Quadrant- I (e-Text)

Module name/ title: Political Economy of Development in India

Paper: Development Communication

Component I: Personal Details

Role Name Affiliation

Principal Investigator Prof. Biswajit Das Centre for Culture, Media
& Governance, Jamia
Millia Islamia, Delhi
Co- Principal Dr. DurgeshTripathi University School of Mass
Investigator Communication, Guru
Gobind Singh
Indraprastha University,
New Delhi
Paper Coordinator (if Dr. Mira K Desai SNDT Women’s
any) University, Juhu
Campus,Mumbai-400049

Content Writer/ Prof. Biswajit Das Centre for Culture, Media

Author(s) & Governance, Jamia
Millia Islamia, Delhi

Andrews D’Souza

Content Reviewer Prof. Biswajit Das Centre for Culture, Media

& Governance, Jamia
Millia Islamia, Delhi
Language Editor Mr. P K Satapathy Department of English,
School of Open Learning,
University of Delhi

Component II: Description of the Module

Items Description of Module

Subject Name Media &Communication Studies
Paper Name Development Communication
Module Name/Title Political Economy of Development in
India

Module ID P6-M26
Pre-requisites
Objectives
Keywords

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Introduction

India gained Independence in 1947 after a long and turbulent upheaval across
the country. Both against the colonial government and within its people, there were
major negotiations across the country regarding the nature of the nation and the
appropriate form of state that should govern it once the British Raj was ended. Many
scholars have agreed that it was precisely in the national movement that the idea of
‘India’ as an entity, a single coherent nation, was formed. The national movement
consolidated Indian thought against its oppressors - the colonial rule - and in so doing,
made possible the existence both of India as a nation and the state that would come to
govern it.
In the process, the national movement would also come to have a large
bearing on the perspective of the Indian State, as enshrined not only in its
Constitution, but also in the legislative and executive actions it would go on to take.
The various competing powers within the core of the early government would go on
to tussle for the appropriate direction to be taken.
Development was then, just like it is today, a core issue. There was a large
Socialist bloc within the Congress party, and this gave the party a distinct direction
towards not only economic growth but also economic equality, to be brought about
using redistributive measures. As PranabBardhan(2006) says that “Political economy
refers to the distribution of political and economic power in a given society and how
that influences the directions of development and policies that bear on them”(p.1) :

Learning Outcomes
In this module, you will learn about the idea of ‘development’ in India. You will
understand the various paradigms and policies that were executed by the Indian state
in tackling problems of illiteracy, unemployment, and hunger, as well as macro-
economic indicators like economic growth. You will learn how each of the
governments in charge of the overall economic planning of the country advanced
certain policies over others.

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Main Text
We have seen how Bardhan defines Political Economy as directly linked to the
directions of development policies. But what are these development policies? The
field of ‘development’ is a vast and growing field, and over the decades, it has
received significant attention and importance. Every nation-state in the world has its
own stance on development, and a plethora of policies and plans that accompany it.
Over the years, it has come to mean very different things at different times and places:
it can invoke very different meanings when used by persons of groups of opposite
political stances.
In newly-Independent India, the economy was in shambles. Decades of colonial rule
had shaped it so as to be as beneficial as possible to the British Empire. Against this
background of massive unemployment, poverty, hunger, and illiteracy, the new Indian
State was determined to adopt a developmental stance.
The huge influence of Nehru at the centre of the to-be and newly- Indian State meant
that the “Nehruvian” project of the first few decades of Independence was reflected in
a number of ways in the structure of the Government. One of the key issues facing the
nation was how to “enlarge the possibilities of human development for the poorest of
its people without exacting fearful costs in human life by unleashing the unpredictable
social chaos of a violent upheaval”. 1 (Frankel 2006, p xix). It was believed that
democratic politics would allow for this drastic change in the social and economic
structure of the country, and that this would help to avoid the apparently dramatic
losses that could come about from revolutionary class struggle. Frankel suggests what
the central belief of the nascent Indian State was:
The solution, according to Nehru, was to be sought in using the vote to build a
mass consciousness, in holding elections to overcome mass inertia, and in
introducing institutional changes at the village level to spur the organisation of
the most disadvantaged groups in class-based political associations. 2 (ibid)

1Frankel,
F. R. (2006). India's Political Economy: The Gradual Revolution (1947-2004). OUP
Catalogue.
2ibid

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It was believed that through the democratic process, the Indian masses could exert
sufficient pressure on the ruling class so that they would be forced to move towards a
more democratic distribution of wealth.

