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Mainstream, VOL LV No 49 New Delhi November 25, 2017

Democracy and Development: Nehruvian Vision

Sunday 26 November 2017

by A.V.V.S.K. Rao

Democracy demands Discipline, Tolerance and Mutual Regard. — Pandit Jawaharlal Nehru (First Prime Minsiter of India)
“Democracy and Socialism are means to End not the End itself.”
—Jawaharlal Nehru


The ideas expressed in this short paper are in the form of reflections on some of the dominant ideas of Jawaharlal Nehru on democracy and development in independent India.

These are evident in India’s pre-colonial ‘Village Republics’ and tradition of democracy in the institution of Gram Panchayats (elected village councils). The Panchayats have been taking care of village administration and development, besides administration of justice and revenue collection. This system of village Panchayats and self-sufficient village commu-nities had been in existence in the medieval period of the Mughals.

The advent of the British Raj and its consolidation led to centralisation of adminis-tration and disappearance of self-sufficient village communities and village panchayats. After India became independent, the pre-colonial tradition was not in any way helpful in intro-ducing a modern democratic parliamentary system. After 1945, Nehru led a democratic, reformist government which pushed out the conservative, authoritative postures of many forces in and outside the Congress, opted for parliamentary democracy based on universal adult franchise. This was the result of the politico-economic choice, and the ideal of the political elite led by Jawaharlal Nehru.

Nehru was very clear and firm in developing and modernising the long stagnant India and believed in the parliamentary system as an instrument of transforming the country into a modern and developing state. This ideal distin-guished independent India (1947-1951) from almost all the newly independent states that have come into existence out of the European empires across the globe.

Nehru pushed aside the arguments by a few pessimists that democracy could not exist amidst a poor, illiterate and huge as well as highly diversified population. The Nehruvian vision was that democracy as a foundation of a newly independent nation can facilitate coordination of other ideals like secularism and cultural pluralism.

Nehru was very much enthused by the idealogy of Fabian Socialism. Accordingly, Nehru dreamt of a liberal socialist parliamentary democracy. The result was a kind of socialist pattern of development which gave a new system—a ‘Mixed economic’ path—for develop-ment of the Indian economy. The ideal of a socialist pattern of development was based more on enthusiasm rather than on the ground realities. By the 1940s India became a backward agricultural country with a limited industrial base mostly consisting of consumer goods industries with practically no heavy, basic, capital and defence production sectors. The industrial sector resembled a tiny island in a vast agricultural sea.

Pandit Nehru wanted to make the country wealthier by encouraging development of modern heavy industries. In this respect, Nehru had strong support from elite groups in the Indian National Congress and some leading industrialists coming from feudal background. This new political elite projected a set of beliefs about economic policy that sought a middle way between heavy reliance on private enter-prise and central planing of the whole economy. This was the combination of the welfare state ideal and mixed economy developed on the basis of the Fabian Socialist ideas of George Bernad Shaw (UK). A mixed economy, where state owned enterprises operate major sectors of the economy and private enterprise was guided by considerable state regulation, it was felt, would successfully meet the economic challenges facing the country. The Government of India, in its Industrial Policy Resolution 1948, expressed a strong preference for Indian enterprises with total support to the agricultural sector by the state.

With a view to clear the major setbacks of the agricultural sector, the Government of India’s introduction of Institutional Reforms in the form of tenancy reforms and ceilings on landholdings for redistribution of land holding among marginal farmers and landless labourers met with a limited success. However, in the mixed economic set-up of India the public sector was mostly run by the bureaucracy and did not serve or promote public interest.

Nehru’s broad economic philosophy of self- reliance through industralisation was long years in the making—the genesis of Nehruvian economic philosophy was to be found in his Discovery of India (1946). As the Chairman of the National Planning Committee set up by the Congress Party in 1938, Nehru expounded the basic philosophy that the ‘problem of poverty and unemployment, of national fefence and of economic regeneration in general cannot be solved without industralisation’.

As a step towards such industralisation, a comprehensive scheme of National Planning should be formulated. That scheme would provide for the development of heavy, key industries, medium scale industries and cottage industries but no planning for India should ignore agriculture, which was the mainstay of the people, and equally important were the social services. It was Nehru’s firm conviction that rapid industralisation of India was essential to relieve the pressure on land, to combat poverty and raise the standards of living, for defence and variety of other such purposes. He strongly believed that industralisation would help in reducing poverty, bringing down income inequalities, and would generate revenues for the governments to fund infrastructure. It was his belief that no country could be economically and politically independent unless it was highly industralised. What is more, an industrially backward country would continually upset the world equilibrium and encourage the aggressive tendencies of more developed countries. Nehru’s belief in industralisation was rooted in his conviction, born out of long years of struggle against colonialism, that in the absence of industralisation a country would not retain its political independence and much less its economic independence. This too was the basis for the belief in the potency of science and engineering-based heavy industry.

Nehru’s ideal of industralisation centred on heavy industry was given a structure and an operational design by Mahalanobis (a well- known statistician from Cambridge and founder of the Indian Statistical Institute) with the two-sector model later modified into the four-sector model. The strategy to be driven by the increased production of heavy engineering or capital goods in the short run required a higher allocation of investible resources to the capital goods sector. It was assumed that this strategy, though it would lead to a lower growth rate and lower levels of consumption in the short run, would yield relatively high growth and consumption in the long run. Thus, there was an implicit assumption of low social discount rate, in the sense that there would be more tomorrow if less was consumed today.

