Introduction

The history of ideas has unfortunately been a fading concern among economists. Modern political economy primarily focuses on the role of special interests in determining public policy. These special interest coalitions are seen to have a stranglehold over the policy process. The most pessimistic variants of this view virtually rule out the possibility of policy reforms unless there is an exogenous shock that undermines the dominant coalition of interests. The role of ideas as instruments that loosen such political constraints over the long run is often ignored (Rodrik 2013). Yet policy debates have important effects on the subsequent direction of economic policy.

In a similar vein, the Indian tryst with centralized national planning was preceded by several decades of intense discussions within the Indian nationalist movement about the contours of economic policy. There was a wide agreement among nationalists that the state has to support industrialization in countries such as India that were late entrants in the development process. Their arguments constituted both a critique of colonial economic policy as well as an attempt to learn from the experiences of countries as diverse as Germany, Japan, and the Soviet Union that depended on institutional innovations to begin the process of capital accumulation. This chapter will show how the economic ideas prevalent in the Indian nationalist mainstream created the intellectual conditions for the eventual establishment of the Planning Commission in 1950.

What began as a sharp critique of British colonial practice, in the early years of modern Indian nationalism after the revolt of 1857, later evolved into a broad consensus among Indian nationalists that the state should assist the industrialization drive that would be necessary to break the iron grip of mass poverty. However, there was also a gradual evolution in the consensus about what would be the principal instrument for such state-led industrialization.