Book name: THE NEHRU-ERA ECONOMIC HISTORY AND THOUGHT & THEIR LASTING IMPACT
Author: Arvind Panagariya
Published by: Oxford
Price: Rs 695
Finding fault with the economic policies of the Nehruvian decades is nothing new. In the age of neo-liberal globalisation, this has become quite fashionable. Arvind Panagariya’s book is the latest attempt to look at Jawaharlal Nehru’s politics and economics in a critical fashion.
Panagariya is of the opinion that while Nehru’s political project of achieving democracy in India has been successful, his economic project of building socialism aimed at reducing acute poverty has been a failure. This is a familiar position arrived at by many scholars. Let us consider the political project first. According to Panagariya, it is indeed laudable that India has been able to remain a constitutional democracy over the past 80 years or so despite poverty, illiteracy and the huge diversity of its people and cultures. This is no mean achievement. There remains a strong socialist strand of inclusivity and equality in the subtext of all political thought in India today, the origins of which can be found in Nehru’s thought leadership. It is somewhat paradoxical then that Panagariya claims Nehru’s socialist economic policies did not hold ground over the years. One might ask was it too much of socialism or was it, in some respects, too little of socialism that was pushed by Nehru when confronted with a crisis?
Panagariya agrees that in the late 1940s and the 1950s, when India’s economic policies were being formulated, the planning framework was validated by a large number of Indian economists as well as by most of the leading international stars in the discipline of economics in those days. The notable exceptions were B.R. Shenoy in India and Milton Friedman in the United States of America. In the absence of a strong domestic capitalist class and lack of industries that would find a ready export market, there was no logical alternative but to build a domestic production base. There could be debate though about giving emphasis to agricultural restructuring, or to light industries, or emphasising building a heavy industrial base of capital goods and large infrastructure. Around the time of Independence, India did have a healthy level of trade surplus in the form of sterling balances. Imports were kept reasonably liberal. What turned out to be a planning error was the inaccurate estimate of the import content of planned investments in heavy industries. Relative neglect of agriculture and the drying up of trade balances and the absence of a ready export market led to a tightening of the twin constraints — food and foreign exchange.
It was at this juncture that Indian planners and Nehru had a choice. They could have depended on greater controls over industry and investments, making it more difficult for a nascent capitalist class to breathe and grow. This option was chosen. But instead of a firm leadership that provided direction to tide over the tightening constraints, the controls slipped into a regime of bureaucratic control and inefficiencies. This was the story of India’s license permit raj that became notorious. All these were, according to Panagariya, the advent of socialist economic policies. However, most scholars, including Panagariya, miss out on a possible alternative that would have broken up the inequalities in land holding and the social exploitation that went with it, undertake effective land reforms, and spend a systematic amount on primary education and healthcare for the poor. Nehru, presumably, did not have the courage, or the political backing, to go down this path. It would have been socialism, but not the kind of socialism that Nehru envisaged.
Every historical evaluation needs to be done in the context of some coordinates of time and place. In the era of globalisation and economic reforms, Nehru-bashing has become fashionable and market-friendly reforms, it has been claimed, have been the liberators of the Indian economy. However, the political economy has a propensity to twist and turn over time. We are now at a juncture where markets and international trade are no longer considered the immaculate instruments of prosperity and peace. Panagariya’s critical evaluation of Nehru may be seen in a different light in this Trumpian world. Aborted socialism is not the same thing as failed socialism. That is a history yet to be written.