political, and environmental consequences. Post-independence land reforms in India aimed to eradicate rural poverty and hunger, but their success was limited due to factors such as lack of political will, corruption, and the influence of dominant castes. Liberalization of the Indian economy has transformed the country into a standard emerging market economy, with substantial growth in income and trade. However, challenges remain, including poverty alleviation, provision of basic services, and ensuring quality employment opportunities.

Frequently Asked Questions (FAQs) of Planning and Economic Development

What are the main differences between the Gandhian and Nehruvian perspectives on development?

The Gandhian perspective focuses on self-sufficiency, non-violence, and moral regeneration, emphasizing agriculture and cottage industries. The Nehruvian perspective prioritizes modernization, socialism, industrial growth, and a scientific society, with a greater focus on urban development.

What were the positive and negative outcomes of the Green Revolution in India?

The Green Revolution led to self-sufficiency in food grain production and increased agricultural wages. However, it also resulted in increased rural indebtedness, a decline in living standards, destruction of traditional relationships, and negative environmental and social impacts, among other negative outcomes.

Why did land reforms fail in post-independence India?

Land reforms failed due to several factors, such as lack of political will, dominant caste presence in the Congress party, lack of an organized peasant movement, lack of land records, and corruption.

How has liberalization impacted the Indian economy?

Liberalization has opened up India's economy to international trade and foreign capital, reduced the extent of public sector undertakings, and maintained government expenditure within normal levels for a country at its level of development. It has increased per capita income and made India a standard emerging market economy.

What measures does Montek Singh Ahluwalia suggest to avoid the "middle-income trap" in India?

Ahluwalia recommends tackling corruption, ending red tapeism, investing in human capital, reforming factor markets (land, labor, and capital), promoting inclusive growth by creating quality employment opportunities, and rehabilitating state capacity to deliver public services effectively and efficiently.