Politics of Planned Development Class 12 Political Science

As the global need for steel rises, Orissa is emerging as a key place for investment due to its significant reserves of untapped iron ore.  The state government aims to take advantage of this growing demand for iron ore and has formed Memorandums of Understanding (MoUs) with both international and local steel manufacturers.  The government believes these agreements will attract necessary capital investments and create many job opportunities.  The iron ore resources are located in some of the most underdeveloped areas of the state, which are mainly inhabited by tribal communities.  The tribal people are concerned that the establishment of industries could lead to their displacement from their homes and loss of their livelihoods.  Environmental advocates worry that mining and industrial activities could harm the environment.  The central government believes that not allowing the industry to develop could set a negative example and deter future investments in the country. 

What do we understand by Political Contestation?

Expertise vs. Public Decision-Making

• Experts cannot provide clear answers to certain decisions, such as balancing the interests of different social groups or considering the needs of present and future generations.
• In a democracy, major decisions should be made or approved by the people themselves.
• While advice from experts in fields like mining, environmental science, and economics is important, the final decision should be a political one made by representatives who understand the public's feelings.

Post-Independence Decisions in India

• After gaining independence, India faced several critical decisions that were interconnected and based on a shared vision of economic development.
• There was a common agreement that India's development should focus on economic growth as well as social and economic justice.
• It was also agreed that the government should play a significant role in this process, rather than leaving it solely to businesses,industrialists, and farmers.

Controversies and Political Judgments

• Debates arose regarding the government's role in ensuring growth with justice. Questions included:
• Whether a centralized institution was needed to plan for the entire country.
• Whether the government should operate certain key industries and businesses.
• How to balance the needs of justice against the demands of economic growth.

Political Consequences and Public Involvement

• Each decision had political implications and required discussions among political parties and public approval.
• This is why the process of development is studied as a part of India's political history.

Overview of Political Contestation:

• In a democracy or in a democrative country the final decision must be a political decision, taken by people’s representatives who are in touch with the feelings of the people.
• After independence, everyone agreed that the development of India will take place by, economic growth along with social and economic justice.
• There was disagreement on the kind of role that the government must play in ensuring economic growth with justice.

Ideas of Development

• Development is a contested concept with different meanings for various groups.
• An industrialist, an urban consumer, and an Adivasi in Orissa would have different views on what development means.
• The debate around development was prominent in the years following India's Independence.
• The 'West' was often seen as the standard for measuring progress.
• Development was equated with becoming more 'modern'.
• Being modern meant emulating industrialized Western countries.
• This process involved the breakdown of traditional social structures.
• The rise of capitalism and liberalism was part of this transformation.
• Modernization was linked to growth, material progress, and scientific rationality.
• This framework allowed for the classification of countries as developed, developing, or underdeveloped.
• At Independence, India faced two models of development: the liberal-capitalist model of Europe and the US, and the socialist model of the USSR.
• Many Indian leaders were influenced by the Soviet model, including those in the Communist Party and Socialist Party.
• Even Jawaharlal Nehru in the Congress was influenced by this model.
• There was limited support for American-style capitalism.
• This preference reflected a consensus from the national movement.
• India's economic concerns were seen as differing from the colonial government's commercial focus.
• The post-Independence government prioritized poverty alleviation and social and economic redistribution.
• Debates on priorities emerged within this framework.
• Some favored industrialization, while others emphasized agricultural development and rural poverty alleviation.

Planning

Despite differences, there was agreement that development required government planning, not just private efforts. In the 1940s and 1950s, the concept of planning for economic rebuilding gained public support globally. The Great Depression in Europe, the reconstruction of Japan and Germany, and the Soviet Union's economic growth in the 1930s and 1940s influenced this consensus.

The Planning Commission's Origins

• The Planning Commission was not an arbitrary creation; it had a fascinating history.
• Contrary to the belief that industrialists oppose planning and prefer a free economy, some big industrialists in 1944 advocated for a planned economy.
• This proposal, known as the Bombay Plan, called for significant state involvement in industrial and economic investments.
• Planning for development became the obvious choice across the political spectrum, from left to right, after India gained independence.

The Role of the Planning Commission

• Shortly after independence, the Planning Commission was established, with the Prime Minister as its Chairperson.
• The Commission became the central and influential body for determining India's development path and strategy.

