How a command economy chained India to poverty
If there is a Nobel Prize for inefficiency, lethargy, irresponsibility, and ignorance, it should be awarded to the persons who governed India from 1947 to 1977, 1980-1989 & 2004-2014. They succeeded in keeping the country poor in perpetuity in all spheres of the economy. Primary and secondary schools, which were responsible for introducing infants to the world of letters and knowledge, were insufficient to cater to the ever-increasing population. Certain Abrahamic religions, which came to India with ulterior motives, cornered the educational establishments that charged exorbitant fees from the poor and downtrodden in society and blamed the majority community for the ills plaguing the nation. They took recourse to the non-existent articles in the Constitution, which they claimed gave them many exemptions from the law of the land.
There were no national highways, an advanced rail network, or civil aviation services, and this retarded the nation’s progress to a snail’s pace. Former Prime Minister Atal Bihari Vajpayee, during his tenure as opposition leader, always reminded the rulers about the need to have world-class national corridors connecting Kanyakumari with Kashmir and Surat to Silchar. It materialized only after 1998 with the swearing in of Vajpayee as Prime Minister. But the national highway project he initiated in 1998 came to a standstill in 2004 following the failure of the BJP-led NDA government in the General Election. For the next decade (2004-2014), the NH project was in limbo as the UPA and its signora never liked the idea of such vast and wide roads. The National Highway project was revived only in 2014 after the change of government in New Delhi.
Certain statistics and figures speak for themselves about the ground realities in the country. In 2014, India had just 387 medical colleges, and these were the institutions that came up during the period 1947 to 2014. But the period 2014 to 2025 saw the number of medical colleges shoot up to 780, an increase of 393 such colleges in just 10 years. India may be the only country in the world where one comes across simultaneous drought and flood at the same time. A rare feat! We do not have a flood mitigation system in place, despite we do have fleet of remote sensing and communication satellites up in the sky. 24 atomic reactors are operating in various parts of the country, providing nuclear power to the national grid.
India has hosted the Asian Games, Commonwealth Games, World Cup Cricket Championship, and Hockey Championship. Though we were nowhere near global standards in athletics and games like volleyball or basketball, our rulers dared to host such events. The Commonwealth Games turned out to be a blot on the nation thanks to the magnitude of corruption associated with it.
Now, members of the family that ruled India post-independence are wondering about the gargantuan unemployment faced by the country’s youth. It took India nearly seven decades to understand the significance of sanitation, hygiene, and the necessity to have toilets in houses and along the roads. Traditional rulers scoffed at the Swachh Bharat Mission, but the fact remains that it was only in 2014 that the average Indian became aware of the importance of toilets. Seventy-five years have gone by, and the poor are groping in the dark for a roof over their heads. State governments like Kerala had launched mega projects for constructing houses for the poor and downtrodden. But the houses built under this category ended up as dens of anti-social elements and trading hubs of narcotics and flesh trade. The more we speak about it, the more the members of the clan are sure to get angry. For them, to keep the people chained to slavery, poverty, and employment was more beneficial, as there would not be anyone to question their supremacy and right to rule.
What made India remain such a poor country and left the people to mend their own ways? Selfishness of the clan that owned the party and their lack of imagination and wisdom. They deserve a special “honor” for having converted the sub-continent from a prosperous state to a country of eternal poverty. The ruling family treated this vast country as a toy and played with it as per their whims and fancies.
While the Teen Murti Bhavan residents pontificated to the people that the country was poor and could not afford to build infrastructure and other facilities, the reality was entirely different. Research by Paul Bairoch, the Belgium-born Swiss economist who worked for the GATT, proved that the period 1750-1900 saw India and China dominating the global economy. In 1750, China had a share of 34 percent, while India’s share was 24.5 percent of global GDP. This meant that these two countries shared around 60 percent of global GDP, while the combined GDP of the US and UK was a mere 2 percent. The standard of living in these two countries was far superior to anywhere in the world. Taken aback by this shocking revelation, the Organization for Economic Cooperation and Development, a club of super-rich countries, commissioned Angus Maddison, a British economist of repute, to study the history of economic development during the last 2000 years.
What Maddison found out literally shocked the Western world. The beginning of the millennium (One CE) has recorded that India led the world with a share of 34 percent of the global GDP. By 1500 CE, China caught up with India, and by 1600 CE, China overtook India. It turned out to be a deuce by 1700 CE as India covered the lost ground. The advent of the East India Company and the subsequent rule by the British monarchy resulted in India being used as a milch cow by the colonial masters. From then on, it was a story of over-exploitation by the colonial rulers, and once they found that there was nothing more to take away from India, they left the Indian shores after mutilating the country and destroying its remaining natural resources.
