Gandhi was not an economist in conventional sense, nor has he given any systematic views on the model of development to be adopted by India. We get the blueprint of Gandhian idea of development in his book HIND SWARAJ. He was critic of the western model of development and believes that that if others adopt the same model, 9 more earths will be needed. The fundamental idea governing Gandhian approach to development was the principle of Non-Violence and Swaraj. Non-violence even towards nature and minimization of needs.
The 3 pillars of Gandhian approach were:
1] Economic growth.
2] Redistributive Justice.
3] Moral regeneration.
7 Sins according to Gandhi.
Gandhi’s approach towards way of life can be understood on the basis of his concept of 7 sins.
1] Wealth without work.
2] Pleasure without conscience.
3] Knowledge without character.
4] Commerce without morality.
5] Science without humanity.
6] Worship without sacrifice.
7] Politics without ethics.
At the time of independence, Gandhians like SN Agarwal, Sriman Narayan proposed Gandhian Plan.
The key ideas of Gandhian plan were:
1] Reform of Agriculture.
This will address the issues of hunger and unemployment. Government should focus on land reforms, cooperatives and rural credit.
2] Revival of cottage industries.
It will not only provide supplementary income, Khadi was also a way to address the requirement of clothing.
Thus the focus of Gandhian plan was to fulfil the basic necessities as a priority.
There is a misunderstanding that Gandhi was against machines and industrialization. Gandhi was not against machines, he was only against imitating the western model in Indian situation. His concern were:
1] Machines should not be pitted against humans.
2] Machinization results into accumulation of wealth and increases exploitation.
Thus Gandhian approach was to make Indian villages self-sufficient entities. He was for the revival of village republic as he believed that ‘India lives in villages’. Without revival of villages, goal of Swaraj would be incomplete.
Gandhian approach was not adopted and we can see the consequences of its neglect. The economic model which we have adopted, to catch up with western countries, is unsustainable and full of conflicts. The developmental model has resulted into imbalanced growth and widening of gap between Indian and Bharat.
Schumacher in his book SMALL IS BEAUTIFUL has suggested the concept of sustainable development based on Gandhian principles. And it indirectly comes from Buddhist model.
Nehru was also not an economist. Nehru was modernist. He was impressed by the achievements of the USSR. He wanted to make India a modern and scientific society. He described his philosophy as progressive socialism and wanted India to be a society based on socialistic pattern. Nehru’s real approach towards development strategy can be understood from 2nd Five Year Plan which was based on Nehru-Mahalanobis model.
Features of 2nd Five Year Plan.
1] Investment in heavy industries.
It will promote capital formation. It will make India independent of foreign imports and essential goods. And India will be able to exercise more autonomy in other areas and protect itself from bargaining of western countries.
2] Nehru introduced centralized planning, despite the fact that it goes against the spirit of federalism.
3] Nehruvian model neglected consumer industries. Indians were to make sacrifices in short term for better life in long term.
4] Nehru was not against agrarian reforms, but he believed that industrialization will create more demand for agricultural goods and will provide fertilizer, equipment for promotion of agriculture.
5] Nehru knew that his model will create shortages of basic commodities, hence he introduced physical control or rationing and fiscal control or administrative pricing.
6] In order to avoid income disparities, Nehruvian model had put state in the commanding heights of economy and kept private sector weak to check accumulation of wealth.
7] Public sector will not only address the concentration of wealth, it will also provide employment.
8] Nehruvian policies could not address the structural weakness of Indian economy. Rationing has resulted into black marketing. Public sectors were not working on economic logic, it was producing poor quality goods at a higher price.
9] Nehruvian model was import substitution and export promotion. However, India could not produce such manufactured goods which can compete with western goods.
10] Nehruvian model resulted into India becoming ‘license, permit, quota raj’, which ultimately made India and Inspector Raj or overdeveloped state.
11] Successors of Nehru have not made correction, despite understanding the weaknesses. They rather continued with more populist policies like ‘garibi hatao’. Garibi hatao remained a rhetoric in pre-reform period. As good as 45% of Indian population was living below poverty line.
Planning and Public Sector.
Planning is a feature of socialist countries. The idea of planning is to determine the priorities and to go for the best possible use of resources. The objective of planning was higher growth and better development. Planning has resulted into state achieving commanding heights in economy. PSUs and other public sector was the major service provider. Public sector with exception of few PSUs started showing weakness of the model. It developed certain structural problems like -overmanning, low work ethics, low capacity utlization, excessive expenses, fiscal deficit, absense of rational pricing policy and negative rate of return.
Above policies became unsustainable. India was facing a dual problem – fiscal deficit as well as trade deficit. India came under financial crisis. Country was left with the foreign exchange which could pay import bill only for a week. The credit of India was in question (Sovereign Debt Crisis). Ultimately India was forced to change.
According to Bimal Jalan, former RBI governor, PSU’s were like old family silver where family had to spend more to just keep silver shining.