Chapter 18
Economic Policy 1947-56

FOR A whole generation before the transfer of power, members of the Indian National Congress had been nurtured in the belief that the poverty of India was the result of British rule and they were confident that independence would release the energies of the people and lead rapidly to prosperity. India would, in fact, achieve in a few years the progress which had taken a century or more in Europe, but this could only be brought about by discipline and careful organisation of resources. 'Planning was thus to be the corner stone of the new economy.

It was also part of the Congress faith that India had suffered from the principles of the 'colonial economy. The production of raw materials, which served the purpose of the rulers, had been regarded as her proper role, and industrial development had been retarded. To an objective observer this may seem a somewhat distorted picture, but it was the foundation of economic thought amongst the rank and file of the Congress Party in 1947. Indian industry must, therefore, be developed at all costs and agriculture could take care of itself.

There were, however, two schools of thought as to the right lines of industrial development. There were the Gandhians, who were justifiably afraid that India might suffer the social evils which attended the Industrial Revolution in England and therefore pinned their faith to the expansion of cottage industries; and there were the modernists, who recognised that a country without highly developed large-scale industries could not count in the modern world. It was perhaps a foregone conclusion that the latter school would triumph, though lip service would still be paid to cottage industries, which might indeed have their place in a transitional economy.

Some of those who thought in terms of large-scale industry oversimplified the problem. It seemed to them mainly a matter of replacing British by Indian industrialists, and there were


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