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The Indian business community played a crucial role in developing the concept of
planned economic growth through state intervention.
British preference: The preferred economic policy in Britain and other western countries
was Laissez faire - free trade between countries.
Problem with LF: The policy seems to be perfect on paper - both the involved countries
should benefit from this. However this policy results in discrimination against the weaker
or late-coming partner and always benefits the more industrialized country.
LF in India:
In the name of laissez faire the Indian indigenous manufacturing was destroyed
particularly the Indian handloom industry!.
In order to promote the British te"tile industry# India was reduced to only a raw material
supplier by the British government.
It led to the large disproportion between the production of raw agricultural products and
the production $ distribution of industrial produce.
Thinking in India:
%oderates and the &wadeshi schools identified British-government policies causing the
economic drain ' hence abysmal poverty in India.
Large-scale organization of industry was recognized as being vitally necessary.
This thinking was also different from the other trends of the swadeshi movement that
recognized indigenous traditional handicrafts through individual and community efforts
as the panacea of the economic ills.
(rotection) *ne of the chief proponents of industrialization +anade also observed that
there was a decided reaction against Laissez ,aire in western countries also where &tate
was recognized as the national organ for taking care of national needs in all matters. -ven
in -ngland The ,actory Legislation and Irish Land &ettlement indicated this change of
(lanning) *nce industrialization on a large scale was identified as the means to develop
Indian economy# the role of state also became vital in such a program. The country was
already bereft of capital and there was a severe lack of capital formation in the economy.
%oreover the private capitalists also could not afford to set up large industries themselves
in the face of stiff competition from British industries. It became essential for the &tate to
contribute to the growth of large-scale industries.
The role of the state to these thinkers was also not confined to industrial growth but also
included the responsibility of bringing about the agricultural and social reforms. The
early criticism of Laissez faire policy in India# thus# gradually developed into the idea of
positive state participation in the economic activities of the nation.
Change in thinking on LF: Later on another reason for this demand was the success of
the first plan in +ussia in sharp contrast to the prevailing crisis of the .reat /epression.
This also fueled the demand in India to involve state participation.