The Bombay Plan: Introduction

[p. 1] Aim of memorandum

This memorandum presents in brief outline a plan of economic development for India. The plan set out in it is not in any sense a complete scheme nor is its scope so comprehensive as that of the National Planning Committee to whose labours the conception of a planned economy for India is very largely due. Our object is merely to put forward, as a basis of discussion, a statement, in as concrete a form as possible, of the objectives to be kept in mind in economic planning in India, the general lines on which development should proceed and the demands which planning is likely to make on the country's resources. It contains no reference to such essential matters as the organization, methods and technique required for carrying out a plan. For instance, neither the problem of distribution, which is vital to any scheme for raising the standard of living, nor the allied question of the control to be exercised by the state over economic activities are discussed in it. These matters, the importance of which is fully present to our minds, are at present under examination by us. The results of this examination will form the subject of a separate report which we hope to issue at an early date. Meanwhile, in view of the prevailing interest in problems relating to post-war economic development in India, we have thought it desirable to publish in advance our views regarding some of the more fundamental aspects of planning so as to [p. 2] stimulate discussion and criticism of our proposals before our investigations of other aspects of planning are completed.

Political assumptions

2. Underlying our whole scheme is the assumption that on the termination of the war or shortly thereafter, a national government will come into existence at the centre which will be vested with full freedom in economic matters. The maintenance of the economic unity of India being, in our view, an essential condition of any effective planning, we have assumed for the purpose of our plan that the future government of India will be constituted on a federal basis and that the jurisdiction of the central government in economic matters will extend over the whole of India. We should, however, explain that this does not preclude the possibility of a regional grouping of provinces and States as an intermediate link in a federal organization. Such regional grouping will not disturb the economic unity of India, provided that, in important matters affecting economic development, the authority of the central government is not impaired. We draw attention to this aspect of the problem because we think that no development of the kind we have proposed will be feasible except on the basis of a central directing authority which enjoys sufficient popular support and possesses the requisite powers and jurisdiction.

Planning organisation

3. We contemplate that under the central government there will be a national planning committee in which the various interests concerned will be represented and to which the responsibility for drawing up plans will be delegated. The actual execution of the plans will be the function of a [p. 3] supreme economic council working alongside the national planning committee under the authority of the central government. The co-ordination of the duties assigned to these two committees and their relation to the various provincial and regional governments will be among the most important problems that will arise in connection with the constitutional aspect of our proposals.

Objective of plan

4. The principal objective of our plan is to bring about a doubling of the present per capita income within a period of fifteen years from the time that the plan comes into operation. Allowing for an increase in population of 5 million per annum, which is the rate disclosed by the last decennial census, we estimate that a doubling of the per capita income within a period of fifteen years will necessitate a trebling of the present aggregate national income. To achieve this increase, we propose that the plan should be so organized as to raise the net output of agriculture to a little over twice the present figure and that of industry, including both large and small industries, to approximately five times the present output. This would still leave our economy mainly agricultural in the sense that the greater part of the population would continue to be engaged in agriculture and allied occupations although the present preponderance of agriculture would be considerably reduced.

Industrial development

5. It is an important part of our proposals regarding industrial development that in the initial stages attention should be directed primarily to the creation of industries for the production of power and capital goods. Nothing has more seriously hindered the development of India's industrial [p. 4] resources during the war than the absence of these basic industries and we consider it essential that this lack should be remedied in as short a time as possible. Apart from its importance as a means of quickening the pace of industrial development in India, it will have the effect of ultimately reducing our dependence on foreign countries for the plant and machinery required by us and, consequently, of reducing our requirements of external finance. The proposal, however, is subject to this important qualification that provision should be made at the same time for the manufacture within the country of the most essential classes of consumption goods, as otherwise a great deal of unnecessary hardship may be caused during the planning period. We suggest that, in the production of these essential consumption goods, the fullest possible use should be made of small scale and cottage industries. This will, besides providing employment, reduce the need for purchasing expensive plant and machinery.

Difficulties anticipated

6. We are well aware of the difficulties which may stand in the way of our objective being attained within so short a period. The execution of the plan will run counter to many deep-seated prejudices and traditions. In the initial stages it will call for a very large measure of personal discomfort and sacrifice. Political differences may make it difficult to set up the necessary constitutional machinery. The international situation after the war may be such as not to permit of the orderly continuance of constructive activities on this scale. If difficulties of this character supervene, the progress of the plan will be materially hampered. Nevertheless, we think that it is [p. 5] worthwhile placing before the country a plan which, given favourable conditions, can be realised. The difficulties we have indicated may delay the scheme but will not necessarily make it impossible of achievement. We have some hope that if the programme we have put forward makes an appeal to the country, that by itself will help in some measure towards securing the conditions necessary for its fulfilment. It may be pointed out that the fifteen-year period we have suggested is intended to cover only the execution of the plan and does not include the time required for the necessary preparatory work, which may take about three to five years. Once the machinery required for executing the plan is properly organized and given sufficient courage and energy in those responsible for carrying it out, we do not think that the attainment of our objective within the period indicated is an extravagant hope.

Problem of finance

7. The estimates of capital expenditure contained in the memorandum are of such colossal dimensions that the whole scheme may appear impracticable to people whose minds are still dominated by orthodox financial concepts. In matters of this kind, the war has been a great educator. Lord Wavell, in a recent speech in London, remarked: "It has always seemed to me a curious fact that money is forthcoming in any quantity for a war, but that no nation has ever yet produced the money on the same scale to fight the evils of peace—poverty, lack of education, unemployment, ill-health". The answer to this question, which has puzzled many an inquiring mind since the commencement of the war, is that money or finance is not the master of a country's economy but its servant and instrument. The [p. 6] real capital of a country consists of its resources in materials and man-power and money is simply a means of mobilising these resources and canalising them into specific forms of activity. Looking at the problem from this angle, we are convinced that the capital expenditure proposed under our scheme is well within the limits of our resources and that, from a business point of view, such expenditure will constitute a sound and profitable investment for the country.

Explanatory remarks

8. With regard to the several estimates of expenditure, production and income contained in the memorandum, it is necessary to explain that, in view of the inadequate data on which many of them are based, they are to be regarded merely as rough approximations and their value as more illustrative than absolute. Further, although most of the estimates are stated in terms of money, it is the quantum of commodities and services they represent that we have primarily in view. Money is used throughout as a measuring rod only; and in order to keep the measure uniform, we have based all money figures on the rupee at approximately the average price level which prevailed during the period 1931-39.