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Revisiting a Savant's Thoughts

The Indian Economy: Problems and Prospects - Selected Writings of D R Gadgil edited by Sulabha Brahme (New Delhi: Oxford University Press), 2011; pp xlx + 433, Rs 1,150.

Revisiting a Savant’s Thoughts

Ashok Mitra

he frenzy of economic liberalisation has spawned one particularly dangerous illusion; it is contemptuous of history. It is as if the country had been pushed back into the Dark Ages after independence, the economy was in an awful mess, and only the arrival of laissezfaire in 1991 started things moving. Nothing of the sort. In the little more than the four decades, spanning from the departure of the British to the dawn of the last decade of the 20th century, India broke out of the low level equilibrium that characterised the long colonial era. Agriculture ceased to be stagnant, industry emerged out of its infancy, and the groundwork was laid for expanding the capacity of production in two crucial areas – power and steel. The engineering industry, including machine manufacturing, got increasingly diversified. The basic infrastructure – from irrigation and land reclamation to roads and highways, the rail network, civil aviation, ports and harbours as well as the communications system – was transformed. The relevance of small-scale enterprises in the context of the phenomenon of massive unemployment was not left out of reckoning either. These 40-odd years no question prepared the economy for a giant leap.

What is perhaps of equal significance, the nation – at least its opinion makers – went through the learning curve and began exchanging views on the contents of, and the policy framework for, economic development. Areas of glaring neglect or obliviousness, such as on issues concerning land redistribution, basic education and healthcare, of course then, the underclasses continued to be at the receiving end of diverse kinds of deprivation and exploitation, regional disparities persisted and in some instances got aggravated. Not that the issues of this genre were totally out of consideration; but their gravity was under-emphasised as sectarian interests stood in the way of any meaningful action. Overall, though,

book review

The Indian Economy: Problems and Prospects – Selected Writings of D R Gadgil edited by Sulabha Brahme (New Delhi: Oxford University Press), 2011; pp xlx + 433, Rs 1,150.

the outcome was the emergence of an ambience of heightened consciousness and a hinterland lush with opportunities and capabilities to be availed of for accelerating economic growth.

It would be childish to deny that much of this advance was because of a particular dream which gripped independent India’s first prime minister, Jawaharlal Nehru. Even earlier, while the country was still under foreign bondage, the Indian National Congress had set up, in 1938, a national planning committee with Nehru at its head. Reports were then widespread about how the Soviet Union was getting transformed by the magic of five-year plans. Such tales fired Nehru’s – and the committee’s – imagination. Yet very little of concrete facts were available about what five-years plans were all about. The national planning committee confined itself to preparing a number of notes on aspects of problems that should call for immediate attention in independent India – mostly a package of impressionistic depiction of ideas and aspirations falling well short of a proper plan. The committee’s work nonetheless had a mild domino effect.

Even as the second world war was nearing its end, M N Roy and his political associates came out with a document they chose to describe as a People’s Plan. More remarkably, a group of leading Indian industrialists too, recognising the problem posed by shortage of capital resources and multiplicity of issues that would confront the nation in the post-war phase and at the dawn of independence, produced their own plan; it plugged for a cohesive, coordinated approach to reconstruction and development with a clear set of priorities.

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There were therefore few voices of dissent when Nehru – who in any event at that instant dominated the national scene – set up, in 1950, the Planning Commission which was asked to present the nation

with a five-year plan. Members of the commission, a mixed bunch of politicians, retired civil servants and industrialists, were not far from babes in the wood where planning was concerned. They called upon the country’s economists to chip in with advice and counsel. What followed was an exciting, interesting spell of debate and discussion. As a sort of almost a discussion paper, the commission put out a hesitant, modest set of proposals loosely strung together which it called the First Five-Year Plan. It did not set any river on fire. Apart from a vague reference to a group of targets and some tentative ideas on resource gathering, the First Plan, had nothing much to offer.

Not that the members of the academia who were approached for advice were, at least initially, in a position to contribute anything more substantial either. Economics was still a nascent branch of learning in the country. The dons restricted themselves, in their own readings as well as in the classroom, to mostly empirical themes; lectures on economic theory started with Adam Smith and ended with Alfred Marshall or, at most, Arthur Pigou, and perhaps on occasion a cursory, doubt-laden mention of Maynard Keynes or his disciple Joan Robinson and, along with her, Edwin Chamberlin. The invasion of planning and five-year plans by and large caught the country’s established economists unawares. But they admired Nehru and were receptive to the general mood to see the nation proceed fast on the road to economic prosperity. Some of them were deeply committed individuals involved in various social service activities and keen to contribute to the economic and social advance of the common man. If planning were to be the deus ex machina for bettering the lot of the people, they would opt for it.

