Indian Economic Plan in Trouble

...Aid from the U.S...

...If the worst that could happen in India were actually to happen, we may see in South Asia what happened in East Asia when the Nationalists were driven from the mainland...

...What happened to the plan in its first year...

...Yet, both the Government and private business will need all these funds and more if expansion is to continue under the plan without a crippling inflation...

...Nevertheless, the effect of rising prices on spending estimates lias been striking...

...Meanwhile, the Government has devised measures to intensifv the growth of small savings, which were an important source of funds during the first Five-Year Plan...

...It is hard to say how much of this inflation is due to more money in circulation, how much ts commodity shortages...

...It is now certain that the total balance-of-payments deficit during the Five-Year Plan will be much higher than the original estimate of $830 million...

...The public sector, with an investment of $1.5 billion, was charged with expanding basic industries and developing minerals...

...The amount of outside financing needed by both the Indian Government and private enterprise proved larger than the original plan's estimates...

...Between April 1956 and April 1957, the index of wholesale prices rose 34 points...

...Surely the financial sums required by the plan are large...

...There is little doubt, however, that the plan is in trouble...

...In my view, the future in Asia, whether it is to be Communist or not, depends on what happens in India...

...and the Colombo Plan countries (if continued on the present scale) and expected private foreign investment should provide nearly $1 billion in outside funds, some 60 per cent of the foreign financing required...

...As a result of the import of V. Vithal Babu, for eight years secretary Itr the Congress party in the Indian Parliament, is author of Toward Planning, Economic Conditions ill India anil other honks...

...Lacking sufficient foreign aid and investments, the Government would sooner or later have to stretch out the plan or some aspects of it, and this would have severe psychological effects on a people who are making heavy sacrifices...

...it has continued to rise since then...

...Should democratic means of development fail through lack of outside assistance, the temptation will grow stronger to apply some of the methods of regimentation being practiced in Communist China...

...No doubt, considering the present mood of Congress about foreign aid, it seems almost silly to say that the most important move that could now be made in foreign policy would be for the Western world, with the United Slates playing principal part, to underwrite and to guarantee the success of the Indian development...

...What happened in the fiscal year 1956-57 was that private enterprise invested more rapidly than was anticipated...

...Critics both inside and outside India declare that the plan is overambitious and should be revised...

...The Indian Government has used practically every possible fiscal instrument to help the plan along...

...It remains to be seen whether the Nehru Government will be forced to re-phase certain aspects of the plan, extend the duration of the entire plan, or adopt more stringent methods of controlling India's finances...

...reduced the minimum taxable income from about $<175 to $625...

...Yet, can one say it is too ambitious for a country of 377 million people, with a per-capita product of less than $60, to attempt to raise its national income 25 per cent in five years...

...Tax rates have been readjusted to give foreign investors greater incentives, and the Government is offering a five-year holiday from the new wealth tax for new companies building industries...

...At the same time, all strata of Indian society have been subjected to various discomforts...

...Recently, too, the Re-Finance Corporation has been set up to make medium-term credit available to private industry...

...This institution will utilize about $54 million available under the terms of the U.S.-Indian Agricultural Commodities Agreement, as well as $32 million provided by the Indian Government...

...The private sector was also allocated about $320 million for modernization and replacement...

...I do not think I am exaggerating, or being unduly alarming, when I say that there is in the making in India a kind of trouble which could make the Syrian affair seem like a minor incident...

...raised excise taxes on numerous articles, including gasoline, cement, sugar, matches and paper...

...Despite all this, the foreign funds needed by the end of the plan are now expected to be in the neighborhood of $1.7 billion...

...introduced new taxes on wealth, expenditures and railway passenger fares...

...There is ground for serious anxiety about India, where the plans of economic reconstruction are in great trouble...

...A large part of its investment was tied up in three steel plants and production facilities for heavy electrical machinery, machine tools and fertilizers...

...The strains caused by economic expansion have dampened the spirits of the people, who have been looking forward to better living standards and now fear that some revision of the plan is inevitable...

...But if we fail to do it, the day will come when we shall reproach ourselves bitterly for having, shortsightedly and in a small spirit, missed our last best chance to make and to keep friends in Asia...

...Recently, a Senate Foreign Relations Committee study group, presided over by Senator Theodore F. Green (D.-R.I...

...noted that even if India's Five-Year Plan ran short of funds "as high as $200 million a year over the next five years—and that is certainly exaggerating the need—it would still be considerably less than our total programs in such smaller countries as Korea and Formosa...

...And the 377 million people of India will in the long run have a great deal more to say about the future of Asia than will the 22 million people of Korea or the 10 million people of Formosa...

...The Government has increased import duties on certain luxury goods...

...In India it is still possible to prove that there is a good future for the people of Asia without the desperate methods of the totalitarian state...

...This past summer, National Plan Savings Certificates with a maturity of 12 years and 10-year Treasury Savings Deposit Certificates replaced other savings certificates...

...Yet, the need for tightening the belt had become essential...

...The private sector, with an investment of $1.1 billion for new projects, was given wide scope to develop both major industries—such as iron and steel, aluminum, industrial machinery, sugar and cement—and medium and light industries...

...As a result of these early setbacks, the Government has decided to restrict its development efforts to "the core of the plan," namely, the expansion of steel, coal, transport and electric power...

...All these measures are bound to place a heavy burden on the Indian people...

...At the same time, general import policies have been stiffened, and promotion of exports on a larger scale is being planned...

...Businessmen placed import orders abroad to the tune of $677 million—a formidable sum of capital to leave the country...

...Two main symptoms stand out: • Spending estimates have had to be revised sharply upward as a result of an abnormal rise in the price level...

...the new certificates have higher interest rates...

...Walter Lippmann capital goods required by the plan, India's foreign-exchange reserves dwindled by some $435 million in 1956-57...

...The Government has also empowered the Slate Bank of India to grant medium-term loans to meet pri\ate industry increasing demands...

...At the same time, it is trying to expand domestic revenue and conserve external resources...

...It is still possible to prove that the Western nations are genuinely concerned with the future of Asia...

...One of the Government's major aims now is to bring more foreign capital into play in the remaining four years of the plan...