A paradigm shift in India's development approach : A boon or a bane
- Part 1 -

Dr S Benjamin Nattar *

With the achievement of independence in 1947, the Indian leaders' biggest concern was all round development of the country. Nation-building, after the tedious job of state building under the astuteness of Sardar Vallabhai Patel, the iron man of India, was not going to be an easy task. It had to be achieved under a specific socio-political system. Adoption of parliamentary democracy was not a difficult affair, as the Indian freedom movement was mostly oriented towards that. It was the economic development model that was a huge worry for the nation's leaders. During the first three years, the main focus was to frame a Constitution for the country, which would be enforced not only for the political governance, but also act as a tool for the socio-economic progress.

Once the Constitution was enacted and adopted, the next move was the socio-economic growth. The general thinking prevalent among the Central leaders was to adopt a centralised approach. In fact, such approach was also reflected in the Constitution whereby, India would not be purely a federal state, but a 'Union of states.' As Dr BR Ambedkar, the architect of the Constitution described it as 'unitary state with subsidiary federal features than a federation with subsidiary unitary features'.

Backed by the ideals of the Constitution and a strong nationalist leadership, a centrally planned and directed development was initiated. A comprehensive model giving emphasis on agriculture and industry, the two main pillars of Indian economy, was evolved. The model so adopted should see a synthesis between economic developmental approach and the ideals of democratic political system. There was no universally accepted established model of development for new democratic countries.

Liberal-Capitalistic Western model followed in most of the democratic countries could prove disastrous as the nation was not yet prepared for such a liberal approach. Would socialist model followed in Soviet Russia and other Communist countries work for India? Was there any Indian model? What model was going to be followed by Prime Minister Jawaharlal Nehru?

These questions could be best addressed only if what 'development' was considered at the time of Independence. In the early 1950s, 'development' was thought purely on economic terms, like Per Capita Income (PCI), National Income (NI) and Gross Domestic/National Product (GDP/GNP). The move was to increase each of these, even though they were inter-linked.

To achieve these, Prime Minister Nehru chose to adopt 'Planned economy' for India. Having been impressed much by the Russian model of 'planned development'; Nehru wanted to take a similar approach. Even though, many critics were linking planning with socialist model, Nehru took the bold move and went ahead to materialise it.

As a first step, he established Planning Commission in March 1950, by a mere Cabinet resolution. This extra-Constitutional body which had the Prime Minister as its chairman, not made accountable to the Parliament, played a major role in the economic development of the country. The Commission framed rules and regulations for itself. Located at New Delhi, the Commission formulated Five-Year Plans on Soviet pattern, allotted fund for executing them and evaluated the plan progress. It focused on a thrust area in each of the Five-Year Plans.

Eminent economists like KN Raj and PC Mahalanobis tirelessly worked to formulate Five-Year Plans in the initial period. Chief Ministers were required to consult the Commission and follow its guidelines in preparing plans for their respective states. The basic objective was to ensure a balanced economic development all over India, monitored by the Centre. Even though there were shortcomings in this endeavour, one has to acknowledge the progress the nation made in agriculture, heavy industry, power, transport and communication etc.

Gigantic projects like Hirakud dam, Bhakra Nangal, Faraka, Bharat Heavy Electricals etc, came up. Nehru took a personal interest in setting up these projects. A strong economic foundation was laid especially in public sector. It is to be accepted that planned economy did falter in some fronts. Emphasis given to one area, neglecting others, brought about a lopsided development. Even then, in the underdeveloped economy like India, this step proved to be a boon. With some breaks after the war with China and Pakistan, so far 12 Five Plans have been executed in India.

The institution of the Planning Commission, however, had come under severe criticism especially after 1967 when the ruling Congress party lost the election in some states. Those states ruled by non-Congress parties took on the Centre especially on the functioning of the Commission. The DMK government in Tamil Nadu went to the extent of setting up the famous Rajamannar Commission to study the Centre-State relations. This Commission's Report, though not binding on the Centre, contained among other suggestions, the abolition of Planning Commission.

