Inflation^ Stagnation and an Alternative Approach to Planning
AFTER independence, the ruling bourgeoisie proceeded to develop the economy along capitalist lines in order to further 'strengthen its class position in Indian society. Economic planning by the state formed part of the bourgeoisie's moves towards this goal. At the time when planning was initiated, the surplus value extracted in Indian industries in the pre-plan years was too inadequate to meet the minimum investment requirements for rapid expansion. Profit-motive ran counter to self-reliance. The extracted surplus value was not ploughed back to increase capital formation. During the three Plans, when manufacturing industries, despite fluctuations, maintained appreciable rates of growth, the government, instead of mobilizing the total material and manpower resources of the nation in order to make a forward stride in our economy and put it on the road to self-reliance, relied heavily on foreign aid and deficit financing. This inevitably led to structural imbalances, which in ttirn led to an inflationary price rise towards the end of the First Plan.
The First Plan had started with a precipitous decline in the price level because of immediate possibilities of termination of the Korean War and the worldwide tendency to reduce accumulated stocks. During the first quarter of 1952, markets in India were flooded with goods previously hoarded. Agricultural production exceeded the target due to favourable