3.8 ndian onom
planning so that it could play an active role in was not possible in a free market economy (i.e.,
the allocation of resources and mobilise them capitalistic economy). The idea of planning in
for equitable growth and development. Though India was inspired from the soviet planning which
India was constitutionally declared a federation of was a command economy and did not suit the
states, in the process of planning, the authority of requirements of democratic India, which was till
regulation, directing and undertaking economic now a privately owned economy.17 The dominant
activities got more and more centralised in the force behind planning in India, at least after
Union government.15 Independence, was Nehru himself who had strong
India’s decision for a planned economy was socialist leanings. He thought it important to
also moulded by some contemporary experiences define the role of the state in the economy, which
in the world.16 firstly, the Great Depression of 1929 was going to be at times similar to the state in the
and the reconstruction challenges after the second soviet Union and at times completely dissimilar to
world War had made experts to conclude in favour it. Though there was an example of a capitalistic-
of a state intervention in the economy (opposite democratic system going for planning, France by
to the contemporary idea of ‘non-interference’ as that time (1947), it had little experience to offer
proposed by Adam Smith). Secondly, it was the the Indian policymakers (France had gone for a
same time that the command economies (i.e., mixed economy by 1944–45). With the basic urge
state economies) of the soviet Union and the East to accelerate the process of economic growth, the
European countries started making news about planners went to define the respective roles of the
their faster economic growth. In the 1950s and state and the market, in the very first Plan itself.
1960s, the dominant view among policymakers The following lines look refreshingly ahead of
around the world was in favour of an active role the times and crystal-clear about the scope of the
of the state in the economy. Thirdly, a dominant government’s role in the economy vis-á-vis the
role for the state in the economy to neutralise private sector.
market failure situations (as happened during the “This brings us to the problem of the techniques
period of the Great Depression when demand fell of planning. A possible approach to the problem
down to the lowest levels) was gaining ground is, as mentioned earlier, through a more or less
around the world. For many newly independent complete nationalisation of the means of production
developing nations, economic planning was and extensive system of government controls on the
therefore an obvious choice. Economic planning allocation of resources and on the distribution of
was considered to help states to mobilise resources the national product. Judged purely as a technique
to realise the prioritised objectives in a well- of planning, this may appear a promising line of
defined time frame. action. But, viewed against the background of the
Once the political leadership had decided objectives outlined above, and in the light of practical
in favour of a planned economy for India and considerations, such an expansion of the public
a major role for the state in the economy, they sector is, at the present stage, neither necessary nor
needed to clarify about the organisational nature desirable. Planning in a democratic set-up implies
of the economy—whether it was to be a state the minimum use of compulsion or coercion for
economy or a mixed economy—because planning bringing about a realignment of productive forces.
The resources available to the public sector have, at
15. Bimal Jalan, India’s Economic Policy, Penguin Books,
New Delhi, 1993, p. 2. 17. Rakesh Mohan, ‘Industrial Policy and Control’ in
16. C. Rangarajan, Perspectives on Indian Economy, Bimal Jalan (ed.), The Indian Economy: Problems
UBSPD, New Delhi, 2004, p. 96. and Prospects, p. 101.