Whither Indian Planning?

In the 1950s and 60s, the Indian economy was ravaged by central planning.

Sir Homi Mody

Sir Hormasji Peroshaw Mody (1881-1969), generally known as Sir Homi Mody, was a noted industrialist and banker associated with Tata Group and an administrator of India. A longer biographical note on the author can be found here.

The following article was published in 1965 by the Forum of Free Enterprise in an essay collection titled “A Review of Current Economic Problems.” In the piece, Sir Mody talked about the deplorable state of planning in India at the time, and the food crisis that the nation was going through. “The greater the failure of the existing plan,” he remarked in the piece, “the larger the size of the next.”

Since 1951, we are living in a state of planned economy. We are having a succession of Five-​Year Plans, and the process is to continue until the “take-​off stage” is reached. How long it will take us to reach that blessed stage, no one knows. For the moment, our economy seems to be ground to a halt, in spite of an expenditure of thousands of crores of rupees on all manner of projects; and who can tell when it will start moving? Agricultural and industrial production is stagnant-​-​there have even been signs of a recession-​-​and there are shortages in practically every commodity and service. But that does not seem to dampen the enthusiasm of the Planners who, as soon as a plan is nearing its end, are ready with another. They work to a pattern-​-​each plan has got to be substantially bigger than the one that has gone before. It matters not if targets, resources, estimates, production schedules and the like have proved hopelessly wrong. The motto seems to be: the greater the failure of the existing plan, the larger the size of the next.

Another notable feature of the plans is that, after a round of conferences and consultations with all manner of people, they emerge in much the same shape as the Planners had originally conceived them. It only shows what a wonderful unanimity can be achieved by a careful selection of economists, professors, statisticians and other such “experts.”

In a developing economy, the need for planning cannot be questioned. The limited resources of the country have to be conserved and directed into the right channels for an orderly development. But it is of the essence of planning that resources should be carefully estimated, targets properly determined and priorities systematically laid down. What we have, instead, is a succession of grandiose schemes which, whatever their importance to the industrial structure of the country, tend to ignore the immediate and basic needs of the people and place an intolerable burden on the present generation. The admittedly poor performance of the large-​scale public enterprises set up in the last few years has aggravated the situation and accentuated the shortages. The importance and urgency of the one remedy for most of the ills we suffer from, namely, increased production, has failed to be realised, thanks to the muddled thinking of our Planners and policy-​makers. In the result, we have shortages on a scale and to an extent never known to this country.

Let us take the food front. Over the last few years, enormous sums have been spent on food grain imports and schemes for agricultural development. Yet, production is more or less stagnant and prices keep on going up. The consumer, who wastes hours in endless queues before fair-​price shops, has to pay a good deal more than the official price if he is to satisfy his hunger. The supply is inadequate and the distribution faulty, and it was only a little while ago that near famine conditions prevailed in many parts of the country. Considering that an average middle-​class family spends over 40% of its income on food, and the poorer sections about 60% or even more, the hardships inflicted by shortages and high prices can well be imagined.

No amount of official statistics or assurances, nor attempts to shift the blame, can alter the situation. How does it interest the “common man” to know who is responsible for his troubles-​-​the Centre, the State, the wholesaler or the cultivator? He wants food, and he knows that that is what an all-​powerful Government has failed to give him. With the vast amounts spent on agricultural development, there can be no excuse for the extremely low productivity of Indian agriculture. Conditions in even some of the poorest countries in the world are better. For one thing, there is as wide a gulf as ever between the agriculturist and the Government, which all the Community Development Projects and Extension Services have not been able to bridge. Our ability to secure vast imports of food grains from countries like the U.S.A. has blunted the sense of urgency and aggravated our troubles. The position continues to be serious and drastic changes in our policy are needed to prevent it from turning catastrophic.

It is the same sorry tale with regard to a host of other essential needs, whether it be water supply, housing, medical relief or transport. Vast numbers of human beings are living in hutments unfit for cattle, and thousands of villages are without any facilities for drinking water. Postal and telegraphic services, so essential to a country of vast distances, have woefully deteriorated. The Union Minister in charge had recently to confess in Parliament that in 1962-63 as many as 2.3 million telegrams had to be despatched by post! Bus queues seem unending, and thousands of people have to travel on footboards of trains. Everything seems to be in short supply; most things are under the strictest control.

The tax burden has reached staggering proportions, and as that eminent authority, Mr. N. A. Palkhivala, has demonstrated in his latest book [The Highest Taxed Nation] India is the most heavily taxed country in the world. Mr. Ashok Mehta, Dy. Chairman of the Planning Commission, blandly stated a little while ago that 1981 might bring some relief. If it is a joke, it is a pretty poor one; if it is a forecast, the authorities must stand condemned.

Is there a way out? Not until the present concept of planning is abandoned and realism takes the place of ideology and reckless experimentation with the resources of the country. The least the situation demands is to spread the Third plan over another year or two, a remedy which no less a person than our Prime Minister has suggested. The way to salvation lies through consolidation of our gains at this stage and, unless our Planners get rid of their obsession with ‘gigantism,’ disaster must inevitably overtake the country.

This essay was selected for publication on Lib​er​tar​i​an​ism​.org by Indian Liberals.

Indi​an​Lib​er​als​.in is an online library of all Indian liberal writings, lectures and other materials in English and other Indian regional languages. The material that has been collected so far contains liberal commentary dating from the early 19th century till the present. The portal shall help preserve an often unknown but very rich Indian liberal tradition and explain the relevance of the writings in today’s context.