GEC ASSIGNMENT

TOPIC: THE FIVE-YEAR PLANS DURING

NEHRUVIAN ERA

SUBMITTED BY: VANSHIKA KUNDU

ROLL NO.: 21/POL/141
ABSTRACT: -
In his last speech to the Constituent Assembly in late 1949, Ambedkar warned
that India was about to enter a ‘life of contradictions’. ‘In politics we will have
equality,’ he said, ‘and in social and economic life we will have inequality.’
These conflicts demanded attention: fail to do so, and those denied ‘will blow
up the structure of political democracy.’ Thus, the ubiquity of planning led to
the development of Planning Commission and, subsequently, the introduction
of the five-year plans. The discussion on five-year plans would be categorized
into five parts. Firstly, the discussion will investigate the meaning, scope, and
growth of five-year plans of the Nehruvian era (the interval between the
formation of planning commission and death of Jawaharlal Nehru). Secondly,
the elaboration of first five-year plan, second five-year plan, and third five-year
plan should be taken in account. Thirdly, the impacts of five-year plans on the
Indian economy will be discussed, especially in the states of Bihar and Uttar
Pradesh, and Punjab. The critical analysis of the three five-year plans will make
up our fourth part. Lastly, the discussion will end with a conclusion.

THE FIVE-YEAR PLANS OF NEHRUVIAN ERA: MEANING, SCOPE, AND

GROWTH: -
A HISTORICAL OVERVIEW: -
The history of Five-Year plans can be traced back to the days of freedom
struggles in the pre-independence era. In February 1938, Subash Chandra
Bose, in his capacity as a short-lived party president, had announced his
intention to have National Planning Committee (NPC) under the leadership of
Jawaharlal Nehru. Upon Nehru’s arrival from Europe, NPC was formed in
November 1938. Due to unavailability of Nehru, in October 1938 organized a
meeting with the Congress’ ministers of industries wherein they had taken a
resolution to address the problems of poverty and unemployment through
industrialization. As a step towards resolution, they demanded for a
comprehensive National Planning. In the process of transfer of power, an
interim government was installed in September 1946, with the power of the
prime minister bestowed on Nehru. Within a month, the Advisory Planning
Board was created. The All-India Congress Committee (AICC) had set up an
Economic Programme Committee (EPC) in November 1947 under Nehru’s
chairmanship. Then, finally EPC maintained that “having a plan” is almost a
sine quo non of political independence.
The Government the Planning Commission in 1950 and tasked with the
responsibility to prepare a document that has a plan for its expenditure and
income for the next five years. To add to this, the big industrialists or non-state
actors had joined together in 1944 and drafted a joint proposal for setting up a
planned economy under Bombay Plan. To quote Birla, ‘We do not aspire to
build industries artificially on the strength of our export trade. Whatever
industrial development there will be, will have to depend entirely on the home
market.’ In April 1951, the draft of the first five plan was introduced and
generated a lot of excitement among the academics, journalists, farmers,
industrialists, politicians, etc. in the country. The extensive debates and
discussions and ‘very ubiquity of developmental plans’ reached its peak with
launching of the second five-year plans in 1956 and continued somewhat till
the third five-year plan in 1961. The time period for the third five-year plan
was 1961-66.

