Independent India was obsessed with the idea of centralised planning, sadly, minus scientific logic and reasoning and an avoidable penchant for blindly aping other countries.
Truth be told, however, the idea of centralised planning was uppermost in the minds of mainstream political leaders, at least since the 1930s – particularly those who were determined to play a major role in independent India.
However, anyone with common sense, logic and sound reasoning powers would have seen that the quest for wealth creation would vary from country to country, and in the case of a vast country like India, from region to region.
Despite adopting a liberal Constitution, which enshrined the values of economic freedom, liberty and property rights in a free society, centralised planning became the byword for those in the new Indian administration, despite the resistance posed by few well-meaning leaders.
In the absence of well thought out projects and with no institutional mechanisms in place, centralised economy became a plaything in the hand of neo-colonialists who came to rule and dominate independent India’s economic planning.
Alas, the shackles of centralised planning continue even seven decades since independence, which has been invariably turned out to be non-productive for a functional democracy like India. Centralised planning has sustained itself over the decades because elected representatives, who hold offices, have enjoyed the fruits of power without a care for implementing economic policies in a decentralised manner. For any elected government over the years, decentralised planning had become an anathema.
It was not always like this. The actual experience of India’s centralised planning both before and after 1947, and up to the First Two Five Year Plans -1951-56 and 1956-61 – was meticulously captured in a marvelous account called A Grammar of Indian Planning by Professor S Ambirajan, which was published in 1959 in the heyday of India’s centralised planned economy. A classic, this first book by this great liberal mind, captured the gigantic architecture of centralised planning in the Indian sub-continent with detailed and vast notes of appendix on China and Pakistan.
In 1959, Prof Ambirajan was a young scholar, but A Grammar of Indian Planning included vast literary references, expostulating on the status of political economy, the planning process of British colonies and of major countries like the USA, USSR, Germany, Japan and Australia. He was well versed with the treatises of classical economics of the 19th century, the emerging theories of Fabian socialism and communist literature. Besides, his second book Malthus and Classical Economics was already in the press.
With such deep intellectual insights and a thorough reading of economic literature post-World War II, Ambirajan was pained by the way the Jawaharlal Nehru government dealt with centralised planning for development and growth of the Indian economy. He was not just well aware of the emerging, if contentious, debates on centralised planning as proposed by C Rajagopalachari, M Ruthnaswamy, B R Shenoy and Prof P S Lokanathan, among others, but also well versed with the writings of the Austrian School of economists like Ludwig Von Mises, F A Hayek and Peter T Bauer. Traditionally, this school emphasises the spontaneous organising power of the price mechanism and holds that the complexity of subjective human choices makes mathematical modeling of the evolving market practically impossible, a template that Indian planners chose to ignore.
Prof Ambirajan’s intention to write the book was two-fold – a deep inclination to understand the idea of planning in the Indian context, which meant compromising democracy inherent in the Indian Constitution, as well as to examine how it was used elsewhere in the world.
A part of the first chapter of the book first appeared as article in the Swatantra on October 1, 1955. Prof Ambirajan studied the documents of the Bombay Plan, the MN Roy Plan, Gandhian Plan and Gandhism Reconsidered, commenting acerbically: “With so much talk of planning filling the air, even the bureaucracy felt the infection and thought the time had come to act.”
But he had little faith in the role of the bureaucracy of Independent India, which according to him, was the same as the British, albeit in different hands: “Fourteen years later, it should now be possible to take a more charitable view of the Government’s endeavours to plan our future. It was no doubt piecemeal planning, it was bureaucracy-bred and red-tape governed; but all the same, those Plans, and proposals were the first attempts at national planning at Government level…”
Ambirajan felt deep anguish over Nehru’s dilution of attention, ill-attempts to reconstruct the economy and instead of pushing it towards prosperity, indulging in mere rhetoric. He noted: “We cherish our hard-won freedom, and we do not wish to change the essential character of our sovereign democratic republic. But we wish also to achieve freedom from hunger, from squalor, from ignorance, and from idleness, for without these freedoms, mere political freedom can have no meaning for long.” Golden words.
