The Hindu Business Line : The rediscovery of Jawaharlal Nehru

Dr Pulapre Balakrishnan, the well-known economist, has rendered signal service to all students of economic development, particularly of India, through his pioneering study The Visible Hand, Public Policy and Economic Growth in the Nehru era.

The title derives from the contrast between Nehru’s obvious reliance on State direction — the visible hand as distinct from the invisible hand, which Adam Smith had pointed to as a spur of all economic activity. The study comes as an occasional paper of the Centre for Development Studies (Tiruvananthapuram), an institution well-known for its many path-breaking contributions to economic policy analysis.

Emphasis on industrialisation

Jawaharlal Nehru’s contributions as a statesman who laid the foundation for a democratic federal polity are, indeed, well-known. But Dr Balakrishnan’s emphasis is on his role as an economic policy-maker, in shaping the country’s development on a “State-directed basis” with accent on heavy machine building. Dr Balakrishnan gives due weight to the contributions of Dr Mahalanobis, whose model had great relevance to the Second Five Year Plan and the policies advocated and implemented by Nehru.

Nehru’s role in building a self-reliant Indian economy cannot be underestimated. As Dr Balakrishnan points out, Nehru’s emphasis was on industrialisation, particularly of industries manufacturing heavy machinery, which was needed to help build India’s steel, power, fertiliser and chemical industries. These proved critical to the future development of India. They were industries that were feeders to other industries.

Dr Balakrishnan devotes considerable space to the critique of Professors C.N.Vakil and Brahmananda, whose alternative model of development would have laid more emphasis on the growth of production of wage goods, in contradiction to that of production of capital goods.

In an expert analysis, he revisits the details of the controversy and comes out with the obvious conclusion that the Nehru-Mahalanobis model did prove, in the long run, to be growth-enhancing, both in terms of GDP and self-reliance.

He also points out that Mahalanobis had sought to exorcise the balance of payments constraint, which could be removed only by India becoming more self-reliant in machinery, the supply of which was becoming scarce in the world as a whole.

The Mahalanobis-Nehru model was not dependent on expectations of aid from richer countries or of foreign direct investment.

Agriculture not ignored

Dr Balakrishnan dismisses criticism that Nehruvian vision ignored agriculture. On the contrary, he points out, through a number of telling quotes from Nehru’s speeches to Chief Ministers’ conferences, that he emphasised agriculture no less than he did industry. Nehru pointed out how the development of industry was necessary for expansion of agriculture. To grow the economy, agricultural growth was equally needed for supplying raw materials to industry, such as textiles, sugar industry and so on.

The model that Nehru and Mahalanobis had followed had a great deal to do with learning from the successes of the Soviet Union’s growth story in the first half of the twentieth century.

This success had been up till then relatively unflawed, except for the obvious mis-steps of the Soviet rulers in the collapse of democracy and introduction of collectivisation, which later failed with disastrous results.

But Nehru avoided these errors of the Soviet experience. He was particularly concerned to point out that India had to follow its own unique path rather than any other international models. Neither the American nor the Russian way would suit India — remarkable insight!

Turning point

Dr Balakrishnan points out that the growth experience in the 17 years of Nehru’s dominance represented a truly significant growth transition. He has reinforced this by reference to the study of some experts in the field. Besides, the data he has put forward in the study confirms the fact that the Nehru era did witness a rise in the rate of growth of India’s GDP (see Table). It is thus clear that the Nehru era was a turning point in India’s economic history. This incidentally raises the question whether or not the eighties formed a more significant growth transition. This is a subject worth debating, especially in the light of the contributions of Dr Arvind Subramaniam et al on the subject. But the fact pointed out by Dr Balakrishnan that the 1980s formed a turning point confirms that there was an inflection point in the 1950s when Nehru towered over India’s policy-making. Dr Balakrishnan’s discussions are enlivened by his reference to the recent discussion on the growth experience of various countries in the light of the World Bank’s report of 2005 entitled Economic growth in the 1990s — Learning from a decade of reform. He quotes with approbation Dan Roderick’s review of this book.

I quote Roderick: “It is a rather extraordinary document insofar as it shows how far we have come from the Washington Consensus. There are no confident assertions here of what works and what does not, no blueprints for policy-makers to adopt. The emphasis is on the need for humility, selective and modest reforms and experimentation”. It affirms that there is no universal set of rules. It is clear that the Nehru era in India, which preceded the Washington Consensus, is an illustration of what works. It establishes that it is not necessarily true that markets alone can guide a nation’s economic development. Nehru’s vision enabled building up of India’s industrial structure on the strength of which India’s economic reforms of the nineties based their success.

It is necessary to have this perspective since in our new-found enthusiasm for market-oriented reforms, we tend to trash the earlier vision of a structured building of the heavy industries following a planning model. Nehru realised that there were difficulties in public sector performance and outputs did not match expectations. But Nehru emphasised the need for improvement in production, productivity and public awareness.

Basic nuts and bolts

The Nehru era was important in that it built the basic nuts and bolts of India’s current booming economy. It also laid the foundation of India’s vast educational and scientific infrastructure on which the country’s current soft strengths are rising.

It is but appropriate to emphasise this, as Dr Balakrishnan has done in another piece, that India’s software industry itself is based on the successful contribution of the state in growing India’s IITs, in particular, and scientific temper in general.

Dr Balakrishnan latest contribution through his paper The Visible Hand is truly impressive. It rediscovers Nehru’s great role in India’s economic evolution and growth. Every generation stands on the shoulders of its predecessors, if they, indeed, contributed to such growth.

Truly, we can say that the 21st century India’s success owes a great deal to the path-breaking contributions of Nehru and his dedicated team.

To sum up, I quote Dr Balakrishnan: “One has to focus on the particular role of Jawaharlal Nehru in the formulation and implementation of the economic policy of his times. Arguably, no Indian leader at the helm of this country had been as crucial to the navigation of its economy. The economic record of his times holds us an important indicator of the effectiveness of his role.

Under Jawaharlal Nehru, the Indian economy transformed from a colonial enclave to one with at least some of the pre-requisites for a sustained long-term growth while at the same time maintaining autonomy from the super-powers, vying for influence on a newly independent Indian sub-continent.”