Was Nirmala Sitharaman's Union Budget this year inspired by Nehru?

Does a rose smell different because you call it by a different name? William Shakespeare almost always comes in handy to describe certain situations. This month, as economy-watchers cheered the 35% rise in capital expenditure by BJP-led NDA government’s finance minister Nirmala Sitharaman, ostensibly in an audacious effort to lift up sagging economic growth hit by the Covid-19 pandemic and much else, it pays to doff a hat to Pandit Jawaharlal Nehru -- and there are already folks who have dubbed the budget for the 2022/23 fiscal year as somewhat Nehruvian.

Quibblers will quibble. Er, isn’t Prime Minister Narendra Modi’s government selling off the crown jewels of Nehru’s public sector -- such as Air India and the Life Insurance Corporation of India? Didn’t it just wash off Neelachal Ispat Nigam Ltd to the Tatas, the same industrial house that has also acquired Air India? How can Modinomics be even remotely described as Nehruvian?

There’s also the claim that large-scale public sector spending to revive demand is Keynesian economics after John Maynard Keynes -- and hence there is nothing Nehruvian about it. Here’s where we need to understand how Nehruvian economics works. But before that, some more steps in the budget that smacks of Nehru need to be outlined.

The finance minister Ms. Sitharaman sounded upbeat about the production linked incentive (PLI) plan for manufacturers that is expected to create 60 lakh jobs over five years. This manufacturing programme is essentially a state-supported plan in 14 sectors with the potential to generate Rs. 30 lakh crore in production.

The scheme either goes to help increase exports (Read: Compete with China) or ensure greater self-sufficiency (Atma-nirbhar) through import substitution, thereby reducing imports. PLI schemes cover everything from drone components to mobile phones, with the government substantially planning the minutiae of the industries -- a far cry from the 1991 reform orientation that seemed to have a “Let the Market Decide” attitude (at least for a while).

The finance minister also promised sovereign “Green Bonds” to help the public sector meet climate change management goals of reducing India’s carbon emissions.

Be it the ‘Capex Mahotsav’, Green Bonds or PLI details, there is a lot in this year’s Union Budget that smacks of Nehru’s speech at the All India Congress Committee (AICC) meeting in 1955 where he spoke of the need to put the public sector at the “commanding heights” of the economy to create a “socialistic pattern” of society following which the Indian National Congress adopted a resolution.

The point to note is that the Avadi plan was not intended to supplant the private sector in a Soviet-style domination but was merely meant to steer it. After all, Nehru, who is “accused” by critics of being a leftist, is also slammed for supporting the intentions of the ‘Bombay Plan’ for industrialisation, proposed by private industrialists in 1944, laying down the outlines of an industrial vision for India. The Bombay Plan was published in the backdrop of the INC, which then had a National Planning Committee under Nehru’s chairmanship, an initiative undertaken by Netaji Subhas Chandra Bose as Congress President. Though proposed by private sector barons, state planning was at the heart of the Bombay Plan, which advocated a “mixed economy” blueprint for industrialisation.

An academic paper I came across listed well the objectives of the Nehru-led Second Five-year Plan launched in 1956:

“The objectives of industrial policy were: a high growth rate, national self-reliance, reduction of foreign dominance, building up of indigenous capacity, encouraging small-scale industry, bringing about balanced regional development, prevention of concentration of economic power, reduction of income inequalities and control of economy by the State”

There is no mention of concentration of economic power, regional development or reduction of income inequalities in the Modinomics scheme of things. And admittedly, this is where Modi is nowhere near Nehru. But a lot else is decidedly Nehruvian -- especially the need to reduce foreign domination and build up self-reliance (Atmanirbhar).

What is the PLI scheme but some kind of a “Bombay Plan” to have the state help private industrialists compete globally or pursue a “Swadeshi” model of manufacturing championed by the Congress party?

Now, let us look at the context in which Nehru’s Second Five-year Plan kickstarted the public sector. India had no industrial base to speak of then, not counting Jamshedji Tata’s magnificent steel city in what is Jharkhand now, textile mills, some steamships and some factories here and there built to help British war efforts.

Nehru effectively used state funding to create a public sector industrial base that in turn helped smaller private industries like a mothership. It is parts of that large edifice that are being privatised now. But it is clear that private industries cannot match up to the public sector in size and scale to fuel nationwide demand. They, in fact, hang by the coat-tails of public sector demand. In other words, the state remains at Nehru’s “commanding heights” -- with public sector industries being replaced by an equally public sector infrastructure projects as the driver of private demand.

You could call the plan Keynesian, yes. But a saying by monetary economist Milton Friedman comes to mind. “In one sense, we are all Keynesians now; in another, nobody is any longer a Keynesian,” he said in the context of everyone reluctantly embracing Keynesian economics in times of financial crisis.

Are we supposed to say: “In one sense, we are all Nehruvians now”? At least the Modi government’s urge to splurge taxpayer money and state borrowings to please the private sector shows that imitation may be the sincerest form of flattering Nehruvian economics.

(The author is a senior journalist and commentator on policy, political economy and governance based in Mumbai. Views are personal)

(This article was first published in National Herald on Sunday)