APPROACH TO THE FIFTH PLAN

Summary

Reproduced from the first of two lectures Dr. Phiroze B. Medhora delivered at Surat under the auspices of the South Gujarat University on 6 February 1973, this Forum of Free Enterprise booklet is a sustained critique of the Planning Commission’s revised Approach Paper to the Fifth Five-Year Plan (1974–79). Medhora argues that after a quarter-century of planning the Commission has ‘apparently learnt nothing—and has certainly not forgotten the cliches.’ He compares the original Approach Paper of October 1972 with the revised version of January 1973 and finds the latter to be a ‘slide-back’ — a fundamental change in concept and strategy disguised as a drafting revision, the most visible symptom of which is the cut in the target growth rate from 6.5 per cent to 5.5 per cent.

Medhora frames the planning debate as one over objectives. He distinguishes the western ‘growth versus distribution’ dilemma popularised by Mahbub-ul-Haq from the Indian problem, which he insists is essentially distributive, since India’s physical resources are not so exhausted as to force a trade-off with employment. Yet the revised Paper, he contends, has reduced the question of minimum subsistence for the poor to a re-arrangement of existing income, leaving the production structure largely untouched. He shows arithmetically that bringing the poorest sections up to a minimum consumption level of Rs. 20 per capita (1961–62 prices) requires a 33 per cent rise in consumption of foodgrains, edible oils, cloth and fuel, against planned growth rates for these items of only around 5 per cent — a gap that is not technical but political.

The core of the lecture is a methodological attack on the Commission’s single-model planning. Medhora argues that with the same level of investment, a redistribution of investment across sectors (heavier weight to agriculture) and a lower capital-output ratio could yield a 7.5 per cent growth rate rather than 5.5 per cent, requiring perhaps Rs. 5,000 crores more in total outlay. He rejects the ‘defeatist’ treatment of exports as inelastic — pointing out that world trade grew 10–12 per cent annually through the 1960s — and the bureaucratic instinct to take foreign aid and imports, but not exports, as policy variables. Citing Japan’s tolerated 5–6 per cent inflation alongside 10–11 per cent real growth in the sixties, he argues that the level of investment, the rate of inflation, and the resource envelope are all choices, not constraints.

Medhora closes by charging the revised Approach Paper with being an exercise in ‘academic planning’ — a paper approach in which computers, rather than human effort, decide the country’s destiny. The Paper accepts its own self-enunciated objectives uncritically, offers no alternative paths, and disdains to present the country with real choices. ‘Even a nominal etatist economy’, he writes, could achieve the modest targets envisaged; the planning exercise as currently practised is ‘timid in its approach, academic in its conception and irrelevant to the task the Planning Commission should be concerned with.‘

Key points

• Medhora reads the revised Approach Paper of January 1973 as a substantive ‘slide-back’ from the October 1972 draft, not a mere drafting revision; the cut in the target growth rate from 6.5 to 5.5 per cent is the most visible symptom.

• He distinguishes Mahbub-ul-Haq’s growth-vs-distribution dilemma (a western framing imported from Pakistan’s experience) from India’s situation, which he argues is essentially distributive since physical resources are not so exhausted as to force the trade-off.

• Bringing the poorest population up to minimum subsistence (Rs. 20 per capita at 1961–62 prices) requires a 33 per cent increase in consumption of foodgrains, edible oils, cloth and fuel — against planned growth rates near 5 per cent — exposing the gap between rhetoric and targets.

• Re-arranging investment across sectors with greater weight to agriculture, and accepting a lower capital-output ratio than the Commission’s 3.14:1, could deliver a 7.5 per cent growth rate at the same investment level; reaching the higher target would require about Rs. 5,000 crores more in total outlay.

• He rejects the treatment of Indian exports as inelastic, noting world trade grew 10–12 per cent per year through the 1960s, and criticises the Planning Commission for treating only foreign aid and imports — not exports — as policy variables.

• Inflation is reframed as a choice rather than a hard ceiling: he cites Japan’s deliberate 5–6 per cent inflation alongside 10–11 per cent real growth in the sixties to argue that the level of investment is a policy variable.

• He attacks the Commission’s monopoly on model-building: by offering ‘one final model to choose from’, it reduces national economic strategy to tinkering rather than genuine alternative-comparison.

• Medhora’s closing charge is that the revised Approach Paper is ‘academic planning’ — a paper exercise in which computers, not human effort, decide destiny — and is therefore timid, academic and irrelevant to the real task before the Planning Commission.