Nehruvian Economics, its Consequences

By R. Chandra Prakash

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

Nehru was an honourable 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 recognised.

However, these qualities and contributions cannot be a cover for his actions which in retrospect have been highly detrimental to a free Bharat. Because, no leader, however great he might be, can be more important than the Nation. History warns us not to repeat same mistakes because the consequences could be devastating. It is in this context that Churchill’s above quote becomes relevant.

This article, therefore, is in continuation of my previous article titled Modi’s Challenge: A Rejoinder — Nehru cannot be Spared, where an attempt was made to summarily explain how Nehru’s legacy threw up challenges for Modi. Here it is endeavoured to elucidate Nehruvian Economics, its evolution, failures and its detrimental effects to the country.

Roots

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 cognisable 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. His close relationship with Gandhiji made him an important figure in the INC as well.

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.

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.

Gandhiji, 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. Gandhiji 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 Co-operatives.

Gandhiji’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 Decentralised economic development policy, as against Nehru’s  highly Centralised one.

Therefore, it is an enigma as to how, despite overbearing authority of Gandhiji 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   

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 is 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 the 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 be suffice to say that Nehruvian economics failed and failed miserably.

Dictatorship Vs Democracy

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 labour 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. Ours is a Democracy.

Interestingly, 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 Nehruvian 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.