It has become so commonplace amongst some circles to say that the post independence India was socialist that this highly problematic position has assumed the status of orthodoxy in the post 1947 Indian economic history. But it is the task of the partisans of the toiling masses to seek out the truth from the facts and to glean true facts out of the mass of propaganda and lies. The likes of Bhagwati and Panagariya tend to see the post independence history in terms of continuous efforts on part of a daring and enterprising Indian capitalist class to survive and to break free from the shackles imposed by a myopic, corrupt and socialistic political class. Further, it is asserted that it is the socialistic economic policy that was responsible for the decades of sluggish economic growth and the break finally came in the year 1991 when the ruling elite, under intense economic pressure was forced to liberalize the economy and what followed is a saga of success that allowed the Indian nation to come into its own and assume its rightful position on the global arena as an economic power house.
By the year 1944-45 it was clear that India was going to become independent, consequently planning and analysis about its future government too began. Every interest group was engaged in drawing up plans regarding the future of the country and conveying it to the Congress leadership which everyone expected to come to power once the country became independent. It was during this period that the Bombay Plan was drawn up as a collective effort of the eminent businessmen and entrepreneurs of the country and submitted to the Congress leadership. Bombay Plan was supposed to serve as a blue print for the economic model that the Indian business class wanted the future political leadership of independent India to put into practice. Most of us who have grown up in the 90s would perhaps find it hard to believe that in this plan Indian big capitalists recommended a strongly interventionist state that would develop heavy industries, railways, dams, power etc whereas that capitalist class would confine its activities to the less capital intensive sectors. Unbelievable as it seems today, this proposal made a lot of sense back in 1944-45. A nascent nation desperately needed the fast development of heavy plants, effective means of communication, iron and state, mining, power etc, but none of the existing Indian firms had the necessary capital, technical know-how etc. Most importantly the Indian firms lacked the will to develop these sectors that had long gestation periods and carried high risks, so they proposed that these may be developed by the state, with the money that it realizes from the toiling masses of the country through taxes. Further, it was proposed that when the time is ripe and when the Indian capitalist class has become mature enough, these sectors developed by the state may be transferred by the state to it, which is in fact what we are now seeing happen through the sale of stakes in the PSUs. The Indian capitalist class also demanded a highly protectionist, closed economy so that the local markets may be preserved for their profits vis-à-vis competition from the MNCs based in the US and Europe. They feared that if the economy was not kept closed, commodities from abroad would glut the market and the Indian firms would be driven out of competition, after all they had financed the Congress during the freedom struggle and now they wanted a nation state of their own, a closed market reserved for them. The Indian capitalist class however did not wish the economy to remain closed forever; it also recommended that when the Indian capitalist class is big and matured enough to withstand competition from the foreign MNCs so that they too may be able to enter the profitable markets at the global level.
It is very clear, to those who would care to see that the economic policy of pre 1991 period had been framed keeping in mind the long term interests of the indigenous capitalist class and there was nothing socialistic about it.
Subsidized education system too was not set up out of zeal to build socialism. Upcoming private industries and the state run PSU’s both required a high skill labor force. Producing a skilled labor force is a critical issue for every capitalist economy. In a backward country India, set behind the rest of the world due to two and a half centuries of exploitative colonial economy, firm steps were required to produce a skilled labor force. It was keeping this in mind that attempts were made to set up a subsidized and high quality system of high education system. The fact that the state was never serious in promoting equitable access to education for all its citizens reflects in the fact that since independence up till now higher education could be afforded by only a very small minority. According to HRD ministry data, till date only about 12% of the total number of students who pass out from school go on to get higher education. This proportion was just about 5% during the time which is called socialists by economists like Bhagwati and Panagariya. The expenditure on education hovered around 2% of the GDP during this whole period, if the compare this figure with the then existing socialist countries, even the relatively backward ones (Cuba still spends around 13% of its GDP on education) it becomes very clear that the orientation of the planners of the pre 1991 economy was anything but socialist. Expenditure on health too remained extremely low as compared to the most backward of the socialist countries.
Other aspects like strong labor laws, cheap food, fuel etc were not given by the state out of charity; they were a result of the strong socialist/communist movements in different parts of the country that forced the state to give certain concessions and keep the capitalist economy acceptable to the masses. Technocrats like Bhagwati and Panagariya do not, cannot see that no political economy in the world can run solely through the whims and wishes of a knowledgeable few. The masses, consciously and at times unconsciously keep struggling to improve their lot. If the inflation rises they struggle for cheap food, when a lot of them begin to die of diseases they struggle for an affordable health care system, union struggles at the work place continue incessantly, so the capitalist class and the state can never realize their plans without facing bitter resistance from the masses. The struggle of the masses against profits and greed may become divided, localized and hence weak, but it never disappears altogether. At present the working class movement in India is relatively weak due to the lack of a central organization. Different sections of the working class are either engaged in pursuing purely localized struggles which make it difficult for them to pose a unified challenge to the machinations of the capitalist class. The latter on the other hand is more strongly organized than at any other time in history, as a result of which its lackeys like Bhagwati and Panigrahiya can get away with saying that it is in the benefit of the toiling masses to give up even its very limited access to entitlements like free healthcare and subsidized education. At some other time, if the working class had been able to able to develop a coherent vision for the future under the aegis of a centralized leadership, such ideas as privatization of healthcare, education and withdrawal of food subsidies from the starving would have seemed unthinkable.
This piece is by no means a defense of Amartya Sen’s positions as he, in the opinion of the writer shares much with Bhagwati and Panagariya than most of us suspect, but a discussion of this aspect would require another full length post so we may leave it aside for some future occasion.