Introduction

• After independence, India needed a strong economic plan to recover from colonial exploitation and poverty.
• Leaders debated whether economic growth or social justice should be the priority.
• Planned development became the government’s strategy for balancing both objectives.

Idea of Planning

• Economic planning was seen as a way to guide the economy towards growth and equity.
• The Soviet Union’s success with Five-Year Plans influenced Indian policymakers.
• Jawaharlal Nehru and P.C. Mahalanobis were key figures in shaping India’s planning system.

Setting Up of the Planning Commission (1950)

• Established by Nehru to create and implement economic plans.
• Aimed to allocate resources, set targets, and promote balanced growth.
• Worked as an advisory body to the government.

The Early Initiatives for Economic Development

First Five-Year Plan (1951-56)

• Focused on agriculture, irrigation, and rural development.
• Aim: Increase food production and control inflation.
• Key projects: Bhakra Nangal Dam, Hirakud Dam, and agricultural reforms.
• Success: Growth rate exceeded targets (3.6% instead of 2.1%).

Second Five-Year Plan (1956-61) – Mahalanobis Model

• Shift from agriculture to heavy industries and large-scale manufacturing.
• Encouraged steel plants, power generation, and infrastructure.
• Public sector expansion (State-led industrialization).
• Challenges: Shortage of foreign exchange, inflation, and growing unemployment.

Key Debates on Development

There was a major debate on what development model India should follow:

The Role of the State vs. Market

• Nehru and socialists argued for state control over key industries to reduce inequality.
• Capitalists and free-market advocates (like C. Rajagopalachari) wanted private enterprise and less state intervention.

Agriculture vs. Industry

• Some believed agriculture should be prioritized for food security and employment.
• Others, like Mahalanobis, argued for rapid industrialization to make India self-sufficient.

Public vs. Private Sector

• The government controlled key industries under the “commanding heights” policy.
• Private sector was allowed but regulated to prevent monopolies.

The Strategy of Development

Mixed Economy Model

• A combination of socialist planning (state control) and capitalist growth (private enterprise).
• Public sector controlled major industries, while the private sector operated with state regulations.

Import Substitution Industrialization (ISI)

• Reduce dependence on foreign goods by encouraging domestic industries.
• High import tariffs were imposed to protect Indian industries.
• Focus on self-reliance rather than heavy imports.

Land Reforms and Rural Development

• Abolition of Zamindari system.
• Ceilings on landholding to distribute land more equally.
• Cooperative farming was promoted but had limited success.

The Political Impact of Planned Development

Growth of Public Sector

• PSUs (Public Sector Undertakings) like BHEL, SAIL, ONGC were established.
• State controlled railways, banking, insurance, and electricity.

Tensions Between Centre and States

• Some states felt planning was too centralized and favored richer states.
• Disputes over resource allocation and industrial locations emerged.

Conflicts Over Economic Policies

• Landowners and industrialists opposed strict government control.
• Workers and peasants demanded more land reforms and job security.

Successes and Criticisms of Planning

Achievements of Planning

• Increased food production due to irrigation projects and Green Revolution.
• Industrial growth in steel, energy, and transport sectors.
• Growth rate of around 3.5% annually (higher than colonial times).

Criticisms of Planned Development

• Slow growth compared to global standards.
• Neglect of rural and small-scale industries.
• Bureaucratic inefficiency and corruption in PSUs.
• License Raj (excessive government control) slowed down private businesses.

The Green Revolution and Its Impact

• Started in mid-1960s to boost food grain production.
• Use of HYV (High Yielding Variety) seeds, chemical fertilizers, and irrigation.
• Increased wheat and rice production, reducing food imports.
• Social impact: Benefited rich farmers but increased rural inequality.

Planning in the Later Years

• By the 1980s, India’s economic policies started shifting toward liberalization.
• Economic crisis in 1991 led to major reforms (ending License Raj, privatization, and globalization).
• The Planning Commission was later replaced by NITI Aayog in 2015.

Conclusion

• Planned development helped India achieve economic stability and industrial growth.
• However, challenges like poverty, unemployment, and regional inequality remained.
• The debate between state control and market reforms continues in India’s economic policies.