Category: World Diary

Forty eight years after India’s first prime minister passed on, Jawaharlal Nehru is remembered when expedient and forgotten when convenient.

Nehru’s chequered legacy is used selectively by no less than his own party, the ruling Indian National Congress (INC).  Putting an abrupt end to his socialist programs with economic liberalisation policies in 1991, the Congress party nonetheless chose to kick-start its political campaign for the recent Uttar Pradesh (UP) state elections, with Nehru as a poster child.

Congress general secretary and the iconic leader’s great grandson Rahul Gandhi started his campaign from Phoolpur in UP, the seat that Nehru represented in India’s parliament, invoking Nehru’s socialist ideals to get the largely poor electorate to vote for his party.

In the posters and banners across Phoolpur it was Nehru and Rahul Gandhi that took centre stage. The party even replaced its traditional slogan “Congress ka haath aam aadmi ke saath” (Congress’ hand is with the common man) with “Nehruji ko yaad karenge, Rahulji ke saath challenge” (Will walk ahead with Rahul on the path shown by Nehru).

But the strategy backfired. The party performed abysmally, and saw the regional Samajwadi Party (SP) – ‘Samajwadi’ means socialist – appropriate its pro-poor posture and come to power with a two-thirds majority.

While the Congress’ poor showing in UP – where it has been out of power since 1989 – was not surprising, the stinging defeat renewed debate on Nehru’s legacy and his socialist ideas.

A renowned Indian historian and intellectual, Dr Ramachandra Guha believes that India’s ingrained democracy, distinguished centres of higher education, pluralistic ethos and bold reforms such as giving equal rights to women would not have been possible without the foundation laid by Nehru’s inclusive, social democratic vision.

But none of that seems to matter to most in India any more. Popular media are replete with instances of today’s increasingly unforgiving generation describing Nehru as “the root cause of all of India’s current problems”.

Free-market economy advocates – including the main opposition Bharatiya Janata Party (BJP) – hold Nehru’s insistence on the Soviet socialist model responsible for India being stuck in the ranks of the Third World 65 years after independence from British rule.

The contrasting estimations of Nehru legacy stems partly from a cluttered understanding of socialism and Nehru’s own interpretation and execution of it.

For the record, to debunk popular misconception, India was officially not a socialist state during Nehru’s era. Also, Nehru was not the architect of the ‘closed economy’ that India ended up being an ideological prisoner of. That was his daughter, Indira Gandhi’s doing in the late 1960s and the 1970s when she was prime minister. She was also the one who introduced an official reference to socialism in the Indian constitution.

For Nehru, socialism stood as the prototype of an ideal society that avoided the excesses of both the unchecked capitalism of the West and the economic totalitarianism of the East.

So, for him, state-owned enterprises became the brick and mortar of the Indian economy that had to be generously nurtured to put the country on the path of progress and modernisation.

To be sure, he was not against private enterprise, but they were not to be given a free hand. He once told the parliament, “private enterprises have a very important task to fulfill — provided it works within the confines laid down and does not lead to the creation of monopolies and other evils that the accumulation of wealth gives rise to.”

The socialistic ‘something for all’ approach was readily accepted by an overwhelming majority during his 17-year rule because it suited the social and economic circumstances of an incredibly heterogeneous country, especially in the early years of independence.

“Those were different times. We [India] thought, in the 1950s that Russia was doing very well. We did not know the problem with state planning and so on. After all, Russians put Sputnik in space before the Americans. So we thought the State is very important for economic growth and technological development. Nehru reflected that popular mood,” said Guha.

But the fall of the Soviet Union and the near bankruptcy of India in 1991 changed all that.

Suddenly, Nehru – and socialism – could stand for no good in a society that was getting increasingly exposed to the riches of the western world, especially the United States.

The socio-political churnings in India around that time saw the BJP, and many regional parties emerge as serious political contenders, gaining currency by attacking everything that the Congress stood for over the decades.

From its empty public coffers to the conflict with Pakistan over Kashmir, border disputes with China, federal-state relations and the establishment of dynastic politics, Nehru started coming under attack for almost every decision that he took – and also for the ones that he did not.

