On the Five-Year Plans (Avadi, January 1955) JAWAHARLAL NEHRU (1889–1964)

On the Five-Year Plans (Avadi, January 1955)
JAWAHARLAL NEHRU (1889–1964)

It was through this speech made at the 60th session of the Indian National
Congress that Nehru committed his party, his government and the nation
to ‘a socialistic pattern of society’ and to economic development through
five-year plans. ere was also another, if less edifying, aspect to this
declaration. It was preceded by a prolonged effort on Nehru’s part to arrive
at some sort of understanding with the Socialist Party. e effort not only
failed but also created an irreparable breach between Nehru and Jayaprakash
Narayan, the greater socialist leader, a close disciple of Gandhi and a former
comrade of Nehru’s. e formal decision to build a socialist pattern of
society made the Socialist Party irrelevant for Nehru and the Congress. e
decision, together with the one on five-year plans, also created the ideology
and the framework for India’s economic policy for the next three decades,
after which it would be abandoned and criticized for holding back India’s
economic growth.

MAIN SPEECH

Yesterday I had the honour to present a resolution before you, which you

passed. In it we stated that we wanted it to be clearly understood that we

aim at a socialistic pattern of society. In the present resolution which deals

with the economic policy, we have to give effect to that decision of yours,

because ultimately it is the economic policy which is going to shape that

picture of India which you call the ‘socialistic pattern’. is resolution is

therefore of the highest importance.

In a resolution of this kind, however long-drawn-out it might be, one

cannot enter into the details of policies. ere is a danger in such

resolutions, and that is that you may use striking words and vague phrases,

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and imagine that you have given a great lead to the country. at does not

help us, because we have to grapple with the problems of India. How to

deal with those problems is itself a problem. e problems of

unemployment and of raising the level of our people are not solved by broad

decisions or slogans. I say this without any disrespect to those who wield

striking words, because I myself have been a wielder of words all my life,

drafting resolutions, getting them passed and so on. But a time comes when

you have to forget words and deal with hard actualities. is applies more

especially to Congressmen because they have much more responsibility than

others in running the government and deciding the government’s policy.

For us merely to write resolutions is not good enough. What, then, must we

do? e only thing to be done is to sit down and draw up a plan, a detailed

plan. at is the function of the Planning Commission and of the

government, and of those whom they consult. Obviously, a Congress

session cannot sit down and draw up a five-year plan. But in a resolution of

this kind we have to indicate the type of thinking needed in drawing up

that plan.

is resolution contains a brief reference to the objective to be achieved.

First of all, after expressing appreciation of what has been done, the

resolution says that the time has now come for substantially increasing

production, for raising the standards of living and for having progressively

fuller employment so as to achieve full employment within a period of ten

years. e first thing to note about this resolution is that it does not merely

repeat what we have said before. It points out that the time has come for us

to advance on the economic and social plane. In a sense we have been doing

it, but we have not been doing it adequately. e time has come to put an

end to unemployment in ten years. By ten years we mean two Five-Year

Plan periods. I wish you to appreciate that we try not to word our resolution

in what might be called bombastic language. We are an old and mature

organization with a great deal of experience. It is not desirable, therefore,

that we should use words which are vague or bombastic. On the whole we

understate what we propose to do. If we really give effect to this resolution,

it means bringing about a revolution in this country, an economic revolution

bigger than any that has taken place in our times. Take the simple fact of

putting an end to unemployment within ten years. Just try to think what it

means in this country with its population growing year by year. It is a

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terrific job, the like of which has not been done in these circumstances in

any other country.

Yesterday, we had the President of Yugoslavia here. It was a great privilege

to have had amidst us such a great revolutionary, soldier of freedom and

builder. Whatever Yugoslavia’s troubles, unemployment has never been one

of them. In fact, they are short of human beings to do their work. For us to

compare ourselves with Yugoslavia in the matter of unemployment will not,

therefore, lead us anywhere. Take the Soviet Union—a great big country,

four or five times the size of India, with a population which is only about

one-third of India’s. e problem is different for them—a vast area with a

small population. Our problem is different—a big country, heavily

populated, and underdeveloped. Similarly, we cannot compare our problems

with those of America, England, and western Europe where they have had

two hundred years of industrial growth. ese comparisons may sometimes

be helpful but they mislead. We have to understand our problem as it is in

India, no doubt learning from what has been done in America, England,

Yugoslavia, Russia, or China, but at the same time bearing in mind that the

conditions in India are special and particular. Further, we have also to

understand that our background is in many ways peculiar, particularly the

Gandhian background.

We talk about planning. As you all know, planning is essential, and without

it there would be anarchy in our economic development. About five years

ago, planning was not acceptable to many people in high places but today it

has come to be recognized as essential even by the man in the street. Our

first Five-Year Plan is now about three years old, and we are now thinking

about our second Five-Year Plan. A phrase in this resolution says that the

second Five-Year Plan must keep the national aims of a welfare state and a

socialistic economy before it. ese can only be achieved by a considerable

increase in national income, and our economic policy must, therefore, aim

at plenty and equitable distribution. e second Five-Year Plan must keep

these objectives in view and should be based on the physical needs of the

people. ese are really the important and governing words of the

resolution and ought to be the controlling factors in drawing up the second

Five-Year Plan. Before going on to other aspects of the question, may I say

that a welfare state and a socialistic pattern of economy are not synonymous

expressions. It is true that a socialistic economy must provide for a welfare

state but it does not necessarily follow that a welfare state must also be

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based on a socialistic pattern of society. erefore the two, although they

overlap, are yet somewhat different, and we say that we want both. We

cannot have a welfare state in India with all the socialism or even

communism in the world unless our national income goes up greatly.

