The Third Plan X-Rayed

The Third Five Year Plan was presented to the Lok Sabha on Monday, 7 August, when it reopened for the Monsoon session. The broad features of the plan are not different from what the draft has earlier discussed. Some of the programmes have been spelled out in greater details, but in matters such as employment and price policy which had been specifically deferred to the final plan, the planners have failed to give any clear indication. The objectives, priorities and strategy are not in any way different from the Second Plan except that self-sufficiency in food grains and increase in agricultural production have been added to the list. If there is anything that the planners seem to have learnt from the difficulties of the Second Plan period, it is a greater realisation of the importance of agriculture in the economic development of the country. However, as we shall see later, it is regrettable that the programmes under the plan have not followed the objectives and priorities in this regard.

The physical programmes that have been included in the plan are estimated to cost more than Rs. 8,000 crores in the public sector and Rs. 4,100 crores in the private sector. However, the financial resources estimated for the present have been placed at Rs. 7,500 crores for the public sector. Thus there is a gap of Rs. 500 crores between the physical and the financial aspects of the plan, and if allowance is made of underestimates, which is usual, with regard to most of the projects, the gap may still political expediency might have necessitated the inclusion of many a scheme which may ultimately be dropped. It, however, raises false expectations the non-fulfilment of which will only create a sense of frustration in the people.

The figure of Rs. 7,500 crores includes only that part of expenditure which is proposed to be met by the centre and the States. Besides, the local bodies in Municipalities, Corporations, village Panchayats and district councils which have been recently created under what is superciliously called decentralization of power, are also expected to raise their own resources to finance local plans or to supplement matching grants. To this must also be added expenditure on development services and institution established up to the end of the Second Plan estimated at about Rs. 3,000 crores for the five-year period. Thus the people will be required to find out more than Rs. 11,000 crores to meet the expenditure on public sector pan projects, in addition to the current expenditure of the governments which too has been rising at a very fast pace. After providing for the needs of the government the people will also be required to tap the various resources to fulfil the private sector part of the plan fixed at Rs. 4,100 crores. After deducting Rs. 2,200 crores which is the estimate of foreign capital imports, the net burden to be shouldered by the people will be Rs. 12,900 crores towards the cost of the plan.

Outlays in the first and the second Plans were Rs. 3,760 crores and Rs. 7,700 crores respectively. Out of this outlay the private sector contributed Rs. 4,900 crores over the ten year period. Thus the public sector expended Rs. 6,560 crores during the period of the two plans. From Rs. 12,000 crores in five years is a big leap and if looking at the heavy defence and other commitments of the nation, thinking people raise some genuine doubted about our capacity to bear these burdens or apprehend serious dislocation of our economic stability; they should be heeded to rather than dismissed as an unambitious lot.

The only argument that the planners have been putting forward is that the plan is too small compared to the vast needs of the people. But they conveniently forget this argument when they fix the priorities or propose sartorial plans. By laying greater stress on basic and heavy industries to the utter neglect of consumer industries by arguing for export promotion even by depriving the consumer at home of his legitimate needs and by imposing taxes to restrict consumption, the planners look to something else than the vast needs of the people. The long term needs of development and the short term needs of satisfying the expectation of the people for a better standard of living have to be balanced. The planning technique that we have adopted copying the Russian model has failed to strike this balance. The Third Plan only seeks to intensify the stresses and strains that the economy has been experiencing all these years.

Agriculture Continues of be neglected

Agriculture is supposed to have been given priority in the Third Plan. The Third Plan outlay on production programmes in agriculture, including large and small irrigation schemes, soil conservation and cooperation, is Rs. 1,200 crores compared to Rs. 667 crores in the second plan. But if we look to the industrial complex the amount proposed to be invested comes to Rs. 2,990 crores together with Rs. 1,486 crores on transport and communication. Out of the sum allotted for agriculture in fact Rs. 226 crores are going to be spent on production programmes. Substantial protons of the outlays on major and medium irrigation and tube wells etc. goes to what is termed as industrial complex. Thus while more than Rs. 450 crores are going to be invested in industries, the investment in agriculture will be barely Rs. 500 crores even if we take account of the assistance likely to be given to the cooperatives. Even granting that industries being capital intensive require more money, this vast difference is not likely to correct the imbalance created during the course of the second plan.

