Book Review: Ranjit Singh Ghuman and Indervir Singh (Eds),Nehruvian Economic Philosophy and Its Contemporary Relevance

This book is a compilation of papers submitted at a seminar in September 2012, presented as separate ‘chapters’. These are grouped under headings dealing with the historical background, theory (Nehru’s thinking on economic questions) and practice (the development path/approach actually taken). The emphasis is more on practice, as it should be regardless of the wording of the title, with four sections covering the record, both in the Nehruvian era (which is rightly taken to extend up to the end of the 1980s) and after (post-1991 ‘reform’ of the economy), through case studies on education, health, agrarian, electricity and steel sectors, and the macro-economic scenario and economic diplomacy and security. It ends abruptly, without a concluding chapter or postscript to bring everything together.

Nehru’s ideas on economic questions (to term them ‘philosophy’ is perhaps an excess, intricately intertwined with his political thinking as a ‘social democrat’ though they were) centred around planned economic development, with industrialisation at its core, undertaken in the framework of a mixed, albeit dirigiste, economy (‘commanding heights’ in the hands of the state) and a democratically organised liberal welfare state committed to establishing a ‘socialistic’, not socialist, society respectful of individual liberty and freedom. Democratic planning for democratic socialism, in short. As commonplace as they might seem today, they were pioneering in their heyday. Planning, even indicative planning (that Nehru had opted for, not the ‘centralised’/complete planning of a command economy), was then a bad word with totalitarian associations. It was, therefore, a conceptual breakthrough of sorts, ideologically—of a ‘third path’ (in between the capitalist and communist roads) for a freshly decolonised country embarking on its ‘tryst with destiny’—of a piece with the even bolder (and more original) non-aligned outlook on foreign affairs, integral to Nehru’s overall weltanschauung.

That approach manifested itself tangibly in the particular industrialisation strategy adopted in the Second Five Year Plan (succeeding the first, which had focused on agriculture, irrigation, multi-purpose flood control and power projects to ensure food security, to use a contemporary term). That strategy was based on Mahalanobis’ modification of the Feldman model followed in the former Soviet Union. The chief contribution of that model was to validate, analytically (under certain simplifying assumptions), the intuitive insight that greater investment in ‘machines to make machines’ (heavy industry sectors, whose output cannot be consumed directly but only be utilised for further investment) in the initial years, instead of ‘machines to make consumption goods’ (light industry sectors, whose output could, in contrast, raise consumption levels immediately), would result in slower growth of the economy at first but accelerated growth after a certain period: a ‘today versus tomorrow’ trade-off, in other words, privileging ‘delayed gratification’.

Implementation of this strategy had, of necessity, to be a state-sponsored process, given the huge capital requirements, complex mega-linkages with other sectors and long gestation periods that investments in heavy industry required. Pre-independence thinking in the Indian National Congress, going back to its 1931 Resolution at the Karachi session (and Nehru individually earlier), had already veered around to a consensus on state control over mining, railways and other key industries. The 1944 the ‘Bombay Plan’ of leading industrialists had also envisaged a state lead, so this (dirigiste economy requirement of the strategy) was not an issue at the time of its launch. Giving shape to the dirigisme feature was to become problematic subsequently, though, because of the lack of conviction on the part of large sections of the Congress and the polity as a whole–with the roots of that problem going right back to the socialists–conservatives divide in the Congress during the 1939 presidentship of Subhash Chandra Bose, including between Nehru and Gandhi, as is well known and also pointed out in the book in passing.

Implied in that strategy, logically (but never spelt out explicitly naturally because it would have been premature to do so at the very outset), was the supposition that both the investment priorities and role of the state could be reconsidered, and refixed, as appropriate, once the ‘take-off’ stage had been attained—in all likelihood, in the direction of a switch to light industry for raising consumption steadily thereafter over the long term. (For raising consumption levels was, after all, the very purpose of choosing an optimal investment strategy, the particular choice made in that respect could not be turned into a fetish.) A process that all might have agreed then, as now, was best done through the private sector of the mixed economy, and reliance on market-based mechanisms, to ensure allocative and other efficiencies and consumer satisfaction.

That kind of a ‘makeover’ of the dirigisme vision of the economy, whenever it was ready for the anticipated ‘take-off’, might, perhaps, not have been considered to be a reversal of the Nehruvian approach by most reasonable observers had it come to be in the normal course of things in an organic manner, with welfare of the ‘bottom billion’, and not the upper crust of society, as the driving force.