● Planning the early years

There was a split within the Congress party regarding the course that needed to be
adopted in terms of the economic and social goals of the country. This split,
represented by Nehru on the one hand and Gandhi on the other, nevertheless accepted
that the capitalist economy (an economic system that relied on the existence of private
property) that had been imposed upon India by the British had been disastrous. Both
sides were firmly against a capitalist model of growth, as they recognised that it
would inevitably lead to an even sharper inequality among the people of the country.
They were also in agreement that Indian economic policy should strive to remove
inequalities in society and that cooperative motives should replace the acquisitive
instinct. However there was a major disagreement on the future path to be taken. On
the one hand, the Gandhians were firmly against industrialisation as a means to
development, inspired by Gandhi’s own belief that the true path for India to reclaim
its glory lay in returning to its villages and forsaking modern technology and
machines; as against the socialists who believed that public investment in and control
of major industries could allow the nation to grow economically and equally. The
final consensus between the two would directly result in the development strategy
employed during the Nehru years. This consensus was represented with Gandhi
accepting that industry could exist side-by-side with village handicrafts so long as it
did not supersede it; and the socialists accommodating a decentralisation of all
economic activity as far as was possible within central planning of the economy and a
preservation of the village as the primary unit of social organisation.3 (ibid, p15-17)

This belief in a uniquely “Indian” socialism included a belief in the power of Soviet-
style central planning. “Ambedkar and Nehru agreed that the social and economic
modernization of India would have to be secured by vigorous planned actions

3 ibid

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emanating from New Delhi. Conservative politicians sitting in the states would be
disciplined by wiser and more far-sighted men sitting in the country’s capital.” 4
(Corbridge, 2009. p.4) This central planning body would look something like this:
“the Nehru-Mahalanobis model presupposed that India would be governed by
a developmental state ... that was relatively autonomous of privileged local
classes ... In India, it would be embodied in the Planning Commission and the
Five Year Plans. The state would specify a social welfare function for the
future (5, 10, 15 or 25 years away) and then devise the best economic and
statistical instruments to match inputs to outputs.5 (ibid, p7)

The five-year plans reflected this mentality. The first five-year plan (1951-56)
focused heavily on the primary sector. A large portion of the allotted outlay would go
to agriculture, irrigation, energy, transport and communication, and community and
development services. The State would play an active role in all sectors of the
economy. This was justified by the immediate problems facing the economy in terms
of a deficiency of capital.
The second five-year plan (1956-61) adopted what would come to be known
as the ‘Mahalanobis model’ after the renowned Indian statistician Prasanta Chandra
Mahalanobis. This model attempted to calculate the most efficient allotment to each
of the productive sectors so as to maximise long-term growth. Economic data and
techniques developed at the Indian Statistical Institute were used. The result was a
plan that focused heavily on industrial development and “rapid industrialisation”, with
investment into basic and heavy industries in the public sector. Hydroelectric and
steel plants were set up, coal production was increased, and railway reach was
extended. The Tata Institute of Fundamental Research (TIFR) and Atomic Energy
Commission (AEC) were set up as research institutes to boost research work into
nuclear power.
The Third five-year plan (1961-66) attempted at balancing the neglect that
agriculture had suffered from the previous plan. There was an emphasis on increasing
agricultural production. However, wars with China (1962) and Pakistan (1965) meant

4Corbridge, S. (2009).The political economy of development in India since independence.

