While the leaders of Indian business as a group and other nationalist social elites both

wanted a planned economy, they could not agree on a strategy acceptable to both. What
were the differences? Explain why they took different stands?

The reasons for the abysmal poverty in India were policies adopted by the British
government which resulted in an economic drain from the country. Agriculture was
ruined by the new system of land revenue introduced under the Raj. The indigenous
induetries were destroyed. Extravagent expenditure had by the government of civilian
and military personnel bled the country financially.

Attraction to planning
1. Genesis of the idea: economic nationalism.
The incipient idea of planning lay in the etastime which was intergral to
economic nationalism.
2. Impetus to the idea: Success of Soviet Russia during 1928-33.
The success of the first plan in Soviet Russia during 1928-23, in sharp contrast to
the prevailing crisis of the Great depression in the capitalist world made the entire
world plan conscious.
3. Death-knell to Laissez-faire: depression of 1929 & Roosevelts New Deal
policies.
4. Planning was viewed as a way to effective industrialization

After 1857British Crown took over adm of Indian colony from the east India company
and India became the direct responsibility of the British parliament. The avowed
economic dictum of the period in Britain was that of laissez faire. In the name of that
policy Indian indigenous manufacturing- particularly the handloom industry- continued
to be destroyed through the fiscal policies adopted by the Government of India

Though both the Indian business class and the left elite wanted a planned economy,
differences in their ideologies and approach resulted in incongruity in their strategies.
Communism and Socialism had began to impact the socio-economic thinking process and
this is where the differences in the ideologies lied. The Indian business leaders
championed the idea of a planned economy but they were mainly seeking protection and
wanted to withhold control on most of the businesses. Where as the left wanted the
complete control to lie with the state and wanted to ensure equitable distribution of
wealth.

For instance, M. Visvesvariya encouraged the idea of planned economy but strongly
advocate against the doctrines of communism. Miter observed that a plan to be successful
should proceed along the lines of not only least resistance but also maximum social
satisfaction. The stress in such an approach was to achieve economic growth by
protection of industries and distribution of wealth through planning, the latter idea being
incongruous to the Indian business classes intentions.

In Britain capitalist had succeeded in realizing with minimum state intervention. In india
the situation was entirely different. In india capitalism had to develop under the aegis of
colonialism. The indigenious capitalist class was dependent on imported technology. The
rate of captal formation, infrastructure was poor. The Indian capitalist could only enjoy
the market periphery due to the English monopoly, thus the demand for protection was
quite natural.

The difference in the outlook of Indian business class and the left elite implicitly surfaced
during the formation of National Planning Commission 1938 where leaders like Nehru,
GD Birla, Sir M. Visvesvariya, Mitter, KT Shah had been present. Only Nehru, KT shah
and meghnad saha were known for their socialist leanings. The big businesses were
definitely apprehensive and critical of the socialist approach to a planned economy but
yet they joined the NPC because they thought that it could look after its interests better
from inside than outside. ..

Indian nationalism developed in two major categories:

Militant groups/ Political extremism:
Emphasized on glorious Hindu past.
Believed in self-reliance and fell back on traditional handicrafts as means of prosperity.
Opposed British rule as it destroyed traditional Indian society with destruction of local
manufacturers.
Boycott of foreign goods, and rejection of western mode of life.

Moderates:
1. Looked forward to industrial developed India
2. Telang, Naoroji, Ranade, Joshi, RC Dutt belong to this school of thought.
3. Protectionism was key for remedy of economic distress of country.
4. For both the reason for poverty was poor policies of British which led to
economic ruin of the country ( Unbritish rule of India)
5. Identified lack of large-scale industrialization was identified as major reason for
poverty and means to eliminate poverty. It was a shift in thinking from past
swadeshi movement which considered development of traditional handicrafts as
panacea for economic ills

Economic nationalism
1. Britain practiced laissez-faire.
2. Took over the markets and destroyed Indian industry, esp. handloom.
3. Grave poverty due to above and destruction of agriculture.
4. The only thing that could alleviate Indian poverty was large-scale
industrialization.
5. And Indian Industry needed protection from foreign goods.
6. The criticism of Britains laissez-faire developed into an idea of state participation
in the economic activities.
7. British policy of laissez-faire officially ended with WWI when orders had to be
placed with Indian firms.

Post-WWI mindset
1. More complex visions emerged.
 2. After 1st WW we see emergence of new generation of economists KT Shah, Sarkar,
Gadgil all were staunch supporter of protection and encouragement to industrialization.
Visvesvaraiya Reconstructing Indian Economy identified following problem of Indian
poverty:
a. Low standard of living of people
b. Low level of education
c. Dependence on agriculture
d. Lack of industrialization and destruction of indigenous industries due to British tariff
and fiscal policies.
3. India had abundant natural resources but inadequate govt. initiative.

Events: Post WWI

1. GD Birla & Purshotamdas Thakurdas formed FICCI (for Indian business
interests) against ASSOCHAM (for European interests in India). It was not state
control they had envisaged but the idea was to seek aid for Indian industry to
stand on their own and the state was to participate in those sectors where private
enterprise was absent.
2. 1934 FICCI AGM, Birla outlined a plan for Indias development. Sarkar outlined
the idea of planning.
3. Idea was that economic development required planning in production and
distribution of purchasing power (hence need to uplift agriculture too).
4. Need to upgrade agriculture without endangering socio-economic structure to
prevent communism from taking roots in India.

Events: Congress gained power (1931)

1. SCBose announced the formation of National Planning Commission, headed by
Nehru, to solve the problem of unemployment & poverty through
industrialization. The committee comprised business-leaders, politicians &
professionals.
2. There was ideological division over the formation of the committee: Congress left
(Nehru, Bose) vs. Congress right (Patel, Rajagopalachari).
3. All members agreed that industrialization could cure poverty but their ways to
approach the problem was different. Socialists wanted a welfare state (right to life
included employment, food, health, etc.)
4. The first difference of opinion rose from Gandhians who questioned the NPCs
right to discuss industrialization. This was defeated.
5. Second difference in opinion arose over the role of the state in the plan. All were
unanimous that critical industries (defense, etc.) be owned by State but differences
over key industries. Business groups could concede state-control over the key
industries but not state-ownership. This kept unresolved when NPC was dissolved
with the onset of WWII.

Post WWII
Reconstruction Committee of [viceroys] council:
1. The colonial state was faced with a crises generated by WWII. Business houses
joined the committee with enthusiasm to protect their interests feom within.
2. New department exclusively for planning.
Bombay Plan:
1. Birla, Thakurdas and Tatas formulated a plan, called Bombay Plan, for national
development, safeguarding the interests of big businesses & preventing the huge
sterling balance from being misappropriated by British for their own interests.
2. The basic idea was that private ownership was sacrosanct and it needed protection
from external competition and internal nationalization.
3. Plan suggested imposition of licensing to give state the control over industries
and echoed the Congress idea of strong central authority on economic matters.
4. The role of state was 3-fold government control, government ownership and
government management. Private enterprises were to get a free hand to choose its
own fields of operation. Public sector must take up only heavy basic industries
that required heavy investment.
5. For improving agriculture, it was recommended that size of holdings be increased
and cooperatives introduced. No inclination to touch the socio-economic balance.