The Hindu Business Line : The politics of development — Through the prism of economic history

Development strategies and budgets reflect the political economy of the times. Political factors always influence and shape economic development strategies and the processes that follow from their adoption in any country. This has also been the case in the 56 years of India's experience since Independence, says A. Vasudevan.

For Mahatma Gandhiji, village self-sufficiency took precedence over the political statement made by the Dandi March. Modern-day Budget-making too is governed by more than mere politics.

IT has been observed that the Budget for 2005-06, presented by the Finance Minister, Mr P. Chidambaram, was dictated by the compulsions of coalition politics and by the vocal influence of the Left parties that support the government from `outside'.

This observation along with the fact that the 75th anniversary of the `Dandi march' is being celebrated in March/April this year, will need to be viewed through the prism of India's economic history. For the `Dandi march' is often viewed as not merely a political event galvanising people to civil disobedience — a concept that Mahatma Gandhiji drew from the experience of Henry David Thoreau — but also an emphatic support to the idea of village self-sufficiency.

On the other hand, the emphasis on agriculture and rural development in recent years, especially since the last ten months or so, is not in the same genre as the perceived underlying idea of the `Dandi march'.

The observation, often made in the tone of a criticism, that all Budget-making and development strategies are only political in content, should be dismissed as nonsense. The reality is that political factors would always influence and shape economic development strategies and the processes that follow from their adoption in any country.

This has also been the case in the 50-odd years of India's experience since Independence.

The Indian experience demonstrates that the leadership of the political party in power has shaped the future path of development on several occasions — immediately after Independence; in 1955; in 1969; in 1980; and in 1990-91.

On all these occasions, interestingly enough, the Congress party was in power at the Centre. Other political parties that held power at certain periods during the last 30 years did not differ from the Congress party in terms of the spirit of the development strategies in existence, although one might be tempted to consider the Five-Year Plan prepared during the period 1977-79 as an exception.

A look at the events leading to 1955. The political leadership of Jawaharlal Nehru was unquestioned at that time. Nehru helped to lay down the development strategy with objectivity, without being too emotional to the fact that the father of the nation, Mahatma Gandhi, had espoused an altogether different development philosophy. Nor did Nehru go full length to accept the Marxian strand of thought or the reasoning of the Fabian socialists with whom he built excellent personal relationships during the years of his study in Great Britain.

Nehru, as Morrison-Jones remarked in the 1960s, was a Gandhian without believing in anarchy; he was a Marxian without the logic of Marxism; and he was a Fabian socialist without the required faith in administration. He was politically skilful in deferring discussions on the development strategy that India should adopt during the years immediately following the Independence.

It was only in the mid-1950s, by which time his political authority was supreme, that Nehru helped shape a strategy for the Second Plan (1956-61) with ingredients of different streams of economic reasoning in different degrees.

Nehru stood apart from several others, including the Mahatma, in the nationalist movement insofar as economic philosophy was concerned. The Mahatma's economic philosophy, often referred to as Gandhian economics, and popularised by J. C. Kumarappa and Shriman Narayan Agarwal, was built on the principle that there has to be village self-sufficiency with agriculture and village industries producing enough for the society to sustain and employ all the surplus labour.

Gandhian economics ruled out large-scale production through the setting up of large industries and the use of new technologies. It did not envisage migration of labour from the rural areas to where development projects are undertaken. The State would have no role in the production processes and the richer sections of the population would act as `trustees' of society. Simplicity and deliberate capping of wants characterise the Gandhian society.

The denial of place for specialisation and division of labour and for possible enhancement of the extent of the market is the major flaw of Gandhian economics.

To expect the rural economy to provide full employment, as Gandhian economics postulated, is unrealistic. To present-day economists, abnegating the use of modern technologies would go against the inquisitive human mind as well as productivity enhancement.

Nehru rejected the basic premise of Gandhian economics, but was inclined to support village industries, partly because they provide the means of livelihood and partly because their output reflects local skills that are in many cases handed from one generation to another bearing distinct cultural identities.

This explains the inclusion of ambar charkha and village industries within the framework of the development strategy of the Second Plan.

Nehru need not have included the village industries, for he was more or less certain that even the Mahatma, with whom he differed on economic matters, did not force his viewpoint on him or the Congress Party in general. He obviously wanted to build a consensus on the development strategy that India should pursue.

He could not have been influenced by Shriman Narayan, a Gandhian, one of the members of the Planning Commission at the time of the formulation of the Second Plan. He knew that his concept of socialism would not be crystal pure.

Nehru let economists with Left orientations, including foreign economists such as Charles Bettleheim, be critical of the Government's support for khadi and ambar charkha, perhaps hoping that officials would defend him. The official explanation, however, was factual, pointing out that the choice of techniques was warranted by the need to absorb surplus labour in the face of limited investments in both the public and private sectors.

The emphasis on the state occupying the `commanding heights' of the economy in the Second Plan reflected Nehru's fascination for the great economic strides that the Soviet Union had made under planning. Nehru, it seems from my own interaction in late 1964 with Dr B. B. Mishra, the author of the famous book on the Indian middle-classes, was influenced in this regard by the communications that he had received from M. N. Roy, who was then in the Soviet Union and was reportedly in close contact with Lenin and Trotsky.

The then British Government, as Dr Mishra explained to me, intercepted some of these communications. But the British Government did not perhaps find these communications influential enough to lead Nehru to take to means that are associated with communist regimes of the times and unsettle the colonial power.

Nehru was a leader of the Socialist group of the Congress party and instrumental in the formation of the National Planning Committee in the 1930s. It was the experience with the Committee that prompted him to establish the Planning Commission in 1950. He did not believe that western capitalism would help India raise its real incomes or provide full employment of labour. Yet another facet of Nehru's life needs to be noted here. By 1954, he was convinced that he should reach out to young socialists such as J. P. Narayan who parted with him soon after Independence to bring about a consensus on India's economic development. His efforts, however, did not succeed.

He found the first opportunity to strike a distinct note when he found that P. C. Mahalanobis' technical work on India's development path would provide a good consensus, with the state assuming the `commanding heights' of the economy to quicken the pace and tempo of development. That was all that mattered to him. The Indian economic experience in subsequent years has many interesting aspects. The fact is that development strategies and budgets do reflect the political economy of the times.

(The author, former Executive Director of the Reserve Bank of India, can be reached at asurivasudevan@hotmail.com)

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