LAISSEZ FAIRE 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 textile 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: Moderates and the Swadeshi 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. Propositions: Protection: One of the chief proponents of industrialization Ranade also observed that there was a decided reaction against Laissez Faire in western countries also where State was recognized as the national organ for taking care of national needs in all matters. Even in England The Factory Legislation and Irish Land Settlement indicated this change of mind. Planning: Once 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. Moreover 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 State 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 Russia in sharp contrast to the prevailing crisis of the Great Depression. This also fueled the demand in India to involve state participation.