Now largely forgotten, the Bombay Plan gives the lie to the claim that Jawaharlal Nehru imposed a model of centralized economic development on an unwilling capitalist class. One wonders what free-market pundits would make of it now. They would probably see it as a dirigiste tract, unworthy of capitalism and capitalists. In truth, it should be seen simply as symptomatic of the Zeitgeist, of the spirit of the times.12
That spirit was all in favour of centralized planning, of the state occupying what was called the ‘commanding heights’ of the economy. Thus the Constitution of India directed the government to ensure that ‘the ownership and control of the material resources of the community are so distributed as best to subserve the common good’; and that ‘the operation of the economic system does not result in the concentration of wealth and means of production to the common predicament’. Within a month of the adoption of the constitution, the government set up a Planning Commission to carry out these ‘directive principles’. Chaired by Nehru, the Commission included high Cabinet ministers as well as experienced members of the Indian Civil Service.
In the summer of 1951 the Planning Commission issued a draft of the first five-year plan. This focused on agriculture, the sector hardest hit by Partition. Besides increasing food production, the other major emphases of the plan were on the development of transport and communications, and the provision of social services. Introducing the proposals in Parliament, Jawaharlal Nehru praised the plan as the first of its kind to ‘bring the whole of India – agricultural, industrial, social and economic – into one framework of thinking’. The work of the Commission, he said, had ‘made the whole country “planning conscious”’.13
The expectations of the Planning Commission ran high. As one columnist wrote, ‘one drawback of democracy is that it works slower than other political systems. But the people of India will not tolerate undue delay in their economic advancement.’14 After the first general election the urgency intensified. Critics from left and right lambasted the first five-year plan as lacking in vision and ambition. True, food-grain production increased substantially, but output in other sectors failed to reach their targets.15
While introducing the first plan, Nehru had said that ‘it was obvious to me that we have to industrialise India, and as rapidly as possible’. That objective was given pride of place in the second five-year plan. Its drafting was the handiwork of Prasanta Chandra Mahalanobis, a Cambridge-trained physicist and statistician who was steeped in Sanskrit philosophy and Bengali literature – in sum, ‘an awesome polyglot, the kind of man for whom Nehru was guaranteed to fall’.16
Mahalanobis was, among other things, the man who brought modern statistics to India. In 1931 he set up the Indian Statistical Institute (ISI) in Calcutta. Within a decade, he had made the ISI a world-class centre of training and research. He was also a pioneer of inter-disciplinary research, innovatively applying his statistical techniques in the fields of anthropology, agronomy and meteorology.
In February 1949, Mahalanobis was appointed honorary statistical adviser to the Union Cabinet. The next year he helped establish the National Sample Survey (NSS) and the year following, the Central Statistical Organization (CSO). These were set up to collect reliable data on changing living standards in India – on wages, employment, consumption and the like. The NSS and the CSO are two reasons why India has a set of official statistics more reliable than those found anywhere else in the non-Western world.17
Such are the uncontentious aspects of Mahalanobis’s legacy. Perhaps more important, and certainly more controversial, are his contributions to the theory and practice of planning. In 1954 Nehru committed his party, and by extension his country, to the creation of a ‘socialistic pattern of society’. The same year, the ISI was asked by the government to study the problem of unemployment. Mahalanobis wrote a note on the subject, which seems to have impressed Nehru enough for him to assign the ISI responsibility for drafting the second five-year plan itself.
Mahalanobis took the task very seriously indeed. In the late summer of 1954, he set off for a long tour of Europe and North America. He had, he confessed, an ‘inferiority complex about economic matters’. This trip abroad was thus educational – to improve his own knowledge about the subject – but also frankly propagandist. By cultivating foreign economists, he hoped to bring their Indian counterparts around to his own point of view. As he told a friend, ‘at the back of everything is one single aim in my own mind – what effective help can we secure in making our own plans and in implementing them’.18
Mahalanobis first went to the United States of America, where he collected information on input–output coefficients, these maintained in a deck of 40,000 Hollerith punched cards. He talked to the man who had done the work (Wassily Leontief, a future Nobel laureate), before crossing the Atlantic to meet the dons of Cambridge. The ‘most brilliant’ of these was Joan Robinson, then just back from a trip to China (where she was ‘much impressed by the progress they are making’.) She thought that the export–import sector in India needed more government control. Mahalanobis agreed, and in turn asked Joan Robinson to visit India as a guest of the ISI. This, he told her, ‘might be of very great help to us because her support may carry conviction that our approach to development planning is not foolish. She smiled and said – “Yes, I think I would be able to knock some sense into the heads of the economists in your country.”’