The agriculture department, the community development staff and the cooperatives are the agencies on which the government has so far relied for the implementation of agriculture programmes. They have not proved equal to the task. The peasant has neither been enthused nor trusted. The ways in which land reforms are being introduced have only disturbed the agrarian economy. The phase of unsettlement does not seem to come to an end. The ill conceived plan of cooperative farming will further hamstring agricultural production. The capital needs of agriculture are generally ignored. One rural credit survey conducted by the Reserve Bank had pointed out the utter inadequacy of cooperatives and other new institutions to satisfy the credit needs of the village people. Old arrangements have been liquidated and the new have not taken their place. Every reform with regard to tenancy rights and ownership of the land upsets the rural order. While facilities for more and more credit are increasingly being made available to those engaged in trade and industry, the villager is being deprived of even traditional sources of credit. Even if irrigation and other facilities are available the people cannot make use of them in the absence of counterpart funds to be invested in agriculture. If the Government really wants to improve agriculture it should invest large funds in building up credit and marketing institutions, Cooperative Societies are desirable on an ideological ground, but it will take them long to become viable and efficient.

Priorities Must be Revised

Priorities of the industrial programme also need revision. The Third Plan lays down the following priorities–

1. Completion of projects envisaged under the second five year plan which are under implementation or were deferred during 1957-58 owing to foreign exchange difficulties.

2. Expansion and diversification of capacity of the heavy engineering and machine building industries, castings and forgings, alloys, tools and special steals, iron and steel and faro-alloys and step up of output of fertilisers and petroleum products.

3. Increased production of major basic raw industries and producer goods like aluminium, mineral oils, dissolving pulp, basic organic and inorganic chemicals and intermediates inclusive of products of petrochemical origin.

4. Increased production from domestic industries of commodities required to meet essential needs like essential drugs, paper, cloth, sugar, vegetable oils and burning material.

Evidently the drawing up of these priorities has not taken any account of the rising prices and growing unemployment in the country. It is true that the country in the long run has to be self-reliant with regard to all its needs, but we cannot afford to postpone any longer the production of consumer goods sufficient to stabiles prices. The Government will go on a wrong track if it assumes that increased food production alone will bring down prices. The consumption pattern of the people is fast changing and their demand in respect of many of these commodities has to be satisfied. Similarly if unemployment is to be eradicated we have to shift our emphasis to labour intensive industries. The programmes, of starting test works to relieve unemployment in densely populated areas, proposed in the third plan do not strike at the root of the problem. It is wasting public money as the Government have been doing in subsidising Khadi and Amber Charkha. Doles may be necessary in case of emergency, but they cannot be made as normal routine. If people are to be provided gainful employment let the plan revise its industrial programme. Small scale mechanised industry, to which only Rs. 84 crores have been allotted, should be developed as the basis of our programme of industrialisation.

There is too much dependence on foreign sources for the implementation of the industrial programme. Out of a total of Rs. 2,993 crores. It will ultimately turn out to be an underestimate for the third plan observes–‘The estimates of foreign exchange requirements have been made on the assumption that payments will be made in cash and that broadly, machinery and equipment will be obtained from the cheapest sources of supply’. As we know these assumptions are not likely to prove correct. Therefore, as in the case of the second plan projects all these estimates will go up.

Too much dependence on foreign sources has forced for plan to orientate all its production programmes to augment export earnings. Requirements of this programme go counter to the needs of developing internal markets, establishing prices, dispersal of industries and labour intensive methods of production. They impose added burdens on the people.

