In 1947, the Congress, which inherited the Indian State, was uncommitted to any decisive strategy to ensure progress. How then did India come to adopt 'development economics' as the way forward?
It was by no means a foregone conclusion that, after 1947, India would embark on a path of planned industrialisation. Its huge agrarian economy was one of the most impoverished in the world; from Gandhi it had inherited a vision deeply opposed to the project of industrial modernity; and, although it possessed powerful industrial capitalists (at the end of the Second World War, India was the tenth largest producer of manufactured goods in the world), they did not form a united class strong enough to push through a project of industrialisation against a society of rentiers, farmers and traders. Historically, the pre-1947 State had not taken on responsibility for developing the Indian economy, and the Congress Party which inherited this State had arrived at independence uncommitted to any decisive economic strategy. There was broad agreement about the problems that faced free India: poverty on a staggering scale and the recurrent threat of famine, the need to maintain economic independence, and inequalities within the society. The proposed solutions, however, varied.
The typical concerns of Indian nationalism rarely encompassed detailed reflection on wealth and power, or the practical arrangements thought necessary to secure these under modern conditions. The historical experience of modernity was usually interpreted as a cultural predicament. Most Indian intellectuals accepted – and strove to twist to their advantage – the colonialists’ point that India's distinctive identity and strength lay in its spiritual attributes. Indians could not compete in the ‘outer’ domain of economic prowess and material production; their control over their own destinies was to be had in the 'inner’ domains of religious and family life. Most also accepted the intuitively plausible assumption that with the end of colonial rule, India's economic deprivation would of itself cease. But as independence approached, some looked more closely to the West’s history for an image of India’s own future. The most impressive aspect of that history was the unexampled prosperity and security that industrialisation had delivered to the peoples and States of the modern West.
The West’s history recounted no uniform story. The idiosyncrasies of Britain and France were nothing like the trajectories of late developers like Germany and Russia; and all could be read through the contrasting lenses of socialist or liberal theory. For Indian intellectuals in the mid-century, the hope was to condense in rapid simultaneity the different processes that had unfolded in slow sequence in the West: secularisation and the rise of a society of individuals, the creation of democratic political institutions, and industrialisation. The ambition was encouraged by the emergence after the end of the Second World War of the world-wide phenomenon of ‘development economics’, which promised to reduce the manifold variety of the West’s pasts into a single, universal set of policy lessons and to place them at the disposal of new States, so enabling them to replicate the Western trajectory. For poor and underdeveloped States, the chance to produce their very own industrial revolutions, to achieve economic 'take-off’, had never seemed more possible: it merely required sedulous application of these theories. Swiftly, the subtle, protracted arguments that had circulated within the pre-independence nationalist movement about India’s future progress, were replaced all but exclusively by the language of economic development….
…This general inclination towards industry yielded no strategy or precise institutional model. Its rhetoric circulated in the annual sessions of Congress and in the pages of the nationalist press, but little further. By the late-1920s, though, nationalist politics had changed. Under Gandhi, Congress had metamorphosed out of the bespoke worsted of the urban educated elite into a homespun mass movement that drew in support from the countryside. Nationalists were debating more actively the issue of industrialisation and its function in shaping India's future, and they did not agree on whether this would indeed remove the miseries of rural poverty. A schism had opened between those who favoured some version of industrial modernity and those who rejected it.
Among the former were three currents, each with its own idea of India’s future. Indian industrialists had perhaps the most practical outline for an economic policy. In the mid-1940s, a roll-call of leading businessmen and industrialists (including Sir Purshotamdas Thakurdas, JRD Tata, GD Birla, Sir Shri Ram, and Kasturbhai Lalbhai) put their names to A Plan of Economic Development for India. Popularly and appropriately known as the 'Bombay Plan’, it was very much a perspective from western India: it saw India’s future progress as driven by the further expansion of the textile and consumer industries already flourishing in cities like Bombay and Ahmedabad. The industrialists, keen to influence Congress to support their strategy, proposed a paternal role for the State in a future India: the State would provide infrastructure, invest in expensive industries like steel, and guard Indian industry from the predations of foreign capital. They agreed that poverty was a fundamental problem, but they envisaged neither a substantial segment of the economy in public ownership nor extensive redistributive responsibilities for the State.
