Analyzing Development Approaches under Nehru Regime (1947- 1964)

Introduction 

 

India's Economy, like any other in the world, has experienced its ups and downs since its inception. For nearly 200 years, colonial powers exploited India. Environmental damage, ethnic rivalries, human rights violations, and massive economic instability and inequality were all consequences of European colonialism. When India was on the cusp of independence from the British in the mid-twentieth century, its situation was dire in every way. The worldwide proportion of GDP had decreased from 25% during its golden period to only 3% at the time of independence, and the Indian markets have been saturated with low-cost machine-made goods.

 The Indian handicraft and textile industries, which once dominated, have declined. About 70% of the national income came from agricultural activities, besides the productivity and output per hectare were very low. This lead to a meagre yield of output irrespective of the large cultivation area. Further, the manufacturing and service sectors had a very low contribution to the GDP. 

India today is the 6th largest economy in terms of nominal GDP. Since independence, it has undergone several significant changes that have made India one of the largest economies. As a result, it is vital to comprehend India's post-independence economic policies, which created the groundwork for its economic progress.

Policies Under Nehru Regime

Pandit Jawaharlal Nehru became the first Prime Minister of India. He was a proponent of economic modernization and had a significant influence on the idea of development and policies for India in its early phases. He believed that the most effective approach to fight mass poverty was through rapid industrialization. (Rajadhyaksha, 2014).

However, he soon realized that due to immense diversity in people's language, ethics and culture, the people lacked unity. Thus, India needed something that could unite the ideas and ambitions of these different people. One of the first steps taken by Nehru after coming into power was to establish a National Philosophy which provides the citizens with clearly defined goals and objectives. Nehru considered the establishment of National Policy as the initial step in restructuring the Indian Economy. Finally, India's economic progress began in the 1950s when Jawaharlal Nehru adopted the five-year plan system borrowed from the Soviet Union. One of the government's primary goals was to accelerate industrialization by generating funds and investing them in giant industrial state-owned firms. Power, steel, heavy electrical, locomotives, and the chemical industries received special attention.

 

First Five-Year Plan (1951-1956)

 

The first five-year plan launched in 1951 was aimed primarily at improving the agriculture sector since Nehru knew that an immediate shift from agriculture to other sectors would not be perceived well by the citizens, so this process needed to be gradual and not instant. For this, he formed his basis from the Harrod-Domar model of economic development, which categorized two aspects crucial for development; low capital-output ratio and high levels of savings. The plan aimed at reaching a target of 2.9% GDP growth by the end of its tenure but to everyone's surprise, the policies outperformed even the plans estimates by ensuring a GDP growth of 3.6%. Thus, the first five-year plan came to be known as a major accolade of Nehru's political career.

  

Second Five-Year Plan (1956-1961)

 

Following the success of the first plan, the second five-year plan implemented by Nehru aimed at the development of the public sector and mass industrialization. Nehru was a keen believer of the fact that for achieving actual development, Indian industrialization should be on par with those of the developed European countries. Following Nehru's protectionist policy of not opening up borders for international trade, this plan assumed trading to be considered as importing of capital goods (closed economy model). A proper economic model with consideration from ISI (Indian Statistical Institute) was introduced and implemented. With an allocated budget of 48 billion Rupees, various power, irrigation, transportation and service institutions were set up, including the Atomic Energy Commission of India and Tata institute of fundamental research.

 

The First Five years maintained the planners' optimism by making more incredible progress toward achieving its targets and ambitious goals. The Indian economy grew at a rate of 3.5 to 4% per year during Nehru's first decade in power. From 1950-51 to 1956-57, the national income increased from Rs. 9110 crores to Rs. 10800 crores. The index of industrial production grew at a compound annual growth rate of 5.7 per cent in the first five-year plan and around 7.5 per cent in the second five-year plan, which is noteworthy. In agriculture, total food grain production was 69.3 million tons, compared to the target of 62.6 million tons. During 1950-51 to 1955-56, the index number of agricultural production for all crops increased from 26 to 117 (FIVE YEAR PLANS).

In the second five-year plan, the agricultural index increased from 116.8 in 1955-56 to 135 in 1960-61. In 1960-61, production was 76 million tons, compared to 69.3 million tons in 1955-56.

 

Criticisms 

Despite India's progress in various areas, international commerce and exports received little attention. The composition of Indian exports remained heavily skewed toward traditional items such as tea, jute manufacturing, and cotton fabrics, accounting for nearly 25% of total exports. Manmohan Singh in 1963 pointed out that the main focus of these Economic policies was on import substitution. This meant that India not only missed out on the benefits of a growing global economy, but it also meant that it remained reliant on foreign aid to meet its basic needs (Rajadhyaksha, 2014).

                        

Another critical aspect of the Nehru rule that was overlooked was the lack of focus on the private sector. The public sector's share of total Indian investment was predicted to be over 46 per cent in the First Plan, over 61 per cent in the Second Plan, and over 58 per cent in the Third Plan. The public sector was tasked with developing and managing heavy and primary industries and economic and social-economic infrastructure, while the private sector was tasked with developing consumer goods industries. 

The public sector was responsible for railways, civil aviation, power generation and distribution, banks, insurance, and other financial institutions, the private sector was held responsible for agriculture and related activities, plantation, mining, wholesale and retail internal trade, foreign trade, and road freight traffic, among other things.

 

The industrial licensing system, which was supposed to ensure that the private sector followed the five-year plans became a source of inefficiency and corruption. Despite the fact that the institution of a planning commission and the period of planning that it ushered in allowed Nehru to concentrate on both economic development and social justice at the same time.

 

Recommendations 

The situation would have been even better if strategies had been implemented to prioritize public investments in agriculture rather than industry, which provided a living for more than three-fourths of the country's population. Investments in the agricultural sector, including irrigation projects, farmer education in scientific farming methods, the construction of rural roads and storage facilities and agricultural research and development could have been done while rising incomes could have been used to finance industrial development once the agricultural sector was relatively healthy and the poverty of its participants were somewhat reduced (Adhia, 2015).

 

Another alternative strategy could have been to rely on private enterprise for industrial development while the government focused its resources on infrastructure, public health, and education—sectoral investments that the private sector does not adequately serve. Considering the significance of the private sector and the existence of India's robust entrepreneurial class, leaders rejected a strategy that included a prominent role for the private sector because they were committed to constructing the morally superior socialistic pattern of society (Adhia, 2015). As it turned out, the country eventually came around to embracing this previously rejected plan in the 1990s.

 

Conclusion

 

Despite a promising start, Nehru's economic policies were widely criticized in the long term. Nehru was the first person to break India's five-decade stagnation impasse, but due to his defective worldview, he was unable to maintain these levels of progress. While many economies changed their growth strategy, India remained resistant to change, resulting in a slowdown in its development. His unwillingness to reduce government control in every economic activity, as well as his opposition to opening up trade borders (protectionism), served as the final nail in India's coffin.