Make planning fashionable again
Mains Paper 2: Economy
Prelims level: Economic Reforms
Mains level: Economic growth and development
- Economic planning is not considered fashionable today.
- The contemporary economic debates will have much to gain by
revisiting the ideas on planning, championed in particular by Jawaharlal
- India under Nehru’s leadership inaugurated a strategy for
industrialisation of the country in the early 1950s.
- This involved the setting up of public sector units (PSUs) in
diverse areas of manufacturing; research institutions in cutting-edge
technologies of the time such as space and atomic energy; and centres of
higher learning, including the Indian Institutes of Technologies (IITs).
- All of these by a poor country, which was still struggling to find
its feet amidst the multiple blows it had to endure during the early years
Challenging the orthodoxy
- The consciously entering into sectors such as machine building and
nuclear research, which needed capital and technology more critically than
- India was also challenging a deeply held orthodoxy in economic
- From the time of David Ricardo, a galaxy of economists had argued
(and many still argue) that countries should develop industries based on
their comparative advantage.
- According to this theory, a labour-surplus country like India
should be limiting its industrial development ambitions to labour-intensive
sectors, such as garments or leather.
- After all, the theory would ask, why should a country like India
produce machines or pharmaceuticals domestically, when such products can
easily be imported from advanced countries?
Pre 1990s era
- The programmes launched in India from the 1950s onwards to build
indigenous capabilities in capital- and technology-intensive sectors,
despite the general poverty of the country, became a model for other
developing and Third World nations.
- The debates around Indian planning provided a fertile launching
pad for the evolution of development economics as an important
- It will only be reasonable to argue that the foundations for
India’s diversified economic base had been laid during the planning years.
- The successes that India enjoys today in the information
technology and knowledge-intensive sectors owe much to the research and
educational institutions that were built during the early decades.
- At the same time, however, planning did very little to remove the
hurdles to the growth of agriculture and small-scale industries.
- India’s record during the post-Independence period in implementing
land reforms and ensuring primary education for all has been rather
Post 1990s era
- India’s commitment towards development through planning had begun
to diminish from the early 1990s itself much before the Planning Commission
was formally dismantled in 2014.
- After the introduction of economic reforms in 1991, public
investment, especially on agriculture and industry, has been on a decline in
- PSUs have begun to be valued only for the returns they bring as
- There has been little recognition of the important role that PSUs
can play as creators of new technologies and knowledge, particularly in
fields in which the private sector may have little interest or capabilities.
- The disregard for planning and the general withdrawal of the state
from economic decision-making have had important consequences on Indian
- India is today one of the largest markets in the world for a wide
range of goods, whether passenger cars, mobile phones or food products.
- Despite the emergence of such a large domestic market, the record
of Indian manufacturing in absorbing the large labour reserves in the
country remains abysmal.
- The imports of machinery, transport equipment, electronic goods
and all their components have been rising continuously in India from the
- This trend has not been reversed after the introduction of the
‘Make in India’ initiative.
Planning in a globalised world
- Planning is not incompatible with markets and globalisation.
- On the contrary, a developing country trying hard to stay afloat
amidst the turbulence of a global economy requires more, and not less,
guidance thorough industrial policies.
- The successes achieved by East Asian countries such as South Korea
in manufacturing are, to a great extent, the result of strategic planning
over several decades by their governments.
- China is gradually shifting its economic base from low-wage
industries, and is now emerging as a global leader, even ahead of the U.S.,
in several new technologies, including artificial intelligence and renewable
- These Chinese achievements owe much to the careful planning and
investments made by its government, particularly in the area of science and
- The employment challenge that India faces close to 15 million
waiting to be absorbed in the industrial and services sectors every year is
possibly bigger than that faced by any other country (except China) in the
- It cannot be resolved with the technologies that foreign companies
bring into India, which tend to be labour saving.
- The technological advances that create new economic opportunities
and absorb not displace labour.
- Consider, for instance, breakthroughs in biotechnology that may
find new commercial applications for our agricultural products, or electric
vehicles and renewable energy solutions that depend less on imported
- India’s research institutions and our PSUs should engage in the
creation and dissemination of such technologies.
- The country’s industrial policies should be able to enthuse young
and educated entrepreneurs from rural areas to make use of these
technologies to create new jobs.
- For all these, planning should be brought back to the centre of
our economic discussions.
Q.1) Consider the following military exercises with the coordinating
countries. Choose the correct matches:
A. Mt Everest Friendship Exercise-India and Nepal
B. Exercise Yudh Abhyas-US and Russia
C. Exercise KAZIND-India and Kyrgyzstan
D. Lamitye- India and Seychelles
Q.1) Critically evaluate the withdrawal of the Indian state from economic
decision-making has had consequences on industry.