As the elections approach, Narendra Modi strides across the political arena as if unchallenged. No other Prime Minister has exuded such brimming confidence in their public appearances, though some may believe that Indira Gandhi came quite close. Nehru, despite the adulation of his compatriots, mostly appeared weighed down by the responsibilities he had assumed and the restraint he had imposed upon his deportment. The understatedness, however, concealed a gameplan. This was to quicken India’s moribund economy, an aspect missed by most of his biographers who have invariably devoted much of their attention to Nehru’s foreign policy ambitions and internal political preoccupations.
Actually, in their focus on the economy, Nehru and Modi share a common factor. Nehru’s speech to the Constituent Assembly on August 14 had declared that the goal of independence was to “build up” a “prosperous” country. At the same time, he did express caution in assuming that this was assured. Modi, ever confident of his capabilities, has tended to be more emphatic. He launched his election campaign of 2014 with the unambiguous promise “Achche din aanewale hai”. For the majority in India, better days can only mean economic betterment.
In effect, both Nehru and Modi emphasised the importance of economic growth, and staked their political career on the progress of the economy.
Nehru’s position is revealed in the following statement he made in parliament in May 1956: “The whole philosophy is to take advantage of every possible way of growth and not to do something which suits some doctrinaire theory or imagine we have grown because we have satisfied some text-book maxim of a hundred years ago.”
Modi, who prefers his delivery upfront, considered the maxim “minimum government, maximum governance” sufficient. It is interesting to spot a character similarity between these two otherwise ideologically opposed politicians. Firstly, they did not shy way from declaring publicly what they intended to deliver, and gave the people an idea of how they would achieve it. This is a far cry from the behaviour of most of India’s politicians today. We don’t really know what they stand for.
So how do the records of these two powerful prime ministers of India stack up with respect to economic growth? The recent announcement by the National Statistical Office of an advance estimate of GDP in 2023-24 gives us data for the full decade for which Modi has been prime minister. This yields a definite picture. Far from having accelerated after 2014, the rate of growth of the Indian economy has slowed since 2016. This need not surprise. 2016 was the year of the demonetisation. Though only a temporary shock, as the money supply returned to its earlier level quite quickly, the shortage of currency could have triggered forces making for slower growth which feed-off of one another. The economy slowed for three successive years, and in 2020-21 it actually contracted. Not even the high growth rates post Covid have been sufficient to negate the impact of four years of progressively slowing growth. Everything points to the role of demonetisation in this as none of the exogenous drivers of growth, namely world demand, agricultural growth or public investment slowed at the time. Whatever may be the reason, we now know that the economic policies of the Modi government have not delivered faster growth to date.
The picture with respect to economic growth in what may be termed the Nehru era, lasting till his death in 1964, is stark. With the implementation of policies to revive the economy, gathered under the rubric ‘planning’, India’s growth rate accelerated in the first half of the fifties and remained steady till 1964. In the annals of twentieth century growth the Nehru era was pathbreaking. While we have reliable data only for the last fifty years of the Raj, we know that the colonial era was a time of stagnant, if not declining, per capita income. This trend was decisively reversed in the fifties. Per capita income has not stagnated since then, though growth faltered for about a decade and a half after the passing of Nehru. The transition in the fifties to a permanently higher growth path may be regarded as the ‘mother-of-all’ economic transitions in India’s recorded history.
What accounts for this differential record of Nehru and Modi with respect to economic growth? Above all, in the 1950s, Indian economic policy was guided by a definite strategy. This was to to try and energise an economy trapped at a low level of income via a big push to be provided through rising public investment. The reliance on public investment was entirely for practical reasons. It was believed that the private sector was unlikely to come up with the level of investment required to shock the economy into motion due to the long gestation period and high uncertainty involved. This strategy paid-off handsomely. As the Indian state invested, so did the private sector. Most would be surprised to know that during the Nehru era the expansion of the private sector’s investment exceeded that of the public sector. In the context, this should not surprise anyone, for, as public investment increases it generates demand, thus expanding the market to be had by the private sector. It is this mechanism that explains the ending of what is believed to be a period of about two centuries of stagnation in India.
Nehru succeeded where Modi failed because he had a strategy for growth. On the other hand, Modi’s advisors seemed to have encouraged him to think in terms of slogans – “minimum government”, for instance. The trouble is that the pursuit of minimum government can result in less of both public and private investment, as can be seen from the mechanism by which growth was achieved in the 1950s in India. It can also be seen in the fact that the private investment rate in India has barely budged since 2014, despite Modi’s avowedly business-friendly government. Having finally sensed the folly of being ideologically committed against a public presence in the economy. his government has used the last two budgets to unleash a blitzkrieg of infrastructure building before the ending of its term this coming May.
None of this is to even remotely suggest that the policies of the Nehru era were ideal. First, exports were ignored, which meant that there was no way of funding even the intermediate inputs and capital goods needed for the industrialisation drive, leave alone the defence equipment and crude oil. This showed up in the balance of payments crises that had plagued India in the fifties and sixties. Secondly, there was the momentous neglect of primary education, especially for women, which slowed the adoption of technology and better practices more generally, in every sphere of life. Human development would not only have led to a much faster eradication of poverty in India, it was the very promise of Indian independence. Perhaps the planners imagined that it would come along in the wake of growth. It did not.
It is not as if growth should be the sole economic indicator we ought to be concerned with but it is a matter of history that both Nehru and Modi chose to locate it at the centre of their economic policy. This makes it a criterion by which we may evaluate the difference they made to the economy in their time as prime ministers of India. Nehru quickened the economy in his time. Prime Minister Modi is yet to do so.
Pulapre Balakrishnan is an economist.
This piece was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been updated and republished here. To subscribe to The India Cable, click here.
