From 50 Years Ago: Fluid Economic Thinking.

The fact that the Indian economy had run into difficulties in the very first year of the Second Plan has been obvious for quite some time. Foreign exchange reserves have gone down sharply, prices have risen, also pretty sharply, over the year and acute stringency has prevailed in the money market even in the slack season, despite substantial increases in money supply and bank advances. How are these symptoms to be interpreted; taken toge the r , do they indi c a t e inf l a t iona ry pressures of an intensity which calls for a halt to the progress of the Plan? Both the Finance Minister’s budget speech and the White Paper mentioned the ‘stresses and strains’ to which the economy has been subjected, more severely during the last few months, but neither attempted to analyse the ‘stresses and strains’ carefully or traced their origin very far. Even the Planning Commission has conveniently stopped publishing the periodical Progress Reports on the Plan which would have helped to locate and mark off the weaker spots, to explore what lay below the surface and thus enable a precise assessment to the degree of imbalance that the economy has developed, discover the causes of such imbalance and suggest correct remedial actions.

The budget debate in Parliament has been desultory and singularly disappointing. This is partly because a lame duck budget which contains no tax proposals is not taken very seriously. Presumably both the critics and supporters of the Government chose to reserve their ammunition for a more suitable occasion which will come when the tax proposals are presented next month. But this can only explain very partially why the debate was so disappointing. For while seeking an answer to the questions thrown up by the present difficulties, there is a temptation to take one of the two lines, either to slide into the line of least resistance and suggest clipping the Plan targets because of the initial difficulties mentioned above or to support the Plan targets and put the blame on the Government for not doing enough to ensure successful implementation of the Plan. The first line of attack invariably descends into a diatribe on the folly of planning, forgetting that the stresses and strains are as much a part of reality as the need for quick development. The supporters of the Plan who blame the Government for not doing enough usually wind up by questioning the intentions and sincerity of the Government and accusing it of siding with vested interests who do not want the radical changes without which the Plan cannot be implemented successfully