Politics of Planned Development

1. Development as political contestation: the POSCO case and left vs right

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• NCERT's case: Odisha (then Orissa) has some of India's largest untapped iron-ore reserves. It signed MoUs (memorandums of understanding) with steel makers, hoping for investment and jobs. The ore lies in poor, mainly tribal districts.
• Tribals feared losing their homes and livelihood. Environmentalists feared pollution. The Centre feared that stopping the project would scare away investors.

• The Hindu (23 June 2006) reported villagers from Dhinkia, Nuagaon and Gadakujanga in Jagatsinghpur district protesting at POSCO-India's office.

• NCERT's argument: experts should advise, but the final decision must be political. It should be taken by elected representatives, because it weighs one group against another and today's people against future generations.

• Everyone agreed on growth with justice and a key role for the government. The arguments were over a central planning body, state-run industries, and how much justice to give up for growth.
• Beyond NCERT: the POSCO MoU was signed in June 2005, and POSCO later withdrew (verify dates). In Orissa Mining Corporation v. MoEF (2013), the Supreme Court let the gram sabhas of Niyamgiri decide, and they rejected bauxite mining. FRA 2006 and RFCTLARR Act 2013 are the legal answers.
• Left and right: the left favours state control and regulation of the economy over free competition. The right trusts free competition and markets, with as little government intervention as possible. In the 1960s, Swatantra was on the right and the CPI and Socialists on the left. The Congress stood at the centre or left of centre.

2. Ideas of development at independence: modernisation and the two models

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• Modernisation: the post-war idea that development means becoming like the industrialised West.
• Old social structures break down, and capitalism, liberalism, growth and scientific thinking rise.
• This idea produced labels like "developed", "developing" and "underdeveloped" countries.

• Beyond NCERT: Rostow, The Stages of Economic Growth (1960), is the classic statement. Gandhi's Hind Swaraj (1909) is the Indian critique. NCERT asks: must we be Western to be modern?

• Liberal-capitalist model of development: the path of much of Europe and the US, based on private enterprise and markets. It had very few supporters in India in 1947.

• Soviet model of development: state ownership and centralised five-year plans (from 1928). They brought rapid growth in the 1930s-40s despite heavy odds. The model impressed the Communists, the Socialists and Nehru. The choice between the two models was part of the Cold War.
• Nationalist consensus: free India's government would not limit itself to the narrow commercial role of the colonial state. Reducing poverty and redistributing wealth were seen as the government's job.
• Disagreement: some put industry first, others agriculture and rural poverty.
• Why planning was popular worldwide (1940s-50s): the Great Depression, the rebuilding of Japan and Germany, and Soviet growth.

3. The planning consensus before 1950: the NPC, the Bombay Plan and alternatives

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• Economic planning: a government design that directs resources towards chosen goals over a fixed period. NCERT says planning was "the most obvious choice" for everyone "from left to right". The Planning Commission was "not a sudden invention".
• National Planning Committee (1938): set up by the Congress on Subhas Chandra Bose's initiative as Congress president, with Nehru as chair. Beyond NCERT: K.T. Shah was general secretary, and the war interrupted its work (verify).
• Bombay Plan (1944): leading industrialists such as J.R.D. Tata and G.D. Birla proposed a planned economy. In it, the state would lead major industrial and other investment. Beyond NCERT: about ₹10,000 crore of investment over 15 years (verify).
• The puzzle of business wanting planning: industrialists wanted the state to build infrastructure and heavy industry, supply capital they could not raise, and protect them from foreign competition.

• Trap (exercise 1): the Bombay Plan did NOT support state ownership of industry. It wanted state initiative in investment.

• Gandhian Plan (1944, Shriman Narayan Agarwal): a decentralised village economy, with cottage industries and agriculture before heavy industry.

• People's Plan (1945, M.N. Roy, for the Indian Federation of Labour): agriculture and mass consumer goods first, with nationalisation of land.
• Sarvodaya Plan (1950, Jayaprakash Narayan) (verify).

4. The Planning Commission, the NDC and the five-year plan

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• Planning Commission: set up on 15 March 1950 by a simple executive resolution. It was neither constitutional nor statutory, so it does not appear in the Constitution.
• It was only advisory. Its advice took effect only after the Union Cabinet approved it.
• The PM was chair. Beyond NCERT: Gulzarilal Nanda was the first Deputy Chairman.
• Its mandate came from the Fundamental Rights and the Directive Principles, especially Art. 39(a), 39(b) and 39(c):
  • Art. 39(a): men and women equally have the right to an adequate livelihood.
  • Art. 39(b): material resources are shared to serve the common good.
  • Art. 39(c): wealth must not concentrate to the common harm.

• NCERT calls it "the most influential and central machinery" for development. Critics called it a 'parallel cabinet' that weakened state autonomy (→ fiscal-federalism).

• National Development Council (6 August 1952): an extra-constitutional body with the PM as chair and all Chief Ministers as members. It approved the plans and gave states a say. Its role has largely passed to NITI Aayog's Governing Council.

• Five-year plan: a five-year document setting the government's income and spending priorities, borrowed from the USSR. India had twelve plans (1951-2017).
• Plan and non-plan expenditure: budgets were split into 'plan' spending on the plan's priorities and 'non-plan' spending on routine yearly costs. (NCERT: present tense; now: the split was dropped from the 2017-18 Union Budget.)
• Public excitement: the First Plan document (December 1951) was widely debated. Excitement peaked with the Second Plan (1956). The 1955-68 stamps (Bhakra Dam, Hirakud Dam, Sindri Fertilisers) show this vision.

5. The First Five Year Plan (1951-56): agriculture first and 'hasten slowly'

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• First Five Year Plan (1951-56): its aim was to pull the economy out of the cycle of poverty.
• K.N. Raj's 'hasten slowly': India should go slowly for the first two decades, because very fast development might endanger democracy.
• Agriculture first: Partition hit farming hardest. Beyond NCERT: canal-irrigated West Punjab and jute-growing East Bengal went to Pakistan, so food had to be imported.
• Big money went to dams and irrigation, such as the Bhakra Nangal Dam (beyond NCERT: also Damodar Valley Corporation, 1948, and Hirakud).

• The plan named unequal land distribution as the main obstacle to farm growth. It made land reform the key to development (details → land-reforms-green-revolution).

• Savings problem:

• National income could rise only if people saved more than they spent.
• Spending was already too low to cut, and capital was small compared with the number of workers.

• Savings rose until the end of the Third Plan, but less than hoped. They then fell from the early 1960s to the early 1970s.

• Beyond NCERT: the Community Development Programme (2 October 1952) (→ panchayati-raj). The First Amendment, 1951 (Arts. 31A-31B, Ninth Schedule) protected zamindari abolition laws (→ amendment-basic-structure).

• Politics: the Congress's landed rural leaders liked the farm focus, but they also slowed down land reform.

6. The Second Plan (1956-61): Mahalanobis, heavy industry and the socialist pattern

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• Socialist pattern of society: goal adopted by the Congress at its Avadi session near Madras (January 1955), shortly before the Second Plan was finalised, and reflected in that plan.
• Beyond NCERT: a Lok Sabha resolution came first (December 1954). The Industrial Policy Resolution 1956 reserved key industries for the state (Schedule A).

• Because the Congress took up this goal, the Socialists found it harder to present themselves as an alternative.

• Second Five Year Plan (1956-61): drafted under P.C. Mahalanobis, who founded the Indian Statistical Institute in 1931. NCERT calls it a turning point.

• Mahalanobis model: heavy investment in capital goods (machines and materials used to make other goods) and heavy industry, mostly in the public sector. The aim was quick structural change. It covered electricity, railways, steel, machinery and communication. Beyond NCERT: steel plants at Bhilai (USSR), Rourkela (West Germany) and Durgapur (UK).
• Import substitution: making at home what was earlier imported, protected by high import tariffs (taxes on imports). This helped both public and private industry grow. But it limited export-led growth.
• Costs:
• India had to spend scarce foreign exchange on imported technology.

• Industry drew money away from agriculture, so food shortages became a risk.

• Frankel (exercise 7): the Congress pulled in two directions. The party executive backed socialist state control, while the government gave incentives to private investors. This vagueness kept a broad coalition together but drew attacks from both sides: Swatantra (1959) on the right, Communists on the left. State leaders with landed support also diluted land reform.

7. The Third Plan, the critiques and the 'plan holiday'

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• Third Plan (1961-66): not very different from the Second. It was derailed by events:
• The 1962 and 1965 wars shifted scarce money to defence. The Department of Defence Production was set up in November 1962 (→ india-external-relations).

• Beyond NCERT: the droughts of 1965-66, food imports under PL-480, and the rupee devaluation of June 1966.

• Urban bias: the criticism, from the Third Plan onwards, that planning favoured industry and cities over farming and villages. Beyond NCERT: the term was popularised by Michael Lipton (1977).

• Agriculture versus industry debate: whether farming and rural poverty or rapid heavy industry should come first.
• The First Plan favoured agriculture and the Second favoured industry.

• Some critics said industry was wrongly put first. Others wanted agriculture-related industries instead of heavy ones.

• Plan holiday (1966-69): the Fourth Plan was due in 1966 but was put off. Planning had lost its novelty, and war costs, drought and an economic crisis hit together. Three annual plans were used instead, and the Fourth Plan began in 1969.

• NCERT's verdict: despite the criticisms, the foundation of India's economic development was firmly in place by then.
• Political fallout: economic hardship fed the Congress's setback in 1967 (→ congress-system-challenges).
• Exercise 4 matching: Charan Singh–farmers, Mahalanobis–industrialisation, Bihar famine–zoning, Verghese Kurien–milk cooperatives.

8. The legacy of planning: achievements, alternatives and the move to NITI Aayog

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• Achievements: a public-sector industrial base, dams and irrigation, scientific and technical institutions, and a drive for self-reliance.
• Limitations (beyond NCERT):
• slow growth (Raj Krishna's 'Hindu rate of growth')
• continuing poverty and weak land reform
• the licence-permit raj and inefficient public companies

• regional imbalance, and people displaced by big projects

• Trap (exercise 2): liberalisation was NOT part of early policy. Planning, cooperative farming and self-sufficiency were (data and the 1991 shift → planning-mixed-economy).

• Kerala model of development: high literacy, long life expectancy and low infant mortality despite fairly low income per person. It came from public education and health care, land reform and social mobilisation.
• Beyond NCERT: Kerala's People's Plan Campaign (1996) gave a large share of plan funds to local bodies (verify share). Do not confuse it with M.N. Roy's 1945 plan.

• Critiques: slow growth, educated unemployment and dependence on Gulf remittances.

• From the Planning Commission to NITI Aayog: the abolition was announced on 15 August 2014. NITI Aayog was set up on 1 January 2015 by a Cabinet resolution.

• It is a policy think tank with no power to allocate funds.
• Members: the PM as chair, a Governing Council of CMs and LGs, a Vice-Chairperson, members and a CEO.

• Its stated aim is cooperative federalism.

• The Twelfth Plan ended on 31 March 2017, closing the era of five-year plans (what replaced them: verify current).

• The debate: a lighter, advisory body vs states losing a forum and a formula for plan transfers (→ federalism-centre-state).

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Exam angles

Prelims — high-yield facts and traps

• Planning Commission: 15 March 1950, set up by executive resolution, PM as chair, first Deputy Chairman Gulzarilal Nanda. It was neither constitutional nor statutory. "It is mentioned in the Constitution" is FALSE.
• NDC: 6 August 1952, extra-constitutional. NITI Aayog: 1 January 2015, set up by Cabinet resolution, non-statutory, does not allocate funds.
• Mandate of the Planning Commission came from Art. 39(a), (b) and (c) (DPSP).
• Plans and authors:

Plan	Year	Author or body
National Planning Committee	1938	Congress, on Bose's initiative; Nehru chair
Bombay Plan	1944	Industrialists (J.R.D. Tata, G.D. Birla)
Gandhian Plan	1944	Shriman Narayan Agarwal
People's Plan	1945	M.N. Roy (not Kerala's 1996 campaign)
Sarvodaya Plan	1950	Jayaprakash Narayan

• "The Bombay Plan supported state ownership of industry" is FALSE. It wanted state-led investment.
• First Plan (1951-56): agriculture, irrigation, Bhakra Nangal, land reform, K.N. Raj's 'hasten slowly'. Second Plan (1956-61): Mahalanobis, heavy industry, public sector, tariffs. Third Plan (1961-66): 'urban bias' critique. Plan holiday 1966-69. Fourth Plan from 1969.
• 'Socialist pattern of society': Avadi session near Madras, January 1955.
• Mahalanobis founded the ISI (1931). National Statistics Day is 29 June.
• Steel plants: Bhilai–USSR, Rourkela–West Germany, Durgapur–UK.
• "Liberalisation was part of early development policy" is FALSE. Five-year plans were borrowed from the USSR.
• The plan/non-plan split was dropped in 2017-18. The Twelfth Plan ended on 31 March 2017.
• Exercise 4 matching: Charan Singh–farmers; Mahalanobis–industrialisation; Bihar famine–zoning; Kurien–milk cooperatives.

Mains — GS-I and GS-II themes

1. Development as a political choice: who should decide – experts, elected representatives or gram sabhas? Use POSCO, Niyamgiri (2013), FRA 2006 and consent under RFCTLARR 2013.
2. The Nehruvian consensus: why everyone from industrialists to communists backed planning; the Bombay Plan puzzle; the politics of the mixed economy.
3. Agriculture vs industry: the shift from the First to the Second Plan, the urban-bias critique, and its political effects (farmers' politics, 1967).
4. Frankel's contradictions in the Congress: party ideology vs government practice, and the centre vs state leaders. What this meant for land reform and the party system.
5. Planning Commission vs NITI Aayog: centralisation vs cooperative federalism. Have states lost their voice with the end of plan transfers and the NDC's role?
6. Alternative paths: Gandhian decentralisation, the Kerala model, and displacement of tribals by development projects.

Current-affairs hooks

• NITI Aayog Governing Council meetings, Viksit Bharat @2047 vision documents and state index rankings (verify current).
• Mining and land-acquisition conflicts in Fifth Schedule areas: gram sabha consent and FRA claims (verify current).
• Production-linked incentives, tariffs and Atmanirbhar Bharat seen as a return of import substitution (verify current).
• National Statistics Day (29 June, Mahalanobis's birth anniversary).
• Kerala's human-development indicators in NFHS and SRS releases (verify current).