Reflections on India's Five-Year Plan
Author(s): C. N. Vakil and P. R. Brahmananda
Source: Pacific Affairs , Sep., 1952, Vol. 25, No. 3 (Sep., 1952), pp. 248-262
Published by: Pacific Affairs, University of British Columbia
Stable URL: https://www.jstor.org/stable/2752802
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Reflections on India's Five-Year
Plan
C. N. Vakil and P. R. Brahimananda
DURING the period of almost one year since its publication, the
Draft Outline of the Five-Year Plan for the economic develop-
ment of India has been the subject of discussion in the central and
state legislatures, state governments, industrial and labour associations,
chambers of commerce, committees of political parties, economists, engineers and other sections of the Indian community, many of which
have communicated their views to the Planning Commission, its
author, in response to a request for criticism and suggestions. Although
it is too early to anticipate the exact form of the final Plan, it should be
useful to consider some of the suggestions that have been offered, since
the Commission intends to take due note of these in preparing the
final Plan. The object of the present article, then, is to examine certain of the major criticisms that have been made and to indicate the
nature of the conflicts and difficulties that confront the planners under
existing circumstances.'
At the outset it must be stressed that the Planning Commission had
to work under extremely difficult conditions. The country was experiencing strong inflationary pressures, and both the central and the
state governments had already embarked upon numerous projects of
various kinds on the assumption that ample financial resources therefor would be available. There was no clear or consistent policy governing price control, foreign trade, allocations of resources, or other
crucial matters. The activities of the different parts of the public, or
government-managed, sector of the economy had not been systematised, nor had there been much effort to coordinate them with those
of the private sector. The government's attitude towards the private
sector vacillated, and its views regarding nationalisation underwent
periodic revision. Projects contemplated both by the public and by the
private sectors appeared to exceed greatly the capacity of the country
to produce or to acquire the necessary construction and other materials.
There was no clear-cut scheme of priorities, and the different state
1 For a discussion of the background and aims of the Plan, see V. K. R. V. Rao, "India's
First Five-Year Plan-A Descriptive Analysis", Pacific Affairs, March I952.
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Reflections on India's Five-Year Plan
governments were pursuing conflicting objectives. The full implications of the acceptance of social welfare commitments and of the pursuit of ethical policies were not yet quite understood; and scarce
resources, which were more urgently required for building up capital
equipment, were being used for various welfare measures. The limitations of the economic system and the significance of the inelasticity of
production in industry as well as in agriculture had not been perceived; and at different stages the government was tightening and
relaxing controls. In fine, there was no systematic effort to view each
problem in a national perspective, to emphasise the national point of
view as against the views of separate sections, or to concentrate on the
formulation of measures which would ease the problems of the country
on a long-term basis.
One of the most significant achievements of the Planning Commission has been its attempt to appraise the financial resources that will
be available during the period of the Plan (1951-52 to 1955-56) and to
shape various projects according to their availability. At the end of
i950 it was calculated that the total cost of central and state schemes
then under way would amount to thirty-five billion rupees, and it was
hoped that these schemes would be completed within six years. The
Planning Commission concluded, however, that no more than II.2
billion rupees can be raised during the period with which it is con-
cerned. Its main task, therefore, was one of pruning-not an enviable
task, inasmuch as it had to engage in protracted bargaining with each
department of the Centre and with each state government in order
to persuade them to curtail their projects. As the central and the state
governments were already committed to a number of development
schemes, the Commission was left very little opportunity to effect a
new pattern of distribution of resources. If it had introduced new
projects of its own, these could have been undertaken only at the cost
of others on which expenditures had already been made. In its pruning, the Commission held that, since food deficiencies represented the
most pressing problem, the bulk of the available resources should be
devoted to the construction of irrigation and multi-purpose development projects. It also took the view that the objective of the Plan should
be the establishment of an appropriate economic base which, after
the first five-year period, would permit an acceleration of development.
For this purpose, a sizable proportion of available resources would have
to be devoted to the development of public utility services. Moreover,
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the railways, which had been subjected to constant wear and tear since
the beginning of the last war, would require rehabilitation, as would
the transport system in general. In view of these demands on the
country's limited resources, not much would remain for industrial
development, which the Commission consequently left mostly to private initiative, although suggesting certain controls for the purpose of
coordinating the activities of the public and private sectors of the
economy.
