IN the last ten years, something like $21 billion of fresh investment has been pumped into the Indian economy. In the Third Five Year Plan, which begins next April, the same amount will be invested in half that time. Compared with the size of India and its population--some 431,000,000 living in just over a million square miles--an investment of $42 billions in 15 years is of course derisorily small. American private enterprise expects to invest three-quarters of such a sum in any one year--and for a population less than half as large. But in India it is a revolution, none the less.

The bare statistics are impressive enough. The index of industrial production has risen by an average of 10 percent a year in the last decade, and this rate masks a much more powerful thrust in all the newer industries. The chemical industry has more than doubled; the crucial sector of machine building--which is at the center of India's strategy for growth--has increased by over 300 percent. Some 6,000,000 new industrial jobs have been created, although even this level is too low to counter the steady flow of new entrants into an economy in which population moves inexorably up by over 8,000,000 a year. New skills have been introduced and workers who in 1955 took four or five times as long as their European counterparts to produce a given article--an Oerlikon lathe, a Mercedes truck, a railway coach--can now do the work in little less than twice the European time, and the gap is still being narrowed. At the other end of the industrial scale, a new class of business managers has come into being. In the next ten years their numbers may have increased tenfold, and this expansion is introducing a new, liberal and professional outlook into industry at a point where, in the past, attitudes have been dominated by the old speculative, "get-rich-quick" philosophy of India's dominant trading caste, the Marwaris.

The thrust of expansion is strong at every level. In the public sector investment has been more than doubled between the First and Second Plan for such basic services as power, communication and transport and for a number of new public ventures in mining, steel making and heavy industry. In the organized private sector, too, investment is twice as large and has run at a level consistently higher than any laid down in official forecasts. But it may well be that growth is most lively in the sector which escapes most easily from the formal records--the new, bustling, thrusting sector of small-scale production.

Statistics here are hard to come by. They cover artificially-fostered uneconomic village crafts as well as the new modernized workshops using power and a few machines. The new small entrepreneurs are too busy finding markets to provide figures for official use, and a healthy suspicion of the tax gatherers tends to deflate any figures they do report.

One must therefore rely on a whole mass of indirect evidence--the eagerness with which small businessmen look to public agencies such as the State Bank for loans, the pressure on space in the 60 new industrial estates, of which there are to be 600 in the Third Plan. When, for instance, a few months ago, 80 new sites were advertised in the Ludhiana industrial estate, 800 applications came in before nightfall. But perhaps the best evidence of the lively expansion is simply visual. A decade ago, a drive from Delhi to Umbala along the Grand Trunk Road was still a drive out of the pages of Kipling. The bullock carts moved slowly through the dust, camels padded silently by, and at dusk a blue haze of pungent smoke hung over the villages and sent the aromatic smell of burning cow dung across the quiet, empty highway. At any corner one might have met Kim and his Lama or settled down to eat and sleep by the camp fires of the old Rani's caravan.

Today, the trucks and trailers hurtle by, day and night. Bicycles in swarms show that the first of the consumer durables has reached the Indian village. Great roads are often the epitome of a society. One thinks of America's shining fleets of private cars and Russia's mile upon mile of empty strategic highways. The Indian roads today are the roads of a society in the first forward thrust of modernization, where the bullocks still hold up the mammoth trucks, carrying nuts and screws and bicycle parts and machine tools from the busy little workshops of the Punjab to Delhi, Calcutta and Bombay. These crowded thoroughfares, these growing transport services, make up perhaps the most striking visual evidence that the Indian economy has discovered the biggest single spring of expansion in the mixed economy--a large and growing class of entrepreneurs.

It is one thing for the Government to determine on development and to provide basic investments and inducements. But it is quite another to be certain of the consequences. What will be the community's response? Will there be citizens ready to seek the risks and rewards of making guesses about the market and acting on them? Such men are not always forthcoming. Some societies are so entrenched in traditional modes of work and prestige that the entrepreneurial faculty does not appear. No carrot of gain tempts them. If the stick of total state discipline is not used as an alternative, nothing happens, as is the case in large parts of Southeast Asia or in upland South America. The best news in India's first decade of planned growth is, therefore, that enterprise exists, irresistibly and unquenchably, that it is growing at a speed to create a whole new climate of opinion favorable to development and to provide the interlocking expansion and external economies by which enterprise in one field assists it everywhere else.


