Why Nehru’s Economic Model is Not a Failed Model

By Zulfiqar Sheth 

NehruWhile discussing in an event about Goods and Services Tax, Union Finance Minister Mr. Arun Jaitely said “Nehruvian model led to no development” He continued “That (Nehruvian) model of development was the reason India couldn’t get up to a growth rate of even 1 percent in those early decades”

The debate on Nehruvian  model of economic development continues for decades, Both opponent and proponent agree on the fact that even after 70 years of India’s independence we are terribly failed to provide urban amenities to rural areas, there is no significant change in the lives of rural masses, inequalities increased, and unemployment escalated at record high. But they differ on whom to blame ?

The first prime minister of India, Jawaharlal Nehru considered as an institution maker. He is the architect of the India’s greatest institutions. His secular, social views and rational, scientific temperament had lifted country to great heights.But they were his successors who constantly contributed in subsequent deterioration of the institutions Nehru built.

Swaminathan S. Anklesaria Aiyar on his blog writes that “It would be churlish to blame Nehru for this mess. He deserves the lion’s share of credit for India’s good institutions. His successors deserve the lion’s share of discredit for the subsequent deterioration.”

Nehru’s vision was to trickle down development fruits harvested from industrialization and institutions to Indian masses. And this step was well planned and had ample bases of economic theories. Dani Rodrik of Harvard University , a significant contributor to  literature on institutions, highlighted that Africa has failed badly to resolve internal conflicts, and so suffered in economic performance. India, on the other hand, has created a society  based on democracy and inclusion that has managed to resolve several economic crises.

In their paper titled Why India Can Grow at 7  Percent a Year or More: Projections and Reflections by Dani Rodrik and Arvind Subramanian concluded that  “Economic development results from the interaction of growth triggers with fundamentals that allow the triggers to be exploited. In the conventional view of the Indian development process, there was a long and dark period—the period of controls and import substitution—followed by the burst of sunlight and reforms since 1991. The boom in the IT sector first awakened observers to the facts that the dark age was not all dark; important cumulative elements (the fundamentals) were being built up that yielded rewards with a lag; and these fundamentals were as important as the triggers that sparked the IT boom. In this case, the fundamentals were the pools of skilled human capital built up through the technology, management, and research institutes—a sort of import substitution effort in skilled human capital—that were integral to the Nehruvian vision. ”

Nevertheless, the Nehruvian economic legacy went beyond the technical institutions: It included  the meta-institutions of democracy: the rule of law, free press, and technocratic bureaucracy that recent research shows are crucial to economic development.

Mr. Finance minister said the Nehruvian model did not help development because less than 1% of the population had a phone.True but it was Nehruvian fundamentals that enabled India to become second largest in the world based on the total number of telephone users. Yes our economic growth was slow and stagnant during first three decades after our independence, popularly known as the “Hindu” rate of growth. It was disappointing but not disastrous. But then following the same Nehruvian recipe of economic development (five years plans) the India saw nearly double-digit economic growth between 2005-06 to 2007-08. It is worth stating in the context that the India grew faster than China in the Nehru era.

(Zulfiqar Sheth is a PhD Research Scholar at the Department of Economics, Aligarh Muslim University, India. Can be reached at shethzulfi@yahoo.com )




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