THE FIRST FIVE-YEAR PLAN (1951-56): -

The first five-year plans sought to get the country’s economy out of poverty. It
emphasized mainly on the agrarian sector including investment in dams and
irrigation, land redistribution, and huge allocations for large scale projects like
Bhakhra Nangal Dam. However, there is no formal model structure that was
designed to formulate the First Five Year Plan, but it was generally agreed that
the technical work behind the target setting in the Plan was inspired by the
Harrod–Domar model. According to this model, the growth in any economy
generated by capital accumulation and financed largely by domestic savings. In
simpler terms, the basic aim of the planners was to raise the level of national
income which could only possible if people saved more money than they
spend. Thus, this model was essentially concerned with increasing the per
capita income in a domestic country.
Notwithstanding the fact that the total stock in the country was rather lower
than total number of employable people, people’s savings did rise in the first
phase of planned until the third five-year plan. Also, this time period witnessed
a serious attempt at land reforms with the abolition of the colonial system of
zamindari. Attempts at consolidation of fragmented lands, so that the farm size
could become viable for agriculture, were successful.
THE SECOND FIVE-YEAR PLAN (1956-1961): -
Though narrowly identified as the model for the Second Five-Year Plan,
nothing is more impressive of the economics of the Nehru era and
representative of the means adopted to pursue its goals than the
“Mahalanobis model.” Jawaharlal Nehru being the chairman of the Planning
Commission, it is often referred as the ‘Nehru-Mahalanobis strategy.’ This
model serves the end of rapidly raising the level of income through
accelerating growth through heavy industries, the raising the levels of incomes
was considered as the means to accomplish the task of the elimination of
poverty. At the core of the strategy was a fast growing ‘heavy goods’ sector.
Therefore, if the first plan had preached patience the second wanted to bring
quick structural transformations.
Here, the government imposed substantial tariffs on imports in order to
protect domestic industries. According to Balakrishnan, such a protected
environment helped both public and private sector industries to grow. As
savings and investment were growing in this period a bulk of these industries
like electricity railways, steel machineries, and communication could in
developed in the public sector.

THE THIRD FIVE-YEAR PLAN (1961-1966): -

The Third five-year plan (1961-1966) for economic development was
introduced in April 1961. This plan aims to take the development effort started
ten years ago one step farther. There was a realisation that India should not
only expand rapidly but also become self-generating and self-sufficient. Since
the agricultural situation went from bad to worse in the late 1960s, severe
drought occurred in many parts of the country, and the Indo-China War of
1962, and the Indo-Pak War of 1965, showed the country's weaknesses, now
planners’ priority was to attain self-sufficiency in food. Thus, the third five-year
plan tried to balance the agriculture and industrial development. The
depreciation of the rupee and the death of Jawaharlal Nehru and Lal Bahadur
Shastri led posed severe challenges to the Indian economy.

UNDERSTANDING ECONOMIC GROWTH IN THE NEHRUVIAN ERA: A

MORIBUND ECONOMY QUICKENED: -
To evaluate the growth performance of the planned economy, we will
compare the antecedent growth in the economy per se of the three sectors of
the Indian economy as analyzed by P Balakrishnan, we start therefore with a
comparison of growth in the Nehru era (1947-1965) with the growth in the first
half of the twentieth century, more accurately the period 1900-47, which
marks the second half of the British Raj in India. As shown in table 1, the
Nehruvian era has been divided into two parts which includes, firstly, the rest
of the 20th century (1947-1999), and secondly, the seventeen years of Nehru’s
prime ministership which marks the time period from 1950-1 to 1964-5.

Sector 1900-1947 1947-1999 1950-1 to 1964-5

Primary 0.4 2.5 2.6
Secondary 1.5 5.5 6.8
Tertiary 1.7 5.0 4.5
GDP 0.9 4.1 4.0
GDP per capita 0.1 1.9 1.9
Population 0.8 2.0 2.0
th
Table 1. Growth of the GDP in the 20 century

