The uncertainty of a decade ago has given place to a muscular
self-confidence to an India that looks to the future with
confidence. By Prem Shankar Jha
years ago India turned 50. For the Indian nation, however,
it was a moment of lingering self-doubt. A four-decade
old strategy of growth lay in ruins. We had given it up
in 1991 and been rewarded with four years of rapid growth
from 1993 to 1997. But the scars inflicted by the economic
crisis of 1991 were still too fresh, and the successes
of 1993-97 too short-lived to permit any great measure
of self -confidence.
Ten years later the uncertainty of a decade ago has given
place to a muscular self-confidence. The country is now
well into its fifth year of rapid growth. The last two
years saw growth touch 9.4 per cent - a possibility that
used to be dismissed as a pipe dream only half a decade
ago, and the average for the past four years is a staggering
8.8 per cent.
is still more satisfying to the Indian ego is the fact
that this growth has been noticed all over the world.
Analysts in the US and Europe, who used to dismiss India
as at best a caged tiger only a decade ago, now believe
(and hope) that it will be one of the two drivers of global
economic development in the 21st century - the other being
contrast between the past 15 years and the three decades
that preceded it could not be greater. Between 1956 and
1975 India grew at 3.6 per cent a year, one of the five
slowest growth rates in the world. How does one account
for the change? The common practice is to blame it all
on Pandit Nehru. Had he not adopted a ''socialistic pattern
of society'' and tried to create a ''mixed economy'' in which
all the ''commanding heights '' were to be occupied by the
public sector, and had he not closed off the economy to
the external world just when capital was seeking new homes
in the low wage newly industrialising countries, India
would have been far, far ahead of where it is now.
this is a convenient fiction. The truth is that the closed
economy was forced upon us by a huge foreign exchange
crisis that began in 1955 and peaked in 1957. And as for
closing India to foreign investment it was done by Indira
Gandhi, not Jawaharalal Nehru.
most important, of several, reason for India''s slow growth
was a conflict between an already established large and
medium-sized industrial establishment that pre-dated Independence
and a new mushrooming intermediate stratum of entrepreneurs,
who mushroomed with extraordinary speed after the government
suddenly and completely stopped the import of all but
essential consumer goods in 1957.
import of virtually every consumer good, from graphite
pencils to nail cutters, very few of which were then being
manufactured in the country, created a huge gap between
supply and demand. Those who had succeeded in obtaining
import licenses reaped huge windfall profits, which became
the seed capital for investment in the very things they
used to import.
new class needed space to grow, and for this it had somehow
to prevent the already extant industrial houses, soon
to be christened the ''large industrial houses'', space
to grow. It got its chance to convert economic into political
power when Mrs. Gandhi banned company donations in 1970
but did not create an alternate, legal system for party
finance. It moved in with cash to fill the gap. It was
thus no coincidence that all the most restrictive industrial
laws, the Industrial Licensing Policy amendment, the Monopolies
and Restrictive Trade Practices Act and the Conversion
clause, were passed in and after 1970.
restrictions created an economy of permanent shortages
and black markets in which the intermediate stratum thrived.
But this was a parasitical economy, so growth languished
and the quality of employment steadily worsened. The foreign
exchange crisis of 1991 showed that a closed economy that
shunned competition could not compete in the world market.
It therefore brought the inherent contradiction between
the interests of this stratum and those of the nation
to a head. The only solution was to break down the walls
that had been built around the Indian economy. But this
also destroyed the protection that the intermediate stratum
of entrepreneurs had relied upon to ensure its survival.
industrial recession from 1996 till 2003 was the shakeout
period for the intermediate stratum of entrepreneurs.
Those that were able to adapt to the new conditions flourished,
but the remainder, large and small, perished in the thousands.
Today the conflict between it and the large industrial
houses no longer exists. Instead India has developed one
of the most muscular entrepreneurial classes in the developing
world. This rapprochement is mirrored in the appearance
of a new word in the media -- India Inc. Today, India
Inc. is busy spreading its wings abroad.
promises to transform the future. The challenge before
the country during the first four decades was how to speed
up growth. It did not meet it very well. The challenge
before it in the seventh and eighth decades is going to
be not growth, which can more or less be taken for granted,
approach paper to the 11th Plan has called it ''inclusive
growth. And so far the Manmohan Singh government has not
met it very well either. But the mists that surround the
future are slowly clearing. It is apparent that neither
privately owned nor government land can any longer be
appropriated for ''development'' without triggering a violent
backlash that could scare investors away.
is also apparent that, with the joint family breaking
up under the pressure of poverty and rising expectations,
and with nearly all the new employment being created in
the unorganised sector, what the poor need is not handouts
of the type promised in the common minimum programme,
but social insurance and old age pensions. These are the
real challenges before our society.
80 years ago John Maynard Keynes wrote that without the
rise of trade unions, capitalism would have met a premature
end. Something very similar can be said of neo-liberal
The author, a noted analyst and commentator, is a former
editor of the Hindustan Times,
The Economic Times and The Financial Express,
and a former information adviser to the prime minister
of India. He is the author of several books including,
The Perilous Road to the Market: The Political Economy
of Reform in Russia, India and China, and
Kashmir 1947: The Origins of a Dispute, and a
regular columnist with several leading publications.
author''s articles can be read at www.premshankarjha.com)