Admittedly, the picture of growth is not so clear in the countryside. There, change has to be grafted straight onto the oldest, most encrusted, most valued traditions of human living. On the Gangetic plain or the rice delta of Tanjore, land has been cultivated continuously for thousands of years, not as a means of buying and selling and making money, but as a source of food for the household and of prestige in the community. Men whose forefathers have followed the same devout cycle of agriculture and religion for generation upon generation are not easily persuaded that the new methods may not be risky or useless or impious or worse.

And resistance to new methods is only half the problem. Better seed, more water, the use of fertilizer--all these imply some investment and in any village at least half the families have no savings at all. The man with 25 acres, even the man with 5 acres, some of them irrigated, has a little capital which can be coaxed into a new pesticide or a better strain of wheat. But the little man with a couple of acres or less gets only a bare subsistence from his land. The landless laborer has nothing. Thus poverty, even more than tradition, holds the countryside back from change.

In the last decade, the Government has made a sustained effort to break down these rural barriers of conservatism and indigence. Its chief instrument of change is the Community Development movement which attempts to push and prod and tempt the farmer into every kind of beneficent village activity, from better crop-growing to better hygiene. And one aspect of the movement is to prepare the way for a more vigorous coöperative system in which the little man will be able to lay his hands on the credit he needs to take advantage of new opportunities in farming and to have some control over the processing and marketing of his improved crop.

These efforts have not been as unsuccessful as some critics of the Government's rural policy now suggest. Agricultural output as a whole has increased by about 40 percent in the last 10 years and commercial crops, such as cotton and jute, have nearly doubled. This is not negligible, especially when the hazards of weather and water are taken into account. India has about 300,000,000 acres that can be cultivated, but only 50,000,000 are irrigated so far; the Third Plan aims at adding another 20,000,000 acres. For the rest, the monsoon rains determine everything and a bad monsoon such as that of 1957-1958 can stop all progress in its tracks and reduce food production by over 6,000,000 tons in a season.

Yet the advance has been undeniable. Some farming groups have long been known to include men of enterprise and innovation. They took to growing commercial crops in the later decades of the nineteenth century--cotton and ground nuts in Saurashtra, tobacco in Gujerat, wheat in the Punjab. Today in these more enterprising areas, and in a scattered way all over India, some peasants are eagerly taking up the new techniques encouraged by Community Development. The pressure of demand for fertilizers grows each year; three times more is now consumed than in 1955. The figure could probably be five or six times greater. About 80,000 miles of new roads connecting villages with major roads have been built under the auspices of Community Development and 100,000 miles more improved; and one can argue that nothing stirs up the entrepreneurial instinct more speedily than having a market within reach.

In short, once the opportunities are available, the pioneers begin to exploit them. Let us say that two or three men in a village make a start with planting rice according to the Japanese method, each seedling spaced and manured, the lines between carefully and continuously weeded. If, as a result, output goes up by 25 percent, other villagers tend to follow suit. As one small farmer put it: "I used to plant and harvest in the ways of my father, but now I think about farming." In a country in which in the past farming methods have had the sanctity of unchanging ritual, this may be the greatest revolution of all.

Nor has the attack on rural poverty entirely failed. Land reform has removed the large rent-collecting intermediaries, the Zamindars and Jagirdars. Perhaps 70 percent of India's country people own some land. The number of farmers' coöperatives has grown from 5,000,000 to 12,000,000 in the last decade and the coöperatives' share in rural credit is now 10 percent, compared with 3 percent before the Plans. Thirty percent of the country people--the men with five acres and more--are probably better off. Another 30 percent have kept pace, in spite of more mouths to feed. Primary education, the village boy's first rung of the ladder, will soon be extended to all India's children. But the root of the problem remains. At the bottom of the scale, especially among the landless and the Untouchables, poverty is growing more intense.

These uneven results reflect the Government's rural achievement as a whole. Those who profess to see only failure miss the unmistakable improvements and points of growth. But the critics are right in estimating that the pace is too slow. India's country people--and they make up nearly 80 percent of the population--must, like the Red Queen, run fast even to stay where they are. To get ahead of themselves, they have to sprint. This means in practical terms a production of food grains increasing not by 3 percent but by 8 percent a year, to grow from 75,000,000 tons today to between 90,000,000 and 100,000,000 tons by 1966. It means much more emphasis on the provision of fertilizers and better seeds, far more detailed plans for land and water use, more efficient mobilization of rural labor for the ditch digging, field levelling and road building, which intensive agriculture demands. It means devoting a larger share of India's best brains to agriculture and providing higher prestige and salaries for rural work. It means a much larger injection of State credit into the coöperative system so that the little man can be staked and released from his bondage--still a bondage covering 90 percent of rural credit--to the local money lender. It means an assured market for food grains with both floor and ceiling prices and this in turn requires a public grain reserve of both wheat and rice. American generosity under Public Law 480 has pretty well assured the needed reserve for wheat, but probably half a million more tons of rice would be necessary to give security to the rice growers. And all these things need to be done energetically and at once.

