Much as it might strain belief today, a socialistic economy was a popular idea when India won independence. Central planning and Five-Year Plans were once integral to the story of India. In the ideological battle between state and market, the former began with a distinct advantage because the market had been tarnished in the public mind by capitalism’s association with British colonialism. It is why on the eve of August 15, 1947, most political parties, left to right, had their own spins on socialism and a planned economy.
The earliest proponent of planning was the eminent Mysorean engineer and administrator, M Visveswaraya. Inspired by the first Soviet plans and the New Deal in Depression-era America, his 1934 book argued for the state to take the economy’s reins, leap forward technologically and trust technocrats. That same year, GD Birla, a titan of the Indian industry, also made a plea for “National Economic Planning” in a speech to fellow businessmen. Four years later, the charismatic President of the Indian National Congress, Subhas Chandra Bose, wrote a letter addressed to “my dear Jawaharlal”, asking Nehru to chair a National Planning Committee. Planning was now a part of the global zeitgeist: in the words of one critic, it had become the “grand panacea of the age.” Most modernists in the Indian nationalist movement looked to it with hope — even Rabindranath Tagore was a believer (though Gandhi remained a skeptic).
Planning’s global ramifications
Soon after India became a republic in 1950, the Planning Commission was formed. As I argue in my book Planning Democracy, by instituting a planned economy in a democratic country, India was embarking on a bold experiment with global ramifications. It was an arranged marriage between Soviet-inspired socialist planning and Western-style liberal democracy, during a Cold War that pitted them as fundamentally incompatible. Yet, India was seen as the great hope of democracy in Asia. The New York Times described Mao’s China and Nehru’s India as “communist dictatorship versus democratic freedom.” The Oxford economist Thomas Balogh noted: “India’s Experiment”— combining plans and Parliament — “may become crucial for the future of the free world.”
The Planning Commission got off to a rocky start. Within months of its birth, Finance Minister John Matthai resigned, complaining that the body was effectively a “super-Cabinet”. Despite the controversy, Nehru quickly smoothened ruffled feathers and the era of the Five-Year Plans was underway. While the Planning Commission was finding its legs in New Delhi, a rival power had begun rising in Calcutta, with momentous consequences for the path the Indian economy would take.
Trained as a physicist at Presidency College in Calcutta and Cambridge University, PC Mahalanobis had turned his attention to statistics. He founded the Indian Statistical Institute in 1931, and over the course of the next two decades, “the Professor” (as he was popularly known) became one of India’s most celebrated scientists, making globally pioneering contributions to the science of statistics. As the “presiding genius” on the subject in India — as Prime Minister Nehru put it — he was intimately involved in establishing the Central Statistical Organisation and National Sample Survey, and bringing India its first two digital computers. Just as planners in Delhi were looking to amass data necessary to plan the economy, the Professor and his institute were ready to step in to handle the problem of big data. It was this conjuncture that nudged open the door to the Planning Commission; and the Professor did not need a second invitation.
As the Five-Year Plans’ stock rose in the 1950s, there were some critics that strained against the Professor’s prescriptions. Unhappy about the coup plotted from Calcutta, Planning Commission insiders tried to reclaim lost ground. Mahalanobis complained bitterly of whispers swirling behind his back and of a silent campaign to sabotage his vision for the economy. More vociferous, and out in the open, were critics such as the Gandhian-socialist ‘Acharya’ JB Kripalani, and the liberal C Rajagopalachari. ‘Rajaji’, who would found the explicitly anti-socialist Swatantra Party, wrote to Nehru about his frustration with the hegemony planning enjoyed: “I fear a church is growing round the God of Planning.”
Yet planning remained the master narrative because while there were sharp disagreements over details, socialism and planning were umbrella ideologies under which most political parties huddled in the early decades after Independence. Even among development economists, the strategy of state-directed industrialisation had the support of most of the country’s leading economists. It is telling, for example, that though they would later turn critics, in the late 1950s and early 1960s, Jagdish Bhagwati, Manmohan Singh and Amartya Sen all broadly agreed on India’s growth strategy. As a critic rued, it was a path that reflected even the “dominant opinion of development economists in the West.”
While the earliest Five-Year Plans boasted some successes — spurring industrial investment, breaking away from the malaise of the colonial period — by the late 1960s, the mood darkened. The collective toll of droughts, wars with China and Pakistan, combined with shortcomings inherent to the Plans, led to repeated economic crises. The Planning Commission’s reputation suffered a body blow, and with Nehru no longer alive to cushion the impact, it never quite recovered its prestige. From then onwards, the attrition of its influence was steady, with every economic crisis ending with the Finance Ministry gaining at the Planning Commission’s expense. By the time the License-Permit Raj had taken firm hold, much of the power that was once the Planning Commission’s preserve was now ensconced elsewhere.
Still, the Five-Year Plans and the Planning Commission limped well into the era of market reforms and economic liberalisation. But Narendra Modi’s victory in 2014 was a clarifying moment, a symbolic rupture. Surely this vestige of Nehruvian India would not survive. Surprising no one, the abolition of the Planning Commission was announced in Modi’s first address from Red Fort on Independence Day. Likening the body to an old, dilapidated house, he declared that it could not be repaired or salvaged — it needed gutting. And in its place would emerge a shiny new NITI Aayog (National Institution for the Transformation of India). Modi, whose popularity matches that of Nehru’s, had ensured that the canvas was wiped clean so that he could stamp his own imprint on Indian history.
(Nikhil Menon is the author of ‘Planning Democracy: How a Professor, an Institute, and an Idea Shaped India’, published by Penguin. He is Assistant Professor of History at the University of Notre Dame)