Five year plans were first introduced in the erstwhile Soviet Union in 1928 for controlled and rapid economic development. Much of the Soviet industrial successes are a result of the implementation of its five year plans. In 1950, India’s prime minister Jawaharlal Nehru, impressed by the Soviet system, adopted five year plans as a model for economic development, and established the Planning Commission which was to act independent of any cabinet and was answerable only to the Prime Minister, who is also Chairperson of the commission. Draft plans were to be approved by the National Development Council, comprising the Planning Commission and the Chief Ministers of all states. An approved plan is then passed by the cabinet and then in Parliament.
The benefits of five year planning, especially in a country as big and unpredictable as India, have been questioned by many, and it has often been seen that targets are not met. This method has still not been able to successfully get rid of poverty and the cost overruns in failed or incomplete public sector projects are often too high. Be that as it may, five year plans are still a good yardstick to determine investment and policy priorities.
India's five greatest problems, Jawaharlal Nehru once remarked, are land, water, cows, capital and babies. To deal with them, he launched India's First Five-Year Plan, which has coped fairly well with the first three. But the shortage of capital to create jobs and necessities for an enormous and fast-growing population has not been solved, and Prime Minister Nehru is impatient for a solution.
"We cannot wait," said he. "That is the difficulty. We have to think in terms of large schemes of social engineering, not petty reforms." India's First Five-Year Plan still had six months to run, but Nehru and his government were plunging ahead with a far more ambitious Second Five-Year Plan, which planners said should add 25% to the national income ( about $22 billion in 1956 ) and create 12 million new jobs by 1961.
Socialism by Expansion-
Nehru was a socialist and his dreams for India revolve around what he calls "the ideal of a socialist society." The First Five-Year Plan, a relatively modest $5 billion program, was not really socialistic. Its proudest achievement: good planning, hard work and good weather had increased food production 18%—for the first time in history relieving India's peasant masses of the threat of famine. The plan strove to fill the most urgent needs of India's millions, pumped the bulk of its money into irrigation, electric power, transport and housing, only 8% into industry, e.g., one steel plant, a locomotive factory, a shipyard. Meanwhile, the "private sector" of India's economy was left free to expand. The new plan, Nehru's advisers agreed, must push more decisively toward socialism and "the public sector must be expanded relatively faster than the private sector."
To draft the new plan, Nehru picked Prasanta Chandra Mahalanobis, 62, head of the sprawling Calcutta University Statistical Institute. Cambridge-trained Professor Mahalanobis, a physicist turned economist, had achieved a sensational rise in prestige, which stands as close to Nehru on economic matters as Krishna Menon does on foreign affairs. Mahalanobis had stocked the institute's library with the works of Stalin and Mao Tse-tung and the proceedings of the Soviet Academy of Sciences, bound in calf. To help draft the plan, Mahalanobis got the services of ten Soviet economists to assist his staff. Mahalanobis has been called a Communist but denied it in hurt tones. "I have been only twice to Moscow but seven times to the U.S.," he said.
Business at Gunpoint-
The central proposal of the new Five-Year Plan: to increase government spending on economic development to $17.6 billion in five years, doubling "public sector" or state-owned industry. The private sector would be encouraged to grow all the while, but on a more...