ROLE OF FREE ENTERPRISE IN SECOND PLAN

By C. L. Gheevala

Summary

C. L. Gheevala’s pamphlet, issued by the Forum of Free Enterprise in Bombay, is a sustained critique of the place assigned to private enterprise in India’s Second Five-Year Plan. Writing in the immediate aftermath of the Plan’s parliamentary approval and the Industrial Policy Resolution of April 1956, Gheevala argues that the ‘socialist pattern of society’ enunciated at the Avadi session of the Indian National Congress has hardened into a programme of nationalisation and Public Sector expansion that progressively confines free enterprise to a residual third category of industry. He marshals the Plan’s own allocation figures — Rs. 4,800 crores in the public sector against only Rs. 2,400 crores for organised private investment, a ratio of 61:39 — to show how sharply the centre of gravity has shifted from the First Plan’s 50:50 balance.

Against this, Gheevala mounts a defence of the record of Free Enterprise during the First Plan. He credits private industry with carrying 71% of the rise in net output and 90% of the increase in industrial and mining production, despite hostile official rhetoric, an ‘inflexible labour legislation’ regime, and what he calls a ‘climate of distinctness’ created by heavy taxation. New industries — bicycles, automobiles, machine tools, non-ferrous alloys, chemicals, ball bearings — emerged from private initiative outside the Plan, and the Indian Tube Company, steel cast foundries and railway-wagon manufacture are cited as cases in point. He singles out the then Minister for Commerce and Industry, Shri T. T. Krishnamachari, whose Madurai remark that ‘private enterprise has failed me’ Gheevala finds incomprehensible given the World Bank Mission’s own favourable assessment and the testimony of the Planning Commission’s periodical reports.

The pamphlet’s deeper argument is political. Gheevala warns that a Public Sector entrusted with the bulk of investible resources will not only crowd out private requirements but will, through nationalisation of Air Transport and Imperial Bank, amendments to Article 31, drastic changes in the Company Law and the establishment of the State Trading Corporation, drift towards ‘State Capitalism’ and a ‘New Despotism’. Quoting the Socialist leader Shri J. B. Kripalani’s Lok Sabha speech of 8 September 1956 and R. H. Crossman on the menace of a ‘vast centralised State bureaucracy’, he insists that the real moral content of socialism is a protest against injustice and inequality, not the construction of a Leviathan that threatens freedom. The closing pages plead for a genuine Mixed Economy of co-existence in which the Private Sector functions under over-all regulation ‘without its initiative being smothered or its incentives destroyed’, and for Free Enterprise itself to discharge fresh obligations to the community so as to make the Second Plan succeed.

Key points

• The Second Five-Year Plan, shaped by the ‘socialist pattern of society’ resolved at the Avadi session of the Indian National Congress, has shifted the public-to-private investment ratio from 50:50 in the First Plan to 61:39, with Centre and State outlays of Rs. 4,800 crores against organised private investment of Rs. 2,400 crores.

• The Industrial Policy Resolution of April 1956 confines free enterprise to a third, residual category of industries and, in Gheevala’s reading, treats private initiative as a stop-gap rather than a partner.

• Despite hostile rhetoric, private business carried roughly 90% of the increase in industrial and mining output and 71% of the rise in net output during the First Plan, and pioneered new lines — automobiles, machine tools, non-ferrous alloys, chemicals, ball bearings, the Indian Tube Company’s steel tubes — outside the Plan’s own schemes.

• Gheevala targets Shri T. T. Krishnamachari’s Madurai claim that ‘private enterprise has failed me’, arguing that the World Bank Mission’s report and the Planning Commission’s own findings flatly contradict the charge.

• He identifies a financing gap of nearly Rs. 1,800 crores in the Second Plan and warns that drawing on the ‘common reservoir’ of savings to feed the Public Sector will leave private requirements starved.

• Recent steps — nationalisation of Air Transport and the Imperial Bank, amendments to Article 31 of the Constitution, changes in Life Assurance, the Company Law and the establishment of the State Trading Corporation — are presented as evidence of a drift toward ‘State Capitalism’ and a ‘New Despotism’.

• Citing Shri J. B. Kripalani’s Lok Sabha speech of 8 September 1956 and R. H. Crossman on the dangers of a ‘vast centralised State bureaucracy’, Gheevala argues that the moral core of socialism is protest against injustice, not Leviathan-building.

• The pamphlet’s positive prescription is a genuine Mixed Economy of co-existence, with private enterprise functioning under regulation but with intact incentives, and with Free Enterprise itself accepting new obligations to community welfare to make the Second Plan succeed.

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