The curious origins of Indian planning

The origins of economic planning in India have a fascinating history. Though Jawaharlal Nehru was attracted to planning and the Soviet model of development since his visit there in 1927, and the Congress formed the National Planning Committee in 1936, the first detailed blueprint of an economic plan for independent India came from a group of industrialists, helped by a few economists and technocrats.

Two recent books — Tryst With Prosperity – Indian business and the Bombay Plan of 1944 by Medha M Kudaisya and ‘ The Bombay Plan – Blueprint for Economic Resurgence by Sanjaya Baru and Meghnad Desai (eds) — have brought to life this long-forgotten document to tell the fascinating tale of the origins of India’s economic planning.

The Bombay Plan was formulated by India’s top industrialists, including JRD Tata and GD Birla, with the help of a few economists.

Kudaisya begins her story of how Indian industry and manufacturing came of age during World War II as it became an important supplier of material to the colonial government and played a crucial role in the war effort. Indian industry supplied a range of products for the war effort including iron and steel, coal, cement, textiles, small armaments and even armoured cars. During this period, Kudaisya says, India became the eighth most industrialised nation globally.

It was in this background, with independence on the horizon, that the industrialists got together and came up with Bombay Plan in 1944. The industrialists themselves were an variegated group with some having close links with the Congress (Birla, Thakurdas and Lalbhai). Though they were close to Gandhiji they did not endorse his politics of mass mobilisation. But despite their differences they were united in their opposition to Nehru’s ‘socialist’ style command economy model.

The Bombay Plan envisaged a major role for the state in the economy and the need for a central planning authority. Now why did a group of industrialists advocate such a wide-ranging role for the state in the economy? Both books grapple with this question and two answers crop up. One is that during the 1940s the intellectual climate in the West was in favour of extensive state role in the economy and, two, the Indian industrialists believed that they did not have the financial muscle to take up large-scale investments, and hence the state had to step in.

The Bombay Plan had an astonishing eye for detail, something that both books mention. The Plan had envisaged the doubling of per capita income within a period of 15 years. It also went into great detail over the sectoral allocations and the funding aspects — a facet brought out several writers in the Baru-Desai volume, including Sanyal, Goswami and Baru.

The authors of the Bombay Plan spoke extensively about reducing income inequalities in society. The second major aspect was their focus on social and human development and called upon the state to provide universal healthcare and primary education.

The authors of the Bombay Plan realised that for extensive state control and drastic reduction of inequality some curbs on personal liberties were inevitable and were willing to live with that.

Convergence and divergence

There was a great deal of convergence between the Bombay Plan and the official Five-Year Plans adopted after independence. The extensive role for the state, the strong emphasis on basic and heavy industry and the ‘mixed’ economy model were some of the areas of convergence.

But there were some major areas of divergence. The Bombay Plan gave great emphasis on social and human development. In this the Bombay Plan authors were real visionaries and the country paid a huge price in the official Five-Plans’ neglect in these areas, something that several economists including Amartya Sen have commented upon extensively. Baru in his article comments about how India missed the bus due to its abysmal social development compared with the East Asian ‘Tiger’ economies and how India is still playing catch-up.

The agriculture sector was another area where the Bombay Plan authors made interesting recommendations. The Bombay Plan did not advocate major land reforms, (neither did the official Five-Year Plans for that matter) but it did call for abolishing the Zamindari system, which it felt led to absentee landlordism, and advocated the Ryotwari system. It also laid great stress on cooperative farming. Despite the considerable areas of convergence, why was there no acknowledgement by the Planning Commission of the Bombay Plan? Also, why were all the political parties silent on the Bombay Plan?

The answers to these questions are provided in the Baru-Desai book. The reasons are entirely political — the Congress’ main rival in the 1950s was the Communists. So both Nehru and the Congress were reluctant to admit that they were influenced by the business class as that would have given fodder to the Communists to attack them. Amal Sanyal, in his interesting article in the Baru-Desai book, talks about the contradictory stand of the Communists on the Bombay Plan. Logically speaking, the Communists should not have had any problems with the main proposals of the Bombay Plan — extensive state control of economy, thrust on human development and cooperative farming. But the Communists were steadfast in their opposition to the Bombay Plan and to quote Sanyal, “The contradiction remained a source of serious discomfort”.

But curiously even the framers of the Bombay Plan also distanced themselves from the Plan. For Sanyal the compelling reason was the business class, soon after independence, got the wind of how widespread the extent of controls under Nehruvian socialism was going to be.

By the time the Second Five-Year Plan was implemented, according to Kudaisya, most of the businessmen were thoroughly disillusioned as they were groaning under a plethora of controls.

Baru and Desai in their articles talk about how the business class responded to the Nehru-era controls. Some like the Tatas turned bitter critics of Nehru and even started funding the libertarian Swatantra Party. Others like Birla decided to work with the system and tone down their criticism, giving rise to ‘crony capitalism’. According to Baru, the groups that gamed the system and flourished due to lack of foreign competition were deeply nervous when India ushered in reforms in 1991.

Both the books have brought to life a long-forgotten document which formed the bedrock for more than six decades of economic planning, even though it remained unacknowledged. Written in an easy and accessible style, the two books will of immense interest to students of Indian economy. If only our official planners had followed the Bombay Plan’s proposals on human development, India would have been a different country today.

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