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January 01, 2006
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January 01, 2006

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Home > 2006 Issues > January 01, 2006

Economic strategy for national renaissance
The Search for the Hindu Agenda-3
By Subramanian Swamy

The Soviet economic model which Nehru had foisted on the unsuspecting trusting Indian public was an unmitigated disaster for the national economy. The Soviet model incidentally failed not only in this country but everywhere else in the world. Germany provides a clinching example of this failure. During World War II, Germany was completely destroyed and thereafter partitioned into two-West and East. The former adopted democracy and market economic system, while the latter was forced to adopt the Soviet economic model. After 45 years when the Berlin Wall fell, the world saw the stark reality: that despite being the same people on both sides of the Iron Curtain, West Germany had become a developed nation while East Germany was in a drab state with gross poverty, high food prices, shortages, unemployment, and of course thousands of political prisoners in jail. This same contrast comes out comparing China before and after market reforms, North and South Korea, and India before and after 1991. The mother country of the Soviet model-the USSR, broke up in 1991 into sixteen countries, each as poor as the other.

Thus, worldwide cross section data make for clear inference that for fast economic development, the essential pre-conditions are democracy and market economy. To hide this fact, Leftist economists describe India?s miserable growth rate of GDP at three and a half per cent per year, achieved under the pre-1991 Soviet model?s Five Year Plans, as a ?Hindu growth rate??that is a nation of Hindus cannot achieve a higher growth rate than that, no matter how wonderful was the Soviet system. Hindus were thus, according to these mortgaged minds, at fault and not the Soviet system. Narasimha Rao as Prime Minister, however, demolished that myth by boldly liberalizing the economy and thus doubling the growth rate. No wonder, the Left never forgave Rao, while the KGB? driven colleagues in his Congress Party disparaged him and even humiliated his dead body by refusing it entry to the AICC headquarters.

However, the Rao- introduced reforms were ad hoc and not fundamental. They were beneficial de-regulation in that it had helped free the Indian economy from suffocation of controls and licences. To make the economy healthy, however, the nation needs today restructuring and reconstruction. We have not only to move more completely to a market economy, but we need new forms of governance of the market forces in a globalised framework that is consistent with the ethos of this ancient country. That means in tune with the enlightened Hindu cultural traditions. Otherwise, devoid of our moorings, we shall be manipulated by international forces. East Asian economies, for example, were booming in the 1980s and 1990s, but they had poor governance norms. One day in mid- 1997, the US by manipulating the Wall Street bond market interest rates, set into motion a currency run and then a banking collapse. A major crisis resulted from which East Asia has still to recover.

Hence, while we cannot opt out of the ongoing globalization process, still we have to ensure that within that process our economy is sufficiently insulated from international raiders and speculators. The globalization that we accept must also remain morally adequate. Globalisation can alter values, spread disease more easily, and disrupt the family system that has been a great shock absorber in India against stress and uncertainty.

I must acknowledge that Pandit Deendayal Upadhaya had forseen the dangers of globalization and mechanical imitation of the West long before even the process had started. In his Integral Humanism[1965] he outlined the new economic strategy in embryonic form that is consistent with the nation?s chitti. Dattopant Thengadi, one of the most original thinkers of the post-1947 decades, had following Deendayalji?s ideas, and written a monograph on the conflict resolution required between market economy and Hindu human values. Based on his work, I had for the Friends of India Society International?s 1978 New York conference re-stated Deendayalji?s ideas in modern economic jargon in an article published by the conference organisers.

Unfortunately, Gandhian Socialism took hold of the centre stage, and thus Integral Humanism could not be further developed into a comprehensive plan of action for national renaissance. Nehruism thus had survived change of governments.

But thereafter, unfortunately, Gandhian Socialism took hold of the centre stage, and thus Integral Humanism could not be further developed into a comprehensive plan of action for national renaissance. Nehruism thus had survived change of governments.

Time is, however, now at hand to bury Nehruism forever for the future glory of India. We need to do that by adopting an alternative policy framework, for which Integral Humanism can be a beacon light.

Briefly stated, Integral Humanism recognized that in a democratic market economy, an individual has a technical freedom of choice, but the system, without safeguards, fails to accommodate the varying capabilities and endowments of the human being. Since the concept of the survival of the fittest prevails in such a system, therefore some individuals achieve great personal advancement while others get trampled or disabled in the ensuing ?rat race?. We need thus to build a safety net into our policy for the underprivileged or for the disabled while rewarding the meritorious and the gifted.

Since maximum profit is enthroned as the goal in a capitalist system, hence the human being has to adjust to the terrifying demands of technology rather than technology adjusting to the integral needs of mankind. Thus a new economic strategy for national renaissance based on Integral Humanism, has to focus on enlightened governance and harmonious conflict resolution of various human interests that drive the economy in different directions. Hindus have done it for centuries through varna ashrama dharma in which the four sources of power: vidya, simhasan, dhana, and bhoomi were not to be concentrated in any one person but dispersed. Unfortunately the concept got corrupted by the adoption of birth-based caste system and untouchability?neither of which is in our vedic scriptures.

The Rao-introduced reforms were ad hoc and not fundamental. They were beneficial de-regulation in that it had helped free the Indian economy from suffocation of controls and licences. To make the economy healthy however, the nation needs today restructuring and reconstruction.

What does all this mean in practical terms? It means that in framing an economic policy consistent with our time-tested value system, we must identify clearly our objectives, priorities, the strategy, the techniques of resource mobilization, and the institutional framework.

Our economic objectives have to be (i) full employment in ten years; (ii) agricultural modernisation; (iii) substantial poverty reduction; (iv) adequate defence preparedness (v) educational opportunities for all and empowerment for innovation; (vi) become developed country by 2025.

All this would require a ten per cent growth rate in GDP, which at current efficiency in capital use implies a rate of investment in excess of 30 per cent of the GDP[present is 25 per cent], a defence budget of 5 per cent of GDP[present is 2.5 per cent] and 6 percent of GDP for human resources development [present is 3]. These are achievable through a proper strategy.

For a proper strategy, we have to first decide on the priorities amongst these objectives. Obviously, any economic policy for India must be designed as a first priority to generate jobs for the people, otherwise the policy would be discredited. This is the mistake Narasimha Rao made, and hence he had to lose an election even though his reforms received world wide appreciation. In other words, policy changes must bring some immediate relief to the people even though the goal of the changes may be long-term. Moreover, a society cannot be strong unless there is full employment. Similiarly, agricultural modernization must be our second priority since rural areas are where even today 65 per cent of our people live, and where much of India?s abject poverty and unemployment can be seen.

We, thus, must devise the economic strategy keeping these objectives and priorities in mind. What that is, I will write in my next column.

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