Can India Finance Her Five Year Plan?

DURING the last year, India’s Five Year Plans, their conception and magnitude, the resources and needs of the country, the difficulties in connection with foreign exchange, the desirability of foreign aid — all these and a number of related questions have received considerable attention in America. The extension of credit by the Export-Import Bank and the Development Loan Fund earlier this year was evidence of the desire of the U.S. government to make an effective contribution to India’s economic development. The resolution introduced by Senators John Kennedy and John Sherman Cooper (former U.S. Ambassador to India) for massive and coordinated support of India’s plans and a strong plea by Senator Hubert Humphrey for large and sustained aid have served to make people increasingly aware of the importance of India’s efforts for social and economic betterment. It is, therefore, essential to ask what is meant by India’s planned development. Why is such a program necessary?

When India became an independent country eleven years ago, she faced enormous economic problems: a stagnant agricultural economy, an excessive population, woefully low standards of living, chronic unemployment and underemployment, lack of financial and technical resources. The lopsided nature of the economy was in no small measure due to retarded development under foreign rule. But the economic ills were also aggravated by post-war inflation and the aftereffects of partition of the subcontinent.

On the other hand, the hopes for betterment of a people who had attained self-rule were understandably high. National freedom engendered “a revolution in expectations.” Moreover, several projects for industrialization, power, and irrigation, and also programs for expansion of social services, had been formulated or were at various stages of implementation, and the necessity for some kind of coordinated effort for economic and social development was increasingly recognized.

After the adoption of the constitution in India in January, 1950, a planning commission was set up to survey the whole economy and devise ways of mobilizing and augmenting the economic, technical, and human resources of the country. The commission is an advisory and consultative body and formulates its proposals and recommendations in close cooperation with various ministries of the union (federal) government and the state governments. It consults continually with various groups of men: industrialists, business and labor leaders, consumers, economic and technical experts, and legislators. India’s plan is thus essentially democratic in its conception and execution.

No facile solutions or ready-made rules exist for the improvement of a vast, impoverished nation. The methods by which Western Europe and the United States progressed over a century and a half can have only a limited application in a country with a large and growing population which has no unconquered frontiers, no colonial territories. Countries like India have to seek their own answers to problems of agricultural reform and industrialization, the role of the state in an underdeveloped economy, the encouragement of private enterprise, and the guarantee of social justice. We are trying to do in India what it has taken centuries to achieve in the West.

INDIA’S plan is to build up a “socialist pattern of society.” We need not be frightened of words, whether “socialism” or “capitalism.” All civilized governments today seek for their people some kind of welfare state or society in which concerted efforts are made to improve standards of living, to provide an increasing degree of economic security, and to enlarge the scope of essential social services. In wartime the state performs many functions to attain common objectives and mobilize national efforts; countries like India are waging a war against poverty, unemployment, disease, and illiteracy, and have to make a similar endeavor. In this sense, as Sir William Harcourt, a former British Chancellor of the Exchequer, observed, “we are all socialists now.”

The constitution of India itself has set forth the ideal of a welfare state based on social justice in which the ownership and the material resources of India are so distributed as to serve the common good and in which the economic system does not result in concentration of wealth and means of production to the common detriment. But a welfare state need not be a totalitarian state. The second Five Year Plan has thus defined its objective: “The accent of the socialistic pattern is on the attainment of positive goals; the raising of living standards; the enlargement of opportunities for all; the promotion of enterprise among the disadvantaged class in the creation of a sense of partnership among all sections of India. These positive goals provide the criteria lor basic decisions.” The government and people of India are seeking to achieve these objectives through consent, not coercion. Our people are using the polling booths, not barricades; constitutional processes, not dictatorial ukases.

Moreover, India’s constitution lays down that there shall be no acquisition by the state without compensation, and wherever such compensation has been paid, as in the nationalization of life insurance companies or a gold mining industry, it has been not only fair but generous. Measures are adopted for economic reform after full debate and through parliamentary procedures. In the Indian economy, agriculture, consisting of privately owned farms, is the predominant industry. No program is visualized for collectivization of the land; the emphasis is on development through cooperatives. While feudal estates are being broken up so as to make the tiller the owner of the soil, ceilings are provided for holdings of land in several states.

Private enterprise contributes nearly 98 per cent of the total industrial production, and it is actively encouraged by the state in its expansion. Thus, two private steel plants have been assisted in their schemes for doubling their capacity through governmental guarantee from World Bank loans, even though three government steel plants are being set up. In other words, the government is willing to help to achieve the maximum national product through private enterprise as well as through State-owned and -managed industries and services. The Indian people constantly remind themselves that the individual on the farm and in the factory is at the center of national development. We believe that a plan is for man, not man for plan.