The Indian Government admits the need. More capital is set aside for agriculture in the Third Plan than in the Second. Concentrated schemes making use of all the techniques of expansion are being prepared for a specially selected pilot district in each state. More emphasis on food production, less on cultural frills, is forecast in Community Development. The production and possibly the importing of fertilizers are to be expanded. Even if farming is the laggard sector, there is no complacency about it now, and the next five years promise to be years of renewed and strenuous effort.


When this pressure is added to the thrusting growth of the industrial sector, the full scale of the problems facing the Indian Government begins to emerge. The chief issue in India in the next years is not, as many critics suggest, any controversy about the role of the public or the private sector. Save on a very few points, there is no essential conflict between them. On the contrary, India is going through the experience Western Europe underwent during the Marshall Plan, or France under the Monnet Plan--the process of learning that there is no greater aid to the lively development of private industry than a large, sustained and well directed program of public investment. The profound question is whether government in all its manifestations--cabinet, party structure, bureaucracy--can carry the tremendous weight which economic success is loading on to it.

The dominant men in the Indian Government are still the leaders formed by the long struggle for independence. They are men of generous vision. They are committed to the idea of a modernized Indian economy. Certainly, no one should underestimate the part played by Pandit Nehru in making the aim of a modern, socially just and economically expanding India the ideal of the Congress Party--and indeed of the Indian nation--in the first decade after independence. But equally the leaders of Congress, apart from Sardar Patel who died in 1950, show few signs of profound interest in administration. Years in jail under the British were hardly designed to draw out whatever innate capabilities they may have had. They came relatively late in life to the direct tasks of government and were plunged almost at once into policies of economic expansion which put a premium on powers of decision, delegation and follow-through. It is not surprising that these are sometimes lacking in the cabinet. Yet the consequence is to lessen drive and direction at the very top.

In the country at large, the Congress Party is also not especially well fitted for the local tasks of economic leadership. Congress resembles either one of the great American parties in that it is a coalition of regions and interests, not the single instrument of an agreed ideology. For the give-and-take of democracy, such a party is eminently well suited. It can construct the local bargains and compromises by which divergent interests are reconciled and voters tempted along new ways. But it is not a very suitable instrument for rallying vast unified popular effort or for exacting great public sacrifice. It follows that India cannot mobilize savings and direct energies as the Chinese Communists claim to do, and Congress as a political party can survive only so long as really heroic sacrifices are not needed from the Indian people. Provided growth goes on, the Congress Party, for all its local feuds and splits, will probably continue to be India's chosen instrument in politics, but it does not contribute much to the dynamism of economic growth and, at times, its incoherences and regional jealousies actually impede expansion.

As a result of this relative lack of drive in the political direction of the country, much more responsibility falls on the Indian Civil Service. Its virtues are immense. It inherited and has largely continued a unique tradition of probity, devotion, intelligence and service. It includes in its higher ranks some of the world's ablest public servants. It has coped bravely with an almost unbelievable expansion in its work and is now preparing without too much complaint to shoulder even more. Yet the virtues it displays are not always the virtues most needed in the new India in which the aims of government are very different from those of the old British administration. Economic expansion and social welfare are now the watchwords in place of the old "law and order," and both aims entail a vast increase in government action--and action of a quite new type. Achievement is now worth more than equity, risk-taking more than slow, secure inquiry, a half-right answer today more than a complete answer next year. The old tradition demands care and the avoidance of mistakes, but it can encourage indecision and buck-passing. The old tradition upholds careful Treasury control and sanction over all public expenditure. But this leads all too easily to "rupee pinching," to dangerously slow and detailed audit, and to what is in effect a perpetual flurry of intervention in agencies to which genuine authority should have been delegated.