Championing Economic Planning

Of these economists, certainly D R Gadgil was one of the foremost. He was as much a scholar as a builder. He had built that

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outstanding research centre, the Gokhale Institute of Politics and Economics, brick by brick. He had long association with the freedom movement and was active in the Servants of India Society. A pioneer of the country’s cooperative movement, he was the key person behind the outstanding achievements of the credit cooperatives in the sugar processing industry in Maharashtra. Since his student days in Cambridge, he had devoted himself to crystallising thoughts and ideas on the prospects and problems of national economic growth. Besides, Gadgil was the author of Industrial Evolution in India, a competent postscript to R C Dutt’s Economic History of India. He might not have dealt with issues related to economic planning in the past, but few knew better than him the nitty-gritty of the country’s economic realities or could match his experience in the cooperative movement. If the nation’s top leaders had given the call to embrace economic planning, he would abide by their decision.

Gadgil’s transit from what is best described as a conventional economist to a planner and defender of five-year plans constitutes an absorbing narrative. For his role in this period was that of a persuader too: he influenced a large section of his colleagues in the profession to discard their doubts and hesitations about this strange animal, planning. He also felt it in his line of duty to convince the cynical tribe of politicians and officialdom that the time had indeed arrived to integrate the concept of planning with the country’s colonial inheritance of compartmentalised administration with the eye fixed only on the issues of the day. It was no easy task. The First Five-Year Plan was not much of a shocker. But, then, like a thunderbolt, P C Mahalanobis, the physicist turned statistician, arrived on the scene. He carried no baggage of conventional economics. Aware of Nehru’s adoration of Soviet planning, Mahalanobis presented his draft outline of the Second Five-Year Plan based on a model closely resembling the modalities of the early Soviet plans. To swallow its format and premises was a greater challenge, but Gadgil did not flinch. How he entered the terrain of planning and helped assist others to do so is an absorbing story.

Economic & Political Weekly

october 15, 2011

The volume under review, in a manner of speaking, strings together that story. It provides an opportunity to retread the concerns and controversies that marked economic policymaking in the post-independence decades and Gadgil’s evolving thoughts in that phase. A compendium of articles, notes and memoranda on problems of planning Gadgil had prepared over two decades, the volume was scheduled to be released on the occasion of the savant’s birth centenary in 2001, but d elayed by a full decade. It nonetheless r etains its relevance. An introduction – which could perhaps have been a shade more carefully edited – offers a systematic presentation of Gadgil’s views on contemporary socio-economic issues. The introductory essay is followed by the text of an oration by the late P R Brahmananda on “The Political Economy of D R Gadgil”. Then comes the meat, the collection of Gadgil’s writings, arranged in seven sections: (I) Planning in India: The Issues; (II) Institutions and Planning; (III) Regional Planning; (IV) Problems of Agriculture and Industrial Development; (V) Income Policy; (VI) Issues in Cooperation and Economic Development; and (VII) Socio-economic Development in New States. Section VIII, the final part of the volume bunches together a ppraisals of Gadgil’s life and work by personalities of diverse backgrounds: A I Levakowsky, S A Dange, H K Paranjape, Tarlok Singh, R S Srikantan and S uhas Palishkar.

A Cooperative Commonwealth

Gadgil never declared himself to be a socialist, but he believed strongly in a pattern of economic growth which would endow the nation’s hitherto underprivileged and deprived classes with their just share. He was equally confident that this overriding objective was impossible of achievement unless vested interests with a stronghold on the system were restrained through regulatory measures. He had therefore no qualms about an expanding public sector, industrial licensing, administrative instruments to control monopolies, reservations for the small-scale sector or exchange control. Coordinated use of the nation’s scarce resources called for close economic coordination which was,

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in his view, no different from planning. He would however enter a caveat. Planning must be decentralised in a thoroughgoing way given the size and population of the country as well as the grave issues of regional, ethnic and other sociocultural heterogeneities. It should have its base on consent; decentralisation is pivotal to ensure consent at each level. This is where Gadgil’s passion for the ideology of cooperative growth makes its entry. Planning aims at optimising the efficiency of the process of not only production but of national distribution as well. It should determine not just what is the ideal bundle of goods and services to be produced and the ideal combination of resources to attain that objective; it must also indicate how the bundle produced is to be distributed in the most desirable manner. The value system has therefore to come in. For Gadgil, concern for the well-being of the underdog was of overarching importance. The early post-independence years had witnessed growth of an unholy alliance between big business, the bureaucracy and powerful politicians. This alliance, Gadgil lamented, was impending the progress and welfare of the weaker sections that formed the nation’s majority. Planning, to be meaningful, must cut athwart this conspiracy against the poor and concretise the will of the people at all levels. This would be possible only if cooperative institutions spread all the way across the economy and were assigned the responsibility of both decision-making and implementation of decisions.

In short, planning must have a full f usion with an all-embracing network of thoroughgoing cooperative institutions. Higher authorities, while formulating programmes and deciding priorities and allocations should take into account the needs and urgings of the millions of smallholders, small industrial and commercial units, self-employed workers and similar categories. The focus has to be on organising a nationwide network of cooperative farms and small-scale industries and service units that would function as eyes and ears of the national planning body. Coping with the problems of credit and finance would be the onus of by a parallel network of banks and credit societies developed along cooperative lines. A


planned India would be a majestic cooperative commonwealth.

