Nehruvian Economics – A Retrospective by R. Chandra Prakash

Those who fail to learn from history, are doomed to repeat it—Winston Churchill

Nehru was an honorable man.  He was also a learned person, an intellectual and a great patriot. No one can question his integrity and nationalism. His overall contributions to the nation-building has to be recognized. However, these qualities and contributions cannot be a cover for his actions which on retrospect, have been highly detrimental to a free  Bharat. Because, no leader, however great he might be, more important than the Nation.  History warns us not to repeat same mistakes again, as the consequences could be devastating. Hence, these articles. It is in this context that  Churchill’s above quote becomes relevant.

Here it is endeavored to elucidate Nehruvian Economics, its evolution, failures and its detrimental effects to the country.

Roots of Nehruvian Economics

The roots of Nehruvian Economics dates back to 1938, when the Indian National Congress [INC] set up a National Planning Committee. Nehru had played an active role in giving shape to National Planning Committee, its functional structure  and the role of the State. This was a period when Russian Bolshevik Revolution of 1917, and Stalin’s Economic Planning, had made cognizable influence upon the academic, economic and political fields all over  the world. Subsequently, this went on to become the core of the post-independence Economic Policy, with the establishment of the Planning Commission under the Central Government. 

 The main objectives set for the INC’s National Planning Committee were: removal of poverty, establishment of self-sufficiency and socialism. The Public Sector was to be the main instrument to achieve these objectives. 

 

Aristocratic Background

One has to remember here that Jawaharlal Nehru has had an aristocratic family background. His father Motilal Nehru was a well established rich lawyer. Motilal Nehru was also a well recognized political leader of the Indian independence movement and a cofounder of Swaraj Party. His close relationship with Gandhi made him an important figure in the INC as well. 

It is with this background that Nehru  received his early education at home under private tutors,  and at an early age of fifteen, he went to England and after two years at Harrow, joined Cambridge University where he took Tripos in Natural Sciences. He was later called to the Bar from Inner Temple. 

Nehruvian Vs Gandhian Economics

In 1917, when the Russian Bolshevik Revolution took place, Nehru was   already twenty eight years of age. As evidenced above, also well educated. He was a person of science and had a scientific temper. He was privy to all the knowledge of what was called ‘modern’ at that period of time  He was privy to all the changes taking place in the economic and political fields all over the world.  Since he was not born in the bottom of the economic pyramid, his economic philosophy was obviously influenced not by grass-root personal experiences, but by the theoretical understanding of poverty and compassion for the  down trodden.. All these should have influenced his perception of history, economics, politics and sociology.

Under Nehruvian economics Public Sector was to play primary role in the core industrial and manufacturing activities. Investment into Public Sector was to be made by the State. New industrial complexes would be created which would provide jobs. In brief, it was Soviet Economic system! And Private Sector was only to play a supportive role and that too mainly in the tertiary activities like Trade and Commerce. Thus, Nehruvian economics presumed that Indian private sector was incapable of establishing large and medium industries on its own and unable to fathom necessary investments.

Gandhi, in contrast, was a grass-root person, both in the economic and political sense. His economic thoughts were tempered by what he had experienced and experimented with in Transvaal, South Africa. Gandhi had clear understanding of Bharat’s social and religious foundations. Hence, his political philosophy of mass-based movements for independence was accompanied by his economic policies of rural based mass Charka/Khadi, and cooperatives. 

Under Gandhian economics women, who constituted very important segment of the population, and a major rural agricultural workforce, were to take active part in the industrial production through their participation in Charka/Khadi movement. And thereby not only contribute to the national income but also become earners on their own rights. Such economic policy was to energize the rural geography into an viable and strong economic force without disturbing the inter-dependence of rural population and the agriculture. 

Gandhi’s call for shedding of foreign clothes and campaign for Swadeshi products not only created a big challenge for the British rulers, but it also integrated very well with his overall economic development philosophy. In short,  it was a decentralized economic development policy, as against Nehru’s  highly centralized one.

Therefore, it is an enigma as to how, despite overbearing authority of Gandhi over INC’s policies, Nehru succeeded to impose upon the Congress his Soviet  economic policy model! There were  some marginal concessions to Gandhian views, such as co-operative movement and Khadi! And Nehruvian economic planning became a reality soon after independence. 

 

Impact of Nehruvian Economics

In 1951 the  First Five-Year Plan was launched. And during his tenure Nehru had launched three Five-Year Plans. A detailed analysis of performance of Five-Year Plans is beyond the scope of this write-up. It suffice to recall that after the successful launching of the Third Five Year Plan, Five-Year Plans gradually faded away from the scene. They might have succeeded in the establishment of core industrial infrastructure in the country like Steel, Heavy Industry, Power, Mining, Transport, Foreign Trade, etc,  but it would not be erroneous to say that set targets in every public sector were seldom met. And the consequences to the nation were grave.  It certainly failed in its three objectives of  alleviating poverty, in attaining self-sufficiency and in the establishment of socialism. 

Nehruvian economic model had resulted in lopsided development in the agricultural-industrial sectors; in the rural-urban geographies. It encouraged mass migration from the rural areas to the urban and industrial areas. It Created Slums and Ghettos, resulting in degradation of human values. It generated perennial shortages in all the sectors of production. It established a License-Quota Raj. Corruption became rampant. It resulted in exorbitant tax-evasion, created Black Markets and generated huge Black Money. It weakened the private sector. It corrupted every segment of factors of production in the country.  It would suffice to say that Nehruvian economics failed and failed miserably.

Failure of Soviet Model

It would be necessary to recall here that Soviet Model of economic policy was conceived and implemented under a political dictatorship. The State had full control over the factors of production, be it finance, raw material, human resources, infra-structure, and could command them to their requirements. So much so even the migration of labor from the rural to industrial complexes or the urban areas were under the State control with quota system in operation. It was not suitable to the democracy.

Interestingly, despite  such overall  dictatorial state control, planned economic policy failed in the Soviet Union itself, as was evident from Gorbachev era; and also in the Communist  China as was evidenced from the Mao period. 

Against Bharat’s Ingrained Character

Experiences of Nehurvian economic policy has established that it was contrary to the intrinsic character of Bharat. It disregarded the people’s individual drive, competence and capacity. It ignored the lessons of its illustrious long history.

Next:  Nehru Era And Bharat’s Missed Opportunities