The manner in which such a makeover was done in China, which too had followed the Feldman model strategy of initial stress on heavy industry, is instructive—in a home-grown fashion, with an exquisite sense of timing and sequencing focusing on internal reform (of the domestic economy) before opening it to a Foreign Direct Investment (FDI). The December 1978 reforms initiated by the Deng Xiaoping–Chen Yun duo commenced with the agrarian sector totally within Chinese (sovereign) control—liberalising the collective economy of the communes to incentivise increase in the marketed surplus of agricultural (and meat/poultry) products. So also in case of the switch in state investment, away from heavy industry, to light industry (textiles, household goods, processed foods, etc.) to boost the output of consumption goods in parallel and a careful adjustment of the ‘scissors price’ mechanism alongside to ensure a rise in the living standards of both the peasantry and urban citizenry more or less in tandem, through exchange of the respective surpluses of the rural and urban sectors of the economy.

Invitation to FDI came later, in the later 1980s and early 1990s, after basic welfare benefits as above had accrued to the populace (and to volatile Foreign Institutional Investment (FII) flows not at all, not until very recently), in a controlled manner on a clear-cut ‘value-added’ basis. Such that the cumulative foreign exchange inflows triggered by the FDI, net outflows on account of repatriation of profits, royalty, etc. have resulted in the staggering US$4 trillion reserves the country has built up—highest in the world, and more than 10 times those of India (and, what is more, fully owned by China, unlike the borrowed and volatile, reversible in a jiffy, FII inflow propped up reserves of India).

Such a copy book planning exercise denouement in India was, however, not to be, as is known to all. What actually happened, as is not uncommon in real life in general, was a (huge) crisis on the foreign exchange front overtaking events in 1991—not the first really, but earlier ‘mini-crises’ having been weathered somehow.

Though the growth rate had gone up to a clear 5 per cent plus in the decade of the 1980s (as compared to 3.5 per cent in the pre-1980), and there were also some feeble attempts at reform of the policy infrastructure (within the planning paradigm), they did not add up to a reappraisal or anything conceptually significant at that conjuncture. (Lack of clarity on the question of take-off of the economy might well have been the reason for the failure of the polity to make good use of that turning point, besides the extraordinary political circumstances and instability of that decade.) A debt default danger and balance of payments crunch alarm just after the 1991 elections led to a disruptive change in the form of the paradigm piercing policy package of the Narasimha Rao–Manmohan Singh Government. And the rest, as is well known, is history.

The question of interest with reference to the theme of the book—in an academic, not policy-making, perspective—is whether the spurt in the growth rate the economy demonstrated in the 1980s could reasonably be identified to be a manifestation of the take-off anticipated in the Nehru–Mahalanobis strategy. At least in hindsight, a quarter of a century plus down the line, even though that may not have been clear at that time in the welter of conflicting signals and game of obfuscation on the ideological front, that is par for the course, so to say, in a democratic polity subject to contrary pulls and pressures.

If so, the Nehruvian industrialisation strategy clearly delivered (whatever its other shortcomings)—by easing the ‘capital goods’ constraint (a fundamental ‘supply side’ structural constraint) afflicting an underdeveloped economy, and thereby having effected a historic transformation.

If not, then, of course, it leads to further questions for enquiry (including basic ones regarding the validity of the Nehru–Mahalanobis model). But it would not, of itself, be enough to establish the converse proposition—of untenability of the heavy industry-oriented development strategy, much less cast doubts about the overall Nehruvian approach of planned development within the framework of a mixed economy. It would still be a fair question to ask whether the pre-1991 progress of the economy, such as it was, could not be considered to be a critical determinant, and enabler, of the subsequent high growth performance, post-1991.

It would have been very welcome if this book had taken up the challenge of pronouncing upon those questions with some rigour, by framing suitable empirical questions to test these hypotheses. (All things considered naturally, including in particular the known points of criticism of the Nehruvian strategy stemming from the assumptions underlying it, such as undue pessimism on possibilities of international trade, or inadequate attention to agriculture—the ‘wage goods constraint’ of economists, which had formed the basis for an alternative, ‘wage goods’-driven, development strategy proposed by Vakil and Brahmananda.)

Or, going a little further, to test the obverse viewpoint, which current orthodoxy in policy-making and political circles avers to be self-evident simply because of chronology—namely, that the post-1993/94 economy (after completion of the ‘reforms’ initiated in 1991) marked a complete break from the past, and (most importantly) was a kind of ‘stand-alone’ success not really dependent on the inheritance of the preceding decades; rather, something that emerged in spite of that legacy.

Regrettably, that cannot be said to be the case. The contributors to this volume—all seasoned social scientists—make no secret of their Nehruvian persuasion (except for one, tangentially). The blurb highlights the intuitively appealing proposition that ‘the fundamentals and foundations laid down during the Nehruvian era provided the much needed substrate for the…post-1991 higher growth trajectory’ (besides the ‘turning points’ of the 1950s and 1980s). Yet, in taking up cudgels on behalf of ‘Nehruvian philosophy’, or countering its negation, they are peculiarly defensive and stop short of doing so frontally. One would have liked to see a more categorical cogitation capable of establishing the proposition definitively.

