How supply chains established by Nehru helped India break free

Bashing Nehru may be fashionable but flawed. He broke free from the exploitative colonial economic structure and laid strong economic foundations; and above all, India grew fast

India broke the chains of slavery on August 15, 1947, when she gained independence, but an equal, if not a more stupendous, task awaited the first Prime Minister, Jawaharlal Nehru: Break free from a different but a very strong chain—the colonial supply chain. Without this rupture, India would not be economically independent and political independence would only be a sham.

Having missed the industrial revolution, India’s agrarian, feudal economy embedded in Britain’s global supply chains fulfilled its role as a colony: Located at the base of the supply chain, she supplied raw materials for upstream producers, an arrangement that suited the apex producers, even as it drained India’s wealth. Within the country, the supply chains meant to support the British effort in the then recently concluded Second World War and, earlier, to maintain the British Indian army’s grip over the sub-continent existed: the railways for movement of goods and personnel, post and telegraph for information flow and ordnance factories for production of ammunition. 

Another critical chain, the food supply chain was in shambles. Just four years ago, over 100,000 perished in the Bengal famine, the deaths attributable in large part to distribution inefficiencies—a fact highlighted by Nobel laureate Amartya Sen in his work. 

Breaking free from the legacy of colonial supply chains meant snapping off the core-periphery or the core-satellite economic relationship with Britain. This meant setting up new links in the supply chains to fight poverty and inequality. In other words this meant setting up new facilities to register high economic growth -  a task we are struggling with even now. 

To achieve this, Indian reliance on the public sector was not an isolated Nehruvian whimsical idea but rather the zeitgeist. The Soviet experiment, Roosevelt’s New Deal and predominance of Keynesian ideas nudged toward this end. Just over a decade and a half ago in 1931, the Karachi resolution of Congress stated that ‘ the State shall own or control key industries and services, mineral resources, railways, waterways, shipping and other means of public transport,’ envisaging key supply chains along with complete logistics under state control. 

And three years later, the President of FICCI in 1934 voiced that a ‘National Planning Commission was essential for her to make a structural break with the past and achieve her full growth potential.’ Just two years before independence, in 1945, Bombay Plan by prominent business leaders recommended a public sector led growth of basic, capital goods and heavy industries. 

Around 70 % of the population was what we now call as Below Poverty Line (BPL); both agriculture and industry were in ruins; and above all, the expectations from the populace were huge. Faced with a gargantuan task, only the consensus regarding the broad economic path that had already emerged during the pre-independence era along with the legitimacy, popularity of Nehru himself and his government and idealism of the countrymen made it somewhat easier. 

In the first three five-year plans from 1951 to 1964, the Indian GNP grew at an average 4 % per year, almost four times the growth-rate from 1900 to 1947 under British rule. Industry grew at a CAGR of 7.1 %, no mean feat by any standards, though agriculture grew at just over 3 %. To put India’s growth in historical context, no other country had grown so fast in the 19th and 20th century, including Japan from 1893 to 1912 before the First World War.

Many of Nehru’s policies showed their beneficial effect long after he had departed. The economic policy of import substitution industrialization of consumer goods, capital goods and intermediate goods reduced dependence on imported equipment. The manufacturing diversified from cotton, sugar and jute textiles to a wider range of goods. By mid-1970s, India met hardly 10 % of its demand for equipment through imports. She had delinked herself from the international supply chains for a wide range of items, which were unfair to her because of the power asymmetry within the chain, barring a few like crude oil. The motto was autonomy and not autarky.

This vertical integration or an internal supply chain for production and consumption of goods, under the state led model, put tremendous control in Indian hands, though it had outlived its utility by early-1960s. Indeed, by then, it was time for India to integrate itself again with the global supply chains but with a stabler economic base and more dominant position. Yet, India persisted with an out-of-date economic model that bred inefficiency, though the world had changed: industrial licensing, for instance, to guide the investment in the private sector was no longer essential after a sizeable economic base was established. Hence, her woes in the later years are not due any fault with the original Nehruvian model suited to the times but to pigheadedness of his successors. 

Regarding food supply chains, India could become self-sufficient in food grains not until the late 1970s and have surplus buffer inventory not until the mid-1980s. Green revolution that started in the mid-1960s with the fortuitous adaptation of high-yield Mexican dwarf wheat, however, could increase agricultural output only because the essential infrastructure—‘temples of modern India’—comprising  agricultural universities, research laboratories, and fertilizer and machine plants was created during Nehru’s time.  

On these counts, bashing Nehru may be fashionable but flawed: for the next decade and a half after independence, Nehru broke off from the exploitative colonial economic structure and laid strong economic foundations; and above all, India grew fast. 

Prashant K Singh is a logistics and supply chain management professional with the Indian Air Force. The views are personal.

He tells how supply chains & logistics affect everything around us on his blog, Unshackled, a part of Business Standard's platform, Punditry.

He tweets as @ZenPK