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.