During the period of the first Five Year Plan (1951-1956) the spell of stagnation was broken, The national income increased by 18 per cent and the per capita income by 11 per cent, taking into account the growth of population. The output of food grains went up by nearly a fourth, or by 11 million tons, and agricultural production as a whole by 19 per cent. Through irrigation and land reclamation the area under crops increased by 26 million new acres.

Nearly 80 million people comprising one fourth of the rural population felt the impact of a dynamic community development program. This program is designed to revivify rural life by improving productivity and providing employment through rural industries. It also aims at improving the health, education, and communications in the village areas. A useful yardstick for measuring the success of such projects is the extent of voluntary contributions of the people; nearly half of the expenditure of this program has been made through voluntary contributions by villagers, in the form of free labor, materials, land, and even cash. A silent revolution is spreading through the countryside. On its success depend the stability and progress of a land where 80 per cent of the people live in villages.

Along with agricultural progress, industrial production increased by 30 per cent by the end of the first plan. Employment was provided for nearly 4 million more people; 6 million more children went to primary schools; the number of technical institutes and universities grew steadily; and health services were extended. But the success of the plan has to be judged not merely in terms of physical targets and percentages of increase in production and consumption, important as they are for an economically backward country. What is more vital is the creation of a new spirit of enthusiasm, hope, and confidence. This the first plan, in a large measure, achieved.

UNFORTUNATELY, it did not make an adequate impact on the economy. A start had undoubtedly been made, but it was recognized that future development had to be more basic as well as speedier. The second Five Year Plan, therefore, is essentially an attempt to lay the foundations of sustained development. Briefly, its objective is to obtain a 25 per cent increase in national income — from $21 billion in 1955-1956 to $26 billion in 1961. Production of consumers’ goods is expected to rise by 21 per cent, with the balance plowed back into national development projects. In terms of per capita income the increase expected is 18 per cent, but in concrete terms this increase can hardly be regarded as ambitious. It would increase the per capita income from fifty-six dollars a year to sixty-six dollars. The ratio of investment to national income would go up from 7.3 per cent to 11 per cent, which is still low in comparison with that of many countries. Employment opportunities are to be provided for an additional 6.5 million people. Food production is to be increased by 25 per cent. Manufacture of steel, which is basic to the Indian economy, would rise to 4.5 million tons a year, which is quite a modest target for a population of 380 million people.

But with all the industrialization that is envisaged, India is and will remain a predominantly agricultural country. To bring and conserve water for Indian farms, to supply fertilizer and manure to Indian farmers, to adopt more efficient practices in consonance with local conditions, organize the farmers for cooperative action, provide schools and health clinics, supply light and power to rural homes and industries, and develop better communications and transport — these are the primary tasks which the government is undertaking. We recognize that India cannot be prosperous unless her villages are improved; but the countryside will not be in a healthy state until the national economy is further diversified, the pressure of population on the land is reduced, avenues of employment extended, and industry built up.

This second plan has run into difficulties in regard to foreign exchange resources available for import of food grains, capital goods, and industrial raw materials. Therefore, the criticism is leveled that the plan has been “overambitious.” It has undoubtedly set high targets for production of food and industrial goods and for increasing incomes and social services. But the country cannot attempt less under the intensive pressure of a rapidly increasing population and of insistent public expectations and demands. It should also be pointed out that difficulties in regard to foreign exchange have not been due to the importation of luxuries or misdirection of scarce resources; by and large, the money has been expended on productive and remunerative projects.

In implementing plans of development, India has received a substantial amount of foreign aid from the United States, from the Colombo Plan, and from other countries, including Soviet Russia, The foreign aid received, however, constituted only about 10 per cent of the total developmental expenditure. The principal financial burden has been borne by the people of the country themselves. India is probably the highest taxed country in the world relative to capacity. Indeed, in this respect the country satisfies the stern criterion laid down by George F. Kennan that “only those [peoples] are really worth helping who are determined to survive and succeed whether one helps them or not.”

A national plan is not merely an inventory of schemes and projects; it must be bold in order to stimulate effort, inculcate initiative, strengthen creative forces. And the people must feel that despite all difficulties and obstacles their government is making a maximum effort for their welfare and progress. “Against the danger of a big plan,” Professor J. K. Galbraith observed after a visit to India and study of her plans, “must be set even greater dangers of frustration of the democratic spirit which would follow from one that seemed reluctant, inadequate, or even insufficiently bold.” In balancing the risks, we have to take into account the prevalence of chronic unemployment with its maladjustments, waste, and social discontent. These are facts which a realistic democratic government has to face.

India’s leadership seeks to unite people by providing constructive objectives of social reform and economic amelioration. With the achievement of political self-rule, a social purpose is essential to stimulate national endeavor and elicit the creative energies of people. India’s Five Year Plans are, in this sense, a symbol of her spirit of resurgence and a beacon for national adventure.