An overlapping, if rather more technocratic, argument was advanced by men outside the nationalist movement, within the Indian Civil Service or connected with progressive princely states like Mysore and Travancore: civil servants such as Sir Ardeshir Dalal, who headed the Planning and Development Department set up by the colonial government towards the end of the Second World War, and visionary engineers like Sir Mokshagundam Visvesvarayya. Committed to the idea of planned modernisation, they favoured a purely pragmatic view of the boundaries between State and private action. Visvesvarayya, who served as Dewan to the Maharaja of Mysore, was already in the 1920s pointing to the success of Japan and insisting that ‘industries and trade do not grow of themselves, but have to be willed, planned and systematically developed’ – an argument he expanded in the mid-1930s in his Planned Economy for India. The task of planning this industrialisation, Visvesvarayya urged, was best entrusted to a central intellectual ‘brain’: an economic council of expert economists and businessmen that would coordinate and direct policy for the whole of Indian society.
A third argument came from the small but articulate left wing of the Congress Party. This too imagined India’s future in terms of industrial modernity, but was distinguished by a broader view of the political conditions necessary to sustain Indian independence. Initially, it simply pressed for more explicit redistributive commitments in both industry and agriculture, and it was able to extract this from a temperamentally cautious Congress in the form of the famous Karachi Resolution of 1931, which for the first time appeared to commit Congress to radical reforms. This declaration expressed a desire to speak a political message comprehensible to other Indians: ‘This Congress is of the opinion that to enable the masses to appreciate what “Swaraj”, as conceived by the Congress, will mean to them, it is desirable to state the position of the Congress in a manner easily understood by them. In order to end the exploitation of the masses, political freedom must include real economic freedom of the starving millions.’ But it hardly contained an economic programme. During the course of the 1930s, though, these intellectuals tried to shape this well-meaning phraseology into a more confident statement about economic production.
The Congress left’s two most rousing voices, Subhas Chandra Bose and Nehru, arrived at an understanding of political economy through an analysis of imperialism, which they understood as an economic form propelled by imperatives of capitalist production, not as a project of racial domination or civilisational supremacy. It would therefore be foolish to conceive of Indian independence merely as a political condition, as many Congressmen did. Political independence would not remove India’s vulnerability to economic imperialism. This pre-independence perspective on the international system and India’s place in it profited by its echoes of Naoroji and his generation, and it set the outline for Nehru's later strategy of planned economic development. In contrast to the industrialists' suggestions, the future Indian State should commit itself to establishing what Nehru and Bose referred to as ‘key’ or ‘mother’ industries: heavy industries that were essential both to build other industries, and for Indian self-defence. Support for light or consumer industries was a distraction from the larger task of pushing India towards an independent industrial future. And these heavy industries had to be in public ownership, for both redistributive and security purposes. Like all who subscribed to the vision of an industrial future, these intellectuals of the Left believed that industrialisation and, they added, policies that redistributed land away from the big landlords, would eliminate rural poverty.
The voices in favour of industrialisation temporarily converged in the late-1930s under the umbrella of a National Planning Committee. Created at the instigation of Bose, it brought together 15 very different men – industrialists, advisers to princely states, scientists, economists and a lone Gandhian – under Nehru’s chairmanship. Retrospectively, it came to be celebrated as the embryo of Congress’s commitment to planned industrialisation, but at the time its own divided views were by no means representative of the party, and it was merely one of the many committees within Congress, hardly commanding attention. Bose himself was on the verge of leaving the party to make his own phantom way into history as a general without an army, while Nehru complained incessantly about the constraints his committee faced: lack of data and statistics, and little cooperation from the provincial and colonial governments. The committee disbanded in 1940, when Nehru went into prison for his eighth spell, and it was not revived until the end of the war. Its earnest councils produced no agreement about the role of the State and of a public sector, or about a strategy for industrialisation and for balancing heavy, light, and what the Gandhians called ‘cottage’ industries.
If the brokers of industrialisation were divided among themselves, the deepest rift in visions about India’s future progress lay between industrialisers and Gandhians. This split threw Congress itself further into confusion, as it slid between resolutions that committed it to a policy of State ownership of ‘key industries and services’ and declarations that it would only support village and cottage industries. The Congress leadership talked murkily around it, as with so many other fundamental subjects of potential conflict, leaving it unresolved by the time of independence….
