It is time for the ruling elite to face up to the fact that in terms of a rational economic policy the country has been marking time for over a decade. In the past this harsh reality was somewhat obscured by one sensational development after another – the Chinese attack in 1962, the death of Mr. Nehru in 1964, the war with Pakistan in 1965, Mr. Shastri’s death in 1966, the Congress party’s debacle at the polls in 1967, the struggle for power in it leading to the split in 1969 and the Bangladesh crisis in 1971.
Mrs. Gandhi has no choice but to treat the economy as her first concern. She will not be able to advance a convincing alibi if she fails to evolve and implement a viable policy in the new year. Even last year she could claim that the country’s security required all her attention in view of the uncertainty regarding Pakistan’s intentions and the unhelpful attitude of America and China. In 1973 she will have no such excuse for postponing urgent decisions.
His peculiar style of leadership notwithstanding, Mr. Bhutto has undoubtedly decided to establish working relations with this country. Similarly, President Nixon has indicated fairly clearly that he is not averse to making a new beginning with New Delhi, and it is unlikely that China will create new complications for it. All in all external problems cannot be said to have priority over domestic issues this year.
ONE FACET
Some of Mrs. Gandhi’s over-enthusiastic supporters can, of course, continue to raise the ghost of a right-wing alliance and external intelligence agencies stirring up trouble. But no one is likely to be deceived by such tactics.
But this is only one facet of the picture. Its other facet is that the Indian intelligentsia has fostered a climate of opinion in which irresponsible populism has acquired respectability and economic rationality has come to be equated with reaction and even subservience to foreign interests. There is indeed a near consensus among the educated in support of the hodge-podge of concepts that passes for the ruling party’s ideology.
It is possible that Mrs. Gandhi will either try to produce a new and healthier consensus on the present consensus on the strength of her popularity among the common people, specially in the countryside, who are more impressed by results than by slogans. The first approach is much more difficult because it calls for a campaign of political education and an assault on wholly erroneous and antiquated views that hold sway among the intelligentsia. But it will also provide a much surer foundation for long-term progress than an attempt to do the right thing behind a facade of false slogans.
Not all our policy-makers and intellectuals are aware that post-war developments have proved that crises of over-production and depression are not inevitable under a system of free enterprise or a mixed economy, that even judged in terms of annual increase in GNP, the communist economic system is neither more efficient nor more innovative, and that the US, Japan and West European countries have not only maintained their technological lead in many fields over the Soviet Union but greatly increased it so much so that the men in the Kremlin are anxious to gain access to their capital, technical know-how and markets. But even those who know the facts for some reason shy away from them and subscribe to slogans relevant to the ‘thirties, a period of depression and mass unemployment in Western countries.
SOVIET MODEL
There is a grudging acknowledgement in certain circles that centralised planning a la Soviet model does not work. And even those among them who find it inconvenient to state this fact in so many words are willing to praise the opposite of centralised planning. In his presidential address at the Congress session last week, Dr Shankar Dayal Sharma, for instance, said: “I am told that in some socialist countries state enterprises have achieved remarkable results through decentralisation.”
It is rather strange that a man in his position should have been so casual on an issue of such vital importance. After all, it was his duty to study the facts carefully and in detail before pronouncing on the subject. Two other points are even more pertinent in the present context.
First, the well-entrenched party bureaucracy in the Soviet Union has been opposed to decentralisation of economic planning and transfer of decision-making powers to managers of individual enterprises because of the fear that this might threaten its monopoly of power. It has in fact managed to stall Mr. Kosygin’s efforts in that direction. In other words, there is a contradiction between the interests of the party bureaucracy and economic rationality.
Secondly, there can hardly be any justification for doing away with private enterprise if the managers are to be armed with powers which even managing directors will envy in India.
In theory managers of public enterprises in socialist countries work in the public interest. But the reality is very different. President Tito, for instance, is gravely concerned over the way managers in his country have amassed private fortunes and built palaces in towns and cities and luxurious dachas on the beaches. And the story is not very different in centrally-controlled enterprises in other communist countries.
The Indian ruling elite continues to hug another illusion. It is that it can revolutionise industry and agriculture through the use of science and technology on a mass scale and at the same time promote an egalitarian system. It is just not possible to do so in a backward country as even the Soviet leaders discovered to their dismay in the ‘twenties and the ‘thirties. Stalin in fact went so far as to denounce egalitarianism as a “bourgeois prejudice.” Only in China Chairman Mao Tse-tung has so far prevented the rise of a new privileged class of technocrats, managers and bureaucrats. But who can say that even there egalitarianism will survive him?
Thus two options are open to the Indian rulers. They can either facilitate production through encouragement to private entrepreneurs or stifle it in the name of an egalitarian ideology. The first may increase absolute disparities but will mitigate the hardships of the poor by holding down prices and increasing job opportunities. Radical rhetoric, on the other hand, will add to the difficulties of the poor by reducing production and job opportunities and unleashing a rise in prices. It is not likely to reduce disparities under the present dispensation because the political elite has entered into an illicit partnership with the business community where both can prosper even in the context of a stagnant economy.
On a superficial view, Mr. Nehru’s middle path is still open to Mrs. Gandhi. But a careful scrutiny will show that the late Prime Minister could build heavy industries in the public sector because of the easy availability of external credits and of PL 480 wheat to absorb the inflationary pressure and that he was sustained in this policy by the rather old-fashioned faith that basic industries would guarantee sure and sustained economic growth. The situation now is clearly very different.
PL 480
Foreign assistance is difficult to come by. On the contrary, the country has to shoulder the burden of repayments. New Delhi has found that PL 480 wheat is not an unmixed blessing and therefore rightly refuses to ask for its resumption. Finally, even communist economists have come round to the view that the order of priority should be agriculture, consumer industries and heavy industry and not the other way about. The Chinese, who can surely give this country a lesson or two in self-reliance, have opted for this path.
All this is not to suggest that there is no case for land reforms and limiting the expansion of big business houses to related industries so that they can have the advantages of economy of scale without stifling new entrepreneurs in other fields. But it is dangerous to maintain an atmosphere of uncertainty and thus inhibit investment.
The point is particularly relevant in agriculture where investment is taking place on a substantial scale for the first time in history. It can easily dry up if the ruling elite continues to talk of green revolution turning into a red revolution. Some tensions are unavoidable in the process of growth because only stagnation can preserve a given equilibrium. But they need not prove unmanageable. Indeed they are necessary for promoting social changes. In any case, the alternative is stagnation and all that it implies by way of shortages, inflationary pressure, lack of employment opportunities and political instability.
The Times of India, 3 January 1973