These dilemmas of bureaucracy are not new. Britain itself went through a comparable crisis of administration in the nineteenth century when the new needs of an industrial society caught up and pulverized the old machinery of an agrarian and mercantile state. Florence Nightingale's description of the War Office in 1859 could be applied to several Ministries in Delhi a hundred years later: "a very slow office, an enormously expensive office, a not very efficient office, and one in which the Minister's intentions can be entirely negatived by all the sub-departments and those of each of the sub-departments by every other." And the reasons for the criticism are the same--an old machine floundering over new tasks. But the Indian dilemmas have been exacerbated by the amount of extra responsibility piled on to the civil servants.

They are not only loaded with the normal expansion of work entailed in providing a new framework of welfare. They are not only subject to the new pressures generated by the very rapid expansion going on in the economy at large. On top of this, they are vested with sweeping powers of control over private industry and with direct responsibility for all the giant ventures which the Plans entrust to the public sector. These include three new steel mills of a million tons each, all to be fully functioning early in the Third Plan, and all to be expanded again before 1966; most of the new pits needed to increase coal output from 32,000,000 to 53,000,000 tons in the first Plans and then, by 1966, to 97,000,000; the bulk of the expansion in fertilizers, communications, equipment and railway-engine building. And in the next Plan the public sector is to include at least six major projects in the largest of large-scale industry--heavy machine building--and each plant promises to be a mammoth. Almost any bureaucracy would have been strained to the utmost with such tasks and there are signs that the Indian Civil Service is getting near to the limit of endurance.

Symptoms of strain are apparent everywhere. Private industrialists chafe under the regulations and controls by which a distrustful Government seeks to oversee their operations; and markets may vanish for good while the businessman waits for a permit in the civil servant's outer office. There are delays and holdups in the commissioning and functioning of the new public ventures because the managerial and technical skills needed to run them are not yet available, at least not in the numbers needed and all at once. A game of musical chairs seems to be developing in which some senior bureaucrats move with disconcerting speed from post to post in the public sector. And their lack of experience encourages the Ministries to continue to intervene in the day-to-day running of the new ventures, thereby adding to their own burdens and disrupting lines of authority below.

But the widest symptom of the malaise is the relative failure of some of the most vital public services to keep pace with the demands generated by India's great thrust of growth. Delays at the steel plants make it unlikely that there will be anything like the flow of steel forecast for the first years of the Third Plan. These delays turn on a shortage of coal, which is already 7,000,000 or 8,000,000 tons behind its target, on the unavailability of railway rolling stock and even on some dislocation in the supply of iron ore. Power production--as in every developing economy--is lagging behind demand, and in the Damodar Valley, India's future Ruhr, it looks as though supply will still fall short of needs by at least 170,000 kilowatts in 1966. The railways have been saved from serious bottlenecks only by the unexpected liveliness of road transport; yet the road building proposed in the Third Plan is probably at least one-third less than the estimated needs of expansion.

Such interlocking shortages in the sectors mainly controlled by the Government reflect not only the degree to which expansion has taken it by surprise. It reflects, too, a certain failure in the mechanism of planning itself. There are no agencies specifically empowered to follow decisions down through the lazy, lower echelons of administration. In Army parlance, "Q Plans"--the Planning Commission--is not balanced by "Q Ops"--say, a tough Cabinet sub-committee demanding a regular account of work in progress, not simply in terms of money spent but of physical targets actually achieved, and giving no quarter until every backlog is made up. Only some such agency with overriding powers to follow up decisions can avoid the present delays and harassments and ensure that all the interlocking needs of expansion roll forward together and do not develop into as many brakes.

It must be repeated: these are the costs of success, not failure. If no pressures of growth were pressing up urgently from below, the shortages in basic services, the breakdowns in planning, the delays in decision-making would not loom so large; but India would be much further from its chosen target of self-sustaining growth. And since they are the pressures of success, there is every likelihood that they will be remedied by effective and relevant action. In a democracy, some decisions cannot be taken until popular dismay is sharp enough to force the issue. Very soon in India lack of power or lack of coal or lack of fertilizer will become a political issue, with farmers and small businessmen--the core of the Congress Party's political support--asking angry questions and threatening to change their vote.