...At independence, then, the direction of India’s economic future remained undetermined. Nehru found himself leader of a party divided in its views about economic development, with no single group weighty enough to impose its vision. The disruptions of Partition had further blurred things: the refugee crisis and severe food shortages, followed by military interventions, called for immediate ad hoc responses. In the Constituent Assembly, the interests of the rural rich were secured by removing land reform and agricultural taxation from the control of the central government and putting them in the hands of the provincial legislatures, more closely subject to the imprecations of the landlords. Within Congress, Patel, who spoke for the landed classes and for the industrialists, orchestrated the departure of the socialists in 1948. This left Nehru isolated, and with Gandhi gone, it made Patel the most powerful figure within the party. Economic planning – which Patel had never favoured – slipped from attention, and by early 1950 Nehru despaired of being able ‘to see the overall picture’. Commentators concluded that the enthusiasm for planning had been a short-lived fashion, now over: the idea had ‘failed’. But Patel’s death at the end of 1950 put Nehru in command of the State.
Any assessment of Nehru’s project of economic development must distinguish between assessing the design’s coherence and evaluating its performance; and both again must be kept distinct from judgements about subsequent, purely nominal appropriations of his ideas. Nehru’s economic thinking is commonly traced to an over-impressionable liking for the Soviet model of planned industrialisation. Yet this is a crude reading of his purposes and practice. Not merely was Nehru from his very earliest encounters with the Soviet experiment critical of its political consequences (a judgement he made very clear after a visit to Moscow in 1927, well before Stalinism); his own practice after 1947 was more improvisatory than ideological, and aimed to unite into a single, coherent strategy quite diverse intentions.
The bright arc of the West’s history illuminated for Nehru a silhouette of India’s future economic possibilities. It encouraged him to believe that an independent India could follow three ends simultaneously: industrialisation directed by a State, constitutional democracy, and economic and social redistribution. This project was rather distant from Soviet practice, and much closer to post-war European social democracy. Indeed, by the late-1940s, Nehru had shifted to a recognisably social-democratic position that would not have been out of place in the radical mood of the post-1945 Labour Party. But it was always his own conception, which joined his views about the international economy with a model of the domestic one and related both to a democratic political order.
The one insight from Nehru’s intellectual engagements of the 1930s that he never abandoned was the Marxist analysis of imperialism, which had convinced him as accurate about the economic relationship between coloniser and colonised. Given the structure of the world economy, it would be only too easy for a new State like India to surrender its political sovereignty by slipping into dependence on foreign capital in its effort to industrialise. Within this international perspective on the constraints faced by the Indian State, Nehru proposed a view of the State’s domestic responsibilities that had parallels with Keynesian ideas. The State had actively to create conditions for economic expansion: not through wholesale nationalisation, but by investment in and direction of a public sector that would function alongside private enterprise in a mixed economy, acting as a counterweight to the cyclical swings and fashions of private investment. Given the Indian State’s inherited tradition of being a low taxer, and given that constraints on agricultural taxation were enshrined in the new Constitution, if it was going to have any resources to redistribute for welfarist purposes, it would have to generate these through a productive public sector in its own control.
The ancestry of this argument for a public sector is therefore not correctly traced to the Soviet model of a command economy, nor did it derive from an ideological conviction in the virtues of collectivism. Rather, in its redistributive ambitions, it had obvious resonances with the policies adopted in many western European countries in the post-war period. That it became associated in the public eye with Soviet practices was largely fortuitous. In the 1950s Nehru had assumed that assistance and support for India’s economic development would come from the Western powers. There was indeed very large-scale American financial and food aid: but the Americans more and more insisted that India develop essentially through investment in agriculture and consumer industries, a strategy they believed promised higher immediate rates of growth.
