Modi detests Nehru, but loves Indira’s lousy economics. Fact: she was rectifying her blunders

Jaitley’s Indira-Hitler comparison demonstrates political and historical illiteracy | Express Newspapers/Getty Images

Indira’s change of heart got trapped between two tragic air crashes, one killing her most Left minister, and other, her economically Right son.

In last week’s National Interest, I had asked why Narendra Modi wanted to put the clock back on everything Nehru, but was perpetuating Indira Gandhi’s worst economic policies, especially bank nationalisation. There has been much comment on this argument.

I do not have a convincing answer today on why Modinomics is in so many ways like Indiranomics. State ownership of banks is the starkest example. There is also this year’s soak-the-rich budget, increasing subsidies over four years after having dissed these in election campaigns, and new yojanas that would make Indira Gandhi proud. Is Modi in awe of Mrs Gandhi? Or does he simply take a leaf out if her hyper nationalist-hyper socialist playbook? Has he also embraced the idea that povertarianism wins elections?

Honest truth: I don’t have the answers and let’s not waste time speculating. Because one thing Modi doesn’t lack is clarity of thought and objective. So we will know soon enough where we are headed. What I can say from evidence, however, is that with the economy devastated by her policies by 1974, even Mrs Gandhi had begun to grow doubts in the wisdom of her manic socialist phase. But maybe she started too late, too slowly and was far too deeply trapped in that politics to extricate herself even in her third tenure, 1980-84.

Let’s check out our political-economic history first. It is generally accepted wisdom that the Indira Gandhi years were our pinkest. Also, that her second phase (at the peak of her glory in 1971 till post-Emergency fall in 1977) was the most deeply socialist of three, the first being 1966-71 and the third 1980-84. Some of India’s worst economic laws were enacted by her largely illegitimate Parliament during the Emergency, some even in its embarrassing sixth year. This is also when words “socialist” and “secular” were inserted in the preamble of the Constitution.

Much of the stuff on her politics, creative destruction of the Congress and Emergency, her iron will and patriotism is familiar to most Indians. But fresh, intriguing and sometimes pleasant surprises have emerged on how her economic thinking evolved over these years. As you would expect, T.N. Ninan, our most formidable commentator on economy and business, had initiated this with a provocative column a few days before her 30th death anniversary in November 2014. He said, intriguingly, that far from reinforcing her socialist drive, Indira Gandhi had actually begun to loosen things up, or at least start some review and introspection by the end of 1974, a year before the Emergency.

Briefly, his thesis is that by this time India was in deep economic distress. Inflation was running high, there was widespread popular disenchantment, and Indira made her most significant economic blunder yet. Under pressure from her durbari Leftist cabal D.P. Dhar, P.N. Haksar etc, she nationalised grain trade; that too, in a crisis year for agriculture. It caused such anger among farmers that, for the first time in her prime ministership, she was forced to withdraw a major decision. This set in motion the process of review and rethink.

This was strengthened by two personalities, though one in departure and the other in arrival. In 1973, an Indian Airlines crash in New Delhi took away her steel and mines minister, and her most Leftist comrade, Mohan Kumaramangalam, a former Communist Party member who had learnt as much ideology at King’s College, Cambridge, as law. The second was the rise of Sanjay Gandhi who, at least in his views on business and economy, was Kumaramangalam’s opposite.

We journalists are not historians, scholars or astrologers. Our skills are generally limited to faithfully observing and chronicling the present, not searching the past or predicting the future. Let’s pass on astrology for now, but thankfully we still have wonderful historians whose work we can rely on. You can find a great deal of wisdom and insight, for example, in Srinath Raghavan’s brilliant essay on Indira Gandhi in Makers of Modern Asia, edited by Ramachandra Guha.

Raghavan says Indira’s “socialist phase” continued till 1973. But this momentum was broken by a crisis inevitable in a post-war, populist economy. Monsoon failures and the 1973 oil shock, he reminds us, had taken our inflation rate to 33 per cent by late 1974. This also fuelled the JP movement. Indira first resorted to a tough anti-inflation squeeze, never mind the warnings of her Left ideologues that these would annoy people. She preferred, Raghavan tells us, the advice of the “more liberal” economic advisors, led by that virtuous usual suspect, Dr Manmohan Singh. She also approached the IMF for a $935 million (a lot then) bailout, quietly allowed the rupee to depreciate, thereby improving India’s exports and reserves. Raghavan argues that 1973-74 “marked an important turning point” in her economic policy, one that remains “underappreciated”. The shift, he says, was attitudinal more than substantive, but it brought growth. During 1975-78 India grew at six per cent per year, which was twice the fabled Hindu rate.

Raghavan quotes extensively from a fascinating exchange of letters between Indira and her close advisor and cousin, B.K. Nehru, whose views on economics were more liberal than on individual liberty: he had hailed the Emergency as a “tour de force of immense courage”. Now he was telling her to replace garibi hatao with utpadan badhao (increase production).

Some of B.K Nehru’s lines are stunningly prescient; we were repeating the same thought, even if not so succinctly, during Sonia Gandhi’s povertarian UPA 2. Raghavan quotes a December 1974 letter from an irritable Indira reminding Nehru that “under present conditions there can be no economic growth which ignores social justice” (sounds familiar?). Nehru bravely joins that battle of ideas by asking whether “social justice [means] equality in poverty or growth in the size of the national cake which may continue to be divided in unequal portions if necessary”. He goes on to argue that “all other objectives should be subordinated to this one objective of increasing production”.

This isn’t much different from an oft-repeated lament of “equal distribution of poverty” by my economist friend Surjit Bhalla, who P. Chidambaram used to describe as being way to the right of Adam Smith, and which led me to the discovery of that trade-marked term, povertarianism.

Gods also have a funny way of working. If one air crash had broken the socialist momentum, another intervened to disrupt her reformist phase as Sanjay died in his aerobatic plane so early in her new term (23 June 1980). Indira did lose her will and spirit to a great extent and was never the same again. Her intellectual shift, however, slowly continued.

I have it on the authority of several key officers and advisors who watched her closely, including foreign service giants like Jagat Mehta and J.N. Dixit, that she felt rotten at the position India was forced to take on the Soviet invasion of Afghanistan. She felt humiliated that some of the speeches by our envoy at the UN sounded more grating than those of the Cubans. She also – probably – had the sense that the Cold War was going to end, and India couldn’t afford to end up on the loser’s side.

There is evidence that she had begun course-correction on foreign policy as well. At the 1981 multilateral summit at Cancun, Mexico, I believe she sought out Ronald Reagan, her first contact with the US at a high level after her disastrous time with Nixon. The following year she visited Washington and a process of mending relations was under way. She seems to have realised that in the new global strategic and economic order after the Cold War, India could not carry on being at odds with the West.

By 1983, however, India’s internal security situation had deteriorated and left little scope for further economic action. Nellie and other massacres happened in Assam in February 1983. By this time Bhindranwale had risen, guns and all, in Punjab as well. What followed, until her assassination, is relatively better known, more recent history. She has been deservedly given a place in history as a great patriot and martyr, a champion of India’s integrity and sovereignty.

Could it be that we have not yet fully appreciated her intellect and prescience on economic and foreign policies? Was she left too little time to make that shift more complete? And how would she respond to a follower if her economics were as powerful and popular as she was at her peak?

Since she is long gone, this was a mere rhetorical question. The point we need to explore and explain going ahead, is why is Narendra Modi in such awe if her economics even as he detests her father and holds her successors in disdain, if not contempt.