Or demolishing it, if that be warranted—in view of the impossibility of success of the mixed economy approach in practice, for socio-political or other reasons, or whatever. The one chapter that expresses doubts about the viability of the heavy industry reliant strategy (inter alia because of failure of the strategy, it feels, to provide for realisation of employment and equity) is, unfortunately, least lucid while leaning toward the alternative of a ‘wage goods’-driven development strategy and is, therefore, far from convincing. Its wishing away of the ‘capital goods constraint’, in particular.

The other ‘what if’ question that a book by this title might have taken up for examination meaningfully for illuminating the relevance of Nehru’s thinking is what might be the contours of a course-correcting policy approach appropriate for the economy, post-take off, within the Nehruvian framework of ‘growth with social justice’? To get rid of rigidities and other dysfunctionalities of the command economy features that were known to have cropped up in the mixed economy framework as a result of undue shunning of market rationality (allocative and other efficiencies through price signalling and other automatic mechanisms) over the years but, at the same time, to consolidate gains made and use them to mount a direct and effective attack on poverty.

Say one capable of incentivising if not ‘directing resources to the sectors in which the poor work (such as agriculture and informal activities), areas in which they live (relatively backward regions), factors of production which they possess (unskilled labour) and output which they consume (such as food)’ to foster ‘bottom up’ growth? Instead of the ‘top down, trickle down’ approach of the post-1991 kind, relying on select industries catering to the urban affluent (‘luxury without limit’ dream-land real estate and private transport, mainly), alongside free imports of luxury goods and similarly oriented FDI (rationalised as being helpful for fostering competitiveness), with unsurprising regressive consequences for income inequality. One seeking to pursue genuinely inclusive growth, rather than lip-service to the concept (as in recent Plan documents etc., which use the term, misleadingly, to describe mere ameliorative measures window dressing, ex-post facto, an unabashedly exclusionary, ‘growth first’, policy paradigm).’ (UNDP Astt. Administrator in a seminar in 2009)

After all, the 1991 Budget speech of the Finance Minister had advanced boost of domestic manufacturing as the rationale for his reform package (but, paradoxically, stopped short of announcing policy measures commensurate with that end), so this kind of an approach cannot be dismissed as a ‘pie-in-the-sky’ fancy of the tribe of ‘permanent nay-sayers’.

But the book does not attempt that either—not surprising in view of the more basic hesitancy noted above, for it is undoubtedly a far more ambitious (and arduous) task.

The strengths of the book lie in the several insights proffered in almost all its ‘chapters’, in the process of providing an overview of the record of performance of the Indian economy. But those nuggets lie scattered in a sea of words, so to say, that speak, often confusedly, to the converted (treating means, in the Nehruvian approach, as ends in themselves and shibboleths); not with clarity and the force of argument and evidence, to dialogue and persuade. Moreover, these are no more than leads that need to be worked upon further—akin to homilies in media articles—rather than definitive pronouncements. That all important task has been left, unfortunately, for undefined others forgetting (it would appear) that, in academic debates, the buck stops with the scholar. For that is what distinguishes the intellectual from the expert!

The weakness of the book arises from its design—as a mechanical compilation of the proceedings of a conference, that fails to make it an organic whole greater than the sum of its parts. Repetition is rife, with considerable overlap but no great logical connection between the thematic content of its individual papers. The absence of an overall assessment synthesising the insights of its contributors in conclusion is sharply felt, more so because of a lacklustre introduction that does not go beyond providing paragraph length précis’ of the ‘chapters’.

In this it may not be alone—there is a growing tendency in the country to bring out conference proceedings as ‘books’ without proper integration, possibly under pressures from funding agencies wanting to see (and show) some tangible ‘output’ emanating from the conclave funded by them. Such ‘minimalist’ accountability, like much else in the country, is pro forma and gross. It is unable to incentivise the pursuit of quality in advancing the frontier between the known and the unknown, in respect of the question(s) that, it can reasonably be surmised, must have formed the ‘raison d’etre’ of the seminar funding proposal submitted to the funding agency.

That criticism of the book does not take away from its utility as a primer on Nehruvian thinking on economic issues and questions pertaining to the national development for younger generations of Indians unfamiliar with the trail-blazing course charted by the nation under his leadership in its infant and growing up years. But a bolder follow-up volume on the lines suggested would be required to establish the contemporary relevance of the Nehruvian approach, if the reader is not to be left dissatisfied with over promise and under delivery.