In my last blog which is a prequel
to this one, I wrote about how Mr. Nehru and his socialist principles led the
economy of this nation to a fully blow debacle. I received various feedbacks on
the same, mostly converging to the argument that my dissertation was mainly
theoretical and not political. People are right if they expected me to address
political issues too when I talked about the failure of a federal government.
Some also argued that 1962 war with China and our miserable defeat in the same
gave a major blow not only to this country’s economy but also to its self
esteem. I agree that China war was a disaster, but its seeds were grown over a
decade before it actually happened, most important of them being 1959 Tibetan
uprising which Nehru govt supported and issues over Himalayan borders near
Sikkim which was not a part of India then. (Sikkim was under the suzerainty of
India, which controlled its external affairs, defense, diplomacy and
communications, but Sikkim otherwise retained administrative autonomy. It
became an Indian state only in 1975.) While Indo-Chinese war per se could a
subject of another blog, it certainly isn’t the excuse with which Nehruvian
government could vindicate itself. Our economy could have been saved despite
the war, but it wasn’t. The point here is that I did not focus on politics in my
earlier blog as Nehru never experienced any vote deficit. He was at the helm of
Congress party which literally ruled the country unequivocally at his times,
thanks to people’s belief that Congress got this country free from British
rule. No political crisis occurred in his era and so, it can be said that all
policies he advocated were free from any political pressures or
majority-deficit encumbrances. The political
crisis came in his daughter’s era and hence, this blog is completely political
!!
While I can’t say that I am
against Indira Gandhi (IG), I must purport that blunders in economic policies
continued in her era too. By the time she became PM in 1966 following death of
Lal Bahadur Shastri (LBS), Congress was already split in two factions, the
socialists led by IG and the conservatives led by Morarji Desai. The internal
problems showed immediately in the 1967 election, where Congress lost nearly 60
seats winning 297 seats in the 545-seat Lok Sabha. IG had to accommodate Desai
as Deputy Prime Minister and Minister of Finance. In 1969, after many
disagreements with Desai, the Indian National Congress finally split. She ruled
with support from Socialist and Communist Parties for the next two years. The
fundamentally socialist upbringing by her father and her complete political
dependency on leftists at the very beginning of her political career made its
due impact on her mind and our country started racing, not walking, towards
becoming a soviet clone.
The results started showing
almost immediately. Her government issued an ordinance ('Banking Companies
(Acquisition and Transfer of Undertakings) Ordinance, 1969') and nationalized
the 14 largest commercial banks in the country with effect from the midnight of
19 July 1969. These banks contained 85% of bank deposits in the country.
Jayaprakash Narayan described this step as a "masterstroke of political sagacity”. I am currently reading
one Nani Palkhiwala’s book called ‘We, The Nation’ where he argues that
ordinances are to be used only as an exceptional last resorts when the
legislative assembly couldn’t function properly. However, IG used these
ordinances as her routine lawmaking tactic, challenging the Indian constitution
itself. A second dose of nationalization of 6 more commercial banks followed in
1980. The stated reason for the nationalization was to give the government more
control of credit delivery. With this second dose, the government controlled
around 91% of the banking business of India. Can you imagine? 91% of the nation’s economy being controlled by a
single person!
The period of 1967–75 was
characterized by socialist ascendency in India which culminated in 1976 with
the official declaration of state socialism. IG not only abandoned the short
lived liberalization program started by LBS but also aggressively expanded the
public sector with new licensing requirements and other restrictions for
industry. She re-launched the Five-Year plans in 1969, which were stalled by
LBS to start damage control by focusing on annual plans with micro-planning. Having
been re-elected in 1971, Gandhi proceeded to nationalize the coal, steel,
copper, refining, cotton textiles, and insurance industries. During the 1971
war against Pakistan, foreign owned private oil companies had refused to supply
fuel to the Indian Navy and Indian Air Force. In response, IG nationalized oil
companies too in 1973. After nationalization, the oil majors such as the IOCL,
HPCL and BPCL had to keep a minimum stock level of oil, to be supplied to the
military when needed. Gandhi claimed that only "clear vision, iron will
and the strictest discipline" can remove poverty. If at all there is
someone who still doesn’t see this as socialist, let me tell him that she also
signed the Indo–Soviet Treaty with Soviet Union in August 1971, which was in
stark deviation from India's previous position of Non-alignment in the Cold
War.