Non-Congress states were not willing to tow in line with the Centre. Their view was that the Planning Commission was taking a partisan approach and not favourably allocating adequate fund to them. They looked at it as a challenge to cooperative federalism. Ignoring all these criticisms, however successive governments at the Centre, whether Congress or non-Congress, only began strengthening the Commission's role. Even the staunch opponents felt the importance of the Commission as a direct challenge would result in reduction of fund allocation under Plan head.

Chief Ministers of states often flew to Delhi, met with the Deputy Chairman of the Planning Commission and pleaded for funds and projects. The Commission acted like a super-cabinet for all practical purposes. There had been instances of Chief Ministers made to wait for appointment with the Deputy Chairman and forced to accept conditions laid down by the Commission lest they should face reduction in the fund allocation.

Chief Ministers of opposition parties-ruled states had to swallow their pride in bargaining fund for their states. Some Chief Ministers had walked out of the meeting with the Planning Commission to show their resentment against its functioning. There were reports in the media of O Ibobi Singh, Chief Minister of Manipur walking out of the meeting. The then Chief Minister of Gujarat Narendra Modi too seemed to have been insulted by the Commission.

To supplement planned economy, the Government of India also formulated different industrial policies. In the initial period, major thrust was laid on Public Sector. Later on, the policy of 'Mixed economy' was adopted, allowing private sector undertakings in major areas, but reserving key industries to Public Sector. In their desire to achieve 'socialistic pattern of the society' the ruling Congress party at the centre and the then Prime Minister Indira Gandhi took a series of measures towards it.

Privy Purse given to the erstwhile princes was abolished and fourteen major private banks were nationalised. The word 'socialist' was inserted in the Preamble of the Constitution. Various welfare schemes were introduced. The state was not only producer but also a provider. Public sector undertakings were more and more oriented towards service than motivated by profit.

This was the scenario till the 1990s. Since then, the national and international economic policies were on a fast changing tract. The Indian government had to adjust to the changing needs of globalisation. Nations had to compete with one another to fast sell their goods. Exports had to increase and imports to decrease. Foreign Direct Investment (FDI) in industries, revenue inflow in all sectors had to go up.

Structural adjustments were made in industrial policy to attract foreign investment. Indian industries' products were to be of quality to compete in international trade. Strict conditions imposed by World Trade Organisation, International Monetary Fund were to be adhered to. As part of these measures, subsidies were to be minimum and labour interests not protected. Stringent environmental conditions, imposed on goods meant for exports had to be accepted. In every way, it would be a world of cut-throat competition in which the sufferer was the common man. Foundation for a paradigm shift was being laid during this period. After the Liberalisation of Indian economy, there has been a massive growth in private sector.

In this new age, neo-liberalism became the guiding philosophy. Welfare state economy had to give way to market-directed and market-controlled economy. More emphasis was on private sector. Public sector which was the hallmark of Indian economy was more and more privatised reversing the trend set by the Government in the 1970s. Even in profit-making public sector undertakings, shares were disinvested. Public-Private-Partnership (PPP) was encouraged. But here too it would be the private sector which would survive at the cost of public sector. (To be contd)

The 'hire and fire' policy followed in private sectors, especially the Multi-National Companies (MNCs) was against the interest of the working class people. But no one cared for the interests of the labour class. In the new world we live, even though the life style of the people has changed, poverty is still prevalent and in fact, the gap between the rich and poor has widened. Purchasing power of the people has, no doubt increased.

But unemployment, unchecked population growth have stunned the economic growth. The question before the policy framers, economists, intellectuals and the general public is whether there was a policy paralysis and systemic and methodological failure in the economic policy and implementation. Has the economic policy has become a fetter to economic development? The planned economy adopted as a model over half-a-century ago seemed to have become unsuitable in the changing international scenario, in the mind of the policy makers.

Even though India entered the age of globalisation, the institution of Planning Commission remained untouched. Pro reformist, the then Prime Minister Dr Manmohan Singh did feel the importance of the commission towards economic progress in India. But the new government at the centre felt that a paradigm shift has to take place apparently to meet the challenges of the present time. One such measure was the abolition of Planning Commission and its substitution by National Institute for Transformation in India (NITI) Aayog.

To be continued....