Rapid industrialisation

The Second Five Year Plan (1956–61) changed direction: it stressed heavy industry. It was drafted by the statistician P.C. Mahalanobis, who argued that building machine-making industries would bring quick structural change to the economy.

Just before it, at its Avadi session in 1955, the Congress declared a 'socialist pattern of society' as its goal: the state would lead the economy and work to reduce inequality.

How industry was built:

• Tariffs (taxes on imports) protected Indian industries from foreign competition, so they could grow.
• The public sector (state-owned companies) built electricity, railways, steel, machinery and communication. Steel plants came up at Bhilai, Durgapur and Rourkela.

Problems:

• India lacked advanced technology and had to buy it from abroad, using up scarce foreign exchange.
• As industry got more investment, agriculture got less. Food shortages loomed, and India had to import food.

The Third Plan (1961–66) followed a similar approach.

Criticism: some economists, such as J.C. Kumarappa, a follower of Gandhi, argued for a different model based on village industries and agriculture. Critics said the plans had an 'urban bias', favouring cities and industry while neglecting agriculture and villages, where most Indians lived. Others replied that without industry India would never escape poverty.

Industry first brought real gains, steel plants and dams that still serve India, but at a price.