On 12 June 1975, the High Court
of Allahabad declared IG’s election to the Lok Sabha void on grounds of
electoral malpractice, since it was held that she misappropriated government
funds for her election expenses and campaigning. The court thus ordered her to
be removed from her seat in Parliament and banned her from running in elections
for six years. Since a PM has to be a member of either Lok Sabha or Rajya
Sabha, this decision effectively removed her from PMO. She refused to resign
and expressed her willingness to challenge HC order in Supreme Court. Nationwide
protest movements started following her autocratic leadership. IG govt
recommended then President Fakhruddin Ali Ahmed to declare a state of emergency,
which he immediately declared on 26 June 1975. What an obedience! Within a few
months, President's Rule was imposed on the two opposition party ruled states
of Gujarat and Tamil Nadu too, thereby bringing
the entire country under her direct control. Now she could do anything!
Police were granted powers to
impose curfews and indefinitely detain citizens. All publications were
subjected to substantial censorship by government. Impending legislative
assembly elections were indefinitely postponed, with all opposition-controlled
state governments being removed by virtue of the constitutional provision
allowing for a dismissal of a state government on recommendation of the state's
governor. President Ahmed also issued ordinances that did not require debate in
the Parliament, allowing IG to rule by decree. Rule by decree allows the ruler
to arbitrarily create law, without approval by a legislative assembly. So, it’s not new for this country that the
President is henpecked by the head of Congress party. As if this analogy is
not good enough for someone to know whom I am talking about, let me give one
more similar analogy. IG openly favored her son Sanjay, who had no
qualifications or credentials to satisfy the needs of the offices he headed. In
1971, when IG govt proposed the production of a "People's car"—an
efficient indigenous automobile that middle-class Indians could afford, Sanjay
was awarded the contract and the exclusive production license though he had no
experience, design proposals or tie-ins with any corporation. I wonder how many
know that ‘Maruti’ company was Sanjay’s foundation. Even while he had not been
elected and held no office, Sanjay used to exercise his influence with cabinet
ministers, high-level government officers and police officers. In one famous
example, I. K. Gujral resigned from the
Ministry of I&B when Sanjay attempted to direct the affairs of his ministry
and give him orders. He was promptly replaced by V. C. Shukla who was Sanjay’s
confidant. In another incident, after popular Bollywood singer Kishore Kumar
refused to attend a function of the Indian Youth Congress, his songs were
banned on All India Radio upon Sanjay's insistence. Look who’s ruling the
country!
IG, being the ultimate ruler,
shackled Indian economy further by undertaking a massive redistribution program.
The provisions included rapid enforcement of land ceilings, housing for
landless laborers, the abolition of bonded labor and a moratorium on the debts
of the poor. Lenin did the same in Bolshevik
Russia. Stalin did the same in Soviet Russia.
In 1977 elections that followed
emergency, Congress party was crushed totally. Indira and Sanjay Gandhi both
lost their seats, and Congress was cut down to 153 seats (compared with 350 in
the previous Lok Sabha), 92 of which were in the south. Janata Dal claimed
victory and came to power. But a seasoned politician by now, IG knew her way
out. When the new govt ordered for her arrest on the charge of planning a
conspiracy of killing their leaders in jail during emergency, she gave so
melodramatic speeches that people almost forgot that this was the same lady
which once ruled them mercilessly. She knew very well that Janata Dal govt was
multi-aided and could tumble at any time giving her a chance to reclaim what
she had lost. Her arrest and long-running trial gained her great sympathy from
many people. Soon, the differences amongst the leaders of new govt surfaced and
Desai resigned in June 1979 as PM after Charan Singh and Raj Narain formed
their own breakaway party. Charan Singh was appointed Prime Minister, by
President Reddy, after IG promised him that Congress would support his
government from outside. Just after a short interval, Congress withdrew support
and President Reddy dissolved Parliament in the winter of 1979. Before the 1980
elections, IG approached the then Shahi Imam of Jama Masjid and entered into an
agreement with him on the basis of 10-point programme to secure the support of
the Muslim votes. In the elections held in January, Congress was returned to
power with a landslide majority. Shrewd, isn’t she?
