Draft Sixth Plan

Summary

Prof. C. N. Vakil’s lecture, delivered under the auspices of the Forum of Free Enterprise on 6 June 1978 and published as a booklet on 14 July 1978, offers an early Janata-era critique of India’s Draft Sixth Plan (1978–83). Vakil welcomes the Plan’s stated departure from earlier Plans — its emphasis on rural development, small-scale industries, a ‘minimum needs programme’ covering drinking water, housing, roads, elementary education, rural health and electrification, and the explicit recognition that the fruits of three decades of planning have not reached the rural masses. He uses this opening to retell, with some satisfaction, an old defeat: in 1956 he and P. R. Brahmanand had submitted to the Panel of Economists a ‘Wage-Goods Model’ that prioritised abundant production of food and essentials of life over heavy industry; the Panel, mesmerised by Russian advisers and by P. C. Mahalanobis’s Plan Frame, set the suggestion aside. After thirty years, he writes, ‘the defects pointed out in 1956 have been realised.’

The body of the lecture is organised in three sections — Aspirations and Limitations, Techniques of Planning, and Plan Model Should Suit Indian Conditions. Vakil argues that the Plan’s rural-development rhetoric will fail unless the entire technique of planning is recast: the bureaucratic machinery delivers only forty percent of allocated rural funds to the farmer (sixty percent is ‘swallowed up by the administration’); Panchayats and co-operative societies have become ‘centres of political rivalries and intrigues’; commercial banks have expanded branches without altering the concept of lead bank lending; and the Rolling Plan device merely keeps targets up to date without changing the underlying method. He insists that solutions require a national consensus, the involvement of the public, a powerful Expenditure Commission to cut waste, and an end to deficit financing that the first year’s budget (Rs. 1,080 crores) has already breached.

In the third section Vakil presses the deeper theoretical point: imported assumptions — that national income growth automatically raises savings, that heavy industry creates employment, that Plans built on coefficients derived from advanced economies fit India — have all been falsified by experience. The Wage-Goods Model, he argues, builds on the realities of Indian agriculture, surplus rural labour, and the structure of internal demand; it would ‘convert periods of surplus production into periods of boon’ by mobilising unutilised labour into capital formation through appropriate institutional devices and social incentives. The booklet closes with an A. D. Shroff epigraph affirming free enterprise as coeval with man — a deliberate framing by the Forum that situates Vakil’s technical critique within its longer classical-liberal lineage.

Key points

• Welcomes the Draft Sixth Plan’s stated shift toward rural development and a ‘minimum needs programme’ (drinking water, housing, roads, elementary education, rural health, rural electrification) as overdue recognition that earlier plans bypassed the rural majority.

• Recovers a 1956 dissent: Vakil and P. R. Brahmanand submitted a ‘Wage-Goods Model’ to the Panel of Economists, prioritising abundant production of food and essentials of life; the Panel, under the sway of Russian advisers and Mahalanobis’s Plan Frame, set it aside — and Vakil now claims thirty years of stagnation as vindication.

• Catalogues bureaucratic and institutional limits to implementation: sixty percent of rural-development funds are absorbed by administration before reaching the farmer; Panchayats and co-operative societies have become arenas of political rivalry; commercial banks have multiplied branches without changing lending behaviour.

• Treats deficit financing of Rs. 2,250 crores in the Plan as ‘disastrous’ — already exceeded in year one (Rs. 1,080 crores in the 1978-79 Budget) — and calls for a powerful Expenditure Commission on the model of the Inchcape Committee to release resources without additional taxation or deficit financing.

• Argues that the ‘Rolling Plan’ is not a new technique but a way of keeping the Plan up to date in its targets and achievements — the underlying method has not changed.

• Rejects the orthodoxy that growth in national income automatically increases savings: in India ‘national income has tended to have gone up, savings do not show any appreciable rise’ — so plan models built on advanced-economy coefficients misfit Indian realities.

• Frames the Wage-Goods Model as a solution: convert excess rural labour into capital formation through institutional devices and social incentives, build mutual dependence between villages and towns, and keep food and other wage-goods abundant and cheap.

• The Forum of Free Enterprise’s editorial framing — Eugene Black epigraph on private enterprise as ‘an affirmative good’, closing A. D. Shroff epigraph — places Vakil’s technocratic critique within the Forum’s classical-liberal lineage.