The perspective governing the Planning Commission's recommendations for implementation of the Plan was similar to that adopted in
determining the allocation of resources. Finding that discrepancies in
the controls governing competitive crops, and the prevalence of high
prices for commercial crops, had led to a large-scale diversion of acreage from food to commercial crops,2 the Commission recommended
that the prices of the latter also should be controlled and that price
incentives should be consistent with the over-all priorities established
by the Plan, since, if food production was to have first priority, farmers
should not be offered maximum incentives to grow commercial crops.
To convert the basis of Indian agriculture from subsistence to mixed
farming and thus to increase its efficiency, the Commission suggested
various organisational measures, chief among these being the constitution of joint village management boards which would treat each village as a single unit of management and pool and allocate its resources.
The Commission recognised that the food problem in India is caused
by the growing disequilibrium between population and supply, and
that it can be met only by relatively long-term correctives; meanwhile,
as minimum interim measures, it proposed monopoly procurement of
foodgrains and urban rationing in all states.
In the matter of taxation, the Commission accepted the view that
any increase in direct tax rates would harm the capital market, and
suggested a voluntary moratorium on the payment of dividends for a
limited period in order to encourage reinvestment of profits in industry. Holding that the development of small-scale and cottage industries should proceed on lines complementary to those of large-scale
industries, it suggested the levy of a cess on the latter in order to assist
small-scale industries and the apportionment of raw materials as well
as markets between the two groups. In regard to family planning, it
2 Competitive crops in different parts of the country include cotton and jowar, sugar cane
and paddy, jute and paddy, and oilseeds and millet.
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Reflections on India's Five-Year Plan
merely recommended that the government should supply facilities for
sterilisation and for the provision of contraceptive advice on economic
as well as physical grounds.
The Commission had to choose between competing objectives and
to withstand conflicting pressures. Given the limited supply of resources, it had to make a choice between agriculture or industry and
between reserving maximum support for the public sector or allowing
relatively more leeway for private capital formation. It had also to
decide between measures designed to achieve greater immediate
equality of incomes at a lower level of aggregate production, and
others calculated to increase total production and thus to provide an
opportunity later for an absolute increment in the income of each
citizen; it took the position that radical redistribution measures would
reduce the volume of savings and thus the rate of capital formation.
The Commission had also to decide whether to give first priority to
the needs of small-scale industries or to those of large-scale ones; in
view of the widespread public support for them, it was obliged to
suggest some measures for re-allocating resources to small-scale industries, even at the Cost of efficiency. Concerning the extension of government activities in industry, the Commission had to choose between
broadening the scope of nationalisation or concentrating the limited
resources of the public sector on the expansion of its productive capacity; it preferred the latter course. In the interest of raising agricultural
efficiency, it had to decide whether to recommend collectivisation or
redistribution of land to small peasants; it proposed joint village management boards as a compromise, for these are to increase the size of
the management unit while permitting peasant landownership. In
respect of labour, it proposed that wage increases be avoided, but sug-
gested only a voluntary moratorium on dividend payments. In short,
the Commission, whose aim was to formulate a programme which
would attract the widest possible support among the national community as a whole and at the same time operate within the institu-
tional framework formulated in the new Constitution, evolved a Plan
that avoids extreme courses of action.
IT is not surprising that such a Plan should have met with a mixed
reception. A plan which seeks to follow a middle way in economic
policy and in the allocation of resources is unlikely to satisfy the expectations or demands of extreme elements in the community. Thus,
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while some sections hold that the Five-Year Plan has gone too far,
others insist that it has taken no commendable steps forward; it is
termed realistic by some and impractical by others. Very few have
realised that, since the Plan had to be compatible with the over-all
objectives of national policy described in the Constitution and clari-
fied by government statements, the scope of the Commission's efforts
and the extent to which fundamental structural changes could have
been suggested were restricted. As the Commission itself has remarked,
the Plan could not be the medium for radical institutional changes
which might lead to wide differences of opinion among different sections of the community. It had, therefore, to adjust the tempo of sug-
gested change to the climate of social opinion as expressed in the new
Constitution and elaborated by spokesmen of the political party in
power.
