Development strategy in India in the early years of independence: a critique

Yesterday I went to a seminar held by a local club where the topic of discussion was the Indian economic model. Speakers were vociferous in criticizing Nehruvia’s model of the economy. This is not the first time I have seen someone spewing venom at Nehru. Many times Nehru has been criticized for his planning strategy during the formative years of independence. Most importantly, these criticisms come from highly educated people who have shown an interest in the nation’s economic development. His main point of criticism is based on the fundamental inconsistency of the high growth rate of the post-1991 globalized economic model and the low growth rate of the controlled economy of the 1960s. In this short essay I am not going to compare the benefits o defects of the two economic models; Because comparisons, as they say, always tend to be hateful. I will only point out some subtle points that might have influenced the planning process during the post-independence period.

When India gained freedom, the immediate consideration of our leaders was to restructure a broken economy. The main problems they had faced were:
1. lack of capital
2. lack of financial institutions
3. lack of infrastructure
4. Lack of a secondary (industry) or tertiary (service) sector and, therefore, excessive dependence on the primary sector

(agricultural sector

At that time, there were two development models open to policy makers. The first is the famous Gandhian model of development, which aimed at minimizing wants to satisfy the least supply and the second was the Nehruvian model, which aimed at maximizing supplies to satisfy the growing needs of the people. people. You can see the diametrical opposition between these two development models. Today, we can laugh at Gandhi’s model for its naivety, but at the time it was an important theoretical concept. However, Gandhi’s untimely death had put an end to his developing concept and the Nehruvian model remained the only alternative available to policy makers. Here we have to consider the low level of maturity and inexperience of our policy makers, including Nehru, because it was their first time doing this kind of thing and enthusiasm had overcome any pragmatic thinking for an alternative, although there were small voices from blocs. from the left could be heard here and there. Now, we would see what could have influenced Nehru’s conception of the economic plan that later became known as the mixed economy.

We will discuss why this model is called a mixed economic model later; First we will see what he prepared for the base work of this model. At that time, two models prevailed in the world:
1. capitalist economy: characterized by free economic forces
2. communist economy: economy controlled by the state
There was enormous international pressure on Nehru to adopt either of these two models. But he was aware of the pros and cons of these two models.

has. why India could not have adopted a capitalist model:-
The Indian market did not develop at that time. Capitals were missing. If privatization were free, it would have two serious consequences:
Yo. There would have been a monopoly of a few private houses which would have ked to heavy

inflation
ii. Second, there would have been a complete neglect of heavy business.
The reason for this was that heavy industrial and infrastructure projects have long gestation periods, meaning the profits would come only after a couple of decades. Therefore, private actors would not be expected to invest money in these types of projects. This would have brought India to a country with no infrastructure at all. So the only alternative left was state investment in such heavy projects. So, the market-dependent capitalist economic model was overthrown.

b. Why couldn’t India have adopted a communist model?

Nehru’s ardent leftist critics say why Nehru didn’t build India on Russia’s lines. I believe the following factors would have prevented Nehru from adopting a strict communist pattern of economic model.

Yo. Communism as an ideology lies in revolution. Here the economic reforms are preceded by a social revolution that breaks the social order and opens a new model. So, basically, such a model is endogenous, that is, a change from within. But an exogenous application of the communist ethos would result in a mere redistribution of wealth, but would not give way to a revolutionary life (said by Che Guevara). One cannot have a true communist economy through policy making. The USSR and China managed to have a communist economy because they were followed by a revolution and thus the total usurpation of the existing economy by communist philosophy. In the 1950s, India and Nehru could not have passed a social revolution through strict communist planning or otherwise. So a strict communist economy was out of the question.

ii. Second, Nehru also wanted balanced market growth. State intervention in the heavy projects was necessary due to a lack of capital, but the agriculture and service sectors did not need strong gestation, so private investment was possible. Therefore, these sectors remained under private control. And the heavy industries were under state control. Some criticize Nehru for neglecting agriculture. Perhaps his point of criticism is towards the inability of Congress to implement the concept of cooperative agriculture. Nehru did talk about cooperative farming, but it fell through for political reasons. Nehru, because of his staggering majority in the Loksabha, could go along with his will with little opposition, but he did not think it wise to start a political crisis during the first years of his rule. As an alternative to cooperative farming, he introduced the concept of a community development project, which aimed at the comprehensive development of rural India.

So India adopted a model of economy that had place for both the private actor and the state. It was like a variable sum approach to power in which neither body has power to the exclusion of the other party, although some may say that the model favored public sectors or state-controlled companies more. This is called a mixed economic model due to the participation of both the private sector as a supplier of consumer goods and the public sector as the high command of the economy that dictate the development of the country’s infrastructure.

Now, before we come to a conclusion about the pros and cons of the Nehruvian model which is called Fabian socialism, we can focus our attention on two brief economic models. Is it so:
has. redistribution first
b. first production

Redistribution first bears similarities to communist economic models. Here the wealth is redistributed first among the various sections and then development and progress are thought of. So, the cost of development, as in the high capital investment, is limited by both the present generation and the future generation. On the other hand, the production-first model aims to increase production first, and then think about the redistribution of production among people. In this case, the pressure of high capital investment has to be borne by the current generation. Nehru adopted the second as his ideological policy, perhaps influenced by the secular Indian tradition of parental care for children.

Many criticize Nehru that this ideology means not eradicating economic inequality. Nehru’s logic in this case was equally appreciative as well. According to his model, a slight degree of inequality was acceptable for rapid development. And second, if redistribution were done first, then the poor who had fallen victim to poverty would have squandered their wealth on quick-gratification goods. This would not have helped for the country’s savings.

So, as an ideological model, the mixed economic model was the most appropriate model at that time. Although the negative repercussions of the model were seen in the late 1980s in terms of a sharp credit crunch, it was due more to misuse than to the model itself. Also, we must not forget the benefits of this model which has manifested itself in SAIL, GAIL, BHEL, IIT, REC, Dams, Ports and other infrastructure marvels and also the green revolution. So, before criticizing the Nehruvian model, one must also understand the temporal dimensions of his politics.