Bombay Plan and mixed-up economy

Paranjoy Guha Thakurta

After the shift quite far to the Right under the previous BJP-led regime, the economy is seeing a shift Leftward, harking back to the Bombay Plan and the mixed economy concept of Jawaharlal Nehru. But is it moving towards a “mixed-up” economy? After the shift quite far to the Right under the previous BJP-led regime, the economy is seeing a shift Leftward, harking back to the Bombay Plan and the mixed economy concept of Jawaharlal Nehru. It is another matterthat the idea of incorporating the best elements of both capitalism and communism/socialism did not quite happen, and in practice, the country got a mix of the worst of both systems, and ended up as a “mixed-up” economy.

SIXTY YEARS ago, a group of seven prominent businessmen assisted by an economist came together to prepare a short blueprint on the future of the economy of India, then still under colonial rule. The document that came to be known as the Bombay Plan was titled: “A Brief Memorandum Outlining a Plan of Economic Development for India”. This document was not merely recalled but extolled during a recent speech by the Prime Minister, Dr Manmohan Singh, on the occasion of the inauguration of the centenary celebrations for Jehangir Ratanji Dadabhoy Tata.

On August 24, speaking at a function organised in New Delhi by the Associated Chambers of Commerce and Industry of India, the first interaction the Prime Minister had with captains of industry and business, Dr Manmohan Singh recalled how as a student of economics in the 1950s and later, as a practitioner in government, he was “greatly impressed” by the Bombay Plan of 1944. He pointed out that in the conceptualisation of the document, J. R. D. Tata had played an important role together with industrial bigwigs of the time including Ghyanshyam Das Birla, Purushottamdas Thakurdas, Lala Shri Ram, Ardeshir Dalal, A. D. Shroff and Kasturbhai Lalbhai, assisted by economist John Mathai who was close to the Tata group.

This is what the Prime Minister said while commenting on the Bombay Plan: “When we read it today, nearly 60 years later, we see how relevant many of the central propositions of the Bombay Plan remain. In those days, it was an unprecedented document. It is worthy of emphasis that nowhere in the developing world had a group of businessmen come together to draw up such a long-term plan for a country.

“The Bombay Plan laid great emphasis on public investment in the social and economic infrastructure, in both rural and urban areas, it emphasised the importance of agrarian reform and agricultural research, in setting up educational institutions and a modern financial system. Above all, it defined the framework for India’s transition from agrarian feudalism to industrial capitalism, but capitalism that is humane, that invests in the welfare and skills of the working people. In many ways, it encapsulated what all subsequent Plans have tried to achieve.”

The year before the Bombay Plan was prepared, the political attitude of many leading industrialists was summarised by the following remark made by a correspondent of The New York Times in March 1943: “The local millionaires deplored what had been happening in the country and pointed out that their object in life being to make money, like most Indian businessmen, they were keeping one foot in the Congress camp, which they expected to see running the country, and another in the British camp which is running it now and gives them fat orders” (to supply material for the Second World War).

In The Oxford History of Indian Business, Prof Dwijendra Tripathi writes that the anxiety of Indian businessmen to draw closer to the Congress at that time could be best illustrated by “their conversion to the concept of economic planning.” He points out that although a number of prominent industrialists affiliated to the Federation of Indian Chambers of Commerce and Industry (FICCI) were connected to the National Planning Committee (NPC) set up by Jawaharlal Nehru in 1938, “the federation refused to contribute even a paltry sum of Rs 1,000 to its funds, citing budgetary constraints.”

Prof Tripathi writes that while the “NPC could not achieve much in concrete terms … it was clear to perceptive observers that planning would be an essential component of the economic policy under a future Congress government.”G. D. Birla himself questioned the credentials of the colonial administration to plan for post-War reconstruction a few months before the release of the Bombay Plan in the following language: “Who is going to plan for India, this government or a national government? A promise has been made after the termination of the War, India will get its own government. Will it be right for this government to make any commitments for something which is to be executed by another government?” (H. Venkatasubbiah, Enterprise and Economic Change: 50 Years of FICCI, Vikas, New Delhi,1977.)

Those who perceive the Bombay Plan as a right-wing programme aimed at ushering free-enterprise capitalism in independent India should note what Prof Tripathi has observed. He wrote: “The authors of the document recognised the need for planned development, emphasised state ownership and control of key industries, and concurred with the idea of a centrally directed authority to ensure successful implementation of the economic plans. Although they assigned a legitimate role for the private sector in the future economic set-up, they candidly conceded that it would have to function under tight state direction.”

The Bombay Plan noted almost in a tone of approval: “Practically every aspect of economic life will have to be so rigorously controlled by government that individual liberty and freedom of enterprise will suffer a temporary eclipse.” Prof Tripathi concludes this section of his chapter on “Business and Politics in Colonial India” with the remark: “Much water has indeed flowed down the Indus since the FICCI leadership cried wolf over the Congress resolution on economic policy — a much milder document — passed at its Karachi session not very long ago (1931, to be precise)”.

We have indeed come a long way since the Bombay Plan. Currently, there are a number of similarities between the economic policy prescriptions espoused by the Congress and the Bharatiya Janata Party. Both parties now apparently reject the “socialist” policies that were put in place by India’s first Prime Minister Jawaharlal Nehru (although, of late, there are signs that the economic programme of the Congress, or, more precisely, its rhetoric is veering Leftwards). Both the BJP and the Congress today argue in favour of a more “market friendly” policy package. It is a separate matter altogether that Nehru himself had advocated a “mixed” economy for India, one that he saw as incorporating the best elements of both capitalism and communism or socialism.

In practice, what happened was arguably a mix of the worst of both systems. The country ended up with a “mixed-up” economy. Successive Congress governments (before the P. V. Narasimha Rao regime) set up an excessively bureaucratic economic system that stifled entrepreneurship and private initiative, on the one hand, and failed to provide primary education and basic health-care to the majority of Indians, on the other. While the rest of the world generally perceived Nehru to have tilted in favour of the former Soviet Union and his economic policies to be socialist in character, his critics at home argued that he pandered to the interests of big business and thus encouraged capitalist practices.

What muddied the waters further was the spurious differentiation that was drawn between the “public” and the “private” sectors in the country. Almost right through the first half century after India became politically independent, public sector corporations served as the personal fiefdoms of politicians and bureaucrats in power — the state thus became the “private” property of the privileged few. At the same time, private corporate groups prospered thanks to a generous infusion of funds from government-controlled banks and financial institutions. Thus, the losses of the public sector became translated into the profits of the private sector and, more often than not, the gap between the “Right” and the “Left” became obliterated insofar as economic policies were concerned.

The BJP-led National Democratic Alliance government shifted the centre of India’s policy quite far to the Right. The so-called Leftward shift that is perceived in the National Common Minimum Programme formulated by the United Progressive Alliance government can be described as a course-correction that became almost inevitable if New Delhi’s economic policies were to become a bit more responsive to the aspirations and the requirements of most citizens of the country.

(The author is Director, School of Convergence and a journalist with over 27 years of experience in various media – print, radio, television and the Internet. He can be contacted at

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