It is clear, then, that the Commission wished to avoid supporting
the extreme courses advocated on the one hand by proponents of unrestricted private enterprise and on the other by exponents of unlimited
government intervention and control. It is hardly astonishing that private business and industrial circles have received the Plan with some
satisfaction. The Commission's clear statement that during the next
five years the government should not expand the scope of its industrial activities afforded a welcome sense of security to private interests
desirous of expansion. At the same time, industrial circles were disappointed that the Plan held out no hope for a reduction in direct tax
rates; they argued that it left development of the entire industrial field
to the private sector without, however, meeting the latter's need for
development funds. In pressing for tax relief, the industrial community tended to exaggerate the soundness of the financial position of
the central government.
On the other hand, the revenue surpluses envisaged in the Plan
depend in large measure upon the continuance of large export-duty
collections, which in turn depend upon the maintenance of foreign
demand for several export commodities required abroad for defense
stock-piling purposes. Impartial observers have reminded the Commission that this source of revenue is contingent on foreign stock-piling
programmes and hence is impermanent. At present, in fact, the I952-53
budget indicates sharply reduced collections, with the result that, instead of a surplus of 260 million rupees in the Central Budget as anticipated in the Five-Year Plan, barely forty million are available from
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Reflections on India's Five-Year Plan
revenue sources for capital projects. Under these circumstances, assuming that the projects in the public sector must be completed and that
the objectives of the Five-Year Plan should be achieved, there is little
room for relief of direct taxation. Moreover, the government has
argued that private funds released as a result of any such relief would
not necessarily be invested constructively but might be used instead
for speculation or consumption. A reduction in direct taxation might,
therefore, excite dissatisfaction among the poorer sections of the country and thus dampen the general enthusiasm for the Plan as a whole.
The. industrial community has expressed the belief that the restrictions contained in the Industries Act, which authorises the government to determine the location as well as the minimum size of any
new manufacturing unit, will tend to discourage private investment.
It has, however, welcomed the Planning Commission's suggestion that
development councils be established in various industries. It has disagreed with the emphasis placed by the Commission on the need for
development of small-scale industries, which it regards as relatively
inefficient, and has shown some disappointment over the Commission's
failure to recommend removal of price controls. The Commission's
exhortations to private enterprise to realise its responsibility and to take
voluntary measures to increase its productive efficiency have in general not been relished by the business community, which has responded
by pointing to the need for equal stress on efficiency in government enterprises. The importance given to agriculture as against industry has
also been criticised, on the score that there can be no permanent basis
for economic development without appropriate industrial expansion.
Exception has been taken particularly to the Commission's lack of
emphasis on the establishment of capital goods industries and on the
expansion of industries producing steel and pig iron, which are in
acutely short supply.
It cannot be denied that some of these criticisms possess merit. The
extension of government control over the location as well as over the
size of manufacturing units is inappropriate in a time of lagging industrial development. It is one thing to emphasise the need for redis-
tribution of industries and another to impose restrictions on their
location, unless the government is prepared to offer counter-balancing
advantages in the areas of its choice. Arbitrary emphasis upon decentralisation may inhibit expansion, since if new industrial units must be
located in a region which does not offer advantages available elsewhere,
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the probability is that they will not be established at all. The government must chocse between a policy which seeks to maximise the rate
of development for a given period before concerning itself with the
factor of location and one which emphasises immediate decentralisa-
tion at the possible expense of over-all economic development.3 The
regions selected for development in the Five-Year Plan undoubtedly
have potential resources and will develop in time; but since the impor-
tant factor is the relative ability of a region to contribute to output
within a given period, it appears necessary to strike a balance between
the objective of decentralisation on the one hand and that of development on the other, so that in the endeavour to increase production in
some regions more output is not sacrificed elsewhere. The pace of
economic development depends upon the creation of a production
surplus, and any measure which delays the achievement of this goal
may prove to be disadvantageous when viewed in an over-all perspective.