5ibid

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that defense spending increased sharply, draining away from available resources. In
addition, severe droughts in 1965 and 1966 led to inflation. There was a need to shift
focus to price control.
The third five-year plan saw the setting up of state electricity and higher
education boards, state road transportation corporations were formed, and the
responsibility of road-building was assigned to them. In addition, Panchayat elections
were started in order to bring democracy to the grassroot level, and states were given
development responsibilities.
At the end of the third plan, economic instability resulted in a ‘plan holiday’
for three years. An increase in defense spending, the war, lack of resources, inflation,
and the droughts led to the years 1966-67, 67-68, and 68-69 being guided by annual
plans. The government used these years to reassess planning goals and procedures.
The immediate attention was paid to increasing agricultural growth. In 1966, in order
to stimulate exports, the Rupee was devalued.

● The Second Phase

Indira Gandhi assumed Prime Ministership of India in 1966. This saw a slight
return to earlier socialist goals of the planning commission that had been diluted.
Fourteen major Indian banks were nationalised and a proposal was made to abolish
privy purses for former rulers of the Princely States, a proposal that had been removed
from the original Draft of the first Plan by SardarVallabhbhai Patel. Her manifesto for
‘GaribiHatao’ in 1971 and proposed anti-poverty programs were meant to create a
large, independent base among the middle and the working classes. Gandhi succeeded
in accumulating political power and prestige, especially through India’s victory over
Pakistan that resulted in the creation of Bangladesh in 1971. However, crises arising
from wartime spending, and droughts had left the economy weak.
One of the many policies taken by the Indira Gandhi government was the
nationalisation of 14 major Indian banks. This places all speculation and investment
activity carried out by banks under strict government regulation. This was also when
the 42nd Amendment was added to the Indian Government, making a claim to it
being a ‘socialist’ government.

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The purpose of nationalising these banks, and the banking system in general,
was to expand the network of banks, increase outreach to rural and poorer households,
and thus integrate a larger portion of the population into the banking system, which
would result in higher savings for the economy. This was not thought to be possible
under private ownership with regulations, because immediate profit interests would
not have allowed for an expansion of the banking system into the remote areas of the
country.
However, the nationalisation of banks was undertaken not only in the purpose
of the economy, as Indira Gandhi also sought to gain political mileage through linking
this move with her ‘GaribiHatao’ movement. The nationalisation of the banks was to
be seen as a bold move taken by a strong leader determined to steer india onto the
path of universal development.
Gandhi’s tenure as the Prime Minister of India was to, however, be marred,
contrary to her partisan interests, by more political imbalance. On the pretext of a
threat to internal security, resulting from the recently concluded war against Pakistan
in the East and the West, an economic downturn resulting from the OPEC crisis of the
1970s, and the subsequent trade union activity further stalling the economy, Indira
Gandhi, through the then President of India, Fakhruddin Ali Ahmed, declared a state
of National Emergency on the 25th of June, 1975, which was to last for 21 months.
But the programmes undertaken during this period did not only reflect the partisan
vision of Indira Gandhi, but also put forth another grammar of development.
For one, under the Emergency, the Delhi Development Authority (DDA) took
on a new, more authoritarian role as it demolished a number of bastisin the name of
creating a more ‘developed’ urban space, such as seen in Silampur, where those
displaced by these demolitions were shabbily relocated into a new, ‘developed’
colony called Welcome. This reflects an idea of development that follows the line of
western, advanced capitalist countries, where a slum or bastipresents a failure of
development and an aesthetic challenge that must be fixed by a benevolent state.
Running parallel to this was the mass forced sterilisation program undertaken
by the government, and spearheaded by Indira Gandhi’s son, Sanjay Gandhi. Tens of
thousands of men were forcefully sterilised in order to ‘control the population’ and
implement a more effective family planning policy. Many of these men were subject

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to botched medical procedures, which often resulted in them suffering from

infections, other diseases, and thousands of deaths. This aggressive policy of
sterilisation reflects the heavy-handed approach to development that the Indira
Gandhi government employed.