Jawaharlal Nehru inspecting some of the exhibits 

The Early Initiatives

• Inspired by the USSR, the Planning Commission of India adopted the Five Year Plans (FYP) approach.
• The government outlines its income and expenditure for the next five years in a comprehensive document.
• The budget is divided into two parts:
• ‘Non-plan’ budget: Covers routine annual expenses.
• ‘Plan’ budget: Allocated based on five-year priorities set by the plan.
• The five-year framework allows the government to focus on the bigger picture and implement long-term economic interventions.
• The draft and subsequent release of the First Five Year Plan in December 1951 generated significant excitement across various sectors of society.
• There was widespread discussion and debate among academics,journalists,government and private sector employees,industrialists,farmers, and politicians.
• The enthusiasm for planning peaked with the launch of the Second Five Year Plan in 1956 and persisted until the Third Five Year Plan in 1961.
• By the time of the Fourth Plan, set to begin in 1966, the initial novelty of planning had diminished, and India was facing a severe economic crisis.
• The government decided to take a ‘plan holiday’ during this period.
• Despite criticisms regarding the planning process and priorities, the groundwork for India’s economic development was firmly established by then.

The First Five Year Plan

• The First Five Year Plan (1951–1956) aimed to lift India's economy out of poverty. Economist K.N. Raj recommended a cautious approach to development to protect democracy.
• The Plan focused on the agricultural sector, addressing issues caused by Partition, with major investments in projects like the Bhakra Nangal Dam.
• It identified land distribution as a key barrier to growth and prioritized land reforms.
• The goal was to increase national income by boosting savings, despite low spending levels and limited capital. Although savings improved initially, they fell consistently from the 1960s to the 1970s.

Rapid Industrialisation

• The Second Five Year Plan focused on heavy industries and was led by P.C. Mahalanobis.
• It aimed for quick structural transformation across various sectors.
• The Congress party's resolution at Avadi, advocating for a ‘socialist pattern of society’, influenced the plan's direction.
• Import tariffs were increased to protect and promote domestic industries.
• This protected environment facilitated growth in both public and private sectors.
• Industries such as electricity,railways,steel,machinery, and communication were primarily developed in the public sector due to increased savings and investment.
• The push for industrialization during this period marked a significant turning point in India’s development.
• Despite its achievements, the plan faced challenges such as technological backwardness, requiring India to spend foreign exchange on importing technology.
• The imbalance between industry and agriculture was a concern, with a looming threat of food shortages due to prioritizing industry.
• The Third Plan continued similar strategies but was criticized for its urban bias and prioritizing industry over agriculture.
• Critics argued for more focus on agriculture-related industries rather than just heavy industries.

Key Controversies

Agriculture Versus Industry

• There was a significant debate about whether agriculture or industry should receive more public resources in India's backward economy.
• Critics argued that the Second Five-Year Plan lacked a proper agrarian strategy and favored industry, leading to the neglect of agriculture and rural areas.
• Gandhian economist J.C. Kumarappa advocated for greater emphasis on rural industrialization.
• Chaudhary Charan Singh, a Congress leader who later formed the Bharatiya Lok Dal, argued for prioritizing agriculture in planning, claiming that the focus on urban and industrial prosperity was at the expense of farmers and the rural population.
• Others believed that without a significant increase in industrial production, poverty could not be alleviated. They acknowledged that Indian planning included an agrarian strategy aimed at boosting food grain production.
• The state implemented land reform laws and aimed to distribute resources among the rural poor. Community development programs and large investments in irrigation projects were also part of the strategy.
• The issue was not with the policies themselves but with their non-implementation, as the landowning classes held significant social and political power.
• Some argued that even increased spending on agriculture would not have resolved the vast problem of rural poverty.

