Nehru’s Economic Vision and Its Impact on India

Source: The post the Nehru’s Economic Vision and Its Impact on India has been created, based on the article “How Nehru’s vision hobbled India’s economy” published in “Indian Express” on 12^th December 2024.

UPSC Syllabus Topic: GS Paper 3- Indian Economy

Context: The article critically analyzes the economic policies of India under Jawaharlal Nehru. It argues that Nehru’s vision of economic development, while well-intentioned, ultimately had a stifling effect on India’s economic growth and development. Nehru Economic Vision and Its Impact on India

How did Nehru’s early political views influence his economic policies?

Nehru’s early views were radical, incorporating aspects of communism such as nationalization and collective farming. However, he moderated his stance during the 1930s and 1940s due to resistance from colleagues like Sardar Patel.

What were Nehru’s primary objectives for India’s economy?

Nehru aimed to eradicate poverty and achieve self-sufficiency through an emphasis on heavy industry and modern technology. Despite acknowledging the employment potential of small industries and agriculture, most capital was allocated to heavy industries.

What were the key instruments of Nehru’s economic policies?

These included:

1. Five-Year Plans (especially the Second Plan, which solidified his vision).
2. Expansion of the public sector.
3. Licensing of private industries.
4. Import restrictions and tariffs.
5. Price and distribution controls.
6. Emphasis on technical education over primary education.

What was the role of the Planning Commission and industrialists?

The Planning Commission’s Panel of Economists largely endorsed the Nehru-Mahalanobis approach. Initially, even industrialists supported facets of the plan but grew critical after hasty nationalization and economic crises.

How did economists like B.R. Shenoy and Milton Friedman critique Nehru’s policies?

• R. Shenoy: Warned that excessive development beyond available resources would lead to inflation and socio-economic instability.
• Milton Friedman: Criticized exchange controls, licensing systems, and subsidies as major obstacles to India’s economic growth.

What was the impact of India’s import and export policies?

India’s import regime was marked by inefficiencies, lack of foreign exchange allocation criteria, and a controlled investment system. Export policies stifled India’s global trade presence, leading to a decline in market shares of key products like tea and jute.

What were the economic outcomes of Nehru’s strategies?

1. Per-capita GDP rose by only 2% between 1951-52 and 1963-64.
2. Heavy industries grew significantly, but agriculture and consumer goods industries stagnated.
3. India’s share in global exports fell from 2.5% in 1947 to 0.9% in 1966.
4. Food production lagged behind demand, necessitating the Green Revolution.

How did socialism influence subsequent decades?

Nehru’s socialist policies entrenched a bureaucratic hesitation towards market-oriented reforms, delaying India’s economic liberalization until 1991.