In recent years increasing responsibilities for labour welfare have
been imposed upon private industries, which have resisted this trend
on the ground that it has a depressant effect upon the rate of reinvestment of profits. In considering this problem, one must realise that a
backward economy undergoing rapid industrialisation faces different
conditions than do advanced countries. In the United Kingdom, for
example, the emphasis on labour welfare and social security measures
came more or less at the close of the Industrial Revolution. In a coun-
try such as India, on the other hand, unless the government provides
for transfers of resources from capital to labour for welfare purposes,
it is likely to lose the political support of a large section of the population. The present climate of social opinion differs from that of i50
years ago. Unless private business realises that welfare measures are
3 The pursuit of decentralisation as an objective in itself can produce startling results. For
example, the Five-Year Plan contemplates an expansion in electric-power output of about one
million kilowatts, mainly in the less developed regions of the country and without adequate
consideration for the needs of developed and rapidly expanding manufacturing complexes such
as that in the Bombay-Poona region, which contributes seventeen per cent of India's total
industrial production and about one-third of its direct tax revenues. Inadequacy of local
power supplies had necessitated the rejection of applications for an estimated ioo,ooo kw. of
power in the region by the end of 1951. Owing to insufficient rainfall in the catchment area
of the hydroelectric system, an acute power shortage has prevailed in the entire region since
October 195i, and a twenty-three per cent cut in industrial consumption had to be imposed
for a nine-month period. It has been estimated that the resulting hypothetical loss in terms of
value of output exceeds Rs.6oo million.
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Reflections on India's Five-Year Plan
essential to the maintenance of a democratic system in the country, a
"mixed" economy will be able to function only with difficulty. The
case for private enterprise in undeveloped countries rests upon its willingness to accept a large share of social responsibilities. Labour welfare
measures are a condition of public support for private enterprise. The
transition would be smoother if enlightened sections of the Indian
business community understood more fully the implications of acceptance of a mixed economy in a backward country.
ANOTHER corollary of a mixed economy is the system of controls
by which the government allocates the available resources to various
fields of activity in such a manner that its scheme of social priorities is
fulfilled. In a country suffering from inflationary pressures and desirous of undertaking a large-scale development programme, controls
-particularly those governing prices-have a significant function.
The Planning Commission has advocated the continuance of certain
price controls. Sections of the business community, however, believe
that a relaxation of controls would serve to increase industrial production. It is difficult to find much substance in their argument. For example, when the government experimented with partial control of
the sugar industry, manufacturers had to sell a certain percentage of
their output to the government at a fixed price; the remainder could be
sold in the free market. A noticeable increase in sugar production resulted, but at the cost of reduced acreage in foodgrains In the same
way, the increased foreign demand for oilseeds led to a reduction in
the acreage devoted to cereals. Unless much land is reclaimed for cultivation, or unless new irrigation works permit an increase in the cultivated area and in the yield from existing acreage, the prospect for
improved agricultural output seems to be limited in the short run,
which is to say that an increase in prices of agricultural commodities
would not lead to a rise in aggregate output. Higher production depends upon large-scale capital investments of a type far beyond the
reach of the ordinary farmer.
In the case of industry also, the extension of specific price incentives to a particular group might create difficulties by encouraging the
manufacture of one product at the expense of another. In an undeveloped economy which suffers from shortages both of monetary and
of real capital and from an inadequacy of complementary resources
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(such as technical skill and new land), the effectiveness of price incentives is definitely limited. Since several industries in India depend
upon imported raw materials, an increase in the price of manufactures will not necessarily bring about an improvement in the supply
of raw materials, unless foreign-exchange earnings improve. A greater
price incentive will not necessarily set in motion the various processes
that must precede an expansion of any particular industry. Capital
must be raised, equipment must be imported, technicians and skilled
labour must be found, and the industry must acquire the requisite raw
materials. Unless these complementary processes are coordinated, the
price stimuli will not induce an increase in the aggregate productive
capacity of the system, so that more of one product can be manufactured without causing a diminution in the manufacture of another.
By itself the price incentive appears too weak to achieve the desired
responses in an undeveloped country and, if pressed too far, may
aggravate inflationary pressures, since an increase in the price incentive offered one sector will raise costs in others.
