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Mainstream, VOL LII, No 23, May 31, 2014

Nehru’s Legacy in the Present Juncture: Assessing Economic Successes and Failures

Sunday 1 June 2014, by Arun Kumar

Nehru, India’s first Prime Minister, passed away fifty years back in 1964. It is time that an objective assessment is made of his contri-butions to the nation at that critical juncture of its existence.

The newly independent nation was grossly underdeveloped due to the colonial rule. Colonisation led to India falling considerably behind the advanced nations in every sense due to the drain of wealth and lack of invest-ment in the economy.

The gap in infrastructure between Britain and India in 1950 gives an idea of the lack of investment in the economy. (Kumar, 2013) Whether in power generation per capita, roads per thousand sq km or in education per thousand of population, India did not catch up with the 1950 level of Britain even by 2000. So, in spite of massive investment in each of these fields after 1947, India remained backward. The lack of investment over two centuries could not be made up in five decades.

What independent India inherited was a backward economy in every sense. Its agriculture was backward with almost no technical change in more than two centuries. Productivity was low and correspondingly incomes in agriculture were low and poverty entrenched in the rural areas. Industry was backward by international standards and largely owned by foreign capital, including certain critical areas like banking and petroleum. India had little R&D and depended on repeated imports of technology. There was a high death rate due to poor social infrastructure and poverty.

The dream of the national movement was that after independence, India would be turned into a modern economy like that of the advanced Western nations. The challenge was how to move from being a poor and underdeveloped nation to an advanced nation in the shortest possible time. For this, poverty, illiteracy and ill health had to be eliminated quickly, physical infrastructure built, and agriculture and industry modernised.

Nehru and his followers set out to accomplish this task of modernising India from the word go. However, there were huge social problems that had to be confronted. India is the most diverse nation in the world with linguistic, regional and religious diversity and wealth and income inequalities and other such variations across the nation. Partition and the war in Kashmir were the immediate crisis that confronted the nation after independence. Drafting the Constitution for such a diverse nation was a major challenge. The country was not only poor but still feudal in its outlook and that posed serious challenges to the idea of modernisation and to the Western institutions of a modern state.

India was also confronted by the Cold War and had to steer a path through this minefield with pressure from the Western bloc to join it. However, given the colonial experience, India did not trust the West. Yet, it depended on the West for trade, aid and military hardware. The dispute and war with China pushed India towards the West but the dispute with Pakistan forced India towards the Soviet camp. The Indian elite did not like socialism or communism but was forced to ally with the Soviet bloc given that the West and China were supporting Pakistan against India. This led to the dilemma and confusion in the mind of the Indian ruling elite, namely, while depending on the Soviets for strategic support, technology and arms, it wanted to follow the West as its ideal in terms of ideology, development and consumerism. (Kumar, 2013)

In the 1950s under Nehru’s leadership, India quickly set up the framework for its modernisation: Constitution, elections, Parliament, planning, elimination of zamindari, land distribution, setting up institutions of higher education and R&D laboratories, agricultural universities, IITs, heavy industry, production of basic goods like, steel and energy, nationalisation of airlines, banks and petroleum and so on.

There was emphasis on simplicity in life so that the nation could plough its resources into development. The rate of investment and savings increased all through to provide the resources for rapid development. There was emphasis on curbing luxury imports and also import substitution so that industry could grow and diversify. The rate of growth of the economy went up sharply in the 1950s compared to the period of first fifty years of the twentieth century under colonial rule.

The experience and understanding of the national movement was that problems faced by the people were social and not individual. So whether it be poverty or illiteracy or ill health, the cause was systemic, namely, the British colonial rule that did not set up the institutions needed. It was clear that the individual could not set them up on their own. Thus, the role of eliminating the basic problems faced by the people was given to the collective, the government. Nehru and his supporters accepted this logic and the government was given the leading role in the economy; not that there would be no private sector. It was to be the driving force of progress in society. The Indian big business also understood this and accepted the fact that they did not have the capital to set up infrastructure and basic industries.

The economy was to become a mixed economy and planning was given the role to help in optimal utilisation of resources to achieve the fastest possible rate of growth. Central Planning was patterned after the Soviets. The public sector received a large measure of support from the Soviets which also gave some technology which set the country along the path of relative indepen-dence. The country tried to balance the state and market.

This economic strategy also helped ward off the pressures from the two Cold War blocs. At the international level, India went in for non-alignment with a tilt in favour of the Soviet bloc given the US tilt towards Pakistan. The existence of the two competing blocs enabled Nehru to get the space needed to chart a relatively independent path of develop-ment. The Western bloc could not exert the pressure it later did, lest India tilted even more towards the Soviet bloc. Thus, aid came from the West in large doses. This was sorely needed because of the consistent trade and current account deficits that India ran on account of the Western development path it chose for itself.

