For some time past, Private Enterprise in India has been continuously under fire. It has been suggested that Private Enterprise is incapable of undertaking large-scale and rapid economic development of the country. It is also suggested that Private Enterprise only results in the concentration of economic power in hands of a few people. It is further said that—and it was said only a few days ago by no less a person than the Prime Minister of India in Calcutta—that Private Enterprise and Democracy are incompatible. But the main provocation for the choice of the subject is a speech made by Mr. T. T. Krishnamachari, who was then the Union Minister for Commerce and Industry, at Madurai on 4th of August. In the course of his speech, he observed that “Private Enterprise has failed me”, and that Private Enterprise was not showing either initiative or enterprise.
Before I proceed to examine the validity of the various contentions which have led some people to the conclusion that Private Enterprise has failed in this country, I should mention that of all Ministers of Industries since India attained independence, Mr. T. T. Krishnamachari must be acknowledged as an outstanding success. Some of us may differ from him on some of the views he holds and propagates.
But I think there is not the slightest doubt that in the discharge of his very high responsibilities as the Minister for Industries, he has shown remarkable drive, energy and understanding of business problems, and above all a capacity for taking quick decisions. It is, therefore, all the more incomprehensible for me that a man of such fine understanding of business and industrial problems and a man who has first-hand opportunities of witnessing from day to day what is being done in the industrial sphere in the last few years, should have preferred to make this charge against Private Enterprise in this country. To quote a Shakespearean phrase, to me it has come as “the most unkindest cut of all”.
Before I examine the charge, it is very necessary that I should give you a brief historical review of Private Industry in this country, particularly before India attained Independence. If you look back to the history of Private Enterprise for 60 or 70 years before India attained independence, you must take into consideration the circumstances and the environment under which Private Industry had to struggle.
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For one thing, we were under a regime, which was quite indifferent and apathetic, if not in some cases definitely antagonistic, to any industrial development in the country. If you for instance study the Tariff Policy of those days, the Transport Policy, or the location of Railway freight, all these will show you the conditions under which Private Enterprise had to struggle. Even in later years, when the Government came to adopt—and that too very grudgingly—a policy of discriminating protection, that policy was too halting and unsuited to bring about any rapid development of industries in the country. In spite of all these limitations and disabilities Private Enterprise was subject to in those days, it was surely through the enterprise and endeavour of Private Enterprise that India was put on the industrial map of the world and attained the eighth place among the industrial nations in the world.
To quote one or two instances; the Cotton Textile Industry (remember only about 40 years ago we used to import every year Rs. 60 crores worth of piece-goods from abroad) has now developed substantially in the last few years when we have become a very important exporter of cotton piece-goods to about 40 to 45 different markets in the world. The very fact that Indian piece-goods should effectively compete with shrewd and established exporters from Lancashire and Japan bears ample testimony to the efficiency with which Textile Industry has been built up in this country.
I would also like to remind you of the days when the late Mr. J. N. Tata first thought of starting the Steel Industry. I do not know if you are aware that a leading British business man of Calcutta ridiculed the idea as a dream, and he even offered to consume every pound of steel made in India! Fortunately for him, he is not alive today; otherwise he would have suffered not a little from indigestion. But the fact of the matter is that a great pioneering effort succeeded in giving India the largest single individual steel-making unit in the British Commonwealth of Nations, and I believe India will be proud also of the fact that she is today one of the most economic and cheapest producers of steel in the world.
Take for instance also the development of hydroelectric power—entirely undertaken by Private Enterprise—a tremendous venture in those days, a venture not only in the sense of generating power but even of making Bombay mill owners believe that power could be generated and supplied to Bombay mills. You know today what it stands for in the economic life of Bombay.
The above two or three instances might show what Private Enterprise, functioning under the limitations and disabilities to which it was subject in those days, could achieve. I may also mention Shipping. Shipping in India against the powerfully entrenched foreign shipping companies almost looked like a dream. It was due to the pioneering effort of the late Shri Narottam Morarji and Shri Walchand Hirachand that Indian Shipping has come to stay and offers today very fine promise of supplying a much-needed complementary transport service to sustain our economy.
Even before we attained Independence, in 1944, seven businessmen of India got together and put before the people a plan for the economic development of the country. Private Enterprise in India was fully conscious of the needs of the country and also had faith in itself that it could undertake development on a very large and extensive scale. After 1947, the Government started taking more active interest in the economic development of the country. Private Enterprise also did not fail to assist in the process of development. The curve of industrial production during the last five years has been continuously rising. If you take 1946 as the base year, i.e., 100, industrial production went up to 117.2 in 1951, 128.9 in 1952, 135.3 in 1953, 146.6 in 1954, and in 1955 it stood at 161.5.
Private Enterprise would have shown perhaps a such better and a more impressive record of achievement, if it had not to work under a certain set of circumstances of which you are all so painfully aware for the last few years. I was on a Committee, which was asked by the Reserve Bank to consider the circumstances under which Private Enterprise was functioning and to explore ways and means of helping Private Enterprise, particularly in the financial sphere. We had a very good opportunity of studying the situation in different parts of the country, and the unanimity of opinion which was represented to the Committee was that Government’s economic policy in the last few years had created an atmosphere of uncertainty in which naturally incentives are likely to be at a low ebb and that capital had been rendered very shy.
Nationalisation of the Imperial Bank and recently Nationalisation of life Insurance have dealt further blows to Private Enterprise and have made capital more and more shy.
Another subject of topical interest is the publication of a letter addressed by Mr. Eugene Black, Chairman of the World Bank, to our Finance Minister, Mr. T. T. Krishnamachari. The genesis of the letter is this: a few months ago, the World Bank sent out a mission. After surveying the situation and after having very intimate talks with Government officials, Planning Commission and Ministers, it submitted their report to the World Bank.
On the basis of this report, Mr. Eugene Black addressed a letter to our Finance Minister, Mr. T. T. Krishnamachari. In the course of that letter, Mr. Black has said:
“In making my own comments, I should like first to emphasise once again my conviction that India’s interests lie in giving private enterprise, both Indian and foreign, every encouragement to make its maximum contribution to the development of economy, particularly in the industrial field. While I recognise that the Government itself must play an important role in India’s economic development, I have the distinct impression that potentialities of private enterprise are commonly under-estimated in India and that its operations are subjected to unnecessary restrictions there.”
This letter has crested a little flutter in certain dovecots. I do not know on how many occasions we have been told by the highest in the country that distinguished foreigners who are visiting India have been terribly impressed with the progress that this country is making. This is perhaps the first occasion when a friendly critic has dealt with a few things in a very outspoken fashion. I can personally vouch for one thing — that Mr. Eugene Black is a real and sincere friend of India. I have reasons to tell you that he earnestly desires that India should develop economically at a rapid pace. But Mr. Eugene Black also is a man who by his extensive knowledge of conditions in different parts of the world is convinced that there are certain well-proved and well-tried methods of economic development which have resulted in substantial progress in many countries of the world and there is no reason that one could see of a hasty departure from these proved and well-tried methods. I am glad that the views held by some of us are being fully confirmed by the conclusions given by the World Bank Mission in its report.
This essay is part of a series from the Indian Liberals archive, a project of the Centre for Civil Society. It is excerpted from a monograph published by the Forum of Free Enterprise on 23 October 1956, titled Has Private Enterprise Failed. The original version can be accessed here.