Her audacity went on increasing after this victory and she even
challenged the global leaders as well. I remember reading in a biographical
piece on Richard Nixon (US president 1969-74) that he used to call her “witch”.
During 1971 Bangla-war when US openly supported Pakistan and mobilized their
seventh fleet of navy (incl. USS Enterprise, the longest naval vessel in the
world) to Indian ocean, Indian bureaucracy started shaking legs and Indian
media started advocating govt to begin talks with US, but IG wasn’t moved a
bit. She flew to Russia, talked to Brezhnev, Russian Premier, and declared from
Moscow radio only that India was not afraid of US navy and was ready to fight.
Within 2 days, Russian navy came to Indian seas armed with nuclear missiles and
US immediately retreated. Nixon later wrote- “this woman suckered us”! With the same impudence, she went ahead
with Operation Blue Star which finally turned back on her and she was assassinated
by her sikh bodyguards in 1984. Her
politically ambitious son Sanjay had already died in a plane crash in 1980 and
his younger brother Rajiv, a passive guy who otherwise would have pursued his
aviation career as a pilot, came to power. India got its youngest and best
looking prime minister ever!
Rajiv did try to liberalize the
economy and commenced reducing the restrictions of license raj. He also brought
onboard Sam Pitroda and paved the way of Indian telecommunication revolution,
which was an amazing achievement and he deserves full credit for that. But,
after reading Rajiv’s biography, I am of the opinion that he was still naïve to
understand economy and instead tried to become larger than life character. He
was a professional pilot and his ambitions too weren’t any lesser than horizon.
Instead of totally focusing on what he had started rightly, he again resorted
to traditional five-year plans, delegated the administrative functions to his
confidants and himself plunged into world politics. Sri Lanka was his special
attraction!
This small island was extremely delirious
for both US and USSR, due to its strategically important geographical location
in Indian ocean. Rajiv initially succumbed to political pressure from his south
Indian alleys and supported LTTE and set up camps in India to militarily train
the LTTE extremists to make them able to fight with Lankan army. He was of course
persuaded by Russia for the same, as Sri Lanka could have been a good military
base for Russia as an answer to US owned island Diago Garcia in Indian ocean,
where US had placed their nuclear missiles having capacity to hit any major
city in Asia. For this favor, Rajiv
received regularly huge moneys from Russia and KGB. After his death, in 1992,
two Indian newspapers, Times of India and The Hindu, had published reports
alleging that Rajiv Gandhi had received funds from the KGB. The Russian
government confirmed this disclosure and defended the payments as necessary for
the Soviet ideological interest.
However, soon Rajiv understood
that things had started slipping out of his hands, as LTTE became too powerful
and went out of his control. Western countries including UK and US started
directly providing arms and ammunitions to LTTE to turn it against India. Rajiv
tried to regain supremacy by military action on LTTE rebels. Indian army
intervened with full force in 1988 Maldives military coup and helped Maldives
army to gain control over LTTE sponsored fundamentalists. Also, Rajiv deployed
Indian Peace Keeping Force (IPKF) to Sri Lanka to restore order and signed a
pact with Lankan govt, ordering militants to surrender weapons and come for a
political dialogue. RAW had completely underestimated LTTE’s power, which later
killed Rajiv in 1991 during his election campaign in Tamil Nadu. I was shocked to learn that his killers had
taken their military training in RAW’s Nainital camp during the time India
supported LTTE.
Following Rajiv’s death, India got its most economically prudent
prime minister - P V Narsinha Rao. As per me, he is the best Prime Minister
of India (in terms of his contribution to national economy) till date and I
would rank him even above A B Vajpayee. It’s his misfortune that Babri Masjid
demolition happened during his tenure and Congress made him sacrificial lamb to
save party’s face, otherwise he would have been given due credit for 1991
economic reforms that transformed the socialist economy of this country into a
meaningful, competitive and efficient economy. Some coin this paradigm shift as
capitalistic, but I would say it was a controlled liberalization, just the way
it was necessary at that time. He was the man who literally carried Congress on
his shoulders for 5 years after Rajiv’s death. But Congress is such a mean
organization that it did not even allow Rao’s body to be taken inside AICC
building, after his death in 2004.
1991 happened, Manmohan Singh
took the credit, our economy survived and this nation was saved from the
ignominy of bankruptcy.
…and we are back to 1991 again
today !!
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