Public Versus Private Sector

India's Development Path: A Mixed Economy Approach

• India did not strictly follow either the capitalist or socialist models of development. Instead, it created a mixed economy by incorporating elements from both.
• Capitalist Model: This model relies on the private sector to drive development. In this approach, the government has a minimal role, and most economic activities are left to private individuals and businesses.
• Socialist Model: In this model, the government owns and controls all means of production. Private property is abolished, and the state manages all economic activities.
• India's mixed economy allowed for a combination of private and public sector involvement. Key features included:
• Private Sector: Much of agriculture, trade, and industry were left in private hands.
• Public Sector: The government controlled major heavy industries, provided industrial infrastructure, regulated trade, and intervened in agriculture when necessary.
• The mixed model faced criticism from both the left and the right:
• Critics from the Right: Argued that the government was too involved, restricting the private sector's growth. They believed that the public sector created vested interests that hindered private investment through licenses and permits.
• Critics from the Left: Felt that the government did not do enough in areas like public education and healthcare. They believed that the state only intervened in areas where the private sector was unwilling to go, primarily benefiting the private sector and creating a new middle class without addressing poverty.
• During this period, although the proportion of the poor decreased, their absolute numbers continued to rise, indicating that poverty did not decline significantly.

Major Outcomes

• Despite the objectives set for independent India, the third objective related to land reforms proved to be the most challenging.
• Land reforms were not effectively implemented in many parts of the country.
• Political power remained concentrated in the hands of the landowning classes.
• Large industrialists continued to benefit and prosper, while poverty did not significantly decrease.
• Early efforts towards planned development only partially achieved the goals of economic development and the well-being of all citizens.
• The failure to make substantial progress in the initial stages created political problems.
• Those who benefited from unequal development gained political power, making it even more difficult to move towards the desired goals.

Foundations

• India's early phase of planned development laid the foundations for future economic growth.
• During this period, significant developmental projects were initiated, including mega-dams like Bhakhra-Nangal and Hirakud for irrigation and power generation.
• Public sector heavy industries such as steel plants,oil refineries,manufacturing units, and defense production were established.
• Infrastructure for transport and communication was significantly improved.
• Despite facing criticism in recent times, these mega projects were crucial for enabling later economic growth, including that of the private sector.

Land Reforms

• In the agrarian sector, significant efforts were made towards land reforms, with the abolition of the zamindari system being a pivotal and successful move. This action not only freed land from the control of a class uninterested in agriculture but also diminished the political power of landlords.
• Efforts to consolidate land, aiming to merge small parcels into larger, more viable farms, were relatively successful.
• However, two other aspects of land reforms faced challenges:
• Ceiling laws, intended to limit individual land ownership, were often evaded by those with excess land.
• Legal protections for tenants against eviction were rarely enforced.
• Transforming these well-intentioned agricultural policies into effective actions proved difficult. Mobilizing the rural, landless poor was essential, but landowners, wielding significant political influence, hindered progress.
• Many land reform proposals either did not become laws or remained ineffective on paper. This scenario illustrates that economic policy is intertwined with the political landscape and that dominant social groups often control policy-making and implementation, despite the goodwill of some leaders.

The Green Revolution

• In response to a severe food crisis, India was heavily reliant on food aid, primarily from the United States. This dependence prompted the U.S. to influence India's economic policies.
• To achieve food sufficiency, the Indian government shifted its agricultural strategy. Instead of supporting underperforming areas and farmers, the focus moved to regions with existing irrigation and wealthier farmers. The rationale was that those with resources could quickly boost production.
• The government provided high-yielding variety seeds, fertilizers, pesticides, and improved irrigation at subsidized rates. Farmers were also guaranteed a fixed price for their produce.
• This marked the onset of the Green Revolution, which primarily benefited wealthy peasants and large landholders.
• While the Green Revolution led to moderate agricultural growth, especially in wheat production, it exacerbated class and regional disparities. Regions like Punjab, Haryana, and western Uttar Pradesh flourished, while others lagged behind.
• The Green Revolution also fostered social tensions between poor peasants and landlords, and gave rise to middle peasant sections—medium-sized farmers who gained from these changes and became politically influential.

Later developments 

• After Nehru's death, the Congress system faced challenges. Indira Gandhi became a popular leader and decided to strengthen the state's role in the economy.
• From 1967 onwards, there were new restrictions on private industry, including the nationalization of fourteen private banks.
• The government introduced many pro-poor programs and shifted towards socialist policies.
• This shift sparked debates among political parties and experts, but there was a temporary consensus on state-led economic development.
• Despite planning continuing, its importance diminished. Between 1950 and 1980, the Indian economy grew at a slow rate of 3 to 3.5% per annum.
• Due to inefficiencies and corruption in public sector enterprises and the bureaucracy's negative role, public faith in these institutions waned.
• This loss of faith led policymakers to reduce the state's role in the economy starting from the 1980s.
• The story of this shift will be explored later in the book.