The Millennium Special

The Past

The Future

S Gurumurthy S Gurumurthy

E-Mail this feature to a friend The Swadeshi Jagran Manch ideologue on the ten economic errors that cost Independent India its future

The first major mistake we made after attaining Independence was the failure to comprehend the Indian situation. We decided to follow the world when there were only two methods available at that time at the global level: socialism, communism and the market model. We decided to make socialism our model without understanding whether the Indian system could accept it or whether India needed an innovative Indian model or not. For instance, Japan never accepted market capitalism or capitalism based on individual rights. It accepted communitarian capitalism.

So every country modified the available thinking to make the nation the core and the global the additive. But we made the reverse, thereby socialism became a slogan. But the discipline needed for socialism could not be built.

This was the first mistake, a major mistake made by us and thus the Indian government never became an Indian establishment. It had its ramifications in politics as well as on the national economy.

The second mistake was when we ignored the real resources of India. If we had exploited the resources, which were available, the nation would have immediately become responsive. For instance 90 per cent of India was agriculture based at that time. That should have become the target.

In the first Five-Year Plan, they attempted it. But from the second Five-Year plan, we shifted the focus. So the empirical talent of India did not get incorporated in the overall economic model of the country. The result was that technology did not become the basis of growth, but ideology did. It became increasingly pronounced later.

Politics began interfering with economics so much that we even built a tempo against businessmen, traders, industrialists, etc -- in a sense -- people who became successful. Those successful outside politics -- who were largely professionals and businessmen -- were detested. Dealing with the government became an obsession with business folk.

Accepting the western view of life in every sphere and ignoring the Indian way in education, skill building, etc, was the third mistake. Contrast it with Japan. In 1990, the United Nations University asked the Japanese Institute of Development Studies to give them a document as to how Japan became an exporter of technology from being an importer of technology after the Second World War. They produced 20 volumes!

The introductory volume revealed that Japan made an assessment of the empirical talent available in the country and began building on it! But we wanted everything on a clean slate with the result that the past advantage of India could not be used and the disadvantages could not be overcome.

Nehru De-privatising and licensing businesses, destroying the entrepreneurial talent of India and making the economy state-centric -- these were major mistakes made by us.

Let us look at all that we are doing now. We are only undoing what we had done earlier, whether it is privatising the insurance sector, attempting to privatise banks or other industries. We are calling this 'reforms' now. That means somewhere we made the mistake. But who is accepting the mistake?

Does anybody say Nehru made a mistake? Or, Mrs Gandhi made a mistake? What happened in the bargain? Talented people attempted to become government officers, capable people decided to become IAS officers, IPS officers ... and we produced a huge managerial talent for public sector but they could not take risks.

Mrs Gandhi There is a misconception that we were a swadeshi economy and began following the liberalisation and globalisation model only from 1999. No, not at all. We were following one set of policies from abroad up to 1990 and began following another set of policies again from abroad after 1991. Because we were convinced from day one that India could not guide itself and therefore we needed guidance from abroad.

The first set of policies de-Indianised India. Instead of Indianising the country in the last forty years, we told Indians that -- 'You are nothing. You don't know anything.' Getting technology from abroad doesn't mean India is nothing. Japan imported technology from the West and the slogan they used were 'Japanese skill and western technology!' We failed in the first forty years and the failure became the basis of the failure in the next ten years. This is where, I think, a very large scale assessment of the sociology of India is needed.

The next mistake is nationalising insurance companies, coal sector, etc. Instead of disciplining them, we nationalised them from 1969 to 1973. Politics was the basis of that, not economics. We could have corrected whatever inefficiency or lack of economic or social sense, which was there in these institutions by disciplining them. These are the sectors which are weighing on the economy today. These have become the biggest burden of India.

I still feel the economy was managed better even within these wrong policies between 1950 and 1980. The gross wrong administration of the economy started in 1980. If you look at the balance sheet of the Government of India in 1980, it showed more assets than liabilities then. Its assets were in excess of the liabilities by Rs 1,000 crores in 1980. Do you know what is the position today? The liabilities of the Government of India are more than its assets by Rs 4 50,000 crores!

In 1990, when the liberalisation began, it was about Rs 220,000 crores. This was because the government began to inflationary finance the economy of India from 1980. That was Mrs Gandhi's decision when she came to power for the second time. She said we should not tax the people but give people whatever they want or even things they don't need and print more currency. Indian rupee that was Rs 4 a dollar in 1950 became Rs 8 a dollar in 1980 and is Rs 43.50 today!

If inflationary finance had been on the production side and not on the consumption side, it would not have been a disaster. With the result, our revenue deficit went up. If there had been a deficit on the capital side, it would not have been a problem. From 1985, we began incurring deficits on the external side also, that is, after we began this screwdriver technology. So, liberalisation on the external sector created consumption deficit on the external sector.

We thought if the consumption sector is activated, there will be large-scale activity. It did not materialise, as India is largely a savings oriented economy. You cannot whip them to spend. The consumption policies that we pursued on the internal side from 1980 and on the external side from 1985 resulted in the crisis of 1991.

Manmohan Singh Because we are pressed to a corner, we defected from socialism to capitalism overnight. Manmohan Singh is the greatest example. He was the one who prepared the Seventh Commission report. He was the one who said the market economy would never help the world, much less India. This shows not change of mind but defection. We never followed the socialist model, we followed socialist indiscipline.

You cannot wipe out all the accumulated indiscipline overnight. So, even if you decide, 'from today India will have to give up the socialist model', it will not work. You must have a vision. This overnight defection completely upset the economy again.

Just like socialism was a slogan earlier, liberalisation and globalisation are the new slogans. It is like infatuation. We didn't analyse the effect of an institution called the WTO. The WTO is globalisation at the global level and not globalisation at the bilateral level. We did not exercise rational judgement and thought the WTO was good for India. And, anyone who talks against it is called anti-modern. With the result, the WTO became the rule setter and trade within the WTO is only multilateral.

You cannot take a concession from a country and give concession to that country without giving concessions to everyone. The biggest weakness of the WTO is that no nation can pick and choose and every nation has to pick and choose. Without understanding all this, we signed the document and today we have no initiative in trade matters.

S Gurumurthy, convener of the Swadeshi Jagran Manch, spoke to Shobha Warrier.

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