While employment of price incentives may induce greater manu-
facturing efficiency in economically advanced countries, it does not
necessarily have a like effect in undeveloped countries, such as India,
which suffer from serious shortages in capital equipment and technical
personnel. An increase in manufacturing efficiency is contingent upon
an improvement of existing processes; if the new method involves
less labour than the old, problems of displacement will result. In a
rapidly developing community in which industries expand at such a
pace that they can absorb labour displaced elsewhere, the problem may
not be acute, but in India mechanisation will intensify the frictions of
the transitional period. Any increase in agricultural production by
means of mechanisation will bring about displacement of labour which
cannot be absorbed under existing conditions.
As long as the aggregate supply of most commodities falls woefully short of total demand, and as long as the possibilities of a speedy
expansion in their over-all production are sharply restricted, the nation
must depend upon price controls to allocate resources in accordance
with the pattern of social priorities established by the government. The
complaints of private business on this score are justified insofar as the
controls have operated unsatisfactorily because of administrative defects and a lack of integration among the various controls. An improvement in administrative efficiency would go far to abate prejudice
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Reflections on India's Five-Year Plan
against controls, which are necessary for the smooth operation of the
economy.
THE priority given by the Planning Commission to agriculture as
against industry has aroused considerable dissatisfaction. This decision
was governed in part by the urgent need to solve the food problem
through an increase in the agricultural potential. But in reserving the
lion's share of resources for agriculture, the Commission ignored the
necessity for expanding industrial capacity in order to ensure a supply
of the construction materials required for irrigation projects, among
other things. It is reasonable to ask whether the country's long-term
problems will be solved by the pattern of allocation recommended by
the Commission. Population pressure is compelling the diversion of
ever larger resources to agriculture in order to feed the people-a problem whose solution can be anticipated only if more irrigation projects
and fertiliser plants are built and vast areas are reclaimed-activities
requiring capital-intensive investment.
The problem of agricultural production in India is not merely one
of organisation. More tractors and greater mechanisation will not effect
significant increases in output. Apart from geographic factors and the
suitability of different kinds of land for the use of machinery, mechanisation will not lessen the dependence upon rainfall. The capacity of
any community to divert resources to the construction of permanent
capital equipment such as irrigation systems depends upon the supply
of construction materials, which depends in turn upon the productive
capacity of the industries that manufacture them. Although India possesses large deposits of iron and other important mineral ores as well
as considerable unused land, these potential resources can be exploited
only with the aid of large-scale capital equipment applied over a long
period. If the Planning Commission had made provision for a substantial expansion of construction-materials industries as well as of
some capital goods industries, it would have set the scene for speedier
development of potential resources at a later date. Had industrial
rather than agricultural development received priority, the method of
capital formation involved would have been more roundabout than
that in fact proposed, but it would probably have yielded better results
in the long run.
Another aspect of the rivalry between agriculture and industry
concerns the likely response of farmers to economic stimuli, upon
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which the success of several of the measures proposed by the Planning Commission will depend. As the vicissitudes of the grow-morefood campaign recently demonstrated,4 the average farmer's response
to various forms of assistance is extremely limited and is likely to
remain so until he has acquired greater education and understanding
and has been freed from dependence on the vagaries of rainfallprocesses which will require considerable time. On the other hand,
the employment of stimuli on the same scale in the industrial field will
attain better results more quickly. If the country could wait indefinitely, it could go on investing in agriculture, even though the response
was limited. In fact, however, unless the problem of poverty is solved
soon, social upheavals may rend the entire fabric of the existing system.
It is in this sense that an expansion of the industrial potential, which
would indirectly benefit agriculture, may be regarded as possibly more
advantageous than concentration on agriculture alone. Since, then,
the agricultural problem must be attacked through measures undertaken in the industrial field, there is ground for complaint that the
Commission should have earmarked greater resources for industrial
development.5
THE Five-Year Plan has been subjected to severe criticism also be-
cause of its modest objectives. It seeks to restore prewar living standards, and envisages a gross rate of investment of barely four per cent
of the national income. Several sections of the community have been
extremely disappointed by the modesty of these goals; for public response to a development plan depends upon what it promises, and
this one offers only meagre rewards. Yet the modesty of the planners
was due not to a deficiency of imagination but rather to the existence
of certain limitations, over many of which they lack control. The
extent to which the rate of investment can be raised does not necessarily depend upon the size of the aggregate national income. The
factors determining a country's investment potentialities include the
distribution of income, the capacity for saving, the public response to
an austerity programme, the period to which such a programme can
4 See, for example, K. G. Sivaswamy, "Indian Agriculture-Problems and Programmes",
Pacific Abairs, December I950.
