APPROACH TO THE SECOND FIVE YEAR
 PLAN
 

OBJECTIVES AND TECHNIQUES

SIGNIFICANT as the achievements of the first plan have been, it is apparent that they have to be regarded as no more than a beginning. The task is not merely one of reaching any fixed or static point such as doubling of living standards, but of generating a dynamism in the economy which will lift it to continually higher levels of material well-being and of intellectual and cultural achievements. The current levels of living in India are very low. Production is insufficient even for satisfying the minimum essential needs of the population, and a large leeway has to be made before the services and amenities required for healthy living can be brought within the reach of any significant proportion of the population. There are large areas or regions of the country which are underdeveloped even in relation to the rest of the country and there are classes of the population which are almost untouched by modem progressive ideas and techniques. It is necessary to proceed faster with development, and this, it must be emphasised, is possible only to the extent that a larger measure of effort, both financial and organisational is forthcoming. For several plan periods to come, it is on the mobilisation of the effort rather than on the gains and returns arising therefrom that attention has to be concentrated. These gains and returns are important, but more important is perhaps the satisfaction that a community gets from attempting a worthwhile task which gives it a chance to bend its energies to productive and socially useful purposes. The `costs' of development, viewed in this light, are a reward in themselves. There is no doubt that given a right approach to problems of development, including social policy and institutional change, a community can draw upon the latent energies within itself to an extent which ensures development at rates much larger than nice calculations of costs and returns or inputs and outputs may sometimes suggest.

THE SOCIALIST PATTERN OF SOCIETY

2. A rising standard of life, or material welfare as it is sometimes called, is of course not an end in itself Essentially, it is a means to a better intellectual and cultural life. A society which has to devote the bulk of its working force or its working hours to the production of the bare where-withals of life is to that extent limited in its pursuit of higher ends. Economic development is intended to expand the community's productive power and to provide the environment in which there is scope for the expression and application of diverse faculties and urges. It follows that the pattern of development and the lines along which economic activity is to be directed must from the start be related to the basic objectives which society has in view. The task before an underdeveloped country is not merely to get better results within the existing framework of economic and social institutions but to mould and refashion these so that they contribute effectively to the realisation of wider and deeper social values.

3. These values or basic objectives have recently been summed up in the phrase `socialist pattern of society'. Essentially, this means that the basic criterion for determining the lines of advance must not be private profit but social gain, and that the pattern of development and the structure of socioeconomic relations should be so planned that they result not only in appreciable increases in national income and employment but also in greater equality in incomes and wealth. Major decisions regarding production, distribution, consumption and investment-and in fact all significant socioeconomic relationships-must be made by agencies informed by social purpose. The benefits of economic development must accrue more and more to the relatively less privileged classes of society, and there should be a progressive reduction of the concentration of incomes, wealth and economic power. The problem is to create a milieu in which the small man who has so far had little opportunity of perceiving and participating in the immense possibilities of growth through organised effort is enabled to put in his best in the interests of a higher standard of life for himself and increased prosperity for the country. In the process, the rises in economic and social status. Vertical mobility of labour is thus no less important than horizontal mobility, for nothing is more destructive of hope and more inhibitive of effort than a feeling that the accident of birth or of a poor start in life is likely to come in the way of a capable person rising in life in terms of economic and social status. For creating the appropriate conditions, the State has to take on heavy responsibilities as the principal agency speaking for and acting on behalf of the community as a whole. The public

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SECOND FIVE YEAR PLAN

sector has to expand rapidly. It has not only to initiate developments which the private sector is either unwilling or unable to undertake; it has to play the dominant role in shaping the entire pattern of investments in the economy, whether it makes the investments directly or whether these are made by the private sector. The private sector has to play its part within the framework of the comprehensive plan accepted by the community. The resources available for investment are thrown up in the last analysis by social processes. Private enterprise, free pricing, private management are all devices to further what are truly social ends; they can only be justified in terms of social results.

4. The use of modern technology requires large scale production and a unified control and allocation of resources in certain major lines of activity. These include exploitation. of minerals and basic and capital goods industries which are major determinants of the rate of growth of the economy. The responsibility for new developments in these fields must be undertaken in the main by the State, and the existing units have also to fall in line with the emerging pattern. Public ownership, partial or complete, and public control or participation in management are specially required in those fields in which technological considerations tend towards a concentration of economic power and of wealth. In several fields, private enterprise can, under present day conditions, make little headway without assistance and support from Government and in these cases the public or semipublic character of the resources drawn upon has to be recognised. In the rest of the economy conditions have to be created in which there is full scope for private initiative and enterprise either on an individual or on a cooperative basis. In a growing economy which gets increasingly diversified there is scope for both the public and the private sectors to expand simultaneously, but it is inevitable, if development is to proceed at the pace envisaged and to contribute effectively to the attainment of the larger social ends in view, that the public sector must grow not only absolutely but also relatively to the private sector.

