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Nehruvian Economy-A Rootless Wonder!
M.G.Devasahayam
As the first Prime Minister of Independent India who enjoyed uninterrupted power for seventeen long years (1947-64) Jawaharlal Nehru was expected to leave a formidable political, administrative, and economic legacy on which future India was to be built upon. Politically it should have been strong grass-roots democracy based on panchayat raj institutions. Administratively there should have been a paradigm change from a colonial-command system to democratic-participatory framework of governance. Economic development should have been people-centered, opting for ‘production by the masses’ instead of ‘mass production’. In all these Pandit Nehru failed and left a flawed legacy which the country is even now finding difficult to cope with.
Economy was the worst of Nehru’s legacies. I am not a World Bank/IMF economist propounding big-ticket reforms but just a student of economics. I cut my teeth into this “science which studies human behaviour as a relationship between ends and scarce means which have alternative uses” (Lionel Robbins)in the late fifties around the time when India’s ‘planned economy’ under the stewardship of Pandit Nehru was ‘taking off’. Even as a student I was baffled as to how fundamental principles of economics were ignored while chalking out India’s ‘development strategy.’
My understanding of economic growth was that there were three pre-requisites for deciding on the development model of a country or a region. One, availability of domestic capital to start and sustain the model. Two, technology to optimize and augment production. And three, a market with purchasing capacity to consume the products. India’s economic situation in the initial years of independence was grim with few manufacturing industries, low-level technology, very little income, hardly any national savings and consequently very little capital investment. The big question was: What should be the economic model for India? What should Jawaharlal Nehru do with regard to economic policy in the circumstances prevailing in early fifties?
The answer was staring at him if only he had cared to look. India at that time did not meet the requirements of a capital intensive, technology-driven and big-ticket economy. But it had all the requisites for a ‘small-is-beautiful’ agro-based economy model. Limited capital for upgrading agriculture along with value addition activities through micro/small industries could have been found from domestic savings. Labour-intensive appropriate technologies could have been developed with this capital. And with a large population there was always a market for agricultural and food-related products.
It is on these lines that Mahatma Gandhi had envisaged independent India as one sui generis, a society unlike any other, in a class of its own that would not follow the western pattern of mega industrialisation, urbanisation and individuation. India would be a people’s economy charting out a distinct course of need-based, human-scale, balanced economic development while conserving nature and livelihoods. This was the “Third way of Development” on the principle of ‘Small is Beautiful’ advocated by eminent thinkers like E.F. Schumacher. This alternative model of development avoided the pitfalls of colonialism, capitalism and communism. This model would be rooted on the traditional rural culture of India and not on any imported ‘civilisation’. Accordingly India will have to develop an independent economic system, an appropriate technology of self-help, a pattern of trade and political institutions that answer best to its own specific requirements. It should be committed to pluralism and decentralized decision-making.
After the untimely death of Mahatma Gandhi within months of India’s independence, Nehru’s alter ego Jayaprakash Narayan (JP) took up Gandhiji’s unfinished task and pursued the sue generis route to build a strong and self-reliant foundation on which future ‘growth’ models could be built to make India an economic super-power. With value-added agriculture as the root, appropriate technology and infrastructure as the trunk, manufacturing small/medium industries as branches and widespread service sector as canopy Nehru could have raised the Indian economy as a strong tree. But that was not to be!
This was because Nehru had other ideas and was looking elsewhere. His economic philosophy had been outlined as early as 1936 at the Lucknow session of the Indian National Congress: “I am convinced that the only key to the solution of world's problems and India's problems lies in socialism ... In short it means a new civilisation ... If the future is full of hope it is largely because of Soviet Russia and what it has done and I am convinced that if some world catastrophe does not intervene, this new civilisation will spread to other lands and put an end to the wars and conflicts which capitalism feeds.'' He was advocating the inefficient and autocratic economic model of Soviet Russia as a ‘civilisation’ to be adopted by democratic India!
True to his aristocratic upbringing Nehru was also influenced by the Bombay Plan of 1944 chalked out by the industrial bigwigs of the time including JRD Tata, GD Birla, Purushottamdas Thakurdas, Lala Shri Ram, Ardeshir Dalal, AD Shroff and Kasturbhai Lalbhai, assisted by economist John Mathai who was close to the Tata group. The Bombay Plan laid great emphasis on public investment in the social and economic infrastructure, emphasised the importance of agrarian reform and agricultural research, setting up educational institutions and a modern financial system. It strongly advocated transition from agrarian feudalism to industrial capitalism without laying proper foundation for a Swadeshi economy. Nehru also could not cast away his colonial loyalties and the influence of the industrial revolution of the West.