Mahalanobis now crossed the Channel, to converse with the French Marxists. Then it was time to shift to the other side of the Iron Curtain. He reached Moscow via Prague, and was at once impressed by the ‘amazing’ pace of construction work: buildings far bigger, and built much faster, than any he had ever seen. He had long talks with Soviet academicians, who said that if India wanted ‘to do any serious planning we must have the active help of, not scores, but hundreds of technologists and scientists and engineers’. Mahalanobis agreed, and invited them to visit his country, so urgently in need of ‘specialists and experts in the economics of planning’.19
These travels and talks finally bore fruit in a long paper presented to the Planning Commission in March 1954. Here Mahalanobis outlined eight objectives for the second five-year plan. The first of these was ‘to attain a rapid growth of the national economy by increasing the scope and importance of the public sector and in this way to advance to a socialistic pattern of society’; the second, ‘to develop basic heavy industries for the manufacture of producer goods to strengthen the foundation of economic independence’. Other (and we may presume lesser) objectives included the production of consumer goods by both the factory and household sector, the increasing of agricultural productivity and the provision of better housing, health and education facilities.
The emphasis on capital goods was justified in two principal ways. The first was that it would safeguard this former colony’s economic, and hence political, independence. The second was that it would help solve the pressing problem of unemployment. ‘Unemployment is chronic because of [the unavailability of] capital goods’, argued Mahalanobis; it occurs ‘only when means of production become idle’. The quickest way to create jobs was to build dams and factories.20
Mahalanobis’s draft plan was submitted to a panel of expert economists. With one exception, all endorsed the emphasis on capital goods and the role of the public sector. To be sure, there were a number of specific caveats. Some economists urged a greater complementarity of agricultural and industrial production; others worried about where the funds for the plan would come from. Increasing taxes would not by themselves suffice, while deficit financing might lead to high inflation. But, on the whole, the leading economists of India were behind what was already being called ‘the Mahalanobis Model of Planning’.21
Table 10.1 – Sectoral outlays in the first two five-year plans
Sector
Outlay in first plan
Outlay in second plan
Total *
%
Total *
%
Agr
iculture and community development
372
16
530
11
Irrigation
395
17
420
9
Power
266
11
445
10
Industries and minerals
179
7
1075
24
Transport and communications
556
24
1300
28
Social services, housing, etc.
547
25
830
18
* In crores of rupees (1 crore = 10 million).
SOURCE: Compiled from A. H. Hanson, The Process of Planning: A Study of India’s Five-Year Plans, 1950 –1964 (London: Oxford University Press, 1966), table 7, p. 134.
This model was, among other things, an evocation of the old nationalist model of swadeshi, or self-reliance. Once, Gandhian protesters had burnt foreign cloth to encourage the growth of indigenous textiles; now, Nehruvian technocrats would make their own steel and machine tools rather than buy them from outside. As the second plan argued, underdevelopment was ‘essentially a consequence of insufficient technological progress’.22 Self-reliance, from this perspective, became the index of development and progress. From soap to steel, cashew to cars, Indians would meet their material requirements by using Indian land, Indian labour, Indian materials and, above all, Indian technology.
Table 10.1 compares the sectoral outlays for the first and second plans. In proportional terms the sectors of power, transport and communications, and social services, retained broadly the same importance. The decisive shift was from agriculture to industry, this compounded by a decline in the importance of irrigation.
While the heavy industries would be owned by the state, there was still plenty of room for private enterprise. For in ‘an expanding economy the private sector would have an assured market’. Their main contribution would come in the form of consumer goods, these to be produced by units large as well as small.23
A government resolution of 1956 classified new industries into three categories. Class I would be the ‘exclusive responsibility’ of the state; these included atomic energy, defence-related industries, aircraft, iron and steel, electricity generation and transmission, heavy electricals, telephones, and coal and other key minerals. Class II would witness both public and private sector participation; here fell the lesser minerals, chemicals, pharmaceuticals, fertilizers, pulp and paper, and road transport. Class III consisted of all the remaining industries, to be undertaken ‘ordinarily through the initiative and enterprise of the private sector’.24
Would the Mahalanobis model succeed? Many Indians thought so, most Indians certainly hoped so. So did their sympathizers worldwide. Representative here are the views of J. B. S. Haldane, the great British biologist who was then planning to move to India and the ISI. When shown the draft plan by Mahalanobis, Haldane commented that
Even if one is pessimistic, and allows a 15 per cent chance of failure through interference by the United States (via Pakistan or otherwise), a 10 per cent chance of interference by the Soviet Union and China, a 20 per cent chance of interference with civil service traditionalism and political obstruction, and a 5 per cent chance of interference by Hindu traditionalism, that leaves a 50 per cent chance for a success which will alter the whole history of the world for the better.25
III
If Mahalanobis was the chief technician of Indian planning, then Nehru was its chief missionary. The prime minister believed that, in the Indian context, planning was much more than rational economics. It was good politics as well. While the plan was based on the work of economists and statisticians, to realize its goal the ‘people must have the sensation of partnership in a mighty enterprise, of being fellow-travellers towards the next goal that they and we have set before us’. Popular participation was the only way to make ‘this Plan, which is enshrined in cold print, something living, vital and dynamic, which captures the imagination of our people’.26
Planning was thus a ‘mighty co-operative effort of all the people of India’. Nehru hoped that the new projects would be a solvent to dissolve the schisms of caste and religion, community and region. Introducing the first plan to his chief ministers, he wrote that ‘the more we think of this balanced picture of the whole of India and of its many-sided activities, which are so interrelated with one another, the less we are likely to go astray in the crooked paths of provincialism, communalism, casteism and all other disruptive and disintegrating tendencies’. Introducing the second plan, he called it a ‘brave effort to fashion our future’, that will ‘require all the strength and energy that we possess’. He believed that ‘ultimately this is the only way to deal with the separatism, provincialism and sectarianism that we have to combat’.27
On the economic side, Nehru singled out two activities as providing the ‘essential bases’ for planning: the production of power and the production of steel.28 At Independence, India had only two steel plants, both privately owned, which produced just over a million tonnes a year. This was inadequate for an expanding economy, more so one that had committed itself to the building of heavy industries.
