The successful fulfilment of the erstwhile Soviet Union's First Five Year Plan by the end of 1932 made a deep impression everywhere, even among those who were hostile to the land of the Soviets. The Soviet people implemented the FiveYear Plan in four years and three months. During those years the capitalist world was hit by a devastating crisis. The crisis of 1929-33 in the capitalist world brought in its train bankruptcy of tens of thousands of joint-stock companies, closure of factories, unemployment and ruin of hundreds of millions of people, including peasants, workers and the petty bourgeoisie in India. The Soviet Union alone was free from this crisis: it made tremendous economic advance at a rate never before attained anywhere in the world.
So the idea of planning was in the air. It had its advocates even in colonial India — among the representatives of the imperialist masters as well as among Indian tycoons like G.D. Birla. While the object of the Plans in the Soviet Union, where private property had been abolished, was to transform and regenerate a backward society for the all-round development of the people, the object of the Indian tycoons and their masters was to organise and use the resources of the country in a systematic manner for the aggrandisement of their classes as well as to hoodwink the people.
In June 1932, Sir George Schuster, then finance member of the viceroy's executive council, proposed that the Government of India should "devise something like a five year economic plan.... even if it led to no practical result it would be good for the country that the attempt should be made."[1] And speaking at the annual session of the Federation of Indian Chambers of Commerce and Industry (FICCI) on 1 April 1934, G.D. Birla stressed the importance of economic planning and urged the adoption of plans in India.[2] In the same year came out Planned Economy for India by Sir M. Visvesvarayya, then the dewan of the native state of Mysore.
In 1938 the Congress set up a National Planning Committee with Jawaharlal Nehru as Chairman. It enjoyed the cooperation of provincial governments — Congress and non-Congress — and of several big native princes such as those of Hyderabad, Mysore, Baroda, Travancore and Bhopal. The Government of India extended its cooperation and sent representatives to attend its meetings. Indian big capital was strongly represented on it. Among its members were Sir Purshotamdas Thakurdas, A.D. Shroff, Ambalal Sarabhai and Walchand Hirachand. The secretariat to the committee was provided by the Tatas, who also gave a loan that made possible the publication of the reports of its subcommittees.[3]
In 1942, during the 'Quit India' struggle, big compradors [4] undertook to draft an economic plan, the Tatas providing most of the resources. The first part of this plan — A Brief Memorandum Outlining a Plan of Economic Development for India, popularly known as the Bombay Plan — appeared in January 1944 and the second part in December of that year. In the meantime one of the authors of the plan, Sir Ardeshir Dalal, managing director of Tata Iron and Steel, was appointed a member of the viceroy's executive council and placed in charge of the new planning and development department of the Government of India. The other authors of this fifteen-year plan were Sir Purshotamdas Thakurdas, Sir J.R.D. Tata, G.D. Birla, Sir Shri Ram, Kasturbhai Lalbhai, A.D. Shroff and John Matthai. For the implementation of the plan the big bourgeoisie depended on two crutches — imperialist capital and the State. It emphasized the need for capital goods, technology and loan capital from imperialist countries. It also relied on "created money" — massive deficit financing by the State — and on a State-owned industrial sector on the foundations of which their fledgling industries would thrive. It recognized the necessity for "a considerable measure of intervention and control" by the State as well as of State ownership and State management of basic industries, public utilities, etc. It conceived of a 'mixed economy' — the existence of both private and public sectors. A strong, centralized state was the heart's desire of the planners. They affirmed that "practically every aspect of economic life will have to be so rigorously controlled by government that individual liberty and freedom of enterprise will suffer a temporary eclipse."[5]
Criticizing the plan, Professors P.A. Wadia and K.T. Merchant said:
"A national government, as our authors contemplate it, will be a government representing the capitalist interests and amenable to their wishes."
They further observed that "the economic structure in India is dominated by a few big trusts, which with the help of the State will eliminate new competitors from the existing industries and leave the field for new industries open to themselves."
Wadia and Merchant also stated:
"The future for investment which the authors of the Plan envisage is evidently a holy alliance between foreign capitalists and themselves on a profit-making basis, of which we have had such bitter experience in the past and in the present."[6]
On the other hand, immediately on its publication, Nehru, then in prison, was ecstatic in praise of it. He hailed it as "one of the most cheering and promising signs of the times in India recently" and resented Professor K.T. Shah's criticism of it.[7]
The Bombay Plan fitted perfectly into the imperial strategy. Like Nehru, secretary of state L. Amery and Schuster, then member of British parliament, warmly welcomed the Bombay Plan.[8]
On 25 January 1945, secretary of state Amery wrote to Viceroy Wavell:
"United Kingdom business interests fully accept that their future in India lies in cooperation with Indians. They are anxious to assist India's industrial expansion which they believe will, if properly organized, carry the hope of considerable profits to themselves as well as to Indians by expanding the market in India for United Kingdom goods.... United Kingdom businessmen are.... at present extremely disposed towards India's industrial ambitions.... I believe that there are a number of negotiations going on between United Kingdom and Indian commercial interests for the establishment of joint enterprises in India."