5 It is to be hoped that in Part Two of the Five-Year Plan, whose execution will hinge
upon foreign assistance, the Commission will provide more adequately for industrial development.
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Reflections on India's Five-Year Plan
be prolonged, the rate of population growth, the capacity to secure
resources necessary for the execution of investment programmes, and
so forth.
To take the most important factor, it is clear that as long as sup-
plies of capital equipment, easily cultivable new land, skilled labour,
basic raw materials, etc. are limited as at present, and as long as increases in the rate of supply of these resources also are restricted,
the mere investment of more money will not produce greater real investment. In an economy with a limited capacity to produce materials
as well as to procure equipment and technical personnel, an increase
in the rate of investment beyond a certain point must be counterbalanced by a decrease in the amount of resources available for consumption. That is to say, in India consumption and investment
generally compete for the limited resources available. Since the supply
of resources is limited, the effect of merely increasing the rate of mone
tary outlay in the construction of various projects will be to inflate
prices, and in consequence some projects will have to be slowed or
left uncompleted, if they are not entirely abandoned. It would definitely not be to the interest of the country to embark upon enterprises
for whose completion adequate resources are not assured. Rather,
prudence dictates that it undertake only whatever volume and pattern
of investment can be sustained with the aid of resources that are likely
to become available. One of the serious technical limitations of the
Five-Year Plan is its concentration in the main on the monetary and
financial aspects of the resources necessary for its execution, without
any accompanying systematic effort to calculate in detail the requirements of the various projects in terms of physical resources. While the
financial aspects of a plan may be consistent, its "real" aspects may
reveal glaring weaknesses. Unless the various types of supplies required
for its different projects are available in the right quantities at the
right time, its schedule cannot be maintained and several of its targets
will be only partially attained. In view of the restricted supplies of such
basic materials as lumber, pig iron and steel and the difficult foreignexchange position, it is questionable whether even the modest rate of
expansion envisaged in the Plan will be achieved without appreciable
foreign aid.
Under these conditions, an increase in the rate of investment will
depend largely upon the extent to which resources can be diverted
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from consumption to investment. As is well known, the low Indian
standard of living places serious limitations upon savings. An austerity
programme which demanded greater sacrifices on the part of highincome groups might, however, evoke more enthusiastic popular response. In the development process, the total response of the nation
to the Plan will depend upon the extent to which sacrifices are made
by all sections of the Indian community, in which marked inequalities in wealth and income exist. If the government should impose a
general austerity programme involving greater sacrifices by the relatively well-to-do, the resulting public response would probably serve
to accelerate the pace of economic mobilisation. There has been a tendency in economic theory to emphasise the consequences of inequalities
in income and wealth. From the standpoint of social tension, what
matters is the extent of inequality in the enjoyment of income. Conspicuous consumption in undeveloped countries, where the majority
lives in bare poverty, is doubly undesirable: not only does it utilise
resources that would otherwise be available for investment, but it also
diminishes popular support for any national plan calling for austerity.
In this sense, the Planning Commission seems to have overlooked the
significance of the need for an austerity programme in order to increase resources available for capital formation as well as public enthusiasm for its Plan. It would be difficult to estimate to what extent the
pace of economic development could be accelerated by increasing the
austerity required of the people, but one result would be certain: the
forces clamouring for radical social and economic reforms would be
weakened thereby. Moreover, if the wealthier groups were prepared
to forgo the consumption of luxury articles and to place national interests above personal interests, the atmosphere in the country would
be very different from what it is today.