Socialism or communism might help you to divide your existing wealth, if

you like, but in India, there is no existing wealth for you to divide; there is

only poverty to divide. It is not a question of distributing the wealth of the

few rich men here and there. at is not going to make any difference in

our national income. We might adopt that course for the psychological

good that might come out of it. But from the practical point of view, there

is not much to divide in India because we are a poor country. We must

produce wealth, and then divide it equitably. How can we have a welfare

state without wealth? Wealth need not mean gold and silver but wealth in

goods and services. Our economic policy must, therefore, aim at plenty.

Until very recently economic policies have often been based on scarcity. But

the economics of scarcity has no meaning in the world of today.

Now I come to this governing clause which I just referred to, with regard to

the second Five-Year Plan, namely, that the second Five-Year Plan should

be based on the physical needs of the people. You will remember that

yesterday the President also emphasized the necessity for basing planning

on the people’s physical needs. Our first Five-Year Plan was based on the

data and the material we had at our disposal as well as on things that were

actually being done at the time. Take these big river valley schemes. All

these things were being done at the time and we had no choice but to

continue them. We had to accept what had been done. Of course, we added

one or two new schemes and rearranged the priorities. at is to say, our

Plan was largely based on the finance available and consisted in taking up

those schemes which were most useful. But it was limited planning, not

planning in the real sense of the word. e conception of planning today is

not to think of the money we have and then to divide it up in the various

schemes but to measure the physical needs, that is to say, how much of food

the people want, how much of clothes they want, how much of housing

they want, how much of education they want, how much of health services

they want, how much of work and employment they want, and so on. We

calculate all these and then decide what everyone in India should have of

these things. Once we do that, we can set about increasing production and

fulfilling these needs. It is not a simple matter because in calculating the

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needs of the people, we have to calculate on the basis not only of an

increasing population but of increasing needs. I shall give you an instance.

Let us take sugar. Our people now consume much more sugar than they

used to, with the result that our calculations about sugar production went

wrong. Now, why do they eat more sugar? Evidently because they are better

off. If a man getting a hundred rupees finds his income increased to a

hundred and fifty, he will eat more sugar, buy more cloth, and so on.

erefore, in making calculations, we have to keep in mind that the extra

money that goes into circulation because of the higher salaries and wages,

affects consumption.

So we find out what in five years’ time will be the needs of our people,

including even items needed by our Defence Services. en we decide how

to produce those things in India. In order to meet a particular variety of

needs we have now to put up a factory which will produce the goods that

we need five years hence. us, planning is a much more complicated

process than merely drawing up some schemes and fixing a system of

priorities.

Behind all this is another factor—finance. Finance is important but not so

important as people think. What is really important is drawing up the

physical needs of the people and then working to produce things which will

fulfil such needs. If you are producing wealth, it does not matter very much

if you have some deficit financing because you are actually putting money

back through goods and services. erefore, it does not matter how you

manipulate your currency so long as your production is also keeping pace

with it. Of course there is the fear of inflation. We must avoid it. But there

is no such fear at present in India. On the other hand, there is deflation.

Nevertheless, we have to guard against inflation. We have to produce the

equivalent of the money pumped in. Sometimes there is a gap between

investment and production, when inflation sets in. For example, let us say

we put in a hundred crores of rupees in a river valley scheme which takes

seven or eight years to build. During the years it is being built we get

nothing out of it but expenditure. is can be balanced in cottage

industries, in which the gap in time is not large. e additional money that

you have put in, is not locked up for long. erefore in planning we have to

balance heavy industry, light industry, village industry and cottage industry.

We want heavy industry because without it we can never really be an

independent country. Light industry too has become essential for us. So has

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cottage industry. I am putting forward this argument not from the

Gandhian ideal, but because it is essential in order to balance heavy industry

and to prevent the big gap between the pumping in of money and

production.

But production is not all. A man works and produces something because he

expects others to consume what he produces. If there is no consumption, he

stops production. erefore whether it is a factory or a cottage unit,

consumption of what is produced should be taken care of. Mass production

inevitably involves mass consumption, which in turn involves many other

factors, chiefly the purchasing power of the consumer. erefore planning

must take note of the need to provide more purchasing power by way of

wages, salaries and so on. Enough money should be thrown in to provide

this purchasing power and to complete the circle of production and

consumption. You will then produce more and consume more, and as a

result your standard of living will go up.

I have ventured to take up your time in order to give you some idea of the

approach that is intended in this resolution when we say that the second

Five-Year Plan should be based on the physical needs of the people. I hope

it has helped you to understand the way we are thinking. I myself do not see

any other way of rapid progress. e financial approach to planning is not

rapid enough. I should like you to explain this to people when you go home

to your respective towns and districts. We are responsible for giving effect to

this resolution. We have to fulfil our promise.