Amery enclosed with this message a memorandum drafted jointly by his office and the Board of Trade and circulated by the Federation of British Industries to some of their members as a confidential statement of the British government's attitude for their guidance in connection with expected visit of the Indian industrial delegation led by J.R.D. Tata and G.D. Birla. The memorandum stated:
"The United Kingdom is no longer the predominant supplier of the cheaper consumer goods in demand by the Indian masses. But after the war it will be vitally necessary for us very greatly to expand our exports in order to maintain the economic stability of the country and bring about general prosperity. Ready adaptation of our economy to the changed, and changing, circumstances in overseas markets is therefore called for if we are to reach our goal. In the case of India it seems clear that our future prospects lie in meeting, and indeed promoting (1) the steady growth in the demand for machinery, equipment, stores, accessories and semi-manufactured materials needed by an expanding and diversified Indian industrial system, and (2) the rapidly developing sophistication of a growing section of Indian consumers consequent upon a marked rise in the standard of living of the urban population and the adoption of Western comforts and luxuries. The first will increase our opportunities in the field of capital goods and in our industrial specialties. The second will increase the offtake in quality consumer goods.... In both respects, a vast market may be opened up through the economic industrialization of India....
"United Kingdom firms may also find it desirable, in view of the rapidly changing circumstances in India, to manufacture in India those items which can economically be made there and which, otherwise, would be manufactured in any event by Indian concern, probably under American or Continental guidance.... This movement towards local manufacture as a necessary adjunct to the retention of the market for as wide a range as possible of a manufacturer's production has developed rapidly during the past ten years, partly as a profitable investment per se, but mainly as the only means of maintaining and expanding a firm's trade in its staple, higher grade items imported from the United Kingdom and of guiding domestic production in the interest of both countries....
"The advantages of an alliance with Indian capital, influence and enterprise are self-evident." [9]
Both the British monopolies and the Indian compradors were eager to "come to cooperative arrangements..... for joint cooperative development of Indian industries." A new phase in the international division of labour was beginning. Under the old international division of labour India had been a market for the industrial goods of the metropolitan countries, mainly British, and a supplier of raw materials. In colonial India some British capital was invested in plantations, the products of which were intended mostly for export; in the railways mainly to service British capital in its export and import trade; in coal mines the output of which was meant chiefly for consumption by the railways; and in engineering workshops for doing repairs. Besides some British capitalists, Indian big bourgeois who were in symbiotic relationship with British capital started some consumer industries like textiles both for export and domestic consumption with machinery and know-how and managerial and technical personnel imported from imperialist countries.
Now a new phase in the international division of labour was opening when the metropolitan bourgeoisie and the Indian compradors looked forward to close co-operation in building not only consumer goods industries but also capital goods industries under imperialist guidance and for the profit of both. Guidance and control would be that of the giant transnationals, based in imperialist countries, and sophisticated technology, which is the key to power, would remain their monopoly.
Interestingly, the Reconstruction Committee of the Government of India brought out in 1945 its Second Report on Reconstruction Planning. Among the aims of this fifteen-year 'perspective' plan, which according to A.H. Hanson, was "even socialistic in character"[!] were the removal of "the existing glaring anomaly of immense wealth side by side with abject poverty", a fair deal for the poor and for the workers, encouragement to small-scale and cottage industries, State ownership of those "new and necessary" large enterprises "for which private capital may not be forthcoming", popular participation in rural development through cooperative societies and panchayats, etc. "In short", comments Hanson, "one may look in vain for any fundamental objective or method of the five-year plans of the 1950s which is not foreshadowed in this remarkable documentary product of the latter days of British rule."[10]
Then in April 1945 the Statement of Industrial Policy was issued by the Government of India's Planning and Development Department. It declared that "in future Government should play an active part in the industrial development of the country", that it should bring under the control of the central government twenty industries of "vital importance to the country's development" and even nationalize them "provided adequate private capital is not forthcoming", that the government "must take power to license industrial undertakings". It expatiated on the need for government controls for, as it said, "In a planned economy it is impossible to do without controls" — various controls including control over capital issues. There were, as usual, platitudes about the "fullest and most effective utilization" of "unused resources of manpower and material", of "socially equitable" distribution of "the additional wealth created by industrial development", the raising of "the standard of living of the masses" and so on.[11]
Earlier, on 16 April, acting Viceroy John Colville informed Amery that the Viceroy's executive council had adopted the following decision: "Apart from ordnance factories, public utilities and railways, basic industries of national importance will be nationalized if adequate private capital is not forthcoming, and if it is regarded as essential in the national interests to promote such industries. For the purpose of Government policy basic industries can be defined as including aircraft, automobiles and tractors, chemicals and dyes, iron and steel, prime movers, transport vehicles, electric machinery, machine tools, electrochemical and non-ferrous metal industries."[12] There was a remarkable similarity between Nehru's "socialist pattern" and the plans drawn up by the colonial masters.
