Strategy for Economic Reform in a Globalised World continues...

Mahalanobis, a confirmed Left intellectual, had been inspired by a Soviet growth model of the 1920s authored by Fel’dman, and he introduced it into Indian planning.

The model was wholly unsuited to Indian economic conditions, because it was predicated on three untenable assumptions; that consumption could be postponed for an extended period and even curtailed; that agriculture would be in a position to provide funds for industrial growth; and that supply of capital goods would generate its own demand for it. The reality was opposite. In 1947, India had just emerged out of a terrible famine, a long Freedom Struggle, and a bloody Partition, not to mention a World War. The large masses of the rural people were either on the poverty line or below it. There was very little scope to tighten their belts. On the contrary, a steady increase in wage goods was necessary to raise standards of living. Agriculture during British imperialist rule had been bled to subsistence levels by the constant appropriations exacted by the British Indian colonial-landlord set-up. Agriculture was thus in no position to finance industrialization. In fact, the sector itself was in dire need of resources, if it was not to slide down further.

Be that as it may, it was the confluence of Nehruvian intellectual commitment to command economy and landed vested interests fostered by the comfortable feeling of the interest groups that planning would merely transfer power to marshall and dispose of resources from the right hand to the “left” hand. That is why the Left-leaning siblings of zamindars and the comprador class found no intellectual difficulty in adjusting to the “socialist pattern” of Indian society. Their foreign education positioned them in key places in the policy making apparatus of the Government to ensure that.

It is important to recognize that a comparison of countries with a common history reveals that those countries which adopted the Soviet economic model performed much more poorly than their counterparts who had adopted the market economic strategy.

to be continued....