Modi’s Central Planning Folly

Modi government, since again coming to power with even bigger majority than in 2014, is centralizing the economy and the society at a rapid pace. It is bringing out one central plan after another one. It is trying to dictate every little thing that is going on in India. For example, apart from the flurry of governmental schemes, in last week itself the NITI Aayog issued a central plan of replacing all petrol/diesel based two and three wheelers to electric vehicles by year 2030. Then there is a central plan for higher education and overall education system of India. The Centre has also planned to invest ₹25 lakh crore in the farm sector in the coming years to boost agricultural productivity etc.

Does this centralizing process bode well for India? Not at all. Central planning is a folly. Both theory and history are crystal clear about this. As Ludwig von Mises a century ago logically proved, the government central planners do not have the price system to work with and because of that they can’t make economically sound decisions. For them the process of economic calculation becomes impossible and this ultimately dooms the economy like the fall of former USSR, and many other socialist economies like Cuba or today’s Venezuela, amply demonstrated. India itself fell victim to this centralizing mindset during Nehruvian era. Three decades of post-independence central planning and import substitution policies, which Modi is bringing back, resulted into total wreckage of the economy. 1990s oil shock exposed the follies of this central planning and forced the Narsimha Rao government to loosen up government’s grip on the economy and society resulting into liberalization policies.

Now, as if India hasn’t learned anything from these past follies, Modi government is repeating the same mistakes again. If people think that because of Modi and his charisma this time things are going to be different then they are deceiving themselves. The laws of economics always work irrespective of time and place. Similar causes will always produce similar results. Central planning didn’t work in past and it will not work in present also. Modi’s policies are going to destroy the Indian economy and society.

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