5. The socialist pattern of society is not to be regarded as some fixed or rigid pattern. It is not rooted in any doctrine or dogma. Each country has to develop according to it own genius and traditions. Economic and social policy has to be shaped from time to time in the light of historical circumstances. It is neither necessary nor desirable that the economy should become a monolithic type or organisation offering little play for experimentation either as to forms or as to modes of functioning. Nor should expansion of the public sector mean centralisation of decision-making and of exercise of authority. In fact, the aim should be to secure an appropriate devolution of functions and to ensure to public enterprises the fullest freedom to operate within a frame work of broad directives or rules of the game. The Organisation and management of public enterprises is a field in which considerable experimentation will be necessary, and this holds, in fact, for the entire socialist pattern. What is important is a clear sense of direction, a consistent regard for certain basic values and a readiness to adapt institutions and organisations and their rules of conduct in the light of experience. The accent of the socialist 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 classes and the creation of a sense of partnership among all sections of the community. These positive goals provide the criteria for basic decisions. The directive principles of State policy in the Constitution had indicated the approach in broad terms; the socialist pattern of society is a more concretised expression of this approach. Economic policy and institutional changes have to be planned in a manner that would secure economic advance along democratic and egalitarian lines. Democracy, it has been said, is a way of life rather than a particular set of institutional arrangements. The same could well be said of the socialist pattern.

OBJECTIVES

6. Within this broad approach the second five year plan has been formulated with reference to the following principal objectives:-

(a) a sizeable increase in national income so as to raise the level of living in the country;

(b) rapid industrialisation with particular em- phasis on the development of basic and heavy industries;

(c) a large expansion of employment oppor- tunities; and

(d) reduction of inequalities in income and wealth and a more even distribution of economic power.

These objectives are interrelated. A significant increase in national income and a marked improvement in living standards cannot be secured without a substantial increase in production and investment To this end, the building up of economic and social overheads, exploration and development of minerals and the promotion of basic industries like steel, machine building, coal and heavy chemicals are vital. For securing an advance simultaneously in all these directions, the available manpower and natural resources have to be used to the best advantage. In a country in which there is relative abundance of man- power, expansion of employment opportunities

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APPROACH TO THE SECOND FIVE YEAR PLAN

becomes an important objective in itself Further, the process and pattern of development should reflect certain basic social values and purposes. Development should result in a diminution of economic and social inequalities and should be achieved through democratic means and processes. Economic objectives cannot be divorced from social objectives and means and objectives go together. It is only in the context of a plan which satisfies the legitimate urges of the people that a democratic society can put forward its best effort.

7. These objectives have to be pursued in a balanced way, for excessive emphasis on any one of them may damage the economy and delay the realisation of the very objective which is being stressed. Low or static standards of living, underemployment and unemployment and to a certain extent even the gap between the average incomes and the highest incomes are all manifestations of the basic underdevelopment which characterises an economy depending mainly on agriculture. Rapid industrialisation and diversification of the economy is thus the core of development. But if industrialisation is to be rapid enough, the country must aim at developing basic industries and industries which make machines to make the machines needed for further development. This calls for substantial expansion in iron and steel, nonferrous metals, coal, cement, heavy chemicals and other industries of basic importance. The limitation is, of course, the scarcity of resources and the many urgent claims on them. Nevertheless, the criterion is not merely immediate needs but the continuing and expanding needs in the coming years as development goes forward. India's known natural resources are relatively large, and in many of these fields, as in steel for instance, she is likely to have a comparative cost advantage. It is desirable to aim at proceeding farthest in the direction of developing heavy and capital goods industries which conform to this criterion.

