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? Attraction to planning 1. Genesis of the idea: economic nationalism. 2. Impetus to the idea: Success of Soviet Russia during 1928-33. 3. Death-knell to Laissez-faire: depression of 1929 & Roosevelts New Deal policies. 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. Problems of Indian poverty were (a) low standard of living; (b) low education; (c) dependence on agriculture; (d) lack of industrialization. 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). 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.