Reassessing Nehruvian policies: Growth, education, and social change

The policies of the first decade-and-a half of planned development are better characterised as Nehruvian Humanism

The development policy implemented in the Nehru era (1950-64) has been the subject of criticism not just in politics, but also in the performance assessments presented by some economists. A sharp contrast is often drawn between the growth performance of about 4 per cent in the Nehru era and the 6 per cent experienced since the 1980s. But do note that the 4 per cent growth experienced in the Nehru era was a major structural change in an economy whose growth in the previous 100 years had been under 1 per cent. The comparable data available in the World Bank Database for the final years of the Nehru era (1961-64) show India with a gross domestic product (GDP) growth rate of 5 per cent, compared to the average of 4.3 per cent in low- and middle-income countries and the 5.2 per cent global average.

 

The real shortfall in development came after the Nehru era, when the severe food crisis in 1965 and 1966 disrupted development. Development effort was further disrupted by political turbulence arising from the split in the Congress, the political impact of the imposition of an emergency, and the victory and collapse of the Janata government. One must also note the deleterious development impact of the war with China in 1962 and the wars with Pakistan in 1965 and 1971. But there was a shift to a higher average of 6 per cent growth after 1980-81.

 

This difference in growth between the Nehru era and the 6 per cent average experienced since 1980-81 is often attributed to the emphasis on import-substituting industrialisation in the Nehruvian era, which failed to exploit opportunities for labour-intensive export production that could have led to a faster growth in manufacturing employment. The main export-oriented possibility in 1951 was for mill-based textile production, and there the constraint was the strongly supported political movement to protect handloom weavers. Do note that the direction of pre-Independence corporate industrial development was very much oriented towards import substitution, and that led to demands for trade protection, a tendency that has never disappeared from our corporate sector’s outlook on development.

 

The basis for export pessimism in 1950 was also the stagnation in global trade growth in merchandise products in the preceding years, with trade valued at $58.5 billion in 1948, $58.6 billion in 1949, and $61.5 billion in 1950. The boom in global trade that led to export growth acceleration, particularly in East and Southeast Asia is more a post-1960 happening.

 

In 1950, the developed world showed limited interest in the prospects of developing countries. In the early 1950s, the countries of Europe and Russia were still in the process of recovering from the ravages of the Second World War. Even the US was focused on European recovery with the Marshall Plan. The development assistance of the World Bank started focusing on soft loans for developing countries only in the late 1950s, and the International Development Association for this purpose was set up in 1960.

 

Given this reality about the state of the global economy around the start of planned development, the choice of a domestic self-sufficiency-oriented economic strategy was the only available reliable choice.

 

A related criticism contrasts what is described as Nehruvian socialism with the market capitalism that is a current focus of development. It is true that during the Nehru era, the government put in a significant effort to develop public sector enterprises, initially in sectors like steel and engineering, and a little later in chemicals, oil exploration and refining.

 

The public sector’s share in gross fixed capital formation (GFCF) rose from 22.7 per cent in 1950-51 to 47.7 per cent in 1960-61, including not just industrial investment but also heavy investment in irrigation projects and infrastructure. This was done mainly because of the assessment that the private sector’s motivation and capacity for investment in these areas was rather limited and that these areas mattered greatly for building up the potential for growth. 

 

At the same time, the government’s policy towards the private sector was quite constructive. The only significant takeover of private sector entities occurred when life insurance companies were nationalised in 1956, as some corporate conglomerates were alleged to have directed their insurance company investments into their own conglomerate enterprises. Established private sector industries did expand during this period, even in areas like steel, which was designated as public sector-preferred in the Industrial Policy Resolution of 1956. The growth of the private corporate sector is reflected in their share of GFCF, which went up from 9.5 per cent in 1950-51 to 16.2 per cent in 1960-61. This is more or less the level that prevailed till 1990-91.

 

Apart from the physical infrastructure, the main substantial contribution of the Nehru era development policy is the expansion of higher education, particularly in technical education and in advancing research capacity. This goal was reflected in the establishment of the University Education Commission in 1948–49, the Secondary Education Commission in 1952–53, the National Council of Educational Research and Training in 1961, and  the Kothari Commission (1964–1966). The Nehru era was also the time when the first IITs and IIMs were established and research capacity strengthened, particularly in agriculture, atomic research and space science. I believe this Nehru era emphasis on higher education, technology and research is what has led to the substantial availability of trained persons for the rapid growth of technology-oriented production and trade in India, which is a significant part of the rise in the growth rate in recent decades.

 

Development policy in the Nehru era aimed at not just economic growth, but also social transformation. The first Five-Year Plan argued clearly for “re-adaptation of social institutions and social relationships” and included, for instance, a widespread community development programme. In fact, the First Five-Year Plan states this clearly: “...the economic condition of a country at any given time is a product of the broader social environment, and economic planning has to be viewed as an integral part of a wider process aiming not merely at the development of resources in a narrow technical sense, but at the development of human faculties and the building up of an institutional framework adequate to the needs and aspirations of the people.”  ( Chapter 1, para 1, FFYP)

 

Even the objective of a socialist pattern of society in the Second Five-Year Plan was projected as a measure to reduce inequality. The data in the World Inequality database does show a significant fall from 40 per cent to 30 per cent in the share of the richest 10 per cent from 1950 to 1980, and a substantial rise after that to 55 per cent by 2010. Hence, the development strategy of the first decade-and-a half of planned development is better characterised as Nehruvian Humanism rather than as Nehruvian Socialism.

 

As someone who is old enough to have grown up to adulthood in the  Nehru era, I would  like to emphasise the spirit of optimism that prevailed amongst us youngsters about India's economic prospects and the possibility of social transformation.  In fact, there was a fine sense of togetherness and cooperation that prevailed widely. You can see it reflected in the song you should hear: “Saathi hath badhana…eke akela thak jayega, milke bojh uthana”. Perhaps this song is the finest description of the Nehru era.

 

desaind@icloud.com