“The tendency to think of plans in terms of overall figures of outlay and large national targets is resulting in too much of artificial and academic exercises in paper planning – and in fanciful proposals for raising resources – which detract attention from the really important job of preparing concrete programmes of development at various levels based on needs and available resources. The Planning Commission whose ramifications have grown with each successive plan, has done little to encourage realistic planning from the bottom. By its constant emphasis on expenditure as an index of development, it has tended to create an atmosphere in which the mere spending of money is considered as good in itself, without regard to the results of such expenditure.”
JANUARY 6, 1960
Planning: Need for a new approach
UNLESS A FRESH APPROACH IS BROUGHT TO THE SUBJECT OF planning in India there is every risk of our continuing to commit the same mistakes as in the past. Recently there has been much talk about the “take-off” stage and what is required to achieve this position. Mr. Anjaria, in his presidential address to the Indian Economic Conference, doubted whether a country with such a low level of per capita income as India could be considered as having reached the “take-off” stage the moment it is able to maintain a rate of investment of 10 per cent of the national income. If the “take-off” is interpreted as meaning the stage of self-sustaining growth here again it seems highly premature to imagine that such a stage could be reached within the next five or ten years. It may be possible for us to attain “self-sufficiency” say, in food, clothing, iron and steel, cement and some other essential items within a decade. But self-sufficiency would amount, in terms of per capita consumption, only to a fraction of what obtains in the more advanced countries. As for ‘self-sustaining in the sense of non-dependence on foreign capital, it is neither desirable nor possible for at least two decades. There is no need to feel ashamed about this, because leading economists in the West now recognise that the underdevelopment in countries like India is essentially a legacy of the colonial system and that the advanced countries owe it to themselves as well as to the harmonious development of an integrated international economy to make capital and “knowhow” available in a big way for the economic progress of the underdeveloped countries. It would be realistic if Indian planning proceeded on a recognition of the crucial part that must be played by external capital in all its forms) to maintain a sufficiently high rate of development in the country.
The tendency to think of plans in terms of overall figures of outlay and large national targets is resulting in too much of artificial and academic exercises in paper planning – and in fanciful proposals for raising resources – which detract attention from the really important job of preparing concrete programmes of development at various levels based on needs and available resources. The Planning Commission, whose ramifications have grown with each successive Plan, has done little to encourage realistic planning from the bottom. By its constant emphasis on expenditure as an index of development, it has tended to create an atmosphere in which the mere spending of money is considered as good in itself, without regard to the results of such expenditure.
The Prime Minister stated the other day that Rs. 900 crores had been spent on agriculture since 1951 but there was little to show for it by way of results. This hiatus between expenditure and achievement is in fact the crucial defect of Indian planning. This hiatus will not disappear merely by shifting the emphasis from financial targets, as Prof. Mahalanobis and others urge. The argument that what is physically feasible should be financially realisable bypasses the whole gamut of economic reasoning that should determine decisions with regard to physical targets. It may be, for instance, physically possible for us to achieve a target of 10 million tons of steel by 1965, because we have the necessary iron ore, coal, etc. But whether we should proceed to plan for increasing production to the limit would depend on a number of considerations, including whether demand for steel would grow at a rate that would warrant this expansion, whether the capital to be invested on extra steel plants could not be diverted to projects which would provide much larger employment as well as rise the national income by a higher rate than investment in steel, and so on. The inflationary effects of heavy spending on projects which involve a large outlay but which will come into production after five or more years should also be considered in a discussion of the subject. When Prof. Mahalanobis contends that the trend of market demand is “scarcely relevant” to a consideration of our target for steel, he apparently imagines that steel-producing capacity is something desirable in itself even if we have no immediate use for all the steel that can be produced. Such an argument might be all right for a country with a plethora of capital resources, but in the present circumstances it is unwise and uneconomical for India to create surplus capacities in the steel or any other industry. As a matter of fact one of our most urgent tasks is to see that the existing capacities in industries and agriculture are fully utilised, because thereby we achieve increases in national income and in employment without any additional investments. Evaluation bodies have already pointed out the glaring failure all over the country to make profitable use of the irrigation potential created by the multi-purpose projects. What this means in terms of low returns on the investment already made and the loss of potential additions to national income can be easily imagined. In regard to industry, it has been estimated by one authority that in seventeen selected groups of industries, ranging from bicycles to wheat flour (including iron and steel and general engineering), if the existing installed capacity were fully utilised, an increase in output of Rs. 273 crores and an increase in employment of 192,000 could be achieved. What this means to the economy can be inferred from the fact that to achieve an equivalent increase in production by new investment might call for an outlay of Rs. 600 crores or as much as the cost of four new million-ton steel plants. The case for utilisation of unused capacity applies with greater force to manpower. Apart from the large number of unemployed and under-employed in the country, the fact remains that the productivity of even those in employment is very low. Prof. Mahalanobis admitted at the Labour Economics Conference that “there was a good deal of general slackness and disinclination for hard work”. He pointed out how our labour legislation had been “too imitative of the highly developed countries’, with the result that many industries were obliged to retain a considerable amount of surplus labour, which affected productivity as well as efficiency. Our labour policy should be revised not only with a view to ensuring a rise in productivity to which will be linked a rise in wages, but also with a view to securing an increase in employment. Official policy hitherto has aimed at ensuring optimum conditions for the employed without regard to the effects of such legislation in inhibiting opportunities of employment for the unemployed.
A new approach to planning should be based primarily on maximising the opportunities for productive employment to the entire adult population of the country. Viewed from this angle, it could be seen that centralised planning alone will not do the trick in a country of India’s size and diversity of conditions. Mixed economy is an inescapable consequence of the political and economic character of the country. The role of the State should be that of a catalyst. It should not become an octopus that seeks to control everything. This means not only a concentration of effort on the part of the State to fill essential gaps in the industrial structure and to establish the social overheads such as education, roads etc., but also to promote a climate in which there will be full scope for the creative energies of the people on the widest scale. Our plans have failed so far mainly in this latter aspect. There has been too much dependence on Central Governmental direction and support and too little of local initiative and inspiration. Neither the progress of agriculture, which is so vital for the solution of our food problem, nor the diversification of industry, which is essential for providing employment, will be possible unless the impulse for improvement and organisation comes from the bottom, from the village and district level. The problem of resources, which looms so large in present discussions on the Third Plan, would assume manageable proportions if there were greater decentralisation of planning and if the programmes of the Central and State Governments were limited to what can be financed out of the resources, internal and external, which they can obtain without resort to inflation.
Reference:
The First 100
A Selection of Editorials, 1878-1978, THE HINDU, VOLUME I