Milton Friedman was an American economist who won the Nobel Prize in 1976 for his work on monetary theory and policy. He visited India in 1955, just prior to the launch of India’s Second Five-Year Plan in 1956. During his visit, Friedman met Indian policy makers and economists, including P. C. Mahalanobis, a key architect of the plan.
Friedman argued that the plan, which aimed to promote industrialization through central planning and state intervention, would harm the Indian economy. He believed that the government’s efforts to promote industrialization by creating state-owned enterprises and investing heavily in infrastructure would lead to waste, economic stagnation, and corruption, not sustainable growth.
Friedman also warned that inefficient resource allocation would result in economic decline, saying, “It is impossible to predict in advance the lines of investment that will turn out to be the most productive — as the failure of so many private enterprises amply demonstrates. There is therefore great need for a system that is flexible and can change easily.”
He also disapproved of the government’s emphasis on import-substituting industrialization. He asserted that this approach would lead to high prices, low quality, and limited choice for consumers and would not promote long-term economic development.
Instead, Friedman advocated a free market approach, which would allow individuals and businesses to make their own decisions about production and consumption based on demand and supply. Their competition would lead to greater efficiency, innovation, and growth. Friedman asserted that the government’s role should be limited to protecting property rights, enforcing contracts, and maintaining a stable monetary environment.