Planned Economy

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 & Roosevelt’s 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 Britain’s 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 India’s 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...