By the mid-1990s, India had started to reap the early benefits of becoming a more market-friendly economy, giving more credence to the theories that debunked Nehru’s socialist experiments.

Today, 21 years after Nehru’s Congress party opted for economic reforms, India looks almost unrecognisable from the Nehruvian era.

Government controls over industries are being dismantled and private enterprises are actively encouraged by all, even the communists, and expanding faster than ever before.

The country which is home to a third of the world’s poor now boasts more billionaires than England, India’s ruler for close to 200 years. The appetite for acquiring private wealth in India seems insatiable. Nehru has been regarded either as a misguided ideologue who shackled India’s material progress, or a hero who laid the foundation for a modern India. But for now, the country seems most at peace with forgetting him.     AR

1991 goes down in history as the year that marked the ideological defeat of socialism in India at the hands of economic realism.

After more than four decades of socialism, India was days away from bankruptcy and forced to turn to the International Monetary Fund (IMF) for a bailout. The condition? That India abandon its socialist economic structure and pursue capitalist reforms.

There was little choice. India’s economy was in a shambles, with fiscal deficit at an unsustainable 8.5% of the economy and the current account deficit touching 3.5%. With total external debt at US$72 billion, India had become the world’s third largest debtor after Brazil and Mexico.

Investor confidence in India was at an all-time low and both the World Bank and the IMF were reluctant to sanction new loans. Meanwhile, foreign suppliers were refusing to honour letters of credit issued by Indian banks that were not approved by a foreign bank.

By January 1991, foreign exchange reserves had dropped to US$1.2 billion; by June, this had halved and was barely enough for roughly three weeks of essential imports. For the first time in history, India was on the verge of a debt default.

In technical terms, India was experiencing a classic example of balance of payment crisis: high fiscal and current account deficits, external borrowing to finance the deficits, rising debt service obligations, rising inflation, and inadequate exchange rate adjustment.

In non-technical terms, the country of 846 million — also the world’s largest socialist democracy — was going bankrupt.

Though the crisis was primarily due to the ballooning of fiscal imbalances over the 1980s, two significant world events precipitated the unprecedented crunch in 1991.

First, the Gulf War increased petroleum import costs in 1990-1991 by half to US$5.7 billion. The government had to bear the additional burden of airlifting and rehabilitating more than 100,000 Indian workers from the Middle East as well as suffer a big drop in remittances from the region.
The second cause was the global recession: world growth had declined to 2.25% in 1991 from 4.5% in 1988. Export growth in the US — India’s largest market — turned negative in 1991. Even more damaging were the events that led to the eventual collapse of the Soviet Union, once a major patron and supporter of India.

Domestically, India was also suffering from political instability.

In the summer of 1990, the National Front coalition government was facing violent nationwide protests by students over its affirmative action policies. In November, the coalition collapsed when the Bharatiya Janata Party pulled out over a disagreement about the building of a temple. The new government was formed, only to also collapse barely four months later, leaving India without a government at its most crucial hour. In May 1991, while campaigning for the federal elections, former prime minister Rajiv Gandhi, leader of the Congress party, was assassinated.
In reaction, and in parallel to these developments, the economic situation worsened.

To keep the foreign reserve ratio above US$1 billion, the caretaker government sold 20 tonnes of gold to obtain a loan of US$240 million. The new government, which took office on June 21, 1991, pledged a further 20 tonnes of gold to Union Bank of Switzerland and 47 tonnes to Bank of England as part of a bailout deal with the IMF.

But the IMF wanted more; it wanted India to undertake a series of structural economic reforms. Many in India, which considered itself the leader of the non-aligned world, viewed the potential arrangement with pain, even embarrassment. Forced between retaining a populist socialist economic structure and introducing reforms at the cost of public anger, prime minister Narasimha Rao chose the latter.

He directed his finance minister Manmohan Singh, the present prime minister, to initiate wide-ranging policy reforms. Steps were undertaken to reduce excessive government controls, liberalise trade, allow foreign investment, encourage private sector business, and gradually embrace globalisation.

The crisis of 1991 thus gave birth to a new India, a capitalist India.   AR