Friday, March 24, 2023
HomeCampus VoiceState has played its part in laying foundation of Indian economy. Now...

State has played its part in laying foundation of Indian economy. Now don’t hegemonise finances

Campus Voice is an initiative by ThePrint where young Indians get an opportunity to express their opinions on a prevalent issue.

Text Size:

India was envisaged to be developed on the lines of a socialist society, after independence, particularly with the enactment of the Constitution and formation of the Planning Commission, both in 1950. The moving force behind this vision was our first Prime Minister Jawaharlal Nehru, who was an admirer of the method of state-led-planned economic development in the USSR.

The socialist approach was manifested in the FYP (Five Year Plans) model and setting up of numerous public institutions by the State across many sectors, right from education, health and agriculture to nuclear energy and space research, such as IITs, IIMs, ICARs, AIIMS, BARC, CSIR, INCOSPAR, DVC, NTPC, to name a few. The confidence in these institutions as our growth poles was affirmed as Nehru called them the ‘Temples of Modern India’. This approach was justified because India had been left impoverished by the colonial rule, the private sector was too small to generate the desired growth, and the State was considered to have the wherewithal to spearhead economic development.

It is imperative to note that in a socialist society, wealth is produced, appropriated and distributed equitably by the public at large. In India, redistribution was attempted, such as by the Zamindari Abolition Act, 1950 but the compulsions of electoral politics impeded the socialist agenda, as a consequence of which redistribution was carried out via expansion of state institutions, evident from the nationalisation spree and target area development schemes of Indira Gandhi in the 1970s.

In the long run, such steps did help in taking development to the backward and rural areas. Gandhi went on to get ‘Socialist’ inscribed in the Preamble to the Constitution by the 42nd Amendment of 1976. However, efforts at socialistic development were concomitant with the deepening concentration of bureaucratic power in the hands of dominant castes and economic wealth in the wealthy upper class.

This inequity led to the subterranean decay of the economy whereby only those who hegemonised either the power of capital or state, developed, while the majority section of the middle class, oppressed castes and the poor remained underdeveloped. The inefficiency of the administrative system and the stagnancy of public institutions prevented the trickle down of economic growth. 

The obduracy to open the economy ultimately resulted in the 1991 economic crisis after which India had to introduce the LPG (liberalisation, privatisation and globalisation) reforms, as a prerequisite to get the assistance of the International Monetary Fund (IMF). These reforms marked a watershed as the State began to roll back, open and liberalise various sectors and encourage private investment.

This was also accompanied by the austerity measures whereby partial or complete ownership of several public enterprises were transferred from state to the private sector to recover losses. This was christened ‘disinvestment’ and became officially recognised with the setting up of a separate Ministry of Disinvestment in 1999 under the Atal Bihari Vajpayee government.

However, in the UPA years of 2005-14, due to the coalition with Left parties, renewed emphasis on state-led development programmes such as MNREGA, RTE, and Food Security Acts along with policy paralysis in the later years, disinvestment decelerated. One of the tenets of the Narendra Modi government, which first assumed power in 2014, was that the government has no business being in business. Finally, in the Union Budget of 2021, it was announced that except for the strategic sectors, the government will privatise the public enterprises.

It has led to quite an uproar over the disinvestment agenda of the Modi government. The question posed is, what should be the limit of State in the economy? We are at crossroads. The nation is divided over whether the government should own or privatise the public enterprises, such as in the profitable sectors of petrochemicals (BPCL), insurance (LIC), pharmaceutical (KAPL) and banking.

Here, liberal socialism should light the road ahead for India. Apart from the strategic sectors, the State should invest abundantly in what American economist Walt Whitman Rostow called “the social overhead capital” (1960), namely health and education (also affordable housing, farmer welfare and food security in India). The big-ticket infrastructure projects of expressways, metro rail, etc. should be funded via PPP (public private partnership) model where the funds are garnered via long term bonds. The private sector and the market demand is suo motu capable enough of generating economic growth. Banks, telcos, insurance, power and petrochemical companies should be allowed to operate on demand-supply of the market, without intervention but with regulation by the State. The Competition Commission should be given wider powers and autonomy to investigate unfair market practices. 

The State has already played its part in laying the foundations of Indian economy. It should not hegemonise finances and resources but rather serve as the agency that should now confine itself to taking care of the basic needs of its citizens so that they have the liberty to produce the development they desire.

The author is a student of Jawaharlal Nehru University. Views are personal.

Subscribe to our channels on YouTube & Telegram

Support Our Journalism

India needs fair, non-hyphenated and questioning journalism, packed with on-ground reporting. ThePrint – with exceptional reporters, columnists and editors – is doing just that.

Sustaining this needs support from wonderful readers like you.

Whether you live in India or overseas, you can take a paid subscription by clicking here.

Support Our Journalism

Most Popular