India unbound

I finished reading this book by Gurcharan Das. It was written in 2001 and is his reflection on economic, social and political life in post independent india. He has an easy writing style that is engaging. That he has written a book pointing out flaws in the economic policies of holy cows of indian national politics, Nehru, Gandhi, Indira and Rajiv, is just icing on the cake for me. I do hold the Nehru family responsible for many ills plaguing India. That doesnt mean I excuse the rest of the country. It is just that, Nehru family had the opportunity to shape the future of millions of people and its track record is filled with lamentable failures. To hide behind years of public service, multiple assassinations and italian widows doesnt exonerate them from their abysmal economic record.

The book does lament a lot on how India, first under Nehru and then under Indira, moved away from a choice of communism or capitalism and chose a third path, 'mixed economy'. The one thing that we can be thankful is that Gandhi didnt get more say in the economic policy after independence. He would have insisted on his crackpot ideas, reason be damned. So, we would have had regression towards handicrafts and appropriate technologies. Ambedkar and Nehru were correct in slamming him for those fantasy theories. I dont have anything against handicrafts but to make them the driver of the economy would be suicide for a country as large and as needy as India. If they are done well, they could be a profitable sector, providing profits and sustenance to those who are good at it.
The economic policy after independence reflected the confusions and idealisms of Nehru as he went about fashioning India in his own image. As someone inimical to profit seeking motives, Nehru created a socialist hell that progressively got worse. While other asian countries realised the power of capitalism and provided their people a new lease of life, India languished on the sidelines with its moral righteousness, even as millions suffered. For Nehru, profit seeking motive represented a base concern. He proceeded to lay the foundation of an economy that actively stifled any entrepeneurial spirit among its merchants, traders and industrialists. By focussing on state backed import substitution instead of export promotion, Nehru showed a weakness of judgement about indian businessmen. There is some justification in Nehru's fear that, without protection after 1947, a nascent indian industry would be wiped out even before it got started. But his response to that fear was to have the state administer all aspects of business sphere. That might be one reason, to this day, India is a nation of laws that are implemented sporadically. Even the state has a limited amount of resources. You can print only so much money before it becomes worthless. The state after 1947 could have focussed on how to bring india's economy on par with other developing nations by setting the playing field within the country for economic activity and enforcing the regulations. But, Nehru decided to plunge the state into an orgy of building 'temples of modern india' a.k.a steel plants. Why was he so afraid of allowing businessmen to do what they do best, run a business seeking profit, use profit to live comfortably, pay their employees, invest in technological developments that improve profitability in the long run and close plants that are unprofitable ? Did he think Indians werent ready for changes that come with private industry ? Did he think the state should be a surrogate parent assuring its citizens jobs where you dont get fired ? How does someone improve their lot if they are doing a job where they know there is no penalty for not doing any work ? Where is the incentive ?
As the author points out, a businessman's focus on economic interests precludes rigidity in their thinking. They can afford to be rigid but then their business has a higher chance to go bankrupt. They might undercut their opposition but as long as the playing field is neutral, they will try to make money the best way they can. At least they provide a purpose where people get together and work for a common purpose. The state support immediately after independence allowed indian businessmen to produce shoddy products because (1) they were constrained in how much they could invest so research and development took a big hit (2) they couldnt set productivity goals for their employees that would serve to achieve progressively higher standards in production (3) They couldnt introduce new products if the market demanded it without approval from the bureaucracy that had only a vague idea of how industry worked and (4) Competition was minimal given the headaches suffered by anyone who wanted to start a business.

Then came Indira. If nothing else, she was smart in a no holds barred survival way. She proceeded to tighten the government policies that discouraged active investment in industry and made sure entrepeneurs were at the mercy of bureaucrats dispensing license permits. Her 'Garibi Hatao' slogan was devious as she should have known it was her government's policies that were causing 'garib' in the first place. She did win a war against pakistan and dismembered it in political sphere. Knowing her father's policies were wrong should have at least alerted Indira towards course correction in the economy but her political instincts probably took over and she decided to continue the short sighted policies that brought nothing but misery.

Obviously, indian people deserved a lot of blame for sticking with congress party this much. Yes, there were reasons why Congress was so successful for this long(power allowed them to build a dedicated base that did their bidding, they had the distribution network in the form of AIR and DD to put out their side of the story most of the time at minimal cost to themselves and so on). But, Congress should have been thrown out long time back for dragging india to the depths of default and ignominy. They have had their chances running on the platform of being the party that got us independence.