Make planning fashionable again

Make planning fashionable again
The withdrawal of the Indian state from economic decision-making has had consequences on industry
Economic planning is not considered fashionable today. Nevertheless, contemporary economic debates will have much to gain by revisiting the ideas on planning, championed in particular by Jawaharlal Nehru. As is well known, India under Nehru’s leadership inaugurated a strategy for industrialisation of the country in the early 1950s. This involved the setting up of public sector units (PSUs) in diverse areas of manufacturing; research institutions in cutting-edge technologies of the time such as space and atomic energy; and centres of higher learning, including the Indian Institutes of Technologies (IITs). All of these by a poor country, which was still struggling to find its feet amidst the multiple blows it had to endure during the early years after Independence. Planning is not incompatible with markets and globalisation. On the contrary, a developing country trying hard to stay afloat amidst the turbulence of a global economy requires more, and not less, guidance thorough industrial policies. The successes achieved by East Asian countries such as South Korea in manufacturing are, to a great extent, the result of strategic planning over several decades by their governments. China is gradually shifting its economic base from low-wage industries, and is now emerging as a global leader, even ahead of the U.S., in several new technologies, including artificial intelligence and renewable energy. These Chinese achievements owe much to the careful planning and investments made by its government, particularly in the area of science and technology. The employment challenge that India faces — close to 15 million waiting to be absorbed in the industrial and services sectors every year — is possibly bigger than that faced by any other country (except China) in the world. It cannot be resolved with the technologies that foreign companies bring into India, which tend to be labour saving. What India requires, on the other hand, are technological advances that create new economic opportunities and absorb — not displace — labour. Consider, for instance, breakthroughs in biotechnology that may find new commercial applications for our agricultural products, or electric vehicles and renewable energy solutions that depend less on imported material. India’s research institutions and our PSUs should engage in the creation and dissemination of such technologies. The country’s industrial policies should be able to enthuse young and educated entrepreneurs from rural areas to make use of these technologies to create new jobs. And, for all these, planning should be brought back to the centre of our economic discussions.

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