We can sniff out that apart from the acceleration of growth in all sectors, the
ranking of sectors by growth has also been reversed. Earlier, the service
sectors were producing more GDP whereas during the Nehruvian period the
commodity-producing sector grew faster. Following Kuznets’s work on
economic growth, in a poor economy with a low level of consumption of even
basic goods, a faster growth of manufacturing sector (or commodity-producing
sector) considered to be desirable. Also, the rate of growth of per capita
income during 1950-64 have exceeded 3 percent which was, interestingly,
more than twice the rate of growth of per capita income of US and UK during
1820-1992. Thus, Nehru years witnessed growth spread across the economy, a
technological advance was fostered, and even being slow and less
revolutionary (like industrial revolution in Europe), it was the ‘taproot of the
modern economy.’ To economist Sivasubromonian, the economic recovery
under this era was ‘swift, smooth and remarkable.’
With the initiation of the planned economy, in sum, there remains no question
about the fact of a dramatic quickening of the Indian economy in the second
half of the twentieth century. To quote a prominent economist Raj of that
time, “The rate of economic growth that has been achieved in India since
1950-51 is 2-3 times as high as the rate recorded earlier in India under British
administration. As a result, the percentage increase in national income in the
last thirteen years has been higher than the percentage increase realised in
India over the entire preceding half century.” However, it was demonstrated
by Nehru himself that the India had achieved only 5 percent in this plan, and 5
percent are likely to be more difficult. As he conceded, “We shall work very
hard, because we have started at such low levels, with such low surpluses.
India is almost at the lowest rung of the income ladder. Even China, I believe, is
a little higher. So was Russia at the time of Revolution.”
India has experienced an alluring record of growth during the Nehruvian era.
However, its growth was not equally distributed. While the states of
Maharashtra, Punjab, Haryana, Tamil Nadu, and Gujarat were growing at a
good pace, others like Orissa, Assam, Nagaland were economically backward.
Particularly, Bihar and Uttar Pradesh were categorized as low performers or
‘BIMARU’ states. Others like Karnataka and Andhra Pradesh have uneven
development with world class economic centres in cities and relatively less
developed hinterland.

The case of Uttar Pradesh and Bihar

Despite the ignitive growth of the Indian economy during the five-year plans,
Uttar Pradesh and Bihar lagged from the socio-economic perspective
compared to other states as analyzed by Golam Rasul and Eklabya Sharma .
Paradoxically, both the states are relatively endowed with better natural
resources and agro-climatic conditions than most other Indian states that
includes: the Ganges plains with fertile soil, the Ganges and its tributaries
provide a perennial source of water for irrigation, and the water and silt from
Himalayas makes the more fertile and suitable for agriculture. Besides, Bihar as
well as Uttar Pradesh are rich in mineral resources. However, there were
certain factors for the low development in Bihar and Uttar Pradesh which are
characterized under structural, institutional, and macro-economic factors.
These structural factors draw up three ‘other factors’: high population and low
skill; weak agrarian structure; poor physical and economic infrastructure. Bihar
and Uttar Pradesh being the densest and most populous states respectively,
lack the skilled workforce which is considered as the primary determinant of
economic growth. Moreover, the insufficiencies in the industrial activities
(inadequacies in private institutions) lead to tremendous pressure on the
sector of agriculture which, in turn, lead to the unemployment of the low
skilled labours. Secondly, the population (80 percent) of these states were
dependent upon agriculture for their sustenance but the primary basis of
agriculture i.e., land was under the elite class. Although the land distribution
took place in these states, many of the land resources still remains under the
control of the elites. Lastly, the per hectare capital expenditure in agriculture in
Bihar and Uttar Pradesh was very less. Due to poor electricity, poor public
infrastructure for surface water, increased diesel prices, and substantial
increase in fertilizers and pesticides led to a stagnant agricultural growth.
The emergence of the caste-based politics in Bihar and Uttar Pradesh, for
instance Samajwadi Party, Bahujan Samaj Party, and Janta Dal was associated
with weaknesses under institutional factors. These parties tend to lock in votes
of citizens on the basis of caste, and creed regardless of their governing
capabilities and performance. Therefore, the political instability in Bihar and
Uttar Pradesh act as a bottleneck to the economic growth in these states and,
above all, led to a weak administration. This administration, thus, was unable
to mobilize local resources effectively to the fund development expenditure.
Finally, the macroeconomic factors included: transfer of resources from Centre
to states and industrial policy. The Centre government provided the financial
support to state governments wherein the states of Uttar Pradesh and Bihar
received relatively less financial support from other states as shown in table 2.