The private sector was barred from starting new enterprises in steel, which, along with coal, shipbuilding, atomic energy and aircraft production, was deemed too important to be subject to the profit motive. The forest belt that runs across central India was rich in iron ore and coal, and it had plenty of rivers too. At once a lively competition began between the states that comprised this belt, each seeking to have the first public-sector steel plant within its borders. This was paralleled by a competition between the industrialized countries of the West, each of whom wanted the contract to build the first plant.29
The second plan had set a target of 6 million tonnes of steel. The output was needed to provide inputs to other planned industries. But it was also a way of promoting forced savings. As one economist famously put it, ‘you can’t eat steel’. While the second plan was being finalized, the Indian government signed three separate agreements for the construction of steel plants. The Germans would build one in Rourkela in Orissa, the Russians one in Bhilai in Madhya Pradesh, the British one in Durgapur in West Bengal. The Americans, much to their sorrow, had lost out. That the war-ravaged countries of Europe had grabbed two contracts was bad enough, that their hated Cold War rivals had taken the third was worse. Years later an American friend remembered how the decision that Bhilai was going to the Russians was communicated over the radio in tones of palpable sadness by the fabled broadcaster Ed Murrow.30
The Russians, of course, were delighted. Nikita Khrushchev visited Bhilai and called it the ‘Magnitogorsk of India’. Pravda ran lavish photo features hailing Bhilai as a symbol of Indo-Soviet co-operation.31 The Indians were more enthusiastic still. A Bengali chemist who worked in Bhilai recalled how his Russian boss had, over the years, become an intimate friend as well. When the time came for the foreign expert to leave, the Indian could not contain his tears. The Russian was stoic, but his wife had sympathetic drops tricking down her cheeks. For the bereft Bengali, those tears ‘were nothing to me but the drops of the holy water of the Volga, which pervasively mingled with the stream of our Ganges, and inundated our fraternity and imperishable friendship’.
In Bhilai, Russian and Indian worked shoulder to shoulder, clearing the land, building the roads and houses, erecting the plant. Those who were part of this effort remembered it with warm affection. It was, recalled one participant, ‘a frenzy without panic, a tempo with a plan. The construction team glowed with pride and satisfaction at the newborn plant they had brought to life, the operation team was anxiously eager to nurture it to its full stature . . . Each of us were helping build the future – a future one could almost see, touch, and feel.’ Finally, in February 1959, under the benign eyes of the president of Indi
a, the first flush of molten iron came out of a blast furnace in Bhilai. All around there were tears of joy and rejoicing. Those who were there long remembered them as ‘the most exciting moments of [their] life’.32
The Indian steel industry was described by a senior official as ‘at once a school of technique and the mainspring of other industrial activities’.33 In fact it was more. The steel factory was a living refutation of the belief that Indians were non-productive and pre-scientific – in a word, backward.
IV
In the economic modernization of India, large dams occupied a rather special place. They would, on the one hand, emancipate agriculture from the tyranny of the monsoon and, on the other, provide the electric power to run the new industries mandated by the five-year plans. Jawaharlal Nehru was enchanted by dams, which he called ‘the temples of modern India’. His fascination was shared by millions of his countrymen, who too came to venerate these towering new monuments built in mud and concrete.
Indian intellectuals greatly admired the Tennessee Valley Authority, the integrated project that was a cornerstone of Franklin Roosevelt’s New Deal. But they also admired the massive multipurpose projects undertaken in the Soviet Union. In the 1940s, anticipating Independence, scientists and engineers made trips to America and Russia to acquaint themselves at first hand with how dams were built. They were deeply impressed with what they saw.34 On either side of the Iron Curtain, these projects represented ‘the triumph of science, technology, foresight and centralized government over politics, petty local authorities and powers, ignorance, superstition, and backwardness’. They represented, indeed, ‘the salvation of the nation through rationality and strength’.35
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