The fiftieth anniversary in anyone's life is a good time to take stock of things. India's achievement on the economic front over the past 50 years has been far short of our potential and well behind those of countries like South Korea and China, which were far behind us in 1947. It is not that the average Indian is in any way less capable or less committed to economic upliftment than the average Korean or Chinese. The difference in performance of the three economies is purely due to the difference in political and economic leadership in these countries in the past 50 years.
In India, our economic independence was celebrated in khadi. While Gandhiji was a true Mahatma when it came to morality and political wisdom, one has to seriously question his economic wisdom. His belief that cottage industry had to be encouraged and supported in preference to organised modern industry has been one of the main reasons for India's backwardness in industrial development.
Let me give one example. India had (and still has) the natural advantage of growing both long staple and short staple cotton. We also had a tradition of exceptional skills in processing cotton. After all, textiles were one of the many items that the early colonisers and traders imported from India.
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The development of the Indian textile industry was regulated by the British who wanted to protect their own domestic textile industry. When India became free it was one industry that could have been developed to world leadership class. What a difference it could have made to the overall economic development of India if we had become the leading exporter of textiles from 1950. But Gandhiji willed it otherwise. His philosophy persuaded successive governments in India to discriminate against the organised sector textile industry and to encourage the cottage sector through tariff and tax differentials. Our textile mills could not afford to modernise as their profit margins were squeezed. Countries like Korea and Japan, which grow no cotton, took Indias place with modern textile mills and much better quality.
If we had become the leading cotton textile producer, we would also have become a leader in synthetic fibres and hence in chemicals. We lost out on that opportunity also.
Textiles is perhaps the largest lost opportunity. But there are almost 800 industries that are still reserved for small scale industry and therefore remains with backward technology, thanks to the Gandhian belief in small scale.
Another area in which Gandhiji's philosophy has haunted our leadership is the belief that being seen to be creating wealth or enjoying it is almost sinful. His glorification of poverty has inspired a totally hypocritical imitation by our politicians. Why should they limit the salary of a minister to a few thousand rupees and then let him make money on the side? Why should they squat on the floor for Congress Committee meetings although in normal life they sit comfortably on chairs or on benches?
After Gandhiji it was Nehru's turn to misguide our economic policy. Nehru was a brown Englishman educated in Harrow and Cambridge. He had a passionate desire to uplift India but had never been part of real life in India during his formative adolescent life. He had imbibed all the ideas of sophisticated Englishmen of his generation which included an innate suspicion of "traders" whom he saw in most industrialists.
With this came the then fashionable belief in Fabian Socialism according to which the state had to control the commanding heights of economy. The public sector had to take the leading role. He set about implementing this philosophy and modelled on Soviet lines with a huge public sector and central planning. He admired the Soviet system which has since then been exposed as being a complete disaster. Today, fortunately, the Planning Commission has become moribund, but we as a country are paying for the public sector follies of Nehru. We cannot privatise most of them for fear of the unions. So we keep on pumping money into State Electricity Boards, State Transport Undertakings, heavy engineering companies, etc. These are "walking dead" organisations which in turn divert resources from the economy.
Another important corollary of Nehru's public sector advocacy has been the retardation of the Indian private sector. The birth of Hindustan Steel is an example. If the government had not gone in for a PSU in steel in the late 1950s, the private sector with foreign investment would have built steel mills. Today, India would have been a major producer of steel as we have iron ore and coking coal and a market. Indian companies like Tatas, Indian Iron and Mukand Iron, etc.would have become world class steel producers like their counterparts in Korea and Japan. In almost every industry we can find Indian entrepreneurs and their companies whose growth and development was limited for decades because of public sector dominance -- cement, engineering, electrical machinery, transportation, power generation etc.
Nehru's folly was compounded by his daughter who not only encouraged more public sector but tightened the shackles on the private sector. For the Indian private sector she designed the MRTP Act which made sure that no reasonably sized Indian company would grow unless it got exemption under the Act. She introduced price controls over a whole range of industries which could thereby have no savings to invest in growth. She redesigned FERA so that most foreign companies had to reduce the level of their shareholding to 40 per cent. More importantly, no new foreign investor would possibly look at India seriously from 1974 onwards because FERA became a Berlin Wall -- defended ferociously by the most determined bureaucracy.
While we celebrate 50 years of independence it is worth realising that private sector business in India had perhaps become less independent after 1950 than it was before. It is only after economic reform was set in motion in 1991-92 that Indian industry and business have begun to enjoy the fruits of independence. We have had freedom only for five years as far as industrial development is concerned. And what a relief it has been in the last five years!
I must conclude by paying a tribute to Indian private sector companies like Tatas, Birlas, Thapars, Singhanias, etc. who had the faith and patience to survive for the 45 years of famine so that they are now able to enjoy the fruits of true economic independence.