Nehru, Gandhi and Modi

June 17, 2014 § Leave a comment

Shashi Tharoor’s latest post on Project Syndicate suggests that Narendra Modi would do well to pay heed to Nehruvian economics and previous government’s inclination towards socially inclusive policies. Tharoor accepts that in what Nehru was trying to achieve, he gave rise to “license raj”, which stifled entrepreneurship and growth. In his argument against decrying of what he calls “Nehruvian socialism”, Tharoor actually seems to get a little too harsh on the first Prime Minister.

Yes, Nehru’s plans for the economy failed in the long term, but he started of with quite a technocratic approach and was looking to adapt some of the best development economic approaches of his time. As Niranjan Rajadhyaksha points out in a consummate article on Nehru’s economics

Was the Nehruvian economic strategy a success? It was in the initial years. The Indian economy had essentially been stagnant in the five decades before India became a sovereign republic. The economy grew at an average rate of 4.09% between fiscal years 1952 and 1965.

The growth crisis came later. It was the first economic boom that India had seen in nearly a century. Industrial output grew much faster than the overall economy, the first step towards a growing role for industry in the India economy since deindustrialisation began in the late Mughal period. The government also managed to run a tight ship. Fiscal deficits were low. A look at the financing pattern of the Second Five-Year Plan shows that Nehru’s economists had assumed that at least part of the ambitious investment programme would be financed by revenue surpluses as well as profits from the railways.

The longer-term report card is far less impressive, as is now well known. The Nehruvian economic model had already run out of steam by the time of his death. India was left with an inefficient industrial structure, too much government regulation of its economy, an inability to compete in the global market and inadequate supply of consumer goods

It wasn’t Nehru, but Indira Gandhi who deeply ingrained the anti-business and rent-seeking policies into Indian systems to an extent that it is taking decades to weed out. Tharoor quite conveniently skips from the Nehru era of socialism to late 1980s/early 1990s Congress governments of Rajiv Gandhi and Narasimha Rao. But in doing so, he is ignoring the 1970s under Indira Gandhi, a period which can be considered to be economically, politically and socially most disastrous in India’s democratic history. So Modi’s imperative today (and even of Manmohan Singh before him) is not fixing Nehru’s socialism, it is cleaning up on Indira Gandhi’s mistakes.

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