Despite the various measures taken by the Prime Ministers, the Indian
economy experienced a relatively stagnant growth rate at an average of 3.5% from the
1950s to the 1980s, while per capita income averaged 1.3%. The initial reasons given
for this lethargic growth rate were attributed to cultural and social aspects of Indian
life, chiefly the ‘fatalism and contentedness of Hindu life’ (which resulted in this
growth rate being called the ‘Hindu rate of growth’). However, later economists have
argued that the developmental path undertaken by the subsequent governments of
independent India was itself responsible for this growth rate and not an extra-
economic or cultural factor. One of the prime examples of excessive government
regulation, which is believed to have contributed to the slow growth rate was what we
now know as the ‘License Raj’, which referred to excessive and stifling red-tapism
within the bureaucracy that limited the ability of businesses to set up. Any application
for a private enterprise had to go through at least 80 government agencies and
departments before being given the license to produce, after which the production and
subsequent expansion of the enterprise was to be heavily regulated by the
government, by the means of various labour laws, and in particular the Monopolies
and Restrictive Trade Practices Act, 1970.
Despite the socialist posturing of the Indian Government, there was a
significant suppression of labour rights and trade union activities in the 1970s and the
1980s, as seen in Bombay, Delhi, and West Bengal. This indicates a certain affinity to
the interests of big capital, as had also been laid down in the Bombay Plan of 1944,
where the 8 leading industrialists of India had proposed massive public expenditure in
order to create an infrastructure conducive to businesses.

● Gradual Liberalisation - The Third Phase

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In the 1980s, the governments of Indira and Rajiv Gandhi began to turn
economic policy even more clearly towards the interests of businesses. They began to
relax the restrictions placed upon industry by the regulations of the government.
Corbridge (2009) quotes Kohli when he says that “a major effect of these policies was
to shift the balance of capital formation in India through the 1980s”. After a period of
rapid growth in the 70s, the public sector capital formation stabilised, and the private
sector began to contribute more to capital formation.
Thus we can see that though the economic reforms of 1991, where the
government accepted structural adjustment reforms in order to open up the economy
to more foreign investment, was triggered by the crisis in the balance of payments, the
1980s can be seen as a precursor, where the state had already begun to withdraw from
its role as the main provider of social programs. This withdrawal of the state was not
in order to allow more dynamic and versatile social movements to spring up and exert
pressure from below, but rather to allow more leeway for businesses and corporations
to conduct business without the restrictions that strong labour laws would have posed.

The development perspective of the Indian state can be seen in terms of the
policies and paradigms it exerted over the various phases of its independent existence.
The birth of the Indian state finds its origins in the “high-modernist” ideology of
Nehru, where there is a desire not only to engineer the physical and material
conditions of the world, but also the people themselves. This is represented by the
faith in the Planning Commission, and particularly in the second five-year plan, where
the technocratic imposition of scientific principles is used in a bid to maximise human
development. This kind of top-down development, which is evidenced also in the
Green Revolution and Indira Gandhi’s “20-point program” has its consequences, as
seen in the Khalistani resistance. By marketising agricultural life and introducing the
profit motive to agriculture, many people weredisembedded from their cultural and
social dimensions. In addition, there was an inability to master new technology, since
much of the biotechnology was directly brought in from other countries, and was not
designed to be specifically suited to Indian conditions. By replacing an agriculture
that ran along co-operative lines with a competitive system, and locking many people
out of the agricultural process (since much of the technology required funds and

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resources that were only available to large landholding peasants), there was a large
degree of unemployment and landlessness, and all of this contributed to the
disillusionment of the people with the model of development that the government had
prescribed to them.

Summary
We can trace the political economy of development in India through the lens of the
state itself. Although provisions were made for bottom-up inputs to enter the political
system (in the form of Panchayats etc.), in reality there was very little scope for these
inputs to shape development policies or their implementation. India’s development
paradigm has always been one determined by the state and passed to the citizens, and
it imagines the citizens not as actors who engage with the political system to make
demands of it, but rather as recipients of social programs. Beginning with the
Nehruvian socialist project, moving towards the suppression of trade union activities,
the implementation of the Green Revolution policies, the Emergency and its
authoritarian model of development, and the gradual liberalisation of the economy
under the Indira and Rajiv Gandhi governments, the modernisation project has always
been a top-down implementation of development policies, technocratically devised
and bureaucratically enacted. If the nation is to learn anything from the failures of
past models of development, it is that citizen involvement and inputs and not only
necessary but crucial for social policies to maximise the wellbeing of the people.

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