Not surprisingly, there is also a family resemblance between the Bombay Plan and these two government plans. As Sir Ardeshir Dalal, one of the authors of the Bombay Plan and then member-in-charge of the central government's planning and development department, which brought out the Statement of Industrial Policy, emphatically said, "the objectives of the Government Plan and the Bombay Plan are the same." He also pointed out that while the authors of the Bombay Plan "do not give a detailed blueprint," "the plan which Government is considering must deal with greater details."[13] To quote Hanson, "There is really very little to distinguish this statement of intentions [Statement of Industrial Policy of April 1945] from the Industrial Policy Resolutions of 1948 and 1956; and it might equally well have guided the actual practice, in matters of industrial development, of the government of independent India.[14] Michael Kidron has also observed: "Many of the measures adopted after independence were foreshadowed during this period".[15]
Not surprisingly again, all these plans were eloquently silent about the need for restructuring the society — the abolition of feudal relations in the countryside and the confiscation of existing imperialist capital, though some of them dwelt on the need for mass participation in rural development work through village cooperatives and panchayats. The Bombay Plan had two special features: the planners declared that India would remain dependent for years to come on capital goods and technology of the imperialist countries and wanted loan-capital from them to finance it (the Statement of Industrial Policy was not so explicit: it modestly said that the government proposed "to set up an organization in the U.K. and in the U.S.A." for "procurement of capital goods required by industrialists"); secondly, the Bombay Plan relied on massive deficit financing — Rs 3,400 crore out of the total plan expenditure of Rs 10,000 crore (at the average of 1931-1939 prices) — besides the sterling balances in India's favour, which it estimated at Rs 1,000 crore and which the starvation and deaths of millions of Indians during the Second World War provided. The purpose of deficit financing would be not to contribute to the welfare of the people but to strengthen the comprador-imperialist combine at the expense of the people. The Plan also depended for resources on increased taxation — obviously indirect taxation, which again would hit the poor.
H.V.R. Iengar (who had been joint secretary, department of planning and development, Government of India in 1944-6, principal private secretary to Nehru from 1946, and afterwards governor of the Reserve Bank of India) was right when he said in the late sixties that the Bombay Plan became the model for India's five year plans. Iengar stated:
"It is all there in the Bombay Plan — the concept of massive State intervention in the economy, of a mixed private and public sector enterprise, the emphasis on heavy industry, the need for foreign capital and need for deficit financing. Indeed, there seems little difference between the basic approach of the Bombay Plan and the approach of the Planning Commission of the Government of India and it would by no means be far-fetched to say that the Planning Commission actually got its inspiration from the Bombay Plan."
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Note by Schuster in GOI Commerce Dept. Procs. A. No.1 of March 1934 file 7-c(l) of 1933; cited in B.R Tomlinson. The Political Economy of the Raj 1914-1947, London, 1979, pp.89-90.
G.D. Birla, The Path to Prosperity, Allahahad, 1950, pp.1-26.
J. Nehru. The Discovery of India, London, 1956 reprint, pp.400-1; Frank Moraes, Sir Purshotamdas Thakurdas, Bombay, 1957, p.190; S K. Goyal, Monopoly Capital and Public Policy, New Delhi, 1997, p.39; A.H. Hanson, The Process of Planning: A Study of India's Five-Year Plans 1950-1964, London, 1966, p.35.
For a discussion of the comprador character of the Indian big bourgeoisie, see Suniti Kumar Ghosh, The Indian Big Bourgeoisie: Its Genesis, Growth and Character, Calcutta, 1985 and India and the Raj, 1914-1947: Glory Shame and Bondage, Vol. I, Calcutta, 1989, Chapter 2.
Purshotamdas Thakurdas et al. A Brief Memorandum Outlining a Plan of Economic Development of India, Bombay, 1944, part I, p.48 — emphasis added.
P.A. Wadia and K.T. Merchant, The Bombay Plan: A Criticism, Bombay, 1945, pp.29, 40; and pp.45-7.
S. Gopal (ed.), Selected Works of Jawaharlal Nehru (hereafter cited as SWN), Vols. I-XV (1st series), Vols. I-III (2nd series), New Delhi, 1972-1985; Vol. XIII, p.353.
N. Mansergh (editor-in-chief), Constitutional Relations between Britain and India: The Transfer of Power 1942-7, (hereafter cited as TOP), Vols. I-XII, London, 1971-1983; Vol. IV, pp.851-2; Indian Annual Register (ed. by N.N. Mitra), Calcutta (cited hereafter as IAR), 1944, Vol. II, p 301 .
TOP, Vol. V, pp.466-71 — emphasis added; see also Vol. IV, pp.424-7,676,741,810-2,851-2.
Hanson, op cit, pp.37-8; see also Michael Kidron, Foreign Investments in India, London, 1965, p. 19.
For the full text of the Statement, see Aspects of India's Economy - AIE - , No. II, Jan.-Mar. 1991, pp.42-63.
Hanson, op cit, p.38; also H. Venkatasubbiah, Enterprise and Economic Change: 50 Years of FICCI, New Delhi, 1977, p.50.