Thursday, November 17, 2011

Impact of History on Economy of India

Well one of my friend once asked me that he wants to learn more about the Indian economy and he asked me how to approach. I told him that he has to first learn about the history of India to understand the economy of India.

History has an impeccable influence on the current state of economy of India. To start with Indian was never a pure agriculture based society even in the ancient history. Even in ancient times, we have a full fledged industry dotted by medical practioners, goldsmits, textile, services etc. In fact India was perhaps more vibrant economy than the west till late 1000 AD. The real decline of India started after the plunder of the wealth by the invaders from current Afghan region. Later on Muslim rulers, made the real dent, they robbed India of the trust and social coherence factor, most critical factor for business to survive. Crony Capitalism entered India for the first time during Akbar regime. Akbar was afraid of the Hindu strength and hence he started a lot of equity related reforms. Most of the rules in business space was influenced by the interest of the courtiers.

Though Mughals plundered India to satisfy their whims and fancies (100 wives of Akbar, 40000 people for Taj Mahal are proof of this), the English were planned in their plundering of India. They systematically introduced the private land ownership, substituted the Indian handicraft industry

He has read a lot of Gandhi and was confused as "Why India did not adopted the Gandhian Model of development after independence?". Gandhi model of development was decentralized (Sarvodya - Gandhi translation of Ruskin Bond "universal uplift" of "unto the last") by Nehru's model ended up being  that of centrally strong planned economy. One strange question was regarding the 5 year planning process. Nehru had nostalgia of "centralized planning" from his appointment as chairman of "National Planning Commission" in 1938. Though this has been copied from the Russian Model of economic planning, it has unique Indianess in that Nehru could not dare to challenge the established big corporate houses of that time. Corporate houses have used the congress leaders as a deterrent to some time protect their interests. In fact Nehru (as well as congress) was heavily under influence of the "Bombay Plan" of influential corporates of that time under leadership of Adarsh Dalal.

Crony Capitalism strengthened its roots once again when same Adarsh Dalal was made chairman of "Planning and development department" in 1944. Gandhi has a different opinion as stated by the S.N. Agarwal and M. N. Roy in 1944 to promote
1. Small Scale
2. Labor Intensive
3. Rural Industry

Central Planning was key to Indian economy till 7th plan and was replaced by "Indicative Planning method of France" in the 8th plan.

No comments: