OBJECTIVES, TECHNIQUES AND PRIORITIES IN PLANNING
In defining the objectives, priorities and techniques of planning in India, it is necessary to bear in mind the scale and dimensions of the problem as outlined in the preceding chapter as well as the basic values which must find expression in the economic and social pattern to be evolved. It is no longer possible to think of development as a process merely of increasing the available supplies of material goods ; it is necessary to ensure that simultaneously a steady advance is made towards the realisation of wider objectives such as full employment and the removal of economic inequalities. Maximum production, full employment, the attainment of economic equality and social justice which constitute the accepted objectives of planning under present-day conditions are not really so many different ideas but a series of related aims which the country must work for. None of these objectives can be pursued to the exclusion of others ; a plan of development must place balanced emphasis on all of these. For instance, even the linked objective of increased production cannot be attained unless the wider objectives of social policy are constantly kept in mind and steadily pursued. On the other hand, equality and social justice will have little content unless the production potential of the community is substantially raised. Development, thus conceived, is a process which calls for effort and sacrifice on the part of the entire body of citizens. For such effort and sacrifice to come forth psychological conditions have to be created which provide an incentive for all to give of their best.
INSTITUTIONAL AND STRUCTURAL FACTORS IN DEVELOPMENT 2. Reference has been made in the previous chapter to the limited and partial development which the Indian economy has registered during the last few decades judged in terms of per capita incomes and standards of well-being, the economy has, on the whole, remained more or less stagnant. This is primarily because the basic conditions under which an economy can continuously expand have been lacking. The impact of modem industrialism in the latter half of the 19th century was felt in this country initially through imports of machine-made goods from abroad which reacted adversely on the traditional patterns of economic life, but did not create the impulse for development along new lines. The transition that followed was characterised not by expansion of industry and a diversification of the economic structure but by a decay of India's traditional arts, crafts and industries, and by an increasing pressure of Population on the land. This retrogression led to a decline in productivity per person engaged in agriculture, the adverse effects of which were perhaps softened to some extent by the shock-absorbing capacity of the old institution of the joint family. The result was a continuous increase in under-employment and the growth of an attitude of "pathetic contentmen" on
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OBJECTIVES, TECHNIQUES AND PRIORITIES IN PLANNING
the part of the people. In such an environment there could be little economic or social progress. Whatever surpluses might have been available in the system under these conditions were directed to the purchase of imports, partly of better finished products from abroad and partly of equipment for the new transportation system designed primarily in the interests of foreign commerce. The responsibility for promoting modem commerce and industry came to be concentrated in the hands of certain classes in the urban areas, and up to the end of the nineteenth century the only major large-scale industries which had taken root in the country were cotton and jute textiles. Little attention was paid to improvement of agriculture or to the needs of the rural areas. After the turn of the century and especially after World War I, it came to be recognised that without rapid industrialisation significant economic advance was not possible. The inter-war period witnessed the establishment and growth of several industries in the country. A more positive policy on the part of the Government and a change in the terms of trade in favour of the producers of manufactured goods and against the primary producer in the period of the depression materially assisted capital formation in the industrial sector. There was, however, little overall economic improvement as conditions in the agricultural sector deteriorated sharply.
3. The backwardness of the Indian economy is reflected in its unbalanced occupational structure. About 68 per cent of the working population is engaged in agriculture, about 14 per cent in industry (large and small scale), some 8 per cent in trade and transport and the remaining 10 per cent in professions and services including domestic service. Even with this large proportion of the population engaged in agriculture, the country is not self-sufficient in food and raw materials for industry. Productivity per worker in organised industry, commerce and transport is about three times that in agriculture, but this sector of the economy has not been expanding rapidly enough to absorb the surplus population on the land. The large-scale underemployment in the rural areas which these conditions have given rise to constitutes a big economic and social problem. A change in the occupational pattern in the direction of greater employment in the industrial sector and in services is clearly necessary if the associated phenomena of mass poverty and unemployment are to be tackled effectively.
4. It follows from all this that the problem is not merely one of making the existing economic institutions work more efficiently, or making small adjustments in them. What is needed is a transformation of the system so as to secure greater efficiency as well as equality and justice. The central objective of planning is to create conditions in which living standards are reasonably high and all citizens, men and women have full and equal opportunity for growth and service. We have not only to build up a big productive machine--though this is no doubt a necessary condition of development- we have at the same time to improve health, sanitation and education and create social conditions for vigorous cultural advance. Planning must mean coordinated development in all these fields.
5. In this task of securing simultaneous advance along several fronts, it would be unrealistic to hold out the hope that rapid and spectacular progress can be made in the initial period of planning. Within a limited period, there is always a measure of conflict between
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THE FIRST FIVE YEAR PLAN
one objective and another and, in the formulation of a Plan for a given period, it is necessary to proceed in terms of priorities as between these objectives themselves laying more stress on some and less on others. This problem of balancing competing objectives is implicit in all planning and the quality of a plan depends upon the soundness of its judgments regarding the relative emphasis on the various objectives. Only to the extent that the Plan succeeds in striking a right balance can consistent policies be formulated and pursued. There is, to begin with, the problem of choosing, on the one hand, between a moderate increase in the standard of life in the near future with relatively small additions to capital equipment and, on the other, a substantially higher standard of life perhaps for the next generation at the cost of continued austerity and privation to the present generation in the interests of rapid capital formation. The implications of this choice have already been discussed in the previous chapter.
6. Secondly, while a fuller utilisation of the idle manpower in the country must be a major objective, and every effort must be made to create opportunities for work in the rural areas through improvements in agriculture, development of cottage and small-scale industries and extensive programmes of public works, especially in the slack season, the lack of the necessary equipment and other materials needed for improving labour productivity limits the rate at which idle manpower can be absorbed. There is, under these conditions, the risk of creating or perpetuating pseudo-employment, which might result in a rise in money incomes without a corresponding increase hi the supply of the goods needed for sustaining the newly employed. The problem, as has been shown earlier, cannot be solved satisfactorily without a substantia. increase in the productive equipment of me community, which, in turn, means more investment. While planning for fuller employment, it is also necessary to keep in mind the distinction between a pattern of employment which can be sustained after the development process has gone some way and a pattern that has to serve for the transitional stage. Rigidity of the occupational pattern is incompatible with rapid economic development. Steps must, undoubtedly, be taken to ensure the fullest possible utilisation, in furtherance of development programme, of labour power now running to waste, but the long-run objective must be to encourage rather than discourage the mobility of labour, geographical and occupational.
7. The problem of unemployment among the educated middle classes in the urban areas is an instance of a failure of coordination between the system of education and the needs of the economic system. As a proportion of the total population, the number of educated men and women in the country is very small, and there is dearth of trained personnel of the requisite quality in business and industry as well as in public administration. Unemployment among the educated classes is to some extent a consequence of the excessive bias in the present educational system towards general literary education to the neglect of specialised, technical and vocational training. To some extent ,the difficulties experienced by educated young men in Ending employment are traceable to a certain reluctance on their part to take on occupations which involve hard manual work or work in somewhat uncongenial surroundings either in cities or in rural areas. The problem has many facets. Unemployment amongst highly qualified and trained personnel may, to some extent, be frictional or transitional in character, but it may also be clue to a lack of adjustment between demand and supply of such specialised
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OBJECTIVES, TECHNIQUES AND PRIORITIES IN PLANNING
personnel. Employment exchanges, closer contacts between educational institutions and employers, private or government, and other devices to encourage a better adjustment between demand and supply can alleviate the problem of middle class unemployment upto a point. But a large and continued increase in the demand for educated men and women can come only from a quickened tempo of development in the economy. As planning proceeds, there will be demands for personnel with various types of qualifications and training and meanwhile it is necessary to take steps to diversify and reorientate the educational system in keeping with the needs of a developing economy.
8. The decisions that have to be taken in regard to the reduction of economic inequalities within a given period also involve a weighing of diverse considerations. While it would be wrong in this sphere to think in static terms and to condone the existence or accentuation of sectional privileges, it is no less important to ensure a continuity of development without which, in fact, whatever measures fiscal or other, might be adopted for promoting economic equality might only end up in dislocating production and even jeopardizing the prospects of ordered growth.
9. There are risks in going too far or too fast in these matters, but the risks of not moving fast enough are no less serious. The decision as to the measure of risk to be undertaken must turn primarily on an appraisal of the capacity of the community to hold together under the sows of major structural changes and of its various sections to maintain a high standard of discipline and restraint while the necessary adjustments are taking place.
DEMOCRATIC PLANNING AND THE ROLE OF THE STATE 10. The question of the techniques to be adopted for planning is linked up with the basic approach that a community decides to adopt for the realisation of its objectives. It is possible to have a plan based on regimentation and on immediate measures for levelling down in the hope ultimately of being able to level up. It is possible to take the view that mass enthusiasm cannot be created except on the basis of reprisals against those classes which have come to be associated in the public mind with the inequities and deficiencies of the old order. But the basic premise of democratic planning is that society can develop as an integral whole and that the position which particular classes occupy at any given time-a product of various historical forces for which no individual or class as such can be held responsible-can be altered without reliance on class hatreds or the use of violence. The need is to secure that the change is effected quickly and it is the positive duty of the State to promote this through all the measures at its command. The success of such planning no doubt depends on the classes in positions of power and privilege respecting the democratic system and appreciating the rapid changes it calls for.
11. It is clear that in the transformation of the economy that is called for the State will have to play the crucial role. Whether one thinks of the problem of capital formation or of the introduction of new techniques or of the extension of social services or of the over-all
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THE FIRST FIVE YEAR PLAN
realignment of the productive forces and class relationships within society, one comes inevitably to the conclusion that a rapid expansion of the economic and social responsibilities of the State will alone be capable of satisfying the legitimate expectations of the people. This need not involve complete nationalisation of the means of production or elimination of private agencies in agriculture or business and industry. It does mean, however, a progressive widening of the public sector and a re-orientation of the private sector to the needs of a planned economy.
