India has to be saved from the clutches of the Nehru dynasty and its determination to keep the country in poverty. The countries hostile to India know the Nehru dynasty will never allow India to develop. That is whey they are supporting the dynasty.
India’s recent economic growth collapse is reminiscent of many similar declines seen in other countries*.
Whilst the proximate causes were severe macro-economic imbalances, the deeper causes were numerous micro-economic distortions and unsustainable politically-motivated fiscal expenditures. Bad policy has been the basic reason for these collapses.
But, the Indian growth collapse poses the puzzle: why have the economic reformers who initiated the economic liberalisation of 1991, and who have been in charge since 2004, allowed such bad policies to undermine their legacy?
The answer lies in the baleful effects of the political sway of the Nehru dynasty over most of India’s independent history, and its basic misunderstanding of Indian society.
The political family founded by Jawaharlal Nehru, India’s first prime minister, and now led by his grandson’s widow, Sonia Gandhi, sees India as a social democratic country requiring welfare handouts to redress poverty.
It is important to note that the two bursts of economic liberalisation in 1991 and 2000-4 occurred under two non-dynasty prime ministers: Narasimha Rao and Atal Behari Vajpayee.
Admittedly, Rao headed a government led by the Nehruvian Congress party and had to defend the reforms of Manmohan Singh, his finance minister, as a continuation rather than repudiation of Nehruvian policies.
Vajpayee, heading Bharatiya Janata Party administration, had no such inhibitions, and under his watch, major economic reforms were undertaken which put the Indian economy on a growth path of 8 per cent a year.
But the Congress Party returned to office in 2004 at the head of a disparate coalition. With the dynastic matriarch Sonia Gandhi holding power, and the reforming 1991 finance minister Manmohan Singh as prime minister, the government embarked on a massive enlargement of welfare spending. The economic reformers in the government were thwarted by the coterie of NGO activists formed into the National Advisory Council of the Congress Party president (Sonia Gandhi). The economy’s growth rate has – predictably – slipped.
With the lower economic growth rate diminishing the tax revenues on which the enlarged spending on welfare had been predicated, a fiscal crisis was brewing until the government finally acted last year.
The prospect of losing the means to finance the welfare state that they wanted to create, forced Sonia Gandhi and her son Rahul to come out in support of the reformers in the government for the minimal reforms they had spent the past three years thwarting.
The basic problem is that the dynasty and its acolytes have never come out openly to develop a public consensus for the classical liberal economy that is needed to replace the defunct Nehruvian socialist model.
So the reformers within the party have had to reform by stealth. When the Congress-backed former finance minister Pranab Mukherjee became India’s president and announced that “trickle-down” from rapid growth cannot redress Indian poverty, it showed a shocking failure to recognise the outcomes of the recent period of rapid growth in reducing poverty at a speed that the failed Nehruvian model never delivered.
The expansion of unsustainable welfare entitlements lies in the failure of the Nehruvians to distinguish between two kinds of populism. The first, embraced by the Congress is redistributive with an extension of state largesse. It views the majority of its citizens as being dependent children who need the state to provide for them.
The other is to empower the people who are fully capable, autonomous beings held back by various impediments created by dirigisme, and the state’s failure to provide the basic public goods of law and order and the merit goods of health and education.
In regional elections last year, Rahul Gandhi, the Congress crown prince, campaigned on the first form of populist programme. His opponents – Nitish Kumar in Bihar, Akhilesh Yadav in Uttar Pradesh, and NarendraModi in Gujarat – based their campaigns on the second form of populism – and trounced him.
This in turn reflects a distinction in the beliefs of two wings of what I have termed Macaulay’s children**, who were the inheritors of Thomas Babington Macaulay, the Victorian reformer, who sought to create an English-speaking middle class in India.
The Nehruvian wing embraced English as its first language; followers of the Gandhian wing saw English as an instrumental second language but retained India’s native tongues as their primary languages.
As the primary language of a group determines the world view of the speakers, (see my Unintended Consequences***), the Nehruvians came to mirror their elitists European cousins and became infected with various forms of ‘noblesse oblige’ disguised as egalitarianism.
By contrast the Gandhian wing still wedded to their native tongues subscribed to Indian tradition. This as the sociologist Louis Dumont has emphasized in his Homo Hierarchicus**** was based on hierarchy, in which given the Hindu belief in reincarnation, promoting equality of outcomes (as opposed to opportunity) in this life, would reverse the just desserts which earned in a past life. The Hindu majority has thus always been an aspiring and not an egalitarian society.
Now that the Gandhian wing has accepted that tradition can coexist with the modernisation on which India’s future depends, it is much more in tune with the aspiring classes which comprise the majority of the Indian electorate.
This offers hope for the future. It is difficult to tell if the Bhartiya Janata Party, or some other combination of regional parties of the Gandhian wing, will be able to resurrect Vajpayee’s reform legacy, roll back the entitlement economy,and finally put an end to the Nehru dynasty’s dysfunctional hold on the Indian polity.
But, this remains the best hope for putting economic growth back on at 9-10 per cent a year that India is capable of achieving – and badly needs.
Deepak Lal is the James S Coleman Professor Emeritus, UCLA