Thus we find ourselves in the grip of a vicious circle. The Third Plan has not taken any measures to break it. The planners despite their talk of boldness, lack the necessary courage to get out of the morons. Perhaps they are so heavily doped that they cannot see things in their right perspective. They have failed to realize that the industrial development of every country has to proceed in the background of its own conditions. Maximum production is possible by different obviations of the quantum of the different factors of production. The optimum for each country depends upon the marginal utility of these factors in that country. The planners are blindly copying western methods with the result that in spite of expending huge sums there are hardly any substantial amelioration of the suffering of the people.

Obsession with Socialism

Westernism apart, the planners are also obsessed with the idea of ushering in a socialist era. There would hardly be any difference with the ultimate objectives of socialism that is imbuing every citizen and his activities with a social purpose as against private profit, reduction of economic inequalities and granting of social justice to all. But the means adopted by socialist countries to achieve these objectives are hardly suitable to the purpose. The State comes forward to own all factors of production and the citizens, big and small, lose their identity. Following these traditional methods the State in India is also extending its sphere of activity even beyond its capacity. It is on this basis that the public sector is accorded a preferential treatment and all others are relegated to a secondary and derogatory position. The third plan also attempts to take a big leap forward in this direction of socialism.

In a planned development there is legitimate field where the state has to function but too artificially divide the productive effort of the nation and to create sectors as if they were inimical to each other is not a correct approach. In fact each authority should be allowed to contribute its best to the development of the nation. The history of the last decade shows that the private sector has shown greater virility and capacity to invest and produce, why should its services be not utilized? If we can tolerate a Birla and a Tata, what is the harm if a few more spring up? The needs of social justice can be secured through fiscal measures. The third plan should pay greater attention to consolidation of public sector enterprises. If they are to run efficiently to yield profits, without any element of taxation in the prices charged for their products, they require being reorganised adman aged by capable hands. The third plan has devoted a chapter to this question but has not laid down any definite programme in this regard. There are problems of coordination between different ministries and agencies of the government. Sufficient managerial and technical talent has to be developed. The omniscient civil servant can hardly serve the needs of an industrial development programme. Many of the difficulties of the second plan were due to lack of adequate personnel. It would be unwise to repeat the mistake again.

Dangerous Indifference to Defence Needs

The greatest defect of the plan is that neither in its formulation of policies and programmes nor in its assessment of resources, has it taken note of the growing defence needs of the country. At a time when defence potential of the country requires urgent augmentation it is unwise to plan on an ambitious scale, in different directions. Indivisibilities of a plan and physical requirement of the different projects need complementary investments. The scale therefore always matters. The over-all lack of resources in man and money, necessitating the postponement of a few projects may also affect adversely other plants already commissioned. Thus there develops idle capacity on the one hand and shortages on the other. It is therefore always necessary and desirable to formulate an integral plan on a scale that will err always on the safer side with regard to its estimates of resources, time lags and achievements. It the Suez crisis created unexpected difficulties for the second plan who knows that a crisis in Ladakh of Kashmir may not upset the whole of the third plan. While we cannot postpone the plans for fear of the unknown we have definitely to plan in a manner that any unformed seen emergency does not blow us off our feet.

In short, an unrealistic, unpragmatic and doctrinaire approach, over-estimates with regard to resources, and under-estimates as to the physical requirements of the projects and the people, refusal to trust the people whether, peasant, labourer, trader or industrialist, over-dependence and unwarranted confidence in the capabilities of the public sector and government agencies, continued denial to the common man of satisfaction of his basic needs, failure to lay down any effective policy for stabilizing prices, balancing foreign trade, failure to realise the need of reorient ting the whole industrial programme with a view to providing employment to all able bodied citizens, undesirable and improper dependence on foreign help, these are some of the salient defects of the third plan. If the faith of the people in planning under democratic conditions is to be sustained and a serious blow to one or the other is to be avoided the third plan should be accordingly modified.

 

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