But for Nehru, a rapid growth rate was not an end in itself. It had to be reconciled with independence and with democracy. Higher levels of output might have been achieved by directing investment towards consumer industries, but this, it was believed, would weaken economic independence, which needed a base of heavy and defence industries. As it happened, external support for the strategy of investment in heavy industries came most consistently and generously not from the West but from the Soviets, eager to extend their sphere of influence. Yet Nehru was equally clear that given the Indian commitment to democratic politics, growth rates in heavy industries could not be forced, in Soviet or Chinese style. In contrast to present-day, instrumentalist attitudes to democracy, which puzzle over whether or not democracy is conducive to economic growth, Nehru assumed that democracy was a value in itself. He did not believe in a trade-off between the two, the ‘cruel choice’ postulated by some economists. Economic development and democracy were intrinsic virtues of the modernity to which he was committed, and both had to be pursued simultaneously. This perhaps obvious point was so elementary to Nehru’s view of economic development that it bears restatement…
…The speed with which professional economists and technocrats came to fill the entire space of public discussion about India’s progress was remarkable. The Planning Commission became the exclusive theatre where economic policy was formulated. The subject was removed from parliament and the cabinet – they were now merely informed of decisions taken by the small cohort of experts. The members of the Planning Commission were by no means all economists, but they were chosen by Nehru for their broad agreement with his political project: committed to ‘socialistic' and reformist ideals, in the Indianised version of social democracy, and above all to a scepticism about the market and a belief that the State had to take responsibility for allocating resources in the economy. The Planning Commission’s work relied on being insulated from wider public deliberation about India’s future. The Second Plan, for instance, with its decisive re-channeling of investment towards heavy industry, assumed a theory about the preconditions for industrial growth but gave little public reason for this shift. In its mathematical formulae, it concealed a choice about consumption (less now for the promise of more later) that was undoubtedly a matter of political debate. The Mahalanobis model was used to impart technical gloss to decisions about investment that had been determined by political criteria and specified by Nehru. Amartya Sen had noticed the narrow instrumentalities of the economic model, and its exclusion of alternative policy choices, in 1958: ‘It really depends upon what you are after. If you are asked (by, say, Pandit Nehru or Khrushchev) whether a particular target, which the government wants to achieve, can be achieved, you can answer the question with a model of the Professor Mahalanobis sort.’
The Planning Commission and its activities left a lasting imaginative imprint on Indian perceptions of economic development, but the moment of its actual ascendancy was brief – at most a decade. By the mid-1960s the idea of a Planning Commission directing India’s economic development within the framework of constitutional democracy was declared by the professionals to be in ‘crisis'. ‘Perhaps,’ one of the closest and still hopeful students of Indian planning wrote in 1968, ‘the Commission itself needs a spring-clean.’ But even the Professor had to admit that the experiment was actually in deeper trouble. In a revealing but forgotten essay on Gunnar Myrdal’s influential account of the failures of development, Asian Drama, Mahalanobis expressed ‘agreement with Myrdal's main contention that “ India’s promised social and economic revolution failed to materialise”’. India had not achieved ‘take-off’, ‘self-generating growth’, ‘the industrial revolution’: all those utopic conditions that the science of development economics had enticingly promised in the 1950s. But where Myrdal traced this failure to the persistence of institutional obstacles and the absence of serious social reforms, Mahalanobis’s diagnosis reiterated the importance of science and technology to economic growth: his response was to retreat from rather than to take the argument into politics. The rise of modern science had created a third ‘domain of decisions’, superior to the existing authority of tradition and the liberty of individual choice: ‘The tradition and outlook of science requires, and in fact consists of, the acceptance of a new third principle of objective validity of scientific knowledge which has its foundations in nature itself, and which cannot be changed by any authority however high its status, nor by personal choice or preference.'
Science was the key to improved rates of economic growth: essential for a ‘self-generating economy’ in industry as well as in agriculture. ‘How to increase agricultural production without increasing the price of food grains,’ Mahalanobis insisted, ‘is perhaps the most difficult problem of Indian planning.’ The solution lay in ‘industrial and technological inputs’ which, to be effective, required that ‘village habits and psychology ... be transformed into the industrial outlook with interests in tools, gadgetry and new innovations, and desire for acquisition of skill in using them’. But advancing the progress of science was a lonely task, since not only the society but the State bureaucracy itself seemed blind to its virtues: ‘the number of civil servants and managerial personnel is increasing but the proportion among them with a proper understanding and appreciation of the scientific outlook is probably decreasing, especially at lower levels’. It was therefore imperative to ‘liberate science from the authoritarian control of civil servants’. Until that happened, he concluded, ‘the future looks dark’. The reliance on the bureaucracy to translate the plans of the intellectuals, to fulfil a cultic role as bearers of Reason’s flame to the society, had led to disappointment.
InfoChange News & Features, January 2005