Over the past decade, one notion has gained considerable popularity: If Sardar Patel, and not Jawaharlal Nehru, was India’s first prime minister, India’s trajectory as a country — including its economic growth and development — would have been completely different, indeed, much better. While there has been a lot of criticism of Nehru for starting India out on the socialist pattern of economy — setting it back at a time when the rest of the world was embracing globalisation and reaping its rich rewards — few have articulated it in detail. Fewer have detailed why Patel would have been better at giving direction to the economy. This book by noted trade economist Arvind Panagariya, chairman of the Sixteenth Finance Commission, and who has served as the first vice chairman of the NITI Aayog, tries to get to the heart of the argument that Patel’s economic development model might have been an improvement on Nehru’s. It does so in two ways. One, and this actually accounts for the bulk of the book, Panagariya looks at Nehru’s motivations for choosing the socialist economic development model for India, details of how those policies were implemented and what their outcomes were, and finally, and possibly most importantly, how those policies had an adverse and lasting impact that held back India from realising its economic potential for years even after Nehru’s death. Two, and this is just one chapter in the book, Panagariya examines several of Patel’s speeches and comments to bring out how Patel differed from Nehru on some of the most fundamental economic issues such as the role of the government in an economy or the kind of relations labour and capitalists should have and how should they be resolved. On the origins of Nehru’s socialist tilt, Panagariya states that the common belief that Nehru was already a convert to Fabian socialism while studying at Cambridge is wholly incorrect. “While he had exposure to socialism as a student, it was not until his second visit to Britain, topped by a visit to the Soviet Union on the way back in the late 1920s, that his ideas on socialism firmed up. By this time he was already in his late thirties,” states Panagariya. He further writes that Nehru’s embrace of socialism was “rooted in the belief that imperialism was the direct result of capitalism: capitalism gave rise to factories which, in the pursuit of profits, sought cheap sources of raw materials and lucrative markets for the finished products. Colonies served both functions. Because international trade was the vehicle to gain access to raw materials in return for the finished products, this line of reasoning also led to the conclusion that it was to be avoided, with self-sufficiency being the goal”. Examining the policy, Panagariya makes a revelation. “Fundamentally, it was (Nehru’s) decision to develop heavy industry upfront coupled with a fixed exchange rate regime rather than socialism or planning per se that necessitated the establishment of the vast bureaucratic regime characterised by investment licensing, autarkic import policy and price and distribution controls. Given the system of fixed nominal exchange rates with no appetite whatsoever to either periodically devalue the domestic currency or keep tight control of the money supply to hold down domestic prices, the licence-permit raj was unavoidable with or without elaborate planning and socialism.” But even if Nehru's model was faulty, why wasn’t it changed after his death? Why didn’t other politicians, civil servants, businesses and policy analysts move away from it? Panagariya’s argument is that Nehru was such a tall leader that most politicians of that period had “fully internalised” socialism in their political thought. Indira Gandhi tried to break away towards the end but it wasn’t enough. Rajiv Gandhi tried but was incapable of convincing the rest of his party and the task finally fell on Narasimha Rao in 1991. On Patel, in a chapter titled, ‘An Afterthought’, Panagariya presents a counterfactual: What if Patel was the younger of the two and was in Nehru’s role? “The most plausible inference. we can gather on Patel’s economic thought is that India would have chosen a markedly different strategy of development. Unlike Nehru, he would not have placed heavy industry at the centre of his economic policy framework. The role of the public sector in industrial production would have been minimal, if any. The country would have sought self-sufficiency in agriculture sooner than it did. This overall strategy would have been free of both investment licensing and public sector manufacturing. The resulting economy would have been far more reliant on markets from the beginning than was the case under Nehru and his successors. The only area where controls would have survived is imports.” So, does Panagariya make a convincing case? The truth is that in today’s polarised times, the answer may be determined more by where a reader’s political leanings lie at present. A dispassionate judgment on Nehru or any prime minister would require laying down a clear set of parameters. Does one judge economic growth under Nehru with the economic growth under Narendra Modi or should one judge it against the 15 or 50 years before Nehru. Or should one compare Nehru’s India to Japan or China or Pakistan of that time? Moreover, readers might have to first ascertain where they stand on the desirability of different economic policies and the role of the government. For instance, where do you stand between the government guaranteeing Right to Education to all children and the government slapping retrospective taxes on companies? Are both good policies, or one good and one bad, or both bad? Pause and think before reading ahead. Now sample the following statement from the book where Panagariya is writing about the lasting adverse impacts of Nehru’s development model: “The visible hand of the government can still be found everywhere, and the country continues to witness the instances of enactment of anti-reform policies as exemplified by the Land Acquisition Act of 2013, the Right to Education Act of 2009, the retrospective taxation law and a return to protectionism.”
