The Fourth Plan

Summary

The Fourth Plan is a short Forum of Free Enterprise booklet (Bombay, 10 March 1965) that gathers two contemporaneous critiques of the Planning Commission’s Memorandum on India’s Fourth Five-Year Plan. The first piece is Dhirajlal Maganlal’s presidential address to the Indian Merchants’ Chamber (delivered 15 December 1964); the second is Dr. A. Krishnaswami’s two-part Hindustan Times article (23 and 25 December 1964). Both authors accept the goal of rapid growth but argue that the Plan’s outlay targets are over-ambitious and detached from the resource realities exposed by the mid-term appraisal of the Third Plan. Their shared argumentative center is a plea for realism in resource mobilisation, restraint on deficit financing and taxation, and a larger, freer role for private enterprise. Interstitial pages reprint free-market epigraphs from Eugene Black, Milton Friedman, and A. D. Shroff, and the booklet carries the Forum’s standard disclaimer that the views are not necessarily its own.

Essays

Resources for the Fourth Plan

By DHIRAJLAL MAGANLAL

Dhirajlal Maganlal’s presidential address to the Indian Merchants’ Chamber works through the financing of the Fourth Plan. He traces how Working Group estimates of a Rs. 30,000-crore outlay were pared down toward a Rs. 21,500-22,500-crore compromise, with roughly Rs. 14,500 crores in the Public Sector and Rs. 7,000 crores in the Private Sector, and warns that even this is almost double the Third Plan. Drawing on the mid-term appraisal, he argues that the Third Plan’s expectations were belied — national income grew about 10 per cent against an anticipated 30 per cent — because of agricultural shortfalls, inflation, over-investment in heavy capital-goods industries, organisational inadequacy, and waste of resources. He calls for a greater spirit of realism: curbing deficit financing and excessive taxation, restraining administrative and non-development expenditure, doubting the optimistic foreign-exchange and Public-Sector-surplus assumptions, and giving private enterprise a fuller, affirmative role rather than treating it as a residual claimant.

• Fourth Plan outlay pared from a Rs. 30,000-crore Working Group figure to a Rs. 21,500-22,500-crore compromise, nearly double the Third Plan.
• Third Plan expectations were belied: national income rose about 10 per cent against an anticipated 30 per cent, with serious agricultural and output shortfalls.
• Over-investment in heavy capital-goods industries intensified foreign-exchange consumption and left installed capacity under-utilised.
• Calls for restraint on deficit financing, taxation, and administrative/non-development expenditure, and questions the Plan’s optimistic foreign-exchange and Public-Sector-surplus assumptions.
• Urges that private enterprise be given a fuller, affirmative role in the Plan rather than treated as a residual source of resources.

Fourth Plan Assumptions and Reality

By DR. A. KRISHNASWAMI

Dr. A. Krishnaswami’s ‘Fourth Plan Assumptions and Reality’, reproduced from the Hindustan Times, reads the Planning Commission’s Memorandum as a distressing document that abounds in generalities and familiar pieties. He catalogues the imbalances the Third Plan’s mid-term appraisal revealed — excess liquidity and rising prices at home, dwindling foreign-exchange reserves and heavy IMF repayment obligations abroad — and argues that the Commission’s targets are ‘not real targets but expressions of intention.’ Using a table of selected production targets (food grains, coal, steel, cement, fertiliser, electricity), he shows how much the actual 1963-64 output fell short of mid-term expectations and how implausible the 1970-71 figures are on present trends. He attacks a mechanical, determinist approach to planning that treats investment as the straight-line determinant of growth, insisting instead on the inelasticity of supply, the need to concentrate on agriculture and quick-yielding projects, and a strategy of consolidation that conserves scarce resources and minimises sectoral maladjustments.

• Characterises the Fourth Plan Memorandum as full of generalities and familiar pieties, with targets that are intentions rather than real targets.
• Stresses domestic excess liquidity and rising prices alongside depleted foreign-exchange reserves and heavy IMF repayment obligations.
• Uses a ‘Selected Targets of Production and Development’ table to show 1963-64 output falling well short of mid-term-appraisal expectations.
• Criticises a mechanical, determinist model of planning that treats investment as the straight-line determinant of growth.
• Advocates a strategy of consolidation — conserving scarce resources, concentrating on agriculture and quick-yielding projects, and minimising sectoral maladjustments.

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