The derailment began in 1991, with the World Bank, IMF loan, and the Liberalisation, Privatisation, and Globalisation agenda.
Post – Independence Economy
We were left with a depressed economy. From 1900 through 1947, the average annual growth rate was under 1%. Capital formation was less than 10%, investment rate was less than 10%, population growth was 2%, and literacy was under 15%; we had less than 500 universities in the entire country. Most villages lacked access to electricity. Instead of a capitalist or a socialist system, we chose a mixed economy.
The Next 30 years
In the following three decades, our economy had an average growth of 3.5% (4 times that of preceding years). In the 1930s, the richest industrialists of the society envisioned the Bombay Plan. According to them, private sector investment in long-term projects was not feasible, and only the government was asked to invest in capital-intensive projects. As a result, 5-year plans were developed with an emphasis on the public sector and public services. This led to a 3.5% growth.
We were procuring food from the United States under Public Law 480. The US wanted India to be subservient, but we preferred non-alignment. It enraged the United States, and they offered support to Pakistan. We had a war with Pakistan two years after independence, which damaged the economy, and then we had a war with China in 1962, which also affected the economy. Following that, in 1965, we had a war with Pakistan, which exacerbated the situation.
After the death of Lalbahadur Shastri in 1965, Indira Gandhi became the Prime Minister and focused on social development through the Public Sector and Public Services. SBI was nationalised from the Imperial Bank of India in 1955. In the same year, the RBI established Agricultural Credit – Long Term Operation Fund and the Agriculture Stabilisation Fund. In 1956, the Life Insurance Company was founded by nationalising 240 failing insurance companies. Co-operatives and co-operative banks were established in 1960. 14 banks were nationalised in 1969. Regional rural banks were established in 1976. We used to have 96 RRBS, however, that number has since been decreased to 43. NABARD was established in 1982 solely to improve agriculture and rural development. The economy was altered by advances in science and technology, power, steel, and infrastructure. We had three revolutions: the Green Revolution, the White Revolution, and the Blue Revolution. We rose to prominence in the pharmaceutical and vaccine industries. The Green Revolution in agriculture changed everything. We export food, therefore famines such as the Bengal famine do not occur. The economy experienced tremendous growth.
There was another conflict with Pakistan in 1971, and as a result, Bangladesh was formed. In 1973, oil prices rose because of an OPEC oil embargo, which caused the nationalisation of the oil industry. Despite this, we experienced a 6% average growth, mainly because of the Public Sector and Public Services.
The year 1992 marks the start of derailment and destruction. Dr Manmohan Singh was the Finance Minister. He previously served as Vice Chairman of the Planning Commission and as the Governor of the Reserve Bank of India. If the previous policies were terrible, he was also to blame. When questioned by the Congress Party’s Parliamentary Board, he sought three years to make things right. 30 years have passed. The situation has deteriorated.
Various policies contributed to the derailment of our economy. Renowned economists proposed various solutions, but Narasimha Rao and Manmohan Singh went to the IMF and World Bank. I’m not saying that anything before 1990 was good. Education and healthcare were not free, the Zamindari system and kingdoms were abolished, but no land reforms were implemented except in Kerala and Bengal. Unemployment and underemployment were both on the rise. Reforms were required to eliminate corruption, improve production efficiency, eliminate caste, and provide free education and health care.
Instead of that, the $3 billion from the IMF and $500 million from the World Bank put the country in conditions known as the Structural Adjustment Programme.
The IMF’s conditions were, high taxation and austerity, restructuring foreign debts, creating new financial institutions, improving governance & fighting corruption, raising prices of public services, resource extraction & direct export. While the World Bank’s conditions were- to eliminate budgetary support to PSUs, eliminate interest subsidies in credit schemes, set up mutual funds in the private sector, restrict government guarantees only to strategic PSUs, close non-viable PSUs, disinvest at least 20% of PSU equity, increase private equity to 49%, and many more.
How were reforms implemented?
In 1994, the telecom sector was opened to private investment, private aircraft were permitted, private courier services were launched, PSU shares were sold, and import restrictions were lifted. Coal mines were made available to the private sector. The guaranteed pension was phased out, and a new pension scheme was implemented. Outsourcing services in the government and public sector began and are now speeding up. Subsidies are reduced in certain cases, and subsidies are eliminated in many others. Almost every industry has been liberalised. Thousands of openings in the health sector have been eliminated. The number of drugs under price control has been reduced. India, which was once the world’s pharmacy, has now become an importer of many medicines.
Beginning of The Total Destruction
From the year 2014 onwards, everything took a turn for the worse. “The government has business to be in business….. The public sector was born to die,” declared the Prime Minister. Demonetization in 2016 triggered an economic disruption. GST – The Goods and Services Tax (GST) was implemented in July 2017 amid widespread misunderstanding. NITI Aayog, which is operating as Aniti Aayog, claims that it seeks to promote 5-6 Global Champions to lead the economy. Covid-19 and the unannounced lockdown decimated MSMEs and jobs. The freebie’s argument has now begun. It is handouts for the poor, but it is commercial support for corporations. The Asset Monetisation-National Monetisation Pipeline represents a complete sale of the family silver. The MANTRA-Fascism is rising in popularity among rulers and their masters. Savarkar, Gowalkar, and others’ ideologies encourage the rich, promote caste inequality, and use religion to separate people, although every religion promotes unity.
Are we at crossroads? Did the free market theory work? Amrit Kaal is a non-existent utopia. Inequality has reached its peak in the last 8 years. The Union Government financially discriminates against the states. Despite the Finance Minister’s appeal to the corporates, the private sector is not ready to invest. Adani has risen to become the world’s second-richest person. What incredible magic! Where did he get his money from? The answer is banks. Mostly, the public sector banks are financing him. Today’s wealthy choose to live in other nations, and capital flight is common. Today, education, health care, banking, life insurance, and railways are privatised. If we do not fight today, our children will not have a tomorrow.
To repair the present, we must battle against the government’s policies. The public sector and public services alone can create jobs and save the country.
Thomas Franco is the former General Secretary of All India Bank Officers’ Confederation and a Steering Committee Member at the Global Labour University.
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