February 12, 2020, was indeed an historic day for 1.35 Billion Indians when the President of the United States of America Mr Donald Trump referred to India as the “Developed Nation”. It surely makes us believe the sayings of our Hon’ble Prime Minister Mr Narendra Modi that in his India “Sab Changga Si” and “Acche Din” are not far.
With a nominal GDP of $2.94 Trillion, India stands 5th across the world and takes the pride of being one of the fastest-growing economies. The neoliberal economists might be having the coffee in the best cup during this transition of India from an economy of $189.45 Billion in 1980 to its current state. With an impressive transformation of the country from being dependent on agriculture for its income to a country where 60% of its economy comes from the service sector, with increased GDP per capita of $2,170, I am pretty sure about the advancement in the standard of living of people across the country. I am sure with such large economy, all Indians might be having food to eat, electricity to light their house, water to drink, accessibility of education to grow & accessibility of hospitals to ensure their well-being.
It is interesting to note, that even after so much of economic improvement, technological advancement and all the other superlative terms, the reality is very distinct from what these numbers tell us. The real scenario of India in the above-mentioned segments is: It tops the list in the ranking of most undernourished countries with 195 million hungry people, 250 million people don’t have the access to electricity, 162 million people don’t have access to safe drinking water, India is a house of maximum illiterates with a number near 290 million and only 43% of Indians have the accessibility to healthcare during pregnancy. This makes it important to analyse the seven decades of Independent India that why even after these being an important agenda in the manifestos of the ruling party, the situation still is so worse, where do we go wrong?
Five Year Plans and the Economic Disparity With the midnight speech on 15th August 1947, India came out of the colonial rule and declared itself as an Independent Nation. Jawaharlal Nehru took the oath as the First Prime Minister of Independent India. Going against the ASEAN Nations, India decided to build relations with the Soviet Union and follow Mahalanobis’s Economic Model. It is very interesting to note how the major agendas under the five-year plans have transformed across the decades and its relationship with the economic disparity.
The first five five-year plans were based on the Mahalanobis Economic Model which promoted country to become self-reliant.
The first five-year plan was not actually a plan but an agenda to reconstruct the broken India post-partition.
It was the second five-year plan which set the stage for formal planning and visionary agendas. It majorly focused on the establishment of heavy industries through public investment to promote rapid industrialization and raising the low saving rates, it was certainly one of the most original agenda in its conception.
The third five-year plan came with the uncertainty of international market which gave 2 options to the planning commission, either to build a strategy to increase exports or
to build a strategy to reduce imports through domestic production. The plan introduced the concept of “import substitution” and promoted domestic vendors. It was regarded as one of the strongest decisions and was widely acclaimed by academicians and policymakers, and was also widely emulated by other developing nations.
The period of the fourth five-year plan was one of the most difficult times of the country when it was facing its worst drought. Other than coming with plans to control the situation, it also introduced the concept of environmental sustainability.
The fifth five-year plan came with the slogan of “Garibi Hatao”, it majorly focused on employment, poverty alleviation and justice. The plan also focused on self-reliance in agricultural production and defence. The Minimum Needs Programme was introduced to provide certain basic minimum needs and thereby improve the living standards of the people. By and large, this was the end of Mahalonobis Model i.e. of Nehruvian Socialism, post this India adopted the Harrod-Domar model.
The sixth five-year plan marked the beginning of economic liberalization which led to the increase in the cost of living majorly because price control policies were eliminated and ration shops got closed. It also marked the beginning of the shift of the focus from heavy industrialization to infrastructure.
The seventh five-year plan was not developed by technocrats rather by the political leadership, especially Prime Minister Rajiv Gandhi. The plan may also be termed as an “infrastructure” plan. It revisited the idea of import substitution strategy and moved towards a more liberal trading regime.
The eighth five-year plan was overtaken by the foreign exchange crisis of 1991, it was the first efforts towards market-oriented economic model, though the shift in planning didn’t entirely take place but India recorded the avg. annual growth rate of 6.7%.
The ninth five-year plan took the cognisance of the fact that demand rather than investible resources is the key constraint towards the growth and policies needs to be framed based on it. The fiscal policy was brought into the planning commission framework rather than been left entirely to the finance ministry.
The tenth five-year plan was more a visionary idea to double the national per capita income and create a hundred million jobs in the next ten years. It also took the cognizance that private investments move to developed regions, creating huge disparity across the country.
The eleventh five-year plan was visionary in a different way it introduced the concept of “inclusive growth”. Along with employment and infrastructure, it focused on human resources especially health and skill development.
Now, as very well can be concluded from the figure 1, it was till the start of 1980s that the economic disparity in the country was getting reduced, it got reduced to the extent that top 1% of the country was sharing 4% in the national income and the bottom 50% were sharing 23%. It shows a striking relation with the period till Mahabolonis Economic Model of Nehruvian Socialism was followed, as very well observed the model was helping the countrymen grow, though the growth was slow but it was inclusive. It was since the starting of the implementation of a sixth five-year plan which made the first attempt towards economic liberalization by adapting Harrod-Domar model which gave an acceleration to the economic growth as well as to the economic disparity. Surely, it was a hard trade-off to choose to be an economic power or to make the countrymen grow.
In the current India, the top 1% has the wealth equivalent to the four times of bottom 953 million. In 2018, the Top 1% earned 73% of the total revenue and the bottom 7 crores earned just 1%. India stands 3rd in the list of most billionaires, and 129th in the list of Human Development Index which judge based on the accessibility of education, health and gross national per capita. Aren’t these facts mindboggling for a country which mentions itself as a socialist in the preamble of its constitution? As Karl Marx mentions in his manuscripts, every capitalist aim to increase his wealth, in a nation with growing wealth the big capitalists attempt to dominate the small capitalists and eventually demote them to labourer and a section of labourers is further demoted to god know what? And this increases the economic disparity among the population.
Abhishek Singh is a student at IIT Kanpur
This article is Part 1 of a three-part series
The views expressed in this article are solely that of the author and may not necessarily reflect Qrius Editorial Policy.