Particularly in undeveloped countries, the degree of individual
response to economic inducements is not necessarily dependent wholly
upon the size of the monetary incentives offered. The response of
labour, for example, to calls for increased production is affected by the
behavior of other sections of the community. If the government wishes
to see a new spirit animate the country, it will need to enforce uniform
treatment far more strictly than has hitherto been the case. There is
no social justification for permitting different rations for different parts
of the country, nor is it equitable to seek a voluntary moratorium on
dividends on the part of capital while imposing a compulsory wage260
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Reflections on India's Five-Year Plan
freeze on labour. It is unjustifiable, in the existing social and political
climate, to perpetuate great inequalities in landownership merely because the government is not in a position to pay compensation immediately to the dispossessed owners. Recent reverses suffered by the Congress Party in some regions have indicated that land reform is popularly
regarded as overdue. Compensation should be paid, but possibly on a
sliding scale inasmuch as payment in full in all cases might serve to
perpetuate existing inequalities of income and might also delay reform. What is at issue is not merely a conflict between landlord and
peasant or between the landlord and his state government, but a wideranging problem which deeply affects the economic, social and political future of the country as a whole. Since, unless the pace of land
reform is hastened, the consequences may be catastrophic, any sound
programme for economic development should contain provision for
some degree of land redistribution if a social revolution is to be averted.
THE conclusion that emerges from a study of the Indian economic
situation is that the problem of poverty must be attacked on several
fronts and over a lengthy period. Because of the large size and rapid
growth of the population and the seriously limited resources available
for capital expansion, the pace of economic change can be only gradual.
The Five-Year Plan is the first official planning effort in India to have
considered the significance of the limitations imposed by the realities
of the economic situation. Its authors have not yielded to the temptation to make wild promises of plenty and prosperity in the near future,
but instead have shown that the road ahead is long and arduous. Any
sudden rash of large-scale organisational changes at the present juncture would not necessarily transform the productive capacities of the
economy or free the country from the need for hard work.
The economic position of India today is somewhat different from
that which prevailed in countries similarly situated a few years ago.
For example, the Indian food problem is caused by the widening gap
between productive capacity and demand. In the last fifty years India
has changed from an exporter of food and raw materials to a largescale importer of both. The partition of the subcontinent increased the
dependence on foreign raw materials of the two large manufacturing
industries of India, jute and cotton, and aggravated the disequilibrium
existing between the country's population and food supply. The food
problem is not merely one of inadequate distribution, which might be
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Pacific Affairs
overcome by government control of marketable surpluses, but rather
one of insufficient production, which can be remedied only by largescale investment. In a country such as the Soviet Union of a few years
ago, the problem was more one of effecting certain improvements in
organisation so that ampler supplies could be made available to the
non-agrarian population or for export. In India the scope for increasing total production and the resources available for capital investment
by means of sweeping organisational changes appears to be limited.
The population problem can hardly be solved in a few years unless
many people are permitted to starve. The growth in population is
creating not merely food-supply difficulties but severe balance-of-payments difficulties as well. Without foreign assistance and the sterling
balances, food imports would consume more than one-fourth of normal foreign-exchange earnings-and their requirements are increasing.
Full comprehension of these difficulties impelled the Planning
Commission to be realistic in the selection of its goals and the formulation of its recommendations. It adopted a democratic approach to the
problems involved and agreed to modify its draft plan in response to
expressed public sentiment. Though possibly somewhat roundabout,
this approach should yield more enduring results than one involving
extensive coercion, which, under existing circumstances, could hardly
effect a rapid or significant improvement in the lot of the masses. It
was only through pioneering enterprise and hard work that the stand-
ard of living was raised in the West, and it is a truism, however un-
palatable it may be to the wishful thinker, that no country has become
prosperous overnight. The difficulties of the transitional period in
India will be so much the less if conflicting interests within the nation
are reconciled, if a livelier spirit of voluntary sacrifice appears among
the different groups, and if foreign capital is forthcoming in large
amounts and in the desired fields. Yet the magnitude of the problem
of poverty is such that, at best, foreign capital, even if it should be
made available in increasing quantity, can only lighten the burden
somewhat. Most of the effort and resources must come from within
the country. The margin of difference represented by an inflow of
foreign capital might, however, alter the entire picture by affording
the necessary impetus to local efforts.
Bombay, Jane 1952
262
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