Steps have been taken up by the government to remedy the defects of the agricultural commodities by setting up small savings and the additional tax efforts. It also provides concessions to foreign investors.
In addition to restraining demand by fiscal and monetary measures, steps were taken to increase supply. As a result government imported 2.I million tons of foodgrains during 1956-57. The Colombo Plan Consultative Committee suggests that a substantial increase in agricultural production is of crucial importance to India's economic progress. Steps are being taken to utilize more fully the newly created irrigation facilities. The agricultural development programmes at the village level are being intensified. The All-India Second Estimate of rice for 1956-57 puts the current year's average and production at 72516000 acres and 239,000,000 tons respectively as against the corresponding adjusted estimate of 7188,000 acres and 2315,000 tons for 1955-56 according to the Directorate of Economic and Statistic, Ministry of Agriculture.
From a long term point of view the success of India's planned economy would depend materially on the achievement of the planned increase in agricultural production. A relatively small shortfall in agricultural production has an exaggerated impact on prices because of the tendency to increase stocks at various stages in the chain of distribution. The problem of economic development is not merely one of containing inflationary pressure which may emerge. It is also necessary to increase progressively the level of investment without placing excessive strain on the economy. This can be achieved only by enlarging the flow of savings and by a continuous increase of productivity.
During the first year of the plan the outlay on development is estimated at Rs. 700 crores (revised estimate) and may actually turn out to be somewhat loss for 1957-58, the central and state budgets have made a provision for about Rs. 965 crores. Even if this is fully spent which is unlikely the outlay during the first two years of the plan will be less than a third of the original planned outlay. While an endeavour is being made to proceed broadly along the lines indicate in the plan, the phasing on investment has to take account of the emerging situation, the aim of Government's economic policy is to match the claim of investment with a financial resources available, both internal and external.
The recent trends in prices and balance of payments highlight the