June 06, 2020
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The Stone Roses

Nehru’s economic policies took wrong turns, but the right direction

The Stone Roses
The Stone Roses

Man or woman, ruler or peasant, no one remains relevant in totality some five decades later. But such is the bruising attack on Jawaharlal Nehru, his ideals and his economics, that anyone scanning the public debates of the day would happily conclude that one man alone is to blame for all our current ‘mess’. This ‘economic debacle’ is at the heart of a right-of-centre attack on the Nehruvian way—shorthand for the socialist economics that defined India till the mid-1980s. It is not only right-wing inter­net warriors (usually based in the US) who use the term ‘Hindu rate of growth’ to lead the charge against Nehru. As top Nehru scholar Pulapare Balakrishnan of the Centre for Dev­el­opment Studies points out, much of the criticism of the man comes from sections of India who have really benefited the most from policies of those times.

“I believe India would have been a powerful exporter much before China, if only Netaji had a front seat in our policymaking along with (Jawaharlal) Nehru...India would have seized the opportunity the world offered and would have become the second-most powerful economy in the world,” Infosys’s N.R. Narayana Murthy once said. His is not a view in isolation. It has on occasion been perpetuated by the Congress itself—its later generations using the Nehru name as a convenient punching bag to explain its own series of  reforms in the 1990s. But more about that later.

Now that the BJP is in power, Nehru’s economic legacy is being dismantled in right earnest. One of the first acts of prime minister Narendra Modi was to announce the unceremonious shutting down of the Planning Comm­ission—that venerated pillar of old nation-building. Another Nehruvian-era symbol—the public sector units—is in for a revamp. Non-viable units like HMT will be shut down; others will be reorganised for ‘efficiency’. Why, Modi’s basic dictum—minimum governance—flies against the Nehruvian socialist grain of state-led intervention. Or look at the BJP’s stated movement away from ‘doles’ to the whittling away of welfare schemes like NREGA.

Actually, and ironically, there is much in Modi’s apparently novel blueprint that reminds us about the much harder challenges and choices faced and made by Nehru and his team for a newly independent India, a country taking fundamental steps in building a modern economy. Consider Modi’s vision: a push for manufacturing through a make-in-India programme; plans for more IITs, IIMs and AIIMSs; lowering the fiscal deficit; executing infrastructure projects. As Modi is discovering, the res­earch bodies set up by Nehru remain relevant today, with the private sector chary of investment in R&D.

So, is the criticism of Nehruvian economic policies justified? “Essentially, the Nehruvian model was a thing of his times. It was much more than economics. It was a vision of an India which is ingrained in our institutions, besides creeds like secularism or sarva dharma samabhava,” says Prof Abhijit Sen, former member, Planning Commission. Sen points out that while “there was a Nehruvian vision of creating a Planning Commission...much of the criticism of Nehru’s economic planning under the Commission happened after he was no more”.

Indeed, the legacy of India’s first prime minister has slowly been undermined by subsequent Congress leaders, including Indira Gandhi, who did away with many democratic norms. Nehru, in contrast, encouraged parliamentary debates while building support for the Planning Commission’s proposals. Several other institutions set up by Nehru have suffered. Indira’s tenure saw the nationalisation of banks, insurance companies, coal mines, non-coking mines, and promulgation of restrictive laws that impacted both domestic and foreign companies. Only the 1991 reforms brought some long-awaited relief—not just to industries, but concomitantly to consumers.

So, was Nehru right in promoting heavy industries and not small and medium industries that would have promoted Indian entrepreneurship? Was he right in supporting large dams in place of small and medium irrigation structures? Why did he bring in the lic­ence and permit raj and shackle Indian industry?  Even as these questions continue to crop up, experts point out that Nehru was in sync with his times and the people. Why else would his family continue to enjoy political favour with the people? “Criticism of Nehru’s vision is more for his economic policies. Whether it was appropriate for his time or not is not the issue. It is heavily inappropriate for the present time,” says economist Surjit Bhalla.

Chief engineer Nehru inspecting the working model of a cement factory

Pulapare Balakrishnan says that the economic development strategy dev­ised by Nehru, together with ren­owned statistician P.C. Mahalanobis, “had led to a good start”. In fact, he points out that “the acceleration of growth achieved in the 1950s has not been exceeded since. It was also a period when India grew faster than China”. However, the end of an era of unchallenged poli­tical support for the Congress after Nehru’s death failed to build on those initial years of growth.

