Yesterday I went to a seminar conducted by a local club wherein the topic of discussion was Indian economic model. The speakers were vociferous in criticizing Nehruvian model of economy. This is not the first time that I see somebody vomiting venom against Nehru. Many times Nehru has been criticized for his strategy of planning during the formative years of independence. Most importantly these criticisms come from highly educated people who have seen interest in the economic development of the nation. Their main point of criticism is based on the fundamental incongruence of the high growth rate of the globalized economic model post 1991 and the low growth rate of 1960s controlled economy. In this short essay I am not going to compare the benefits or short comings of the two economic models; because comparisons as they say always tend to be odious. I will only point to some subtle points which might have influenced the planning process during the post independence period.
When India gained freedom the immediate consideration of our leaders was to restructure a broken economy. The major problems that they had faced were:-
1. lack of capital
2. lack of financial institutions
3. lack of infrastructure
4. lack of secondary (industry) or tertiary(service) sector and hence over dependence on primary
At that time there were two models of development open for the policy makers. The first one is the famous Gandhian model of development which was aimed at minimization of wants to meet the lesser supply and second was the Nehruvian model which was aimed at the maximization of supplies to meet the increasing wants of people. You can see the diametrical opposition between these two models of development. Today, we may laugh at the Gandhian model for its naivety but at that point of time it was a major theoretical concept. However the untimely demise of Gandhi, had put an end to his concept of development and Nehruvian model remained the only alternate available for the policy makers. Here we need to consider the lower level of maturity and low experience of our policy makers, including Nehru, because it was the first time they were doing these kind of things and the enthusiasm had over powered any pragmatic thinking for an alternate, though there were small voices of left blocks could be heard here and there. Now, we would see what might have influenced Nehru’s conception of the economic plan which later came to be known as mixed economy.
We will discuss why this model is called a mixed economic model later; we will first see what prepared for the ground work of this model. At that time two models were prevalent in the world:
1. capitalist economy: characterized by free economic forces
2. communist economy: state controlled economy
There was enormous international pressure on Nehru to adopt any of these two models. But he was aware of the pros and cons of these two models.
a. why India could not have adopted a capitalist model:-
Indian market was not evolved at that time. There was lack of capitals. If privatization were free then it would have two serious consequences:
i. there would have been monopoly of a few private houses which would have ked to heavy
ii. Secondly, there would have been complete neglect of heavy enterprises.
The reason for this was, infrastructure and heavy industrial projects have high gestation periods that means the profit would come only after a couple of decades. So the private players would not be expected to invest money on such kind of projects. This would have led India to a country with no infrastructure at all. So the only alternate left was state investment in such heavy projects. So capitalist economic model with dependence on market was struck down.
b. Why India could not have adopted a communist model?
The ardent leftist critics of Nehru say why Nehru did not make build India on the lines of Russia. I think the following factors would have prevented Nehru from adopting a strict communist pattern of economic model.
i. Communism as an ideology lies in revolution. Here the economic reforms are preceded by a social revolution that breaks up the social order and ushers a new model. So basically, such a model is endogenous that is change from within. But an exogenous application of communist ethos would result in mere redistribution of wealth but won’t usher a revolutionary life (: said by Che Guevara). One cannot have true communist economy through policy making. USSR and China were successful in having a communist economy because they were followed by a revolution and hence total usurpation of the existing economy by the communist philosophy. In 1950s India and for that matter Nehru could not have approved of a social revolution through strict communist planning or otherwise. So a strict communist economy was out of question.
ii. Secondly, Nehru also wanted a balanced growth of market. State intervention in the heavy projects were necessary because of lack of capital but agriculture and service sectors did not need heavy gestation so private investment was possible. Hence these sectors remained on private control. And heavy industries were under state control. Some criticize Nehru of neglecting agriculture. Perhaps their point of criticism is towards the Congressional inability to implement concept of co-operative farming. Nehru did talked about co-operative farming, but it did not materialize because of political reasons. Nehru because of his astounding majority in the Loksabha could have his will carried away with little opposition, but he did not think it was prudent to start a political crisis during the early years of polity. As an alternate to the co-operative farming he introduced the concept of community development project, which aimed at wholesome development of the rural India.
So India adopted a model of economy which had place for both the private player and the state. It was like a variable sum approach to power wherein no body holds power in exclusion of the other party, though some may say that the model favoured the public sectors or state controlled enterprises more. This is called mixed economic model because of the participation of both private sector as the provider of consumer goods and the public sector as the commanding heights of economy dictating the infrastructural development of the country.
Now before having a conclusion about the pros and cons of Nehruvian model which is called Fabian socialism we can put our attention to two brief economic models. They are:
a. redistribution first
b. production first
Redistribution first has similarity with communist economic models. Here the wealth is first redistributed among the various sections and after that the development and progress is though of. So the cost of development, as in high capital investment, is borne by both the present generation and the future generation. On the other hand the production first model aims at increasing the production first and then thinking about redistribution of the production among the people. In this case the pressure of high capital investment has to be born by the present generation. Nehru as an ideological policy adopted the second one, perhaps influenced by the age old Indian tradition of paternal care towards the children.
Many criticize Nehru that this ideology means not eradicating the economic inequality. Nehru’s logic in this case was also equally appreciative. According to his model, a slight degree of inequality was acceptable for the rapid development. And secondly, if redistribution was done first, then the poor who had been the victim of poverty would have squandered their wealth on goods of immediate gratification. This would not have helped for saving of the country.
So as an ideological model the mixed economic model was the best suited model at that point of time. Even though the evil repercussions of the model was seen in the late 198s in terms of heavy credit crunch, but it was more because of misuse than the model itself. Besides we should not forget the benefits of this model which has manifested in SAIL, GAIL, BHEL, IITs, RECs, Dams, Ports and other infrastructural marvels and also green revolution. So before criticizing Nehruvian model one has to understand the temporal dimensions of his policies also.
Mitrabhanu Mahapatra works as a free lance writer-cum-photographer. He is presently running a web site called incubation360 which is a repository of very high quality articles on contemporary issues. Mitrabhanu has good depth of knowledge in the areas of sociology and evolution of society. His point of analysis of society is through a systems approach with hints of organized anarchy model. He also takes interest in philosophical writings which try to find out the relationship between reliigon-spirituality and science. You can get to know more about him and his articles in the link: http://www.incubation360.com