Institution of Planning and the Early Years of Indian Economy

With the formation of India as a nation state, India and its leadership faced a mammoth task of building new institutions in all areas of governance. Nehruvian leadership was known for its socialist inclinations and influence of Soviet Russia on Nehru himself. Although the Indian constitution has been inspired in many ways from different constitutions of the world, the economy itself during the formative period was much informed by the socialist model of Soviet Union. This was reflected in the adoption of the institution of planning in post independent India to drive and plan its economy.

Planning as an institution was established in India through setting up of Planning Commission of India by a ‘Resolution of the Government of India’ in March 1950. In a newly independent nation which had formally promulgated its constitution two months ago on 26th January 1950, this was a big step in establishing economic development and infrastructure building as policy objectives of the country. The first five-year plan was launched in 1951.

The declared objective of the government of India, through the planning commission was “to promote a rapid rise in the standard of living of the people by efficient exploitation of the resources of the country, increasing production and offering opportunities to all for employment in the service of the community. The planning commission was charged with the responsibility of making assessment of all resources of the country, augmenting deficient resources, formulating plans for the most effective and balanced utilisation of resources and determining priorities.

All of the objectives have the potential of being affected by the political processes themselves. The idea of assessment of resources, or their utilisation or the determination of priorities, though institutional objectives in implementation become subject to political contingencies and imperatives.

Centralisation vs Decentralisation: The early planning debates

Looking at the earliest debates on the issue of planning in India between the Gandhians (including Gandhi himself) and the Left faction within the Congress it is found that while the former faction supported a regulation of growth of the modern industries the latter argued that the whole question of Congress policy toward industries must be resolved within the framework of an “all-India industrial plan”. The central issue of the debate was whether to adopt a centralized or a decentralized approach for the economy and governance.

The leadership along with the vast majority of the professional intelligentsia of India “had little doubt about the central importance of industrialization for the development of a modern and prosperous nation” (Chatterjee 1993: 201). However the opposition to this strategy mainly came from (the chief source of mass mobilization during the independence movement) Gandhi himself. Gandhi’s idea of machinery, commercialization and centralized state power as the curses of modern civilization, as having been thrust upon the Indians by European colonialism, ran counter against both the liberals as well as the Left within the Congress. He argued that industrialism itself was the root cause of Indian poverty. Although until 1940s this was the dominant idea within the Congress in spearheading the nationalist movement against the British, as the materialisation of the nation state neared the discourse distances away from it.

The conflict of ideas came at the forefront with the beginning of shaping of idea of a National Planning Committee (NPC). Subhash Chandra Bose in his presidential address at the Haripura Congress in February 1938 declared that the national state “on the advice of a Planning Commission” would adopt “comprehensive scheme for gradually socializing our entire agricultural and industrial system in the sphere of both production and appropriation”(Chatterjee 1993: 200).

Soon after in October that year National Planning Committee was formed with Jawaharlal Nehru as its chairperson. Of the fifteen members of the committee four (Purushottamdas Thakurdas, A.D. Shroff, Ambalal Sarabhai and Walchand Hirachand) were leading merchants and insutrialists, five were scientists (Meghnad Saha, A.K. Saha, Nazir Ahmed, V.S. Dubey and J.C. Ghosh), three were economists (K.T. Shah, M.Visvesvaraya and Radhakamal Mukherjee) and three were included for their political credentials (J.C. Kumarappa- a Gandhian, N.M.Joshi a labour leader and Nehru himself).

J.C. Kumarappa questioned the basic strategy of adopting industrialization as a national priority by the Congress, arguing instead for the restriction and elimination of modern industrialism. Nehru however argued that most members of the committee favoured large scale industrialization as a political strategy as long as it did not come in the way of the cottage industries. Stressing upon the changed context in which Indian state was working he added “the question of establishing and encouraging large scale industries” cannot be ignored and that “it is not only within the scope of the Committee to consider large scale industries, but it is incumbent upon it to consider them”. He added “we are trying to catch up as far as we can with the Industrial Revolution that occurred long ago in Western countries”. (Chatterjee 1993: 202)

Thus not only the Gandhian position on industrialization was bypassed by appealing constantly to the bigger picture of the nation, but the institution of planning became the very means for the determination of priorities and material allocation of productive resources on behalf of the nation and constituting the modality of political power outside the immediate political process itself.

Industrialisation vs Agriculture: Second Five Year Plan

In tandem with the thrust on centralization by the Nehruvian leadership, large scale industrialization was taken up by the government under the planning model. The second five-year plan brings out the stark contrast in its respective attention towards agriculture and industries. The declared objective of the plan was “Our Second Five Year Plan seeks to rebuild rural India, to lay the foundations of industrial progress, and to secure to the greatest extent feasible opportunities for weaker and under-privileged sections of our people and the balanced development of all parts of the country. For a country whose economic development was long retarded these are difficult tasks but, given the effort and the sacrifice, they are well within our capacity to achieve”.