Torn between these opposing thought processes Nehru wanted to create a balance between the rural and the urban as well as agricultural and industrial sectors in his economic policies. He saw no contradiction between these and stated that they could go hand in hand. Nehru hailed western-style large and heavy industries as ‘temples of modern India’ and big dams to be the very symbol of India's collective growth and source of energy. For Nehru “industrial engineering and agriculture met on a common platform”. He did not find any conflict in developing Chandigarh, an elitist-rich city as ‘symbol of modern India’ while allowing thousands of villages to rot without even the most basic necessities of life and livelihood. He was also promoting nuclear energy meant to serve only a highly centralized industrial economy.
This was Nehru’s brand of mixed economy that brought together disparate elements-command and control colonial structure; highly centralized government-owned Soviet communism and the relatively decentralized private-owned industrial capitalism-under one roof. Communists and capitalists were tied together and asked to march towards prosperity and progress under the tutelage of colonial institutions! Though Nehru dreamt of achieving the best of these systems, India ended up suffering the worst of all these. This was reflected in the high level of state and central control that was exercised on the industrial and business sectors of the country and the culture of corruption and mediocrity prevailing in government and public sector. The rigorous state laws and License rules put a great degree of restrain on the free execution of industrial policies for growth and employment generation. Even the farmers, along with the business personnel, found themselves at the receiving end of rigorous state control policies and high taxation.
The natural corollary was widespread poverty, unemployment and deep-set iniquity. Institutions of governance became tools of the government and the power brokers to command and harass the people the way they wanted. As a result the ordinary Indian who strove to contribute his mite to the economic and social well being of the country faced obstacles at every turn. Socialism as practiced by Nehru was ‘state capitalism’ and economic autocracy giving overwhelming power to government functionaries over citizens’ lives and activities. Under this system of management, corrupt and unscrupulous parasites living on others’ labour flourished and honest entrepreneurs who stood on their own feet and stuck to certain principles suffered ignominies. Incompetent and unprofessional governments indulged in wanton wastages and squandering of resources and were unable to deliver basic services to the citizens. The country and its people were reduced to poverty and penury making them incapable of ‘realising their potential’.
Volumes can be written on the damage caused to Indian economy by Nehru’s ‘directionless’ and muddle-headed policies which his daughter Indira Gandhi pursued for the next near-two decades of dynastic rule. She made virtue of the poverty (garibi) that her father created, coined the slogan of ‘garibi hatao’ (banish poverty) and won a massive electoral victory in 1971. When this orchestrated agenda flopped and public anger surfaced in the form of JP Movement against corruption, unemployment and price rise she resorted to political dictatorship by imposing Emergency to implement her autocratic economic agenda!
All these have left deep impact on India’s economy, which are reverberating even today. Barring certain regions agriculture continues to be primitive with productivity at very low levels. Farming continues to be ‘a gamble in the monsoon’ as it was during Nehru’s days. What is worse, value addition in agriculture with commercial processing at mere 2/3 percent is among the lowest in the world. Bihar of the fertile Gangetic belt, where massive steel industries came up during Nehru’s time at the neglect of agriculture had fallen between two stools and is today the poorest in all parameters of development.
Choking of entrepreneurship through excessive bureaucratic controls and the resultant languishing of small/medium industries have resulted in huge unemployment/underemployment. To remedy this in 2014, Prime Minister Modi virtually begged the big industrialists-in India and abroad- to come and ‘make in India’ even as people are queuing up to buy goods ‘made in China’!
Even five decades after the exit of Nehru from the scene India is not ready to become a capital intensive, technology-driven and big-ticket economy. We depend upon Foreign Direct and Institutional Investments to bring in capital and technology for setting up large infrastructure and industrial projects. This is because Indian economy continues to be a rootless wonder and most of the ‘credit’ for this goes to Pandit Jawaharlal Nehru whom his acolytes continue to proclaim as the ‘Maker of Modern India’. What an irony!