Modi is a Second Nehru

As I have pointed out in the past, the present government of Narendra Modi in New Delhi is nothing more than a shadow of the past Nehru government as far as it comes to the matter of economic policy. Let me point out the similarities between both governments. 

Nehruvian economic policies 

  1. Planned economic development
  2. Modern type of industrialization with its emphasize on heavy industries
  3. Protectionism (inward looking or import substitution) 

Nehru’s economic policies basically were socialist in nature. He based his policies on the example of the then USSR policies of five year central planning by the central government. Foreign trade was frowned upon and discouraged heavily by the use of policies of import substitution and import taxes and quotas. Heavy industries were promoted by the government via license raj where a handful of industrialist like Bajaj, Birla and Tata etc., benefited immensely while leaving behind smaller independent entrepreneurs who didn’t have enough political clout to win the licenses. 

The present BJP government in New Delhi has continued these policies in various forms. Their policies are basically the same old wine in a new bottle of Hindu nationalist rhetoric. For example, after coming to power Narendra Modi changed the name of the old planning commission to NITI (National Institute for Transforming India) Aayog, reflecting his Hindu nationalist ideology, instead of dismantling it. NITI Aayog continues the central planning work of old planning commission in a different guise. Modi’s development model is also based on heavy industrialization of the economy where a few industrialists like Ambani or Adani are benefiting at the cost of the whole population. 

And just like Nehru’s secular nationalism Modi’s Hindu nationalism is also based on protectionist policies. It can also be seen in all other sectors here, only the names are different. Instead of import substitution we have make in India policy. Instead of inward looking policies, Modi has policies like Atmanirbhar Bharat. Former chief economic advisor of Modi government Prof. Arvind Panagaria showed this reputation of the past and resigned from his position. After his resignation he penned a warning article where he compared Modi’s policies with Nehru’s. He said, 

When GoI raised custom duties on a number of products in December 2017, as an eternal optimist, I took the view that this had been done for revenue reasons. But increases in duties on a long list of products ranging from kites and footwear to cellular mobiles phones and motor vehicles in Budget 2018 have ended that optimism.

Indeed, revenue secretary Hasmukh Adhia has explicitly stated that the duties have been levied, not to raise revenue, but to provide protection to micro, small and medium enterprises (MSMEs). Adhia adds, “We have a phased manufacturing programme in electronic manufacture industry for which increasingly we will be putting more duty on the final product, then on second level of spare part and third level of spare part.” …

For those of us old enough to remember the India of the 1960s to the 1980s, this is déjà vu. Thanks to ultra-high protection and tight internal regulation, India was condemned to per-capita growth rate of less than 2% during 1950-51 to 1990-91. Imports as a proportion of the GDP, which did not even once touch the 10% mark during the four decades, fell to as low as 4.1% in 1969-70. Exports were consistently lower yet. …

No matter how much Narendra Modi tries to differentiate its government from past Congress government of Nehru, his policies are nothing but a shadow of Nehru’s policies. Combined with his Hindu nationalism, these economic policies are destroying India from the inside. It seems that is the fate of the Indian nation state in the end. 

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2 thoughts on “Modi is a Second Nehru

  1. Rohan Mehta says:

    Dr. Madhusudan
    Sir, how what is your opinion on 1991 Economic reforms? It is said it was a gamechanger. However, I seem to come to conclusion that due to coincidence with emergence of Internet and World Wide Web, the IT industry benefitted and, because of this, there was an illusion of growth which seems to now running out of steam. India was hailed to create an economic model that seems to jump directly from primary sector namely agriculture and allied activities to tertiary sector namely service sector, completely bypassing the secondary sector i.e. manufacturing etc. Sir is this not abnormal and may result in grave consequences for India? Thank You.

    • Mises India says:

      1990s reforms were forced by the market forces on then government. It wasn’t a choice, but a no option because of circumstances. It was hodgepodge attempt of opening the economy. Even that hampered market approach benefitted Indians as always happens with markets.

      Any kind of central planning is going to be bad only for a country.

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