8. Investment in basic industries creates demands for consumer goods, but it does not enlarge the supply of consumer goods in the short run; nor does it directly absorb any large quantities of labour. A balanced pattern of industrialisation, therefore, requires a well- organised effort to utilise labour for increasing the supplies of much needed consumer goods in a manner which economises the use of capital. A society in which labour is plentiful in relation to capital has to develop the art and technique of using labour-intensive modes of production effectively-and to much social advantage-in diverse fields. Indeed, in the context of prevailing unemployment the absorption of labour becomes an important objective in itself. In using labour- intensive methods, it may well be that the cost of the product is somewhat higher. This entails a sacrifice which can be reduced through technical and organisational improvements. In any case, a measure of sacrifice in the matter of consumption is inevitable while the economy is being strengthened at the base. The sacrifice diminishes as more power, more transport and better tools, machinery and equipment become available for increasing the productivity of consumer goods industries, and in the long run the community gets increasingly large returns. Meanwhile, the stress on utilisation of unutilised or underutilised labour-power alleviates the immediate problem of unemployment Another point that may need stressing in this connection is that the use of labour-intensive methods often implies that a smaller proportion of the incomes generated is available for saving and reinvestment Steps must be taken to ensure that this does not happen on any significant scale. It has to be remembered that employment at rising levels of income can be created only to the extent that the saving potential of the economy is raised.

EMPLOYMENT

9. The question of increasing employment opportunities cannot be viewed separately from the programmes of investment envisaged in the plan. Employment is implicit in and follows investment and it is, of course, a major consideration in determining the pattern of investment. The fact that the plan involves substantial stepping up of investment and development expenditures means that it will raise incomes and increase the demand for labour all round. An employment- orientated plan, however, implies much more than determining the optimum scale of investment. The creation of employment opportunities and reduction in under-employment cannot be approached merely in overall terms. The problem needs to be broken up in terms of sectors, regions and classes. Diversification of the industrial pattern, a suitable policy on location of industries, special measures to assist small scale and cottage industries, maintenance of economic activity continuously at high levels, provision of adequate training facilities, measures to promote geographical and occupational mobility of labour, all these must be considered as elements in the programme of creating new employment on the requisite scale. In this context continuous technical studies regarding the employment component of various types of investment and of the relationship between the direct employment resulting from an act of investment and the further increases this leads to over a period will be necessary.

10. Studies made in the Commission indicate that the second five year plan will provide employment opportunities for the new entrants to the labour force and relieve under-employment in agriculture and in village and small-scale industries. As a result of the plan, the working force in mining and factory establishments, in construction, in trade and transport

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SECOND FIVE YEAR PLAN

and in services will increase relatively faster than in agriculture and allied pursuits. This in itself is a good beginning. Over a period, a larger shift in the occupational pattern away from the primary sector and into the secondary and tertiary sectors will be necessary and is to be expected. There are in the plan substantial programmes of irrigation, soil conservation, improvement of animal husbandry and agricultural improvement in general. These, together with the programmes relating to the village and small-scale industries, will diminish under-employment in the rural areas. It is likely,however,that the plan will not have a sufficient impact on the carryover of unemployment of the earlier period. Basically, it has to be remembered, unemployment in an under-developed economy is only another aspect of the problem of development. The same factors which limit the scale of effort a community can make by way of increasing the rate of development limit also the advance in the direction of employment The plan contemplates a large expansion in construction activity both in the public and private sectors, and it should be possible to vary the volume of such activity within limits in response to the changing requirements of the employment situtation. Since employment in construction is by its. nature temporary, care has to be taken to ensure that new construction programmes are taken in hand as those in progress near completion and that arrangements are made for proper deployment of labour from one project to another.

11. From the economic as well as from the larger social view point expansion of employment opportunities is an objective which claims high priority, but, it is important to stress the fact that over period, the volume of employment grows only as the supply of tools and equipment on the one hand and of the wage goods on which the incomes of the newly employed come to be spent is expanded. If the essence of development is the undertaking of new tasks to build up the apparatus of production, the extent to which the available manpower in the country can be used safely for these tasks depends upon the degree to which the supply of wage goods like food, cloth, sugar, and house- room can be augmented quickly. Improvements in productivity in these lines are thus of vital importance from the point of view of employment itself. It is only a truism that the problem of unem- ployment of an endemic kind is not acutest in the countries in which productivity is high because of the use of machinery and new techniques but in those in which low productivity limits the overall size of incomes, inhibits the use of labour on works which do not add immediately to the supply of currently needed consumer goods and keeps down the size of the market While it is imperative that in a country with an abundant supply of manpower, labour-intensive modes of production should receive preference all along the line, it is nonetheless true that labour-saving devices in particular lines are often a necessary condition for increasing employment opportunities in the system as a whole. The objective, it need hardly be stated, is increasing employment at rising levels of incomes.

INDUSTRIAL POLICY