At this distance, with a vastly improved statistical system and increasingly refined tools of analysis, several of Gadgil’s premises and conclusions could appear weakly formulated as well as utopian or arcane. While admiring his faith in rural development to spawn from a massive expansion of cooperative ventures, it might still be commented that he would seem to have underrated the real and potential prowess of class factors. Even as he railed against the evil designs of big business, he was relatively mute on the role of big landlords and the rich peasantry. Before being too judgmental one must however consider the context of the time and social background he belonged to. What should ultimately matter is that Gadgil had vision with deep patriotic roots. Economic liberalisation has substituted vision by the Dow Jones Index.

Mahalanobis’ Plan model was not exactly Gadgil’s cup of tea. Centralised planning went ill with decentralisation. Mahalanobis acknowledged, almost as an afterthought, the importance of small-scale units for creating employment and indicated an allocation for the purpose; there was no explicit reference though to the desirability of any cooperative arrangements. But the wise gentleman from Pune was no spoiler. He endorsed the Mahalanobis Plan; he approved its boldness, its explicit statements on intents and targets, its stress on the public sector and its underpinning of a regulatory apparatus. Two most eminent academic institutionbuilders, founders of the Indian Statistical Institute and of the Gokhale Institute of Politics and Economics, joined forces on a common cause. At least for a while, there was even a sharing of work between the two institutions. (According to contemporary gossip, the alliance led to a senior don from one of the institutes tying the knot with a scholar working in the other.)

Disappointment in Store

For both Mahalanobis and Gadgil, their association with national planning ended in disappointment. The Mahalanobis Plan called for hard decisions. Since Nehru was with him, he would, he assumed, succeed. He was wrong, for Jawaharlal Nehru existed at two levels: ideas in the abstract enchanted him; he however led a party which formed the country’s government, the political and administrative constraints of which could not be brushed aside. Besides, the bureaucratic framework left behind by the British was conditioned to be extra cautious in approach: the factor of class bias was no less relevant. Senior civil servants treated with suspicion the contour and contents of a Plan that had an implied distrust of private initiative. A glaring l acuna in the Mahalanobis model was their opportunity. Since it echoed the Soviet assumption of a closed economy, it was almost silent on its implications for the country’s external economic accounts. Fortuitously or otherwise, a balance of payments problem soon arose, the bureaucrats were happy beyond measure, the Plan was in doldrums. The eclipse of the Nehru era in the aftermath of the Indo-China border incidents saw the Planning Commission recede to the background. Mahalanobis and his Plan framework were a great stimulus for transforming the country’s database and honing analytical skills essential for economic planning.

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Economic Political Weekly


Following the 1991 holocaust, preparation of five-year plans has gradually been reduced to an academic exercise; Mahalanobis is merely an uncomfortable memory. Gadgil’s fate has not been far different. He apparently failed to assess the fastdeveloping situation. Mahalanobis had faded away from the scene; Gadgil was still full of hope to marry the concept of cooperative development with planning. He must have pinned his faith on Indira Gandhi and responded positively to her invitation in 1967 to be deputy chairman of the Planning Commission. He applied himself with tireless zeal but to no avail. The circumstances were against him. The devaluation of the rupee and crop failure in two successive years had cast a shadow on the country’s financial outlook, resources were hard to come by, presentation of the Fourth Five-Year Plan was held in abeyance, Gadgil’s tenure coincided with the phase of “Plan holidays”, the Planning Commission fell back on the stratagem of



annual plans. As this volume will bear witness, even within that constricted space, Gadgil stuck to his beliefs and convictions. The formula he laid down for differential treatment of economically retarded states while deciding on the distribution of Plan assistance was not tampered for the next three decades.

As one goes through this collection of his writings, one is compelled to recall the disgraceful episode of his departure from the Planning Commission. By 1970, Indira Gandhi no longer needed him. She could have called the eminent professor in for a quiet conversation, gently broken her intention to restructure the commission and express her appreciation of the toil and troubles he had taken to shepherd the commission in a most difficult phase. Instead, he and his colleagues were summarily discharged via a brusque message conveyed through a serving civil servant. The shock of the humiliation was simply too much; Gadgil could not complete his

journey from Delhi to Pune and died on the train from a cardiac seizure.

It is a different India, a globalised India and the Planning Commission as it now exists is busy planning how to shortchange further the nation’s poor. In Gadgil’s vision, society’s superstructure was to be deployed to expand and nourish the base; what is happening today is skulduggery in the name of planning so that the superstructure could throttle the base. At the same time, Maharashtra’s sugar credit cooperatives Gadgil had once given shape to have turned into a playground for thieves and hucksters. Few will perhaps at this moment care to learn something of the flavour of those times when patriots were in charge of planning. For those who will, this volume will be satisfying fare.

Ashok Mitra ( has been a contributor to both EW and EPW for more than five decades. He was also on the board of Sameeksha Trust until 2004.






Economic Political Weekly

october 15, 2011 vol xlvi no 42

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