On centralised planning, he profoundly, demonstrated both the philosophical and the real impact of what it entailed. “There are unpredictable and imponderables in human life which are forever beyond the purview of the planners,” he said, adding, “It would, therefore, be foolish on the part of the administrator to impose one particular type of economic growth drawn from the experience of one country on the economy of another country. The movement of economic progress of a country must follow its own path, based on its history, aptitudes, and other determining circumstances.”
Prof Ambirajan raised some rather pertinent questions: “How can a democratic government launch a Five-Year-Plan—let alone a series of Five-Year-Plans—when its own life is rather precarious? For successful planning and execution, a government should enjoy both stability and longevity; but it is this very stability and longevity that breeds dictatorship, either of an individual or of a caucus ruling in the name of a party. It looks as though it is unthinkable that we can enjoy both the priceless freedom of a sovereign democratic republic and the material advantages of a rigidly formulated, fanatically advertised, and ruthlessly executed planned economy.”
His observations on Prime Minister Nehru, who became a hero of Independent India, where even Patel and Rajaji were ignored, are perceptive indeed. “In a sense, our, Prime Minister, Jawaharlal Nehru, is our greatest asset, for while he enjoys the prestige and wields the authority of a dictator, he has also the emotional nuances and ready adaptability of a true democrat. Even as he is conscious of the possibilities of planning, he is not unwilling at the same time to acknowledge the limitations of democratic planning. But the Prime Minister is not the whole of the administration, and there is always the danger that circumstances may turn the best asset into a dangerous liability. The Prime Minister should be an example, not a glittering facade for others to hide behind and pursue their respective ends.”
Therefore, the idea of Five-Year Plans, as envisaged by India’s Prime Minister, was nothing short of economic suicide. Prof Ambirajan said something that is relevant to contemporary India as well: “No doubt there is a tendency on the part of Government to increase its powers more and more and spread its tentacles over the whole life of the nation and invade every nook and corner of the citizen’s private and public life. This aspect of the problem is a problem for the political scientists, and it is the responsibility of the statesman to see that the nation and the people are not drowned in the waves of totalitarian omniscience and exercise of omnipotence. Successful economic growth should not end as mere successful suicide!”
According to him, “Economic development is but one of the many factors that determine a country’s or a community’s prosperity. Without social betterment and general cultural progress, mere economic development can have no meaning for us.” He added: “By and large, the three major determinants of the process of economic growth, besides the basic factor of natural resources, are the trend of the population, the state of technology and the level of capital accumulation. All these three tend to grow along with a country’s economic development, and act and react upon one another with results neither uniform nor clearly foreseeable.”
Ambirajan was against deficit financing of government expenditures without a realistic assessment of the needs and resources available. He had warned: “One thing must be firmly borne in mind, however; the easy habit of borrowing and spending without any serious attempt to put forth our own best effort and make good would, in the long run, ruin ourselves and destroy our credit in the world.”
According to him, whether for a person or the entire community or country, “planning means analysing the needs and balancing them with the available resources.”
Prof Ambirajan categorically stressed that without limiting the role of government and at the same time without offering a larger role for private enterprises, the goal of economic development and growth will not be possible to achieve at least in the Indian context. How prophetic he was to envision the maladies of the first 40 years of Indian economy! Today, not unnaturally, his words come to haunt.
IndianLiberals.in is an online library of all Indian liberal writings, lectures and other materials in English and other Indian regional languages. The material that has been collected so far contains liberal commentary dating from the early 19th century till the present. The portal helps preserve an often unknown but very rich Indian liberal tradition and explain the relevance of the writings in today’s context.
Read more: S Ambirajan – the forgotten liberal political economist (1936-2001)
The opinions expressed in this essay are those of the authors. They do not purport to reflect the opinions or views of CCS.