RELATIVE SHARES OF THE PUBLIC AND PRIVATE SECTORS IN OWNERSHIP OF
PRODUCTIVE CAPITAL 12. We should like to emphasise here that, as far as the ownership of productive capital assets (other than in agriculture, small-scale industry and transport, and in residential housing) is concerned, the share of the public sector is already large. The book value of gross fixed assets owned by the Central and State Governments, together with the working capital in the enterprises concerned, amounted to over Rs. 1,200 crores at the end of 1950-51 (as compared to about Rs.875 crores at the end of 1947-48). The distribution of these was roughly as follows :-
(Rs. crores)
Railways . . . . . . . . 837
Irrigation works (including multi-purpose river
valley projects) . . . . . . 230
Communications and broadcasting . . . 53
Electricity undertakings . . . . . 40
Industries . . . . . . . 44
Civil Aviation . . . . . . . 10
Ports . . . . . . . . 8
Central Tractor Organisation . . . . 5
TOTAL . 1236
The above estimate excludes the investment in motor transport. Strictly speaking, account should also be taken of the productive capital assets owned by port trusts, municipalities and other semi- public agencies which probably amounted to well over Rs. 1000 crores.
13. The value of productive capital assets in the private sector (again excluding agriculture, small-scale industry and transport, and residential housing) in 1950 was not perhaps more than about Rs. 1500 crores. According to the Census of Manufactures for 1949 the net productive capital employed in twenty-nine groups of factory industries amounted to only about Rs. 510 crores ; for the factory industries not covered by the Census, as well as to allow for depreciation (so as to make the estimates comparable with those for the public sector which give the gross value), an additional provision of Rs. 600 crores might be made. The break down of the estimate of the value of total productive capital in the private sector, referred to above, would thus roughly be as follows :-
(Rs. crores)
Factory establishments . . . . 1110
Plantations . . . . . . . 100
Electricity undertakings . . . . 70
Mines . . . . . . . . 30
Shipping and Aviation . . . . . 32
Motor transport . . . . . . 130
TOTAL . 1472
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OBJECTIVES, TECHNIQUES AND PRIORITIES IN PLANNING
14. These estimates are necessarily rough, and relate to historical and not replacement value, which will be considerably higher in both cases, but they show that in the building up and maintenance of basic services essential for organised industry, and to some extent in industrial development itself, the State has already been playing a not insignificant part. It also suggests that the productive capital in industry and in services essential to it is so small compared to the needs of the country that, in the further accumulation of it, the two sectors can well supplement each other and need not necessarily expand at the expense of the one or the other.
RELATIONAL BETWEEN THE PUBLIC AND THE PRIVATE SECTOR 15. In the industrial sphere, the respective roles of the State and of private enterprise have been enunciated in the Industrial Policy Statement of 1948. In terms of this Resolution, the principle of Government ownership and control has been accepted in regard to a segment of the economy comprising arms and ammunition, atomic energy and railways. It has also been stated that in regard to certain key industries like coal, iron and steel, aircraft manufacture, ship- building, manufacture of telephone, telegraph and wireless apparatus, etc., the State is to be responsible for further expansion except to the extent that it considers the cooperation of private enterprise necessary for the purpose. In the rest of the industrial field the initiative for development and the responsibility for management will rest on private enterprise. Government have, however, the right to acquire any undertaking in the public interest and to intervene in cases where the conduct of industry under private enterprise is not satisfactory.
16. The distinction between the public and the private sector is, it will be observed, one of relative emphasis ; private enterprise should have a public purpose and there is no such thing under present conditions as completely unregulated and free private enterprise. Private enterprise functions within the conditions created largely by the State. Apart from the general protection that the State gives by way of the maintenance of law and order and the preservation of the sanctity of contracts, there are various devices by which private enterprise derives support from the Government through general or special assistance by way of tariffs, fiscal concessions, and other direct assistance, the incidence of which is on the community at large. In fact, as the experience of recent years has shown, major extensions of private enterprise can rarely be undertaken except through the assistance of the State in one form or another. The concept of private enterprise, as, indeed, of private property, is undergoing rapid change, and the view that private enterprise can function only on the basis of unregulated profits is already an anachronism. The process of reorientation should and is certain to continue and gather speed, and the problem is to see that the transition is smooth and orderly. Already, in certain spheres of industry units owned publicly and units under private enterprise are functioning side by side. The points of interaction between private and public enterprise are multiplying rapidly. In the maintenance of industrial peace and the promotion of a cooperative outlook between capital and labour, the State has necessarily to play a vital role. All these are indications that the private and the public sectors cannot be looked upon as anything like two separate entities ; they are and must function as parts of a single organism.