Economy: Planning in India
Now we are staring the second chapter of Indian economy that is planning in India. This chapter is very important because the point is when we became independent on 15th of August 1947 when union jack was displaced by Indian tri colour. The Herculean task ahead of our national leaders was how to reconstruct the economy. 20% people were controlling 80%of resources. So the point was how to make the independence meaningful for the masses? Because unless and until financial you can say empowerment all other empowerment are meaningless and shallow. So the point was how to reconstruct our economy? How to equalize distribution of resources among people? At the time of independence almost all sectors were shattered none of the sectors were in shape. So the problem was which model our national leaders should adopt? Then our national leaders they started looking at various models. Like there were so many countries which were earlier colonies like USA was also a colony of Britain. USSR was also under George’s rule before the Bolshevik revolution of 1917. But in 1947 these countries were very developed. So our national leaders they thought, that if it is possible to implement the model which was implemented by these countries so that we can also ensure better lifestyle, we can also eradicate poverty, unemployment from our country. So first of all we started looking at various models, various planned models. And then we were confronted with the basic problems that no two planned models can ever be the same, plans are decided by this specific requirements, specific reality of that particular country. There are various determinants of planning and no two planned models can be the same. Plans are decided by a particular country based on several factors. If I, I have to write it down we can say that determinants of plans. First is availability of resources. Which kind of mineral resources, which kind of natural resources are available in that particular country? That plays a very important role in shaping the planned model for that country. Then you have availability of man power, whether it is skilled man power, unskilled man power? What kind of human resource is available? Then you have geographical location of that country. Whether the country is land locked? Whether the country is sea locked? So geographical location plays a very important role, that which kind of planning the government will adopt. Then you have strategic position, strategic position of that country. Then we have system of government in that country. Is it democracy? Is it autocracy? Is it ruled by military junta? So what kind of government the country has? That also shapes the way of planning that will be adapted in that country. Then you have culture, history, philosophy of that country. So determinants of plans are different. When our national leaders they started looking at USA, Canada, Australia, USSR, China then we found that the realities of these countries were different and the realities of India is different. So we cannot implement planned models simply on the basis of cut, copy and paste. Having said that, having said that no two planned models can be every be the same .Plans are country specific, plans are nation specific. Plans are decided by the basic reality of that society and country. We just cannot imitate a particular planned model and we can implement it on to India. It was not possible. But broadly speaking we can divide these plans into two. First was capitalistic planned model and second was socialistic planned model. There were n- number of plans, if there are n- number of countries there would be n- number of plans. But based on broad similarities we can divide all every type of plan model into two categories, capitalistic planned model and socialistic planned model. What is capitalistic planned model? Were economic decisions are taken by market forces. When I say economic decisions what to produce? How to produce? Where to produce? With whom to produce? Where to distribute? These are economic decisions and these decisions are taken by market forces, that is forces of demand and forces of supply. This planned model, capitalistic planned model works on these two forces and this model was a great success. We have seen that once upon a time America was also a poor nation, a fragmented nation. Australia was also nothing but a graveyard of poverty. But this planned model had successfully contributed in bringing these nations from the category of poor to the category of rich. So our national leaders Pandit Jawaharlal Nehru and his associates decided that in India also we will implement plan, capitalistic plan model. It was all done that we will implement capitalistic plan model. But the problem the problem was where was capital? We had land lords but we did not have disposable capital that can be invested into any new venture. Where were market forces? Where was forces of demand and where was forces of supply? 80%of the people were below poverty line. What will they demand and how come there would be supply? This was the problem. Market forces can only work when there is enough supply enough demand in the market and accordingly there is enough supply in the market. Even though we decided in favor of capitalistic planned model, because this model was a great success, but the problem was where was capital and where were market forces? There was no demand because demand is decided by per capita income, purchasing power. And supply is decided by investment. If you look at this model supply is decided by level of investment. Investment is decided by level of profit, level of savings. Savings is decided by level of profit. Profit is decided by level of sale and sale is decided by level of demand. Demand is decided by level of purchasing power and level of purchasing power is decided by per capita income. So if per capita income was low supply was also low. So where were the market forces? Third where was the technology? Because capitalism works on latest technologies, but to apply those technologies we need capital. And again I told you we had landlords and we had no capitalists. And the most important hurdle in the way of implementation of capitalism was social considerations. As I told you that at the time of independence India was an impoverished nation, a devastated nation, an alienated nation. So first and foremost task was to work for those people who were downtrodden who were deprived who were vulnerable. And capitalism works on the principles of maximization of profit. How can we allow unfettered capitalism without any checks and balances without looking in to the fact that majority of people they were below poverty line? So this capitalistic model would have exploited these deprived sections which had ultimately affected the unity and integrity of nation. That is why even though we wanted to implement capitalistic model we decided against this. We are sorry we cannot implement it, because these were the problems. Then we turned our eyes towards socialistic model. What is socialistic model? Where, economic decisions are taken by the government. And this model was also a great success in USSR and east European countries. And there is a book written by Rabindranath Tagore titled” Roosi chithi”. In the book” Roosi chithi” Rabindranath Tagore writes that USSR had achieved a development in 5 years which is otherwise achievable in 40 years for other countries. And more over this socialistic model was very close to our heart, our national leaders, our freedom fighters they were considering USSR as close, because USSR was propagating a class less society. USSR was working for the downtrodden; the entire socialistic idea communistic idea was to eliminate capitalism. And most of our people they were poor, so philosophy was very close to socialistic model. It was also a success. So then our national leaders decided decided that if we cannot implement we cannot implement capitalistic model because of these reasons we can easily implement socialistic model. Because it is it is closed to our ideology, it is close to our ideology, it works for the downtrodden, it works for the elimination of classes from the society. So we decided now okay, okay, okay we cannot implement capitalistic model we will implement socialistic model. But the biggest problem was apprehension of land lords and princely states. This was the mere apprehension only single apprehension; otherwise there was no problem in implementing socialistic model. We cannot overrule, we cannot ignore the apprehensions of land lords and princely states. Because if you look at the history you find that the reason behind the failure of 1857 revolt was because the landlords and capitalists they did not co-operate with our freedom fighters. They supported Britishers. That is why the first freedom struggle of 1857 failed. India itself was a result of communal partition and it was not just one partition, there were various divisive forces active in our nation. Several parts of India were demanding cession, separation from India. So at the time of independence we could not even afford to fuel the apprehensions of princely states and landlords. That is why if you look at the constitution of India what you find is article 31 right to property. Under article 19 you find right to property thus you find the provision of previpercess and privileges given to princely states. Why did we give this these privileges? Only to allay the fears of princely states and landlords. Because when India’s independence became inevitable it was clear by the time of cabinet decision plan. It was clear that sooner or later, rather sooner than later India is going to be independent. These princely states and land lords were filled with fear, they were fearing that once India will become independent, democracy would be adopted and democracy would mean the rule by the underprivileged class because of their large numbers. Then they had apprehensions that when these people, poor people will come to power they will deprive them of their privileges, they will deprive them of their properties, lands. That is why our constitution makers gave that is why our constitution framers they gave the right to property to those land lords and princely states just a kind of appeasement that they did not fe they did not they did not fear. Their property, their land, their privileges are constitutionally protected. So the only problem in the implementation of socialistic model was the apprehensions of land lords and princely states. So there were problems in the implementation of in the implementation of both the models the capitalistic and socialistic model. That is why in 1947 we went for mixed economy.