Revisiting Nehruvian model

India is celebrating the 125th birth anniversary of Jawaharlal Nehru. Economic commentators are busy analysing the impact of Nehruvian economic model on India’s independent development. Nehru’s economic thinking gave primacy to public sector, import substitution, hostility to foreign capital, planning and so on.

Economic policy cannot remain static. It has to respond to emerging economic challenges. Public sector has created strong foundations for India’s industrial development. However, the license raj and unwarranted state intervention in the economy stifled market creativity. Rampant corruption and lack of competition have adversely affected financial viability of public sector. Economic reforms could unravel the hidden potential. But unbridled privatisation resulted in cronyism. The state-market nexus eroded the credibility of reforms process. The Modi government has decided to abandon the planning process which was the significant contribution of Nehruvian economic thinking. The relevance of planning is being questioned in the era of market-led economic development. But planning has already undergone a change in the post-reforms period. It moved from command planning to indicative planning. Sectoral imbalances in the economy, social and regional inequalities, huge backlog in human development and other factors call for planned intervention in the economy in some form or the other. Imperatives of natural resources management, employment-intensive development further reinforce the importance of such an approach.

Import substitution is now replaced by import liberalisation. Hostility towards foreign capital gave way to proactive efforts to attract it. These changes brought in much-needed dynamism into the Indian economy. But indiscriminate imports have widened current account deficit and made the balance of payments position at times precarious. The predatory footloose capital is increasing the volatility in the economy. The rise of short-term foreign debt often complicates the problem. A study done by the apex bank itself reveals that the foreign capital has relied more on India’s domestic market rather than expanding the frontiers of India’s exports.

Apart from the domestic economy, Nehru’s economic thinking symbolises commitment to restructuring iniquitous international economic order. The dominance of global North on the world economy emphasises the importance of this objective. The marginalisation of least developed countries and developing economies in the global trade speak volumes about the need to restructure world economy. India is still firm on this. This is evident from the stand taken by it at the recent meetings of the World Trade Organisation.

As Amartya Sen pointed out, India should neither have market mania nor market phobia. The state should invest in infrastructure, social sector and welfare economics. The markets should have freedom to create wealth. The state should confine to preventing the manipulation of economic process by strong and wealthy to the detriment of the weak and marginalised. This applies to both domestic and global economy. The ideas of great thinkers need not make us dogmatic. Pragmatic reappraisal of their ideas in the light of contemporary challenges would be a better approach than a summary rebuttal.