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Monday, Dec 05, 2022

Explained Books: An economic history of independent India

The economy’s slowdown happened after Nehru. Average GDP growth fell to 3.4% from 1965-66 to 1971-72 and to 3.1% during the subsequent seven years.

Pulapre Balakrishnan, his new book 'India’s Economy From Nehru to Modi: A Brief History'.

Title | India’s Economy From Nehru to Modi: A Brief History
Author: Pulapre Balakrishnan
Publisher: Permanent Black
Pages: 272
Price: Rs 895

Were the Nehru years a wasted era for the Indian economy? Did the ostensibly Soviet Union-inspired planned development model — which channelled resources towards multipurpose river-valley projects, mines, fertiliser plants and capital goods (machine tools, heavy electrical, transport equipment, iron and steel), as opposed to consumer goods — result in economic stagnation?

Not really, according to the new book by Pulapre Balakrishnan. Annual GDP growth averaged 4% during the Nehruvian period (1950-1 to 1964-5), compared to 0.9% over the last half-century of the British Raj (1900-1 to 1946-7). Per capita GDP growth, too, accelerated to 1.9% against 0.1%. That gap would have been even more had population risen at 0.8% a year (the average for 1900-47) and not at 2% (for 1950-65).

The author, a professor of economics at Ashoka University, takes on two major criticisms of the Nehruvian economic strategy. The first is that it ignored agriculture — when the sector grew faster than the population, in contrast to the per capita output decline recorded during the Raj. Agriculture would also have benefited from the Bhakra-Nangal, Hirakud, and Nagarjuna Sagar dams (Balakrishnan forgets to mention the world-class state farm universities at Pantnagar, Ludhiana, Bhubaneswar, and Hyderabad established in this period).

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The second criticism is the creation of public sector “white elephants”. Balakrishnan argues that public sector undertakings during Nehru’s time, far from being a drain, actually generated savings. At the inauguration of a second plant of Hindustan Machine Tools in 1962, Nehru took pride in its having been funded by the “surplus” from the first. As regards the private sector, it wasn’t about suppression as much as the recognition of weak “animal spirits” among entrepreneurs in the uncertain post-Partition environment under a new political entity. They wouldn’t, at any rate, have invested in long-gestation projects.

The economy’s slowdown happened after Nehru. Average GDP growth fell to 3.4% from 1965-66 to 1971-72 and to 3.1% during the subsequent seven years. It had partly to do with droughts (in 1965, 1966, and 1972), wars (1965 and 1971) and the forex crisis-induced 36.5% devaluation of June 1966. But much of this period also coincided with Indira Gandhi’s measures such as nationalisation of banks and coal mines, the MRTP Act, and vertiginous income tax rates.

Explained Books appears every Saturday. It summarises the core argument of an important work of non-fiction

First published on: 27-08-2022 at 04:22:27 am
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