Licence Raj

[Gambit]

Licence Raj versus License Raj Narayanan Madhavan, Hindustan Times Email Author August 17, 2007 Sometimes, the smallest of things can generate insights that could well run deep. Sometimes, these things are symbolic. While the nation celebrated 60 years of Independence on Wednesday, a lot was recalled in newspaper articles, many of them on economic achievements and the recent emergence of India as a promising global economy. One thing in our own columns caught my attention. Among the milestones mentioned was the end of the license raj that happened in 1991 when Dr Manmohan Singh substantially abolished industrial licensing for most industries. What caught my attention here was that I saw an American spelling (license raj) whereas the copy should have said licence raj in British English style. The younger generation at the news desk is usually lax on spellings in general, and American spellings in particular. Cant blame them. You see, most of them went to college after economic reforms began, and many things are alien to them. These include waiting lists for telephone connections, high interest rates for home loans and grueling procedures to get foreign exchange. American spellings are part of the baggage that comes with economic liberalisation, call centre jobs and easy credit cards. Chakravarthi Rajagopalachari, founder of the Swatantra Party, coined the term licence raj to make an evocative play on the term British Raj that people disliked and turned the negative branding effect on Nehrus economic policies that emphasised on state controls, socialism and industrial permits and quotas. But I ask myself a simple question: Had India followed its liberalisation policies in the 1950s instead of the 1990s, what would have happened? I have no easy answers, but it is clear that India would have had to export agricultural commodities in exchange for modern industries and foreign capital, or done something approximating to that. However, there was not much to export from here. Maybe a bit more of garments would have been exported. With foreign capital, India could have stolen some of the Chinese and Taiwanese thunder in electronics or labour-intensive manufacturing. On the other hand, there might have been no IITs (Indian Institute of Technology), no Steel Authority of India Ltd, no Indian Oil Corp. Dozens of public sector undertakings may not have come into being. Now for the next big question: If there were no controls on industries, what would we have liberalised in the first place? Actually, a force has to be created before it is unleashed. The creation of a Nehruvian public sector, and subsequent neo-Nehruvian policies like Indira Gandhis nationalisation of banks, laid the ground for an industrial and financial structure. This structure, for all its shortcomings, had the potential to generate both human resources, knowledge base and the domestic economy that eventual liberalisation make use of. I do believe that viewing the licence raj with a differently spelt license raj is symbolic of the way we suffer optical illusions in analysing history. Socialism, viewed through the rear-view mirror of liberalisation, appears different. Nehruvian policies also look dismal in many ways, but perhaps it would be fair to say that while many of his policies were flawed, they also laid the groundwork for the forces that gained from liberalisation and free market opportunities. At least 25 Nasdaq-listed technology companies today owe their origins to people nurtured by Nehrus policies that subsidized their education at the cost of primary schools or farmers. It is an irony that many of the biggest beneficiaries of Nehruvian largesse are among the most fashionable critics of socialist policies. As we raise a toast to their achievements and 60 years of Independent India, I only wish Nehru had created centres of excellence called Indian Institutes of History (IIHs) the way he had created the IITs. That might have helped us get a better sense of history. Link

[Gambit]

Nehruvian Socialism has almost become a dirty word these days and has been a much maligned strategy. So is he justified in implementing draconian laws and restrictions on imports back then? Did his strategy give us a solid platform from where to launch, as we did in the liberalisation of 1991?

[The Outsider]

I think it was very important to have the kind of economic model we went for at the time of independence. There was no chance for Indian industry to grow and survive in an open economy. Though what we did in '90 should have been done a decade earlier and in smooth phases rather than as an abrupt step. Even now sectors like agriculture and railways need a lot of protection.

[Guest dada_rocks]

On the other hand, there might have been no IITs (Indian Institute of Technology), no Steel Authority of India Ltd, no Indian Oil Corp. Dozens of public sector undertakings may not have come into being. ***************** crappy thinking the existing iits in its nascent stage got aid from different countries or UN wing sympathetic to India cause.. with liberalization domain of good-will certainly wud have spread hence more iits as opposed to just six.. Let us face it nehruji crippled the state by his over-indulgence with socialism and then from the meagre budget set some money aside for these educational isntitutes and we are to believe that was the best we could have done.... BTW his uninterrupted electionn for 17 long years didn't help the cause either.. I know many nehru-bhakts picture it as positive saying that way tradition of democratic took deep root. Conveniently forgetting there was not even a signle leader who had autocratic tendencies in India if anything Nehru by showing his displeasure over his non-selection in CWC cabinet meeting as PM showed he was more power hungry than the rest thereby less democratic than the rest of the crowd of existing stalwarts...Any other leader with better democratic ideals wud not have accepted the Gandhian veto in that meeting..... And we get lectured he was democrat par excellence.. Not true going by the evidence I just mentioned he comes of as the least democratic among the erstwhile leaders.. Good that he kept winning the election , otherwise who knows what he wud have experimented with given his shameless grab of power aided by Gandhi.. BTW even when we were forced to go for liberalization naysayers had exactly the sam argument whihc u guys are putiign forward oin defence oif nehruvian policies of early years.. The metaphor of Donkey and horse in the same race was so prevalent among political oppistion to liberalization and we all have seen how that race panned out.

[Lurker]

Nehruvian Socialism has almost become a dirty word these days and has been a much maligned strategy. So is he justified in implementing draconian laws and restrictions on imports back then? Did his strategy give us a solid platform from where to launch, as we did in the liberalisation of 1991?

This is actually a topic for a thesis almost but in a nutshell Nehruvian economics definitely helped India than adversly affect it. When India became Independent we were one poor country. And a country that had been raped by a foreign country that started off as trading company(East India company). Now think for a moment how the Indians would have reacted if they figured out new foreign companies coming to India? Deja vu all over again. Plus obviously what foreign companies would want to come to a country which was greatly poor at the time? Nehru's policies not only gave us a strong platform for which our current liberalisation is based but more importantly it gave Indians a sense of confidence that was long gone since we became subservient to British empire. Under his Socialist policies we managed to create some world class Educational Institutions as also Modern technology. Take the Heavy Engineering Corporation at Ranchi. It is one fantastic technical marvel, and must have been one of the very best of its time. I spent a summer there working as an intern and I was surprised to see many a machines with tags like "Biggest lathe machine in the world", "Biggest XYZ machine in the world". It was a moment of great pride for a young Bihari lad to see we had some of the biggest machines in the world. Can you imagine the pride that a person who worked on them would feel? In the end HEC got screwed up due to people who worked there, and also the politics that crept in our Public Sector thanks to left wing parties. But how are you gonna blame Nehru's policies for it? Yes it was the best way to go and turns out today's India has reaped a lot of benefits from it. xxx

[Guest dada_rocks]

other than few rhetoric I don't see anythign in support of how it was the best way to go....India was not developed hence wud have been a loser in liberalized economy I kept hearing till 95 leftist the close cousin of nehruvian soclaims still believe in that fantassy.. But given it bleeded us to bankrupcy and our subsequent loans-solicitation came with the condition of policy course-correction and then only we learnt we were on the wrong path ,one has every reason to believe had that Nehruvian socialism been even marginally sustainable am not talking about any growth here the planning commissions honchos wud have never taken to liberallization.. it's another matter that these same guys are making virtues out of hobson's choice we were offered. Going by what has transpired in 15 years of liberalization and going by how others who opened their markers earlier have fared,the theorythat nehru's socialsm actually burdened and stunted the indian growth sounds more plausible.