H C Singh

Decline in Indian Economy During Nehru’s Socialism From 1951-52 to 1965-66

The study is based on the book “India The Emerging Giant” by Arvind Panagariya, particularly the statistics provided therein Indian economy seems to have been led by Demand-Supply principle from 1951-52 to 1987-88 so it suffered particularly upto 1965-66. Connection Patris analysis has been followed to an extent half heartedly.

In this connection it will be pertinent to quote from Arvind Panagoriya book ‘India the Emerging Giant’ as under:

‘Demand verses Supply- If the economy is demand led the development and progress is slow. “Therefore the success of demand driven approach often depends on the governments taking necessary action to relieve the bottleneck stiffing the supply response” Accordingly Patrick in 1966 refuted this concept. Thus the supply-driven or supply-leading approach assigns the government a more active in building institutions and creating inter mediation instruments ahead of the demand… India actively employed this approach in second half of 1970’s and the 1980’s with respect to both the expansion of rural bank branches and what came to be known as priority sector lending” of course there are limitation to this approach of lending money by government to private entrepreneurs and firms who may siphon the amount for personal use and in due course declare the company bankrupt, Govt has to be vigilant, more vigilant than in other fields.”

Because of Nehru’s Socialist pattern of economy on to an extent in USSR model, economic progress right upto 1980 was very slow, if not negligible, for a newly independent country with very high hopes. Between 1951-52 to 1987-88 the economy grew at 3.8%. In contrast economy of Korea and South East Asia grew at rates of 8 to 10% per annum. I pursuit of socialism, 5 year plans were prepared in detail in all the spheres of economy by the Panning Commission which laid out detailed map of policies and ways to implement them. First Plan was for the years 1951-52 to 1956-57. With hopes of making Indian Socialism very successful and productive in all the economic fields so that other newly independent countries in South East Asia and Africa follow Indian model for their progress and economic development. Unfortunately for India in the Indian Variety of Socialism there was virtually no increase in per capita income. Instead of increase in employment opportunities there was decline. At the end of all three 5 Year Plans from 1951-52 to 1965-66 there has been, instead of rise, there was decline as per statistics. The lowest ever GDP recorded pulled down the growth rate for entire 3rd Plan period ending 1965-66 to miserable 2.8 percent while population was growing at the rate of 4 percent per annum.

To demonstrate the contrast between Socialist Economy and its the abandonment for free economy following figures of Poverty ratios as per Planning Commission from 1951-52 to 1995-96 are given. Rural, urban and National Ratios are given below:-

 Year                 Rural              Urban              National

1951-52            47.37            35.46                 45.61

1966-67           64.30            52.34                  62.90

 Poverty fell down remarkably in the decade after Socialism was completely abandoned and there is improvement in the condition of rural and urban Indian in all fields, agriculture, industry , service and electronic and management

         Year                                             Rural                        Urban                  National

July 1995 – June 96                      37.46                      28.04                          35.00

There is marked decline in poverty ratio in rural areas from 64.30 to 37.46 but in urban areas poverty has also declined significantly from 52-34 to 28-24 virtually down by 50%.

 In contrast when Socialism was abandoned for Free trade under Narsimha Rao with Dr Manmohan Singh as Finance Minister the economy grew quite fast as GDP in 88-89 was the highest at 10.5. While average GDP in 88-89 to 2008 has been 7% that means almost double the average population growth, thus improving the living standards of all below poverty line the middle class and of course much more of Upper Classes, Entrepreneurs, Technocrats and Business Managers.

 It will be seen what havoc to Indian economy was brought by Socialist Economy during 15 years of 3 Five Year Plans from 1951 to 1966 and in contrast what and how much Indian Economy improved when GDP rose from 3.5% to average 7 to 8 percent India, thus became Emerging Giant only after abandoning Nehru’s Socialist Pattern of Economy. The reason as to why Indian Socialism failed to usher in economic and social improvement of vast number of Indians below poverty line and unemployed was that controlled economy led to Inspector Raj in India—meaning increase in corruption all round which remained uncontrolled particularly in Rationing Department, Income Tax Deptt and Industries Deptt. There was all round neglect so there was all round decline in GDP, increase in poverty and unemployment.


December 30, 2009 Posted by | India, Indian Economy, Indian History, Political Commentary, Politics, World History | , , , , , , , | 1 Comment