The really controversial aspect of the Third Five Year Plan is its size. The draft outline places the total Plan investment at Rs 10,200 crores (at 1958-9 prices), of which Rs 6200 crores will be in the public sector and Rs 4000 crores will be in the private sector. The distribution may appear to some to be a little too generous towards the private sector, considering the fact that the goal of Indian economic policy is still recognized to be the establishment of a socialist State. But the issue is not crucial in the present context; after all even as it is, the ratio does mark an advance over the Second Plan as it has turned out to be. The crucial issue is not so much the division of the cake as the cake itself. The determination of the size of investment for a plan may rest on a number of considerations. One may relate it to an income target or an employment target; one may also derive it from the achievement of past plans, or from the rate of progress realized in other economies in similar circumstances. In any case, some kind of a target is to be kept in view with reference to which resources financial and physical are mobilized. It is a wrong procedure in planning to start from the availability of finance, if only because it may degenerate into acceptance of a line of least resistance. So economic plan is important. One is reminded here of the textbook distinction between private finance and public finance to the effect that whereas in the former, expenditure is adjusted to income, in the latter, income is adjusted to expenditure. Planning is, if anything, an extension of the area of public finance. And there is no reason why the principle of public finance should not apply to planning. In planning, as much as in public finance, expenditure which in the context of development is what we call investment has a prior claim for consideration, to be fixed with reference to some sort of a target; resources are then to be adjusted to it, even though the determination of the target itself may have to be based on an estimate of the range of possibilities of resource mobilization. The rate of growth envisaged for the Third Five Year Plan in the draft outline is an increase of national income by 25 per cent over the five-year period. This is a reasonable expectation when it is remembered that the investment ratio contemplated is about 14 per cent of the national income at the end of the Plan. Yet it is certainly a conservative target. Countries like China, Yugoslavia, Japan and West Germany have, under different systems of economic organization and in varying circumstances, shown much higher rates of growth in some cases the growth rate exceeding 10 per cent perminimum. Even when account is taken of the fact that conditions in India are, on social and institutional grounds, less favourable to growth, the fact remains that a growth rate of less than 5 per cent per minimum cannot, by modern standards at any rate, be said to indicate ‘rapid economic development’. The deficiency stands out more sharply when it is remembered that out of an investment of Rs 10,200 crores about Rs 2200 is to be financed by ‘budgetory receipts corresponding to external assistance’. So economic plan is important. While the growth rate envisaged for the Plan may not be inspiring, it is not depressing either. For, with an income growth of about 5 per cent per year and a population growth of a little over 2 per cent per year, we shall have a rise in per capita income of about 3 per cent per year, which, compared to our past achievements, is a move forward. The position, however, becomes different when the size of investment is considered in relation to the employment needs of the economy. Here the picture that comes out is disconcerting. The Planning Commission expects that the proposed volume of investment will secure employment for 14 million persons 10-5 million outside agriculture and 3-5 million in agriculture. Now, this seems to be rather a pious wish. Our past experience of the operation of the Second Plan shows that an investment of the order of Rs 6750 crores could provide employment altogether to 8 million persons 6-5 million outside agriculture and 1-5 million in agriculture. This gives an investment-labour ratio of about Rs 8440. On this basis, the employment possibility arising out of an investment of Rs 10,200 crores works out to only about 12 million persons. This means that while the Third Plan starts with a backlog of about 7 million unemployed, it ends up with an unemployment figure of 10 million 3 million out of a total of 15 million of new entrants being added to the current backlog. This surely is more than the economy should be asked to bear. Will, then, the pattern of investment in the Third Plan be made more labour-intensive than it was in the Second Plan? Unless a more minute breakdown of the lines of investment is shown and the labour coefficients of individual pieces of investment are worked out, one cannot be sure as to what precisely is aimed at. The broad distribution of Plan outlay shown in the draft outline does not seem to suggest any significant deviation from the Second Plan pattern. So economic plan is important. However, even if the investment-labour ratio is brought down by varying the pattern of investment, the implication of the procedure for the productivity of labour must not be lost sight of. When investment increases by 50 per cent and employment associated with it is made to increase by 75 per cent for this is what the Plan is supposed to aim at it is almost inevitable that labour productivity should fall in the course of the operation of the Plan. And if it does, the prospect surely is disconcerting. The need for an upward revision of the investment target follows inevitably from our analysis. The minimum that one would suggest is an order of investment that would provide employment to 14 million persons consistently with the maintenance intact of the productivity of labour. The question is still open, and the attitude of the Planning Commission in this respect, as in so many others, is anything but inflexible. The caution which characterizes the Commission’s approach to the question stems, it appears, from an over-much pre-occupation with ‘finance’, to the neglect of ‘resources’ as such. In the food target, for example, there is a potential for an expansion of the economy which does not seem to have received sufficient appreciation. In case the target is realized—and of course its realization is not outside the bounds of possibility we shall have about 40 per cent increase in food production over the 1960-1 level. This should, with a proper organizational support, make possible a larger investment than is assumed in the draft outline. At any rate the matter deserves reconsideration. So economic plan is important.