In some senses it was a continuation from the first plan, however some of the key propositions indicate the tilt towards industrialization. In more concrete terms the second plan was aimed at:

  1. An increase in national income by 25% over the period of five years.
  2. Enlargement of employment opportunities at a rate sufficient to absorb the increase in labour force consequent on the increase in population.
  3. Forwarding of industrialization to prepare the ground for more rapid advance in the plan periods to come.

These objectives were predominantly aimed at providing an infrastructure and institutional framework apt for increase in production, employment and economic development.

Advances in Industrial Production

Baldev Raj Nayar in The Modernization Imperative and Indian Planning assesses this period of planning as one that saw ‘a great stride forward in industrial production’. There had been remarkable change in the content of industrial production. The value added in manufacturing industry increased by around 90% over the three plans in respect of the consumer goods, by almost seven times for intermediate goods and by ten times for machineries. As a result the picture of an industrial structure with an almost total concentration on consumer goods at the beginning of the planning was drastically altered. Significant advances were also made in the heavy industries sector which made the basis for the country to advance with its own investment goods in the future. Nayar asserts that with these developments there was also an expansion of design and engineering capabilities in the country.

Thus a highly diversified, technically sophisticated and complex industrial structure was preparing to take shape although this growth rate had fallen short of the expectations of the planners according to Nayyar. Yet he argues that the slower rates of national income growth hid the vast structural changes that had been occurring in the industrial system in India, which was related to the particular vision that Nehru had for the country.

Political and Financial Fallouts

There were various underlying political and financial fallouts of this plan. Due to a relatively small economic base, and a heavy industry strategy, resource mobilization became an essential aspect of Indian planning strategy. Because of a democratic system India was unable to overload the general public with heavy taxations and inflationary trends, yet both taxations and inflation did play out in a big way during the initial decades of post independent India.

Sudipta Kaviraj suggests that during the Nehru period the only way in which agrarian transformation was undertaken was through a “conservative, gradualist and molecular process”. But in case of industrialization the Nehru government was not satisfied with the continuance of the semi-feudal rural power, which was acceptable in the agrarian reforms. Thus it adopted massive plans for capitalist development. Evidently the Indian elite rejected a trajectory of satellite growth and went ahead with a plan for institutional control of capital goods industries through the state sector. Kaviraj also suggests that this kind of an institutional control was an experiment largely untried in other underdeveloped countries.

He takes a class-coalitional view of the situation by arguing that these economic plans led to some significant shifts in the internal power distribution within the ruling bloc itself. “Planning assisted and ideologically justified an enormous expansion of welfare bureaucracy which also set in motion some internal conflicts in the administrative apparatus of the state, e.g. the debate about the relative decisional weight of technocrats and bureaucrats and more crucially the division of their respective domains of control” (Kaviraj 1997: 61). Thus more Nehru became politically weakened in the party organization, the greater resistance was witnessed at the state level to his reformist policies and the more he was forced into the logic of passive revolution where people were no longer seen as subjects but as objects of development process. By the mid-1950s this idea became the dominant logic of the ideology of Indian planning.

But Kaviraj asserts that industrialization becoming the dominant aspect of Indian planning led to the withdrawal of support of farmers’ lobbies in most of northern India from the Congress thus weakening it seriously in both class and party terms. This was one of the biggest repercussions of the heavy industrialization tilt in the planning ideology as it led to a separate farmer-based mobilization in politics. As farmers’ lobby was consolidated with time both Congress and subsequently other political parties from time to time kept appealing to it in order to gain the upper hand in the political process.

Planning as the solution to the crises

But planning which laid emphasis on industrialization and disappointed some of the pressure groups in India, also became the means to satisfy them subsequently. Partha Chatterjee suggests that the institution of planning as we have seen emerges in this process as the means by which the necessity of these changes (molecular and reformist changes in passive revolution) is rationalized at the level of the social whole. The particular will of the modern sector had to be expressed as a general project of the ‘nation’. He argues that if land reform was not attempted in the 1950s it was not a fault of planning or lack of political will. Rather this scenario according to him was a stage in the journey of this so called “passive revolution of capital” which did not incorporate within its rule the representative mechanism solely operated through individual agents but through entire pre-capitalist groupings in which they existed erstwhile dominated by the existing caste and class configurations.

Planning through its programmes of community development sought to extend the benefits of plan projects to entire existent structures of communities through which the modernizing state secured legitimacy for itself in the representative process of elections. Chatterjee suggests that through planning there was a combing of accumulation with legitimation while avoiding the social conflict. Thus the project of state hegemony was decentralized at various levels through social group hegemony and the instrument used was the institution of planning.


Chatterjee, Partha (1993): The Nation and its Fragments: Colonial and Postcolonial histories, Princeton: Princeton University Press.

Kaviraj, Sudipta (1997): “A Critique of the Passive Revolution” (Ed) Partha Chatterjee, State and Politics in India, Delhi, New York: Oxford University Press.

Nayar, Baldev Raj (1972): The Modernization Imperative and Indian Planning, Delhi: Vikas Publications.

Leave a Reply

Your email address will not be published. Required fields are marked *