Already there are signs of greater awareness and concern. It seems likely that the private coal industry will be allowed to increase its expansion in order to make up for the manifest short-fall in coal. Managerial and technical staff are being looked for abroad for the public steel plants. There is new understanding of the scale of managerial training and recruitment needed in the next decade. New procedures to ensure "follow-up" are being discussed in the Planning Commission. A certain amount has been done to shorten the formalities by which licenses and permits are issued to private industry. It now seems possible that the problems of administering the Plan--over and above the question of its aims and content--will, rightly, hold the center of the Government's attention in the next five years. If so, there is no domestic reason why the Third Plan should not produce a new and even greater surge of growth.


But there is one consequence of the great thrust of expansion over which the Government has little or no control--and one which could conceivably destroy all the hope and momentum developed so far. This factor is the shortage of foreign exchange. India's long-term strategy is to reduce its dependence on outside supply. Endowed as it is with vast reserves of iron ore, adequate coal and a wide range of other minerals, it is only following the path of good sense in basing its large industrial expansion upon machine making and general engineering. Its future economic pattern will more nearly resemble the internal, continental market of America than, say, the trading economy of Japan. But at this early stage of growth, its dependence upon foreign supplies for machines, for the tools for building them and for the materials they use, is still very great and will grow greater in the next decade of rapid growth.

Every developing economy tends to face this dependence. By definition an undeveloped society lacks the means of development--the machinery and the skills--which are the fruits, not the forerunners, of successful growth. Foreign exchange cannot be produced domestically. But domestic expansion cannot get under way without it. This is why foreign investment or the development of a strong export sector has been again and again the prelude of domestic growth, as it was with British investment in the United States and American investment in parts of Latin America or with such lively export trades as Swedish lumber and Canadian wheat.

But India faces daunting handicaps in its search for a greater flow of foreign exchange. The climate of private international lending is not what it was in the nineteenth century when Britain, with its narrow domestic resources, dominated the world economy. America, the new lynch-pin of world trade, is a much more self-sufficient giant and today, if oil exploration were not so heavily financed from the West, private capital flowing to the undeveloped economies would be little more than a trickle. It is not expected to exceed $210,000,000 of investment in India in all the five years of the next Plan.

The outlook for a sharp increase in Indian exports is not much more promising. India's staple exports--tea and jute and cotton goods--are all inhibited in one way or another: tea by high excise duties in the West, jute by alternative methods of packaging, cotton goods by stiff Asian competition and by Western quotas designed to protect the West's own higher-cost producers. India's present exports and invisible earnings are expected to provide $7,492,000,000 over the next five years, but this figure covers only the normal imports needed to keep the present economy moving. The whole foreign exchange component of planned expansion--about $5,456,000,000 in the next five years--must come from new sources, and since a vast expansion in either exports or private investment is ruled out, this is roughly the sum which India has to seek in economic assistance from abroad. Without it, the economy will either cease to grow sufficiently to keep pace with the built-in accelerator of expanding population, or the Government will have to impose so severe a program of domestic austerity as to be almost certainly incompatible with free choice and free consent. Either way, the liberal society will be shown to have no future in Asia.

In short, India in 1961 resembles in some measure the nations of Western Europe in 1947. At that time, most of them had made a most strenuous attempt to drag themselves up from the pit of wartime destruction. Their farmers, their workers, their managers had accomplished a vast effort to convert war industry back to peacetime uses and to restore war-ravaged agriculture to full production. But over one factor they had no control. The raw materials, the food, the capital they needed for further advance were available only in North America; but their dollar reserves had been run down to almost nothing and they still lacked the goods to export to North America in return for its supplies. Such was the deadlock from which they were rescued only by the vision and foresight of the Marshall Plan.

Today, in its relation to the whole Atlantic world, India stands caught in something of the same contradiction. Years of effort have set its economy in motion as never before, but for further expansion the essential component of foreign exchange is simply not available. It neither can be earned by exports nor imported by means of normal commercial loans. The whole momentum of the first thrust of growth is thus at stake and turns upon an obstacle which cannot be hurdled from the Indian side. Only the Western powers have the means at this stage to see to it that the obstacle does not force the Indian experiment to a full stop.

So far, the powers have generously but intermittently supported India's great experiment of growth in freedom. But the kind of sustained decision underlying the Marshall Plan--the decision to see the effort through to success--has yet to be made. Until it is, the Indian effort, great as it is, must remain precarious. As the Third Plan begins, the pressures, fully as much as the promise, generated by India's growing economy suggest that a decision should not be delayed too long.

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  • BARBARA WARD JACKSON, member of the editorial staff of The Economist, London; author of "The West at Bay," "Policy for the West," "Interplay of East and West" and other works
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