Management advisor M.B. Athreya has a different view. “Nehru’s political legacy has been greater and more enduring than his economic legacy. On economics he was a prisoner of his anti-imperialist life struggle and admiration for the initial achievements of the Soviet economy.” Pointing to Nehru’s push for capital-intensive industries and failure to capitalise on India’s huge, low-wage lab­our-pool for domestic and world markets, Athreya says Nehru did not adopt a pragmatic stance to India’s economic development strategy, based on the country’s SWOT in the 1950s. The result was that India did not partake of the opportunity of the historic post-war trade boom between 1946 and 1972. While the Asian Tiger economies of Southeast Asia grew handsomely, Nehru went for an import substitution model.

Drawing a parallel between challenges faced by India in the 1950s and now, Nasir Tyabji of the Institute for Studies in Industrial Development says the relevance of Nehru lies in the fact he “saw through the possibilities developing at a time when conditions were no less challenging”. The choices before India were the same, as even then the US was looking at India as a huge market for its goods while being supportive of India’s independence from British rule. However, Nehru did not toe their line, as he was keen to rebuild an industrial base in India. “Today, our preferred path is to do what Americans or the wto or international agencies want us to do (for instance, in pharma sector). There is no evidence that the government is applying its own mind to how to walk the talk,” says Tyabji.

Three areas where most experts feel Nehru fell far short of expectations is in tackling poverty, primary and secondary education and healthcare. Poverty remains a challenge which no government since then has been able to meet while relying only on welfare programmes like PDS. The state of school education and healthcare seem to be further slipping into an abysmal state, with governments looking to the private sector to fill the gap. The contradictions within the BJP’s education policy—roping in the RSS to formulate modules on the one hand, with an avowed intention to prepare the youth for job market challenges on the other, has alarmed many experts. They wonder which is worse—neglect of primary and secondary education during and since the Nehru era or the current saffron hues in education?

On the oft-repeated criticism that Nehru’s neglect of agriculture was one reason for India’s becoming dependent on shiploads of wheat from the US, economist Ashok Desai states the charge is not justified, given Nehru’s push to create more dams. “Nehru was a great one for building dams—the temples of modern India. So it (agriculture) wasn’t a mistake. But he did not do enough.... Agriculture then, as now, remains a state subject,” he says.

The economy may be in a better state today, but a lot of the credit still has to be given to the Nehruvian legacy that laid the foundation of big industries in the public and private sector. Experts feel that while shackles of import licences and industrial licences were wrong, the current line of ‘industrialisation at any cost’ is a mistake. Many feel our policymakers have lost the ability to think independently as Indians. For all the shortcomings of Nehruvian polity and economics, including failures to push through land reforms or a uniform civil code due to pressures from within the Congress, even his critics give Nehru credit for establishing India’s industrial  and knowledge economy base. And that is a supreme legacy to hand down to posterity.


A Brief History Of Nehruvian Economics

  • 1944 Leading industrialists led by J.R.D. Tata designed the Bombay Plan, which agreed the state should steer all levers of economic activity.
  • 1947 Nehru inherited an economy and industry in tatters. India was one of the poorest countries in the world.
    361 mn India’s Population in 1947
    50% Below poverty line
    82.7% Lived in rural areas
  • March 1950 The Planning Commission was constituted; in 1951, the IRDA was instituted. India sustained its food economy by increasing imports.
  • 1955 P.C. Mahalanobis became the high priest of planning. His model made government take a leading role in investment and setting up of PSUs. This had wide political support.
  • 1956 The state acquired a monopoly over all big, capital-intensive business. The government pushed big dams, steel plants, and other “temples of modern India”.

The dominant thought was that state-controlled socialism was the way forward. Dissent came from Rajendra Prasad and Vallabhbhai Patel—both suggested a mixed economy.

  • 1960 There was criticism of the dangers of hurting entrepreneurship, but Nehru had his way. By the 1960s it was apparent that the controls had led to corruption and stasis.
  • 1991 Various symbols of the state-led pattern of development was dismantled; now, the Modi government is pushing further right and away from this path.
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