The exclusion of the foreign trade sector in the scheme of the Nehruvian model for India, was often attributed to the export pessimism of the planners. This explanation was discounted by Jagdish Bhagwati (a noted Indian economist from Columbia University, USA) as an expost rationalisation of the decision to ignore the trade sector by the planners. However, the most plausible explanation for ignoring trade as a means of transforming domestic resources into importable goods was that it too was influenced by ideology and the desire for self-sufficiency.

Nehru’s opinion was that to base India’s national economy on the export market might lead to conflict with other nations and to sudden upsets when those markets were closed to India. There were echoes of the periphery or a developing country losing out to the Centre—the developed countries in their foreign trade transactions, as enunciated by Hans Singer and Raul Prebish.

If India’s agriculture becomes strongly entrenched, as dreamt by Pandit Nehru, then it will be relatively easy for India to progress on the industrial front, whereas if India concen-trates only on industrial development and leaves agriculture in a weak condition, it would ultimately weaken industry. It was also well known fact that Nehru was keen on institutional changes in agriculture and advocated redistri-bution of land and promotion of cooperative farming. Whilst redistribution would confer ownership rights on those who toiled on land and promote equity, co-operative farming would promote efficiency gains from the increased size of farms. Abolition of the Zamindari system, a radical institutional reform proposed by Jawa-harlal Nehru was wrought with several problems as it was vehemently resisted by the then Zamindars and big landlords who also wielded political clout in various States.

It was the introduction of co-operative farming encompassing both production and marketing that was high on the agenda of Nehru’s programme for agriculture. He was most impressed with the growth in productivity of China’s agriculture based on institutional innovations including co-operative farming. However, cooperative farming that conferred advantages to the size of farms could not be forcefully enforced as it was conceived as a voluntary programme. Besides, cooperative farming was opposed by landed interests and advocates of free enterprise on the ground that it was a step towards collectivisation. Though Nehru’s ambition for cooperative farming as a means of increasing food production was thwarted by its opponents, his plans for land reform and technical change in agriculture never wavered. The evidence available from many detailed studies would suggest that whilst Nehru’s views on agriculture aroused contro-versy, there was no basis for the charge that the Nehruvian strategy ignored agriculture. Many opponents of Nehru’s philosophy and ideology pointed out that the Nehruvian economic strategy was much too heavily oriented towards state ownership of industry and public enter-prises to the detriment of the private sector.

It should be, however, noted that in the Nehruvian scheme, there was no theological adherence to state ownership. It was true that Pandit Nehru was keen that the commanding heights of the economy, as he referred to financial services and essential industries, should be the purview of the state, but he was not an exponent of total ownership and state control of the economy to the exclusion of private enterprise. In fact, Nehru believed that the socialistic pattern of society that the Indian National Congress had endorsed as the ultimate objective could only be achieved in a mixed economy. For Nehru, Socialism was a means for rapid industrialisation with all its benefits for India’s vast population rather than a doctrine driven by the objective of promoting equity through state ownership of the means of production.

Nehru’s ideal was for a socialistic pattern of society within the framework of democracy, it was this unusual and brave experiment at self-sufficiency based on industrialisation that drew the attention of world leaders and policy-makers to India. A democratic framework also required all policy decisions and implementation of policies to bow to the rule of law. There was no question of forcible movement of labour from agriculture to industry, no question of forceful acquisition of land or marketable surplus and nor room for wage ceilings and prohibition of labour organisations by law. These and other features of a democracy that constrain swift implementation of policies are often ignored by those who point to China’s relatively high growth rates, and its other achievements.

The record of growth of the economy during the Nehru era, to be specific from the year 1950 to 1964, was respectable if not impressive. Growth during the Nehru years (1947-1964) at 4.1 per cent per annum not only exceeded the record growth of over the last half-a-century of colonial rule, but also matched the rate of growth of the economy from the post-indepen-dent years to the beginning of the post-liberalisation era. A detailed analysis of growth during the Nehruvian era would make it clear that the commodity producing sectors grew faster than the services sector, as it should be in a poor country. Nevertheless, it was widely admitted that the post-Nehruvian era was marked by excessive regulation, state inter-ference in economic activity and a host of other problems including widespread corruption.

Nehruvian Legacy and Economy Today

The Indian economy today is in sharp contrast to that of yester years in the growth rates it has achieved since 1991, the composition of the GDP, its development record and its world image. The growth rate of the economy since liberali-sation has surpassed all previous records, easily exceeded the three to four per cent growth rates that has been the norm for long, touched nine plus between 2005-2006 and 2007-2008 and even in subsequent years has not dipped below six per cent, in spite of the credit crunch experienced during many years in the recent past.

Much more dramatic is India’s entry into the world markets as an investor. Here again India’s total stock of FDI abroad is comparable to any newly industalised economy. The structure of the economy centred on capital intensive and human skill intensive manufacturing and services is a definite consequence of the heavy industry-oriented industralisation strategy, a strategy that required substantial volumes of engineering skills. Nehru, by instinct, obser-vation and study of other economies including the Soviet Union and reliance on science-centred education, a science-oriented, and liberal demo-cratic outlook, was indeed a towering world figure whose contribution in laying the foundation of today’s economic progress cannot be overestimated.

Prof Rao is an Honorary Professor in Economics at the Jawaharlal Nehru Institute of Advanced Studies (JNIAS), Hyderabad. He was formerly Senior Professor and Head, Department of Economics, Osmania University, Hyderabad.

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