Theoretical support for a large and interven-tionist government came from the ruling ideology at that time in the advanced Western nations. After the Great Depression of 1929-33, these economies followed the Keynesian approach which led to the creation of a welfare state with large public investment in infrastruc-ture and a large public sector (with a few exceptions).

This economic strategy resulted in a big step up in growth after 1950. Industry grew rapidly and diversified. Public services increased so that health standards improved and the death rate fell sharply. Literacy spread and science and technology, ignored by the colonial power, received a big boost.

Unfortunately for the Nehruvians, the stra-tegy of Western development was based on trickle down and led to persistence of poverty and growing inequality in society. It also led to pro-urban and pro-industry policies to the marginalisation of rural areas and agriculture. This led to a growing energy intensity of the economy. For a country that is short of petroleum resources, this has meant that every time the world faces an oil crisis (like in 1967, 1973, 1979, 1989 and the 2000s) the Indian economy also goes into a crisis.

The feudal attitudes in society could not be changed rapidly since the leadership was largely feudal in nature. This reflected in the functioning of the institutions set up. For instance, among the elite there was resistance to eliminating illiteracy so that they could get cheap labour. Consequently, adequate emphasis was not given to good school education and especially for the poor. This has been an important cause of the persisting poverty in the country and continuing backwardness. It has also meant inadequate emphasis on R&D. It is not that Nehru did not talk about these critical issues but the party over which he presided did not go along with him. The bureaucracy which was to deliver remained in the colonial mould and did not pull its weight for transforming the nation into a modern state.

The top-down policies of copying Western modernity also led to inadequate employment generation so that very few could get into the lucrative organised sectors and bulk of the population has remained stuck in the agriculture sector and the unorganised sector at low wages. The marginalised sections in society, the SCs, STs, women, Muslims and so on have not benefited as much as they ought to have. Thus, the policy of reservations has not only continued but has had to be extended to other marginalised sections. All this led to the growing social and political crisis in the country in later years.

The consensus over policies that existed at the time of independence (due to the experience of the national movement) quickly dissipated with the elite sections cornering the gains of development and wanting more to become like the Westerners who were their role model. At a very low per capita income they wanted to have the same consumption level that the average person in the advanced countries had. The growing middle class and elite in society in their impatience to consume more, increasingly resorted to the black economy and corruption to have higher incomes. Business men also captured policy through corruption and manipulation and this fuelled the black economy further. The seeds of these trends were visible before Nehru’s death. He had to write a letter to all the Chief Ministers cautioning them against the growing corruption in the country.

The growing corruption and the black economy led to failure of policies. The large role of the government in the economy started to come unstuck. Development started to falter and with that the faith of the people in the government and its policies also declined rapidly in the 1970s and 1980s and led directly to the New Economic Polices in 1991. The country came full circle to the pre-1950s policies minus the colonisation by a foreign power. Nehru was blamed for the failure of policies which led to India lagging behind the other developing countries, like the South-East Asian Tiger economies and China.

In conclusion, it can be said that Nehru’s policies in the 1950s and early 1960s set independent India on a path of rapid development in spite of a very difficult political and social situation in the country and the international situation due to the Cold war. It was his policies that set the base for later faster growth in the country by setting up the social and physical infrastructure. His policies enabled the private sector to grow rapidly and become big enough to take the lead in economic development in the period after 1991. The policy framework put in place resulted in reduction in poverty even if at a slow pace.

However, as pointed out above, the big mistake was to follow the top-down approach to development in the race to catch up with the West. It compromised on the independence of economic policies which were only relatively independent because they were basically a mix of the market and central planning copied from the West. These policies led to growing inequity in society, to persistence of poverty, inadequate employment generation, rising energy intensity and periodic crisis in the economy when the global oil economy faced a crisis. There was growing black economy due to political economy reasons that led to widespread policy failure and to the decline in the faith in government intervention in the economy and that became the undoing of the Nehruvian framework in the post-1991 phase. But the consequence of this change in framework has meant a less caring state and society, growing self-centredness, rising consumerism, rapid environmental decline and mounting inequality. Finally, though the seeds of the failure of the Nehruvian framework lay within itself, Nehru’s legacy cannot be seen in stark terms as success or failure.

[The above article is based on my book, The Indian Economy since Independence: Persisting Colonial Disruption,

Vision Books, New Delhi, 2013. —A.K.]

The author is the Sukhamoy Chakravarty Chair Professor, Centre for Economic Studies and Planning, School of Social Sciences, Jawarhal Nehru University, New Delhi. He is also the President, JNU Teachers’ Association (JNUTA). He can be contacted at nuramarku@gmail.com, arunkumar1000@ hotmail.com and arunkumar@ mail.jnu.ac.in