Five-Year Plan

India's five greatest problems, Jawaharlal Nehru once remarked, are land, water, cows, capital and babies. To deal with them, he launched India's First Five-Year Plan, which has coped fairly well with the first three. But the shortage of capital to create jobs and necessities for an enormous and fast-growing population has not been solved, and Prime Minister Nehru is impatient for a solution.

"We cannot wait," says he. "That is the difficulty. We have to think in terms of large schemes of social engineering, not petty reforms." India's First Five-Year Plan still has six months to run, but last week Nehru and his government were plunging ahead with a far more ambitious Second Five-Year Plan, which planners say will add 25% to the national income (currently about $22 billion) and create 12 million new jobs by 1961.

Socialism by Expansion. Nehru is a socialist and his dreams for India revolve around what he calls "the ideal of a socialist society." The First Five-Year Plan, a relatively modest $5 billion program, was not really socialistic. Its proudest achievement: good planning, hard work and good weather have increased food production 18%--for the first time in history relieving India's peasant masses of the threat of famine. The plan strove to fill the most urgent needs of India's millions, pumped the bulk of its money into irrigation, electric power, transport and housing, only 8% into industry, e.g., one steel plant, a locomotive factory, a shipyard. Meanwhile, the "private sector" of India's economy was left free to expand. The new plan, Nehru's advisers agreed, must push more decisively toward socialism and "the public sector must be expanded relatively faster than the private sector."

To draft the new plan, Nehru picked Prasanta Chandra Mahalanobis, 62, head of the sprawling Calcutta University Statistical Institute. Cambridge-trained Professor Mahalanobis, a physicist turned economist, has achieved a sensational rise in prestige, stands as close to Nehru on economic matters as Krishna Menon does on foreign affairs. Mahalanobis has stocked the institute's library with the works of Stalin and Mao Tse-tung and the proceedings of the Soviet Academy of Sciences, bound in calf. To help draft the plan, Mahalanobis got the services of ten Soviet economists to assist his staff. Mahalanobis has been called a Communist but denies it in hurt tones. "I have been only twice to Moscow but seven times to the U.S.," he says.

Business at Gunpoint. The central proposal of the new Five-Year Plan: to increase government spending on economic development to $17.6 billion in five years, doubling "public sector" or state-owned industry. The private sector would be encouraged to grow all the while, but on a more moderate basis. Thus the Indian program falls short of complete state socialism. Nehru has long argued, as Britain's Laborites now do, that socialism is feasible without full nationalization. But Nehru favors controls over private enterprise. "An army," he explained, "does not occupy a country by placing a soldier in every nook and cranny: a gun mounted on a hill enables an army to control surrounding areas effectively."

One of Nehru's weapons is a constitutional amendment passed last spring. It empowered the government to seize needed agricultural and slum property without paying full compensation, for, otherwise, as Nehru saw it, "the haves will remain haves and the have-nots will remain havenots." Parliament gave him more ammunition last month by cracking down on the managing agency system, that dates from the English East India Co.'s practice of handling ventures for absentee owners. Today, 22 of the largest managing agencies control 23% of India's industrial assets. The new law entitles the government to put two men on any board of directors and to veto appointments of and salary raises for other corporate directors.

Government by Faucet. With Nehru's guns mounted on the hillocks of free enterprise, Planner Mahalanobis confidently expects to manipulate the economy with august precision. Says he: "We merely turn the taps of consumer goods or income on and off as the plan requires." India cannot build enough modern, mechanized factories, but Mahalanobis says he can turn out consumer goods and create jobs for India's huge army of unemployed (some 25 million, and growing in annual leaps of nearly 2,000,006) by building up cottage industries in the villages. Example: he would permit no expansion of textile mills, instead would double the output of handloom cloth.

Planner Mahalanobis' confidence, however, is not shared by many another Indian, including even some of Nehru's ministers. The Second Five-Year Plan is under a heavy barrage of fire. Mahalanobis, critics found, had underestimated the cost of needed new railroad mileage by a whopping $1.4 billion. Industries Minister Krishnamachari, bemoaning the dearth of skills in India's vast untrained manpower pool, despaired of attaining the plan's steel production goals. "Finding personnel for the new steel plants," he said, "looks like a superhuman task."

What most dismays the critics, particularly politicians, is the difficulty of financing the plan's "large schemes of social engineering." To many, Mahalanobis' formula seems dangerously facile. It relies on $1.3 billion of foreign investment and government aid (v. about 2 1/2 times the amount prescribed for the First Five-Year Plan) to partly cover the imbalance in foreign payments owing to stepped-up imports of capital goods. Even if it could get such lusty help from abroad, the government would have a hard time stuffing it down the throats of the growing body of Indian xenophobes. At home, Mahalanobis wants to jack the tax level from 7% of national income to 10% (the U.S. tax level: 26%). Even with the higher taxes and $1 billion from outside, a deficit of $4.4 billion would remain. Mahalanobis suggested filling half the gap through funded debt, the other half simply by having the government print $2.2 billion in new money.

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