Table 2: Financial support given to different states during Nehruvian era

Since Bihar and Uttar Pradesh have relatively underdeveloped industries and
services sector, the financial assistance to both states was very less. Moreover,
the administration, considered as an agent of socio-economic change, was
unable to collect revenues. To quote Pffifner and Presthus: “the administration
is an organization and direction of human and financial resources to
accomplish desired economic ends’’. Introduced in 1952 under the industrial
policy, the ‘freight equalization’ further marginalized the states of Bihar and
Uttar Pradesh. The new policy ensured same prices for all commodities
through government subsidies. Under this policy the raw materials from Bihar
and Uttar Pradesh were transported to other states at subsidized rates which,
in turn, favoured the growth of southern and western states. While coal and
other natural resources in Bihar were not considered under this policy and
were, thus, inexpensively available to other states. While the policy was
cancelled in 1992, but had already negated the comparative advantages of
Bihar and Uttar Pradesh’s mineral resources and affected the industrial and
economic growth.

Green revolution in Punjab

Punjab has achieved remarkable growth since independence and is now the
richest state of India. This growth and prosperity are primarily the result of
Punjab's adoption of new technology in agriculturePunjab’s cultivators were
the first to use the Borlaug seed-fertilizer during the mid-1960s, and within few
years it became the symbol of green revolution. These were the agricultural
price policies that helped Punjab to sustain and develop new technologies.
There were many determinants for the agricultural transformations in Punjab
which includes: Rural infrastructural development, manufacturing sector,
technology upgrading, and contribution of agriculture to industrialization .
According to G.S. Bhalla, the installation the tube wells, good agricultural
policies, electricity, land resources which, in turn, requires the machines for
agriculture, helped Punjab to become a pioneer in agriculture and
industrialization activities.

CRTICAL ANALYSIS OF THE THEREE FIVE YEAR PLANS: -

The strategy of development has raised several criticisms. To begin with the
first five-year plans, the people started savings but the rise was not that
spectacular as was expected at the beginning of the first five plan. And later
from the early 1960s still the early 1970s the proportion of savings actually
dropped consistently. The second five-year plans led to rapid industrialization,
however, since India was technologically backward so it has to spent precious
foreign exchange to buy technology from the global market. More importantly,
according to K.L. Dutta, as the industry attracted more investment than
agriculture the possibility of food shortage loomed large over the country. As
Mahalanobis himself had instantly recognised that in the 1950s Indian
agricultural growth was severely constrained by the availability of the most
basic kind of industrial inputs. The planners found balancing industry and
agriculture really difficult.
According to Nikhil Menon, a public and private dichotomy emerged. India was
following a mixed economy but much of the agriculture and trade were left in
private hands. The green revolution played a significant generation role in self-
sufficiency, however mainly a rise in wheat production. The rich peasants and
the large landholders were the major beneficiaries. Some regions like Punjab,
Haryana, and western Uttar Pradesh became agriculturally prosperous while
other remained backward. Hence, it increased the polarization between
classes and regions. And the lack of primary education dispels the notion that
policy in the Nehru era had neglected the crucial role of agriculture and the
savings potential of the public sector enterprises. Moreover, the centralisation
of power was also considered as the reason for the uneven economic
development of different states (Menon).

CONCLUSION: -
To India’s first prime minister, planning was a refuge: ‘something apart from
what might be called political ideologies and political conflicts.’ Therefore, to
sum in, the planned economy laid foundation for ‘planning as an instrument of
policy’ with rigid state control and regulation in economic activities after
independence. According to Balkrishna, despite many challenges, Nehru
played an important role in the five-year plans as not only does the growth in
the Nehru era amply exceed what was attained in the final half-century of
colonial rule, but the quickening of the economy observed over the second half
of the may been seen to have achieved in the Nehruvian era. These planning
laid the foundation of NITI AAYOG in the Modi era when planning commission
was abolished. The planning as an instrument of policy somehow helped India
to become the fifth largest economy of the world, with nominal GDP of USD
2.94 trillion in 201. Also, it is the fastest growing trillion-dollar economy in the
world.