Since 1947, the family patriarch, in his bid to retain control over the sub-continent, made the people suffer. They found the easiest way to keep the people subjugated and poor was by bringing the entire country under a command economy, a la China. The manufacturing sector was under state control, and the phenomenon was named the public sector, a term that is contradictory by itself. In the Indian public sector, there was no role for the public. The private sector was more public than the public sector. What will happen when the government enters business? Lethargy, complacency, and laziness took over. What will happen when the government enters business is well proved by the story of National Bicycle Corporation of India Ltd, a company launched in1939 by the Birla Group and taken over by the government in 1974 following labor disputes and agitations. The company has not produced even a single bicycle to date, but has employed 10,000 workers!
It is in this backdrop that Arvind Subramanian, former chief economic advisor to the Government of India, and Devesh Kapur, professor, Johns Hopkins University School, have come out with the book “A Sixth of Humanity”, Independent India’s Development Odyssey- published by Harper Collins. The 18-chapter-long book takes the reader on a trip down memory lane and offers them what is in store for them. The book begins with the speech delivered by the then Prime Minister Jawaharlal Nehru after the transfer of power during the intervening nights of 14th and 15th nights of August 1947. He had declared that while the whole world was asleep, India had its tryst with destiny. Sir, the whole world was not sleeping. People inthe USA, Canada, and other European countries were not sleeping at that hour. The sun had already risen in Australia and New Zealand.
This contradiction could be experienced in the economic policies pursued by the new government led by Nehru. The authors say that the policymakers were confused in deciding whether to focus on economic growth or on social development for the poor. This confusion resulted in India falling behind China, South Korea, Taiwan, and even Indonesia in GDP. The curse on India was the Soviet model five-year plan, about which the proponents themselves were not sure.
The nationalization of Banks and the abolition of the privy purse to the former rulers of the princely States by amending the Constitution were portrayed as revolutionary measures in realizing a socialist society! There were reports in 1971 itself that the nationalization of Banks and the abolition of the privy purse were done to prevent the growth of the Swatantra Party, which was posing a serious challenge to the Nehru-Gandhi clan’s supremacy in Indian politics. Most of the former rulers were close to leaders like C Rajagopalachari, Piloo Modi, Minoo Masani, N G Ranga, who had warned about the disaster awaiting the Indian economy. But the proprietors of Congress did not heed these alerts and pursued the “Keep Left” ideology, which destroyed entrepreneurship. Add to this the License Permit Raj policy, a means to extract the pound of flesh for the new royal family.
Socialism in India was the synonym for crony capitalism. Only those who were on the right side of the ruling dispensation could flourish. The economic policy followed by the Congress regime (also known as Avadi socialism because it was during the AICC session held at this Chennai suburb that the Congress adopted this imported ideology as the guiding light of the GOP) resulted in our ministers approaching foreign countries with begging bowls in the 1960s, 70s, 80s, and 90s. Corruption became the national pastime. Only those with proper connections in the Railway Ministry could get reserved tickets in long-distance trains. In the 1970s, 80s, and 90s, it took almost 40 hours to reach Mumbai from Kochi! These issues never torment the ministers and leaders because they used to fly even small distances. Even district-level trade union leaders commute by imported SUVs while their sons drive around in sports coupes.
The socialist path succeeded in generating a parallel economy worth Rs.2 lakh crore in the early 1980s itself, according to Arun Kumar, an economics professor at Jawaharlal Nehru University, whose book “Black Money in Indian Economy” revealed that in 1991, black money constituted 35 percent of the national economy. This shot up to 62 percent by 2013 and was the main reason for the demonetization announced by Prime Minister Modi in November 2016. To a certain extent, it was a success as the number of taxpayers doubled in a matter of three months.
While countries like the USA, Germany, and the UK encouraged their entrepreneurs to produce or manufacture more, it was a cardinal sin in India to do so. Even tax-paying industrialists lived under the fear of raids and arrests during the Indira Gandhi and Rajiv Gandhi regimes. Memories of Lalit Thapar getting arrested for some innocuous reasons during Rajiv Gandhi’s tenure are still fresh in my mind. The scenes of Rajan Pillai’s (the pioneer business baron from Kerala) dead body being brought to Trivandrum from New Delhi, too was proof of how industrialists and entrepreneurs were treated during the License Permit Raj. There were “leaders” who wanted Indians to remain poor forever. Wasn’t it Abraham Lincoln who said, “You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time.”
Gone are the days when rural folk “swallowed” claims that gold could be made out of potatoes.
Let me make it clear that I am not at all an economist and have not learnt the topic. Reading this book was like taking a para jumping without any training. The only prayer was to help me land safely.
A SIXTH OF HUMANITY by Devesh Kapur & Arvind Subramanian
HarperCollins
Note:
1. Text in Blue points to additional data on the topic.
2. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.
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