File photo of Indira Gandhi
File photo of Indira Gandhi | Commons
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Just weeks after then-Prime Minister Indira Gandhi declared that the top 14 private banks in India will be nationalised, trade unionist V.B. Karnik had asked if this was just a “political stunt”.

Writing for Freedom First, a magazine founded by Swatantra Party leader Minoo Masani, Karnik raised serious questions over whether this was a well-thought-out move at all.

In the 50th anniversary of bank nationalisation, we reproduce the article, courtesy Freedom First.

There can be no doubt that the events which took r place in the political field in the last few days were sensational as well as significant. But the question that is still baffling the public mind is: were they the result of a drift or a design?

The series of events began with a note on economic policy-later described as containing her “stray thoughts” – which the Prime Minister thrust upon the Congress leaders in an unceremonious manner on the occasion of the A.I.C.C. meeting in Bangalore. It could have easily led to a crisis. But the worldly-wise Congress leaders avoided it by just adopting the note. They must have thought, in their usual way, that there was no harm in adopting a high-sounding resolution as nobody would ask for its implementation. They acted, true to their colour, belief and tradition. But was the Prime Minister equally innocent or did she have a deep purpose in confronting the Congress leaders with her note?

Also read: If Modi wants a real legacy, he must undo Indira Gandhi’s disastrous bank nationalisation

The crisis that was avoided on an issue of policy took place on a different issue, the issue of the selection of the Congress candidate for the post of the President. The Prime Minister failed in securing the selection of her nominee. In defeating the Prime Minister in this manner did the veteran leaders of the Congress act in a deliberate manner, mindful of all the consequences, or did they act in their usual slipshod way relying on their strength in the organisation to overcome any crisis that may arise?

The scene then shifted to Delhi and the next blow was struck by the Prime Minister, the blow taking the form of the virtual dismissal of the Finance Minister followed by the nationalisation of fourteen private commercial banks through an Ordinance. Did the Prime Minister strike this blow just to avenge her defeat in Bangalore or in pursuance of a well-thought-out policy of extending State control over national economy in order that it may subserve the purpose of economic progress and social welfare?

Nationalisation of banks has been on the anvil for a number of years. It found a prominent place in a number of resolutions and declarations adopted by the Congress. Those who accepted them have little right to complain if steps are now taken to implement the pledge to nationalise the banks. They can complain about the manner and the method of bringing it about but not about the actual object. The method adopted of issuing an Ordinance on the eve of a meeting of Parliament is open to very serious objection. In spite of it, Congress ranks have generally welcomed it. In addition, it received overwhelming support in the country and the Prime Minister who initiated it has gained considerably in popularity and prestige.

Also read: 50 years after nationalisation, Modi needs to starve PSU banks, not celebrate them

In the enthusiasm over the nationalisation of banks, the people have forgotten the unsavoury treatment that was meted out to the erstwhile Finance Minister. He was virtually dismissed without even the courtesy of prior intimation or consultation even when, in addition to being a loyal Finance Minister, he was also the Deputy Prime Minister of the country. Was it done on purpose to bring home to the Congress leaders the power and the authority of the Prime Minister? And does it set the pattern of her behaviour with her colleagues in the Cabinet?

The Congress High Command has, after a few motions of annoyance and displeasure, acquiesced in this high-handed action of the Prime Minister. Is the acquiescence temporary and diplomatic, or is it permanent and real? Has the relation of forces in the Congress undergone a radical change and has the power in the organisation passed from the hands of the strong, solid men, with deep roots in the power structure in cities and villages, to the hands of a medley of smooth talkers, crafty demagogues and impatient idealists? Looking at the Congress, it is unrealistic to imagine that any such change-over has taken place. Then why did the older, more sophisticated leaders allow themselves to be checkmated in this fashion? Are they just drifting along with the current, or do they have any deep plan for converting their present defeat into tomorrow’s victory? It is difficult to see what the plan could be, as along with the passage of time their strength and influence are going down instead of going up.

Nationalisation of banks by itself will not solve any problem. If the professed objective of helping economic progress by making cheap credit available to agriculturists, to small-scale producers and to petty businessmen is to be achieved, a lot of hard and patient work will be needed to locate such credit-deserving persons, to study their projects and to provide them, apart from credit, all other assistance that they may need. This may require the initiation of many new economic policies and activities. It will also require the injection of a new spirit of public service and an accent on efficiency, on shouldering of responsibilities and on taking of quick decisions. Has the Prime Minister evolved any plan for bringing about these much-needed changes in governmental activities and procedures? Or was nationalisation of banks adopted as a mere political stunt to outwit her opponents in the Congress? Was it a mere drift, or is there any design behind it?

Also read: TalkPoint: Is it impossible to fix India’s disastrous PSU banks?

The people as a whole and the democratic forces in the country will not be unduly interested in the internal quarrels in the Congress organisation. They could have ignored them altogether if the Congress were not the ruling party and a big stabilising force in the country. In any case they cannot be happy at the emergence of one single person as a domineering authority in any democratic organisation, nor can they relish the rude and insulting treatment that was accorded to a senior and respected leader, whatever one’s views about his economics and politics. Such trends are destructive of the spirit and climate of democracy and must be opposed whatever the organisation where they manifest themselves.

It is likely that, having acted in a huff and without any well-thought-out design, the Prime Minister may be now pushed in the name of socialism in the direction of wholesale and outright nationalisation of all means of production, distribution and exchange, that would be the road to anarchy and chaos. It is to be fervently hoped that the Prime Minister will refuse to follow that slippery road. If it is rapid social change that she has in view, there will be many and many in the Congress and outside who will sympathise with her and give her all possible help in bringing it about in a peaceful manner. In that case she need not drift from one adventure to another. Adventures will land her in the company of careerists and adventurers, many of whom do not have any concern for democracy and any loyalty to the country and its Constitution. On the contrary, if she prepares a design of the progress that she has in view and chalks out the steps required to be taken to attain it in a quick but lawful manner, she will not lack support. It may be remembered, however, that the country values liberty and decency in public life as much as economic progress. The design must have an important place for them. The country has drifted too long. Socialism has been more a mirage and a deceptive slogan than a realistic socio-economic programme to be attained from stage to stage in an orderly and vigorous manner. Let us now at last have some design in our social and economic policies and activities.

This article was originally published in August 1969 in Freedom First magazine.

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1 Comment Share Your Views


  1. As Shri Mihir Sharma’s column earlier today pointed out, it was the wrong decision fifty years ago. Remains thus after all this while. It is not that no one has the courage to reverse it. It is just that it is too large a store of candy – although now much depleted – for anyone to voluntarily walk out of.


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