After suffering a defeat, a less ideological Indira Gandhi, not a firebrand socialist anymore, came to power in 1980. Perhaps she had read or heard about the on-going reforms in post-Maoist China under Deng Xiaoping and how the leader had said that “I don’t care if it’s a white cat or a black cat. It’s a good cat so long as it catches mice.” She may have also realised that her anti-market, anti-big capital, and small-is-beautiful populism pursued earlier was not delivering the expected results in terms
of economic development.
In any case, there is little evidence of any ideological dogmatism in Indira Gandhi. She became the Prime Minister after Shastri’s death not because of her ideology, but because of her lack of it. She was “weak” and non-controversial relative to her adversary Morarji Desai, who was known for his decisiveness and dogmatism, and hence acceptable to all sections of the Congress party, including the Syndicate. Her ideological flexibility was manifest in the chequered history of her attitude to the communists. As president of the ruling Congress party in 1959, she got the first communist party government in Kerala dismissed on July 31, 1959, in spite of resistance from both her father Nehru and husband Feroze Gandhi.
A decade later, after the Congress split, she turned left and sustained her minority government during 1969-1971 with support from the CPI and pushed through a radical economic programme. The Soviet Union and by implication, the CPI, lent her support during the critical years of the Emergency.
In June 1975, however, she said that “I do not believe that a democratic society has the obligation to acquiesce in its own dissolution.” Then she also declared that Marxism had no place in Indian democracy.
Similarly, we will recall how, during the setting up of the public sector steel plant at Bokaro and the Bangladesh liberation struggle, Indo-US relations had nosedived and India had been closely identified as a member of the Soviet gang. After the Soviet invasion of Afghanistan on Christmas Eve 1979, the Janata government had condemned the act. After Indira’s re-election in 1980, relative to her predecessor’s, her reaction was somewhat muted. Her changed approach to world politics was also evident in her rapprochement with the United States and her highly cordial meetings with US President Ronald Reagan at Cancun in October 1981 and in the US in July 1982.
Simultaneously with her flexibility, one of her prime strengths was “. . . her symbolism of Nehru which. . . was in a sense false. . . but she could benefit . . . from her connection with Nehru without any inheritance of his reformism.” Her policies were primarily designed for furthering political ends, and the expansion of CPSEs provide a good example. Rapid expansion of employment and public investments in the CPSEs happened in the 1970s under Indira Gandhi, well after the Nehru era.
Employment in CPSEs went up from about 66,000 in 1970-71 to over 15 lakh in the mid-1970s with the nationalisation of coal and hydrocarbon industries. And so did investments. In 1984, near the end of Indira Gandhi’s rule, a news magazine observed: “The public sector is in sheer variety and size, a marvel of industrial development. It makes everything from bread and shoes to ships to satellites. But it does so in a most inefficient way. In 1982-83, its Rs 30,000 crore investment yielded a wispy profit of 2 per cent – a level at which no private investor could survive.”
CPSE expansion under Indira had little to do with the commanding heights of the economy. Indira Gandhi’s changed pragmatic outlook on the economic front was reflected in the approach to the Sixth Five-Year Plan which she launched in 1980.
After the First Five-Year Plan, the subsequent three five-year plans had fallen short of their growth targets and only the Fifth had met the target. Buoyant growth was crucial for the realisation of socio-economic objectives such as removal of poverty, generation of gainful employment and technological and economic self-reliance. The Sixth Five Year Plan categorically acknowledged this. Furthermore, it paid attention to capacity constraints, especially in sectors with relatively long gestation such as major irrigation, power, transport and steel, and eschewed the path of favouring quick maturing and directly productive projects for accelerating growth in the short run at the cost of growth in the medium- to long-run.
In the event, partly because of buoyant agriculture, the Sixth Plan met its growth target. Venkataraman was the finance minister under Indira Gandhi from January 14, 1980 onwards. He was succeeded by Pranab Mukherjee on January 15, 1982. They both operated under a “different Indira Gandhi” after 1980.
The telecom and cement industries provide good examples of the “different Indira Gandhi” after 1980. IPR 1956 had put the manufacture of most telecommunication equipment – telephones and telephone cables, telegraph, and wireless apparatus (excluding radio receiving sets) – under Schedule-A containing industries whose future development were to be the exclusive responsibility of the state.
The Indian Telephone Industries (ITI) was established as the first CPSE in 1948. It had a manufacturing plant in Bengaluru. Almost the whole output was sold to a single customer, the Department of Posts and Telegraphs (P&T). The inefficiency of the choice of technology, plant locations, fragmentation of capacity as well as too much emphasis on employment generation had led to congestion of telephone lines as well as long waiting times for a new connection.
There was a waiting time of over two years to get a landline telephone connection. India’s telephone density, or the number of telephone connections per 100 people, at 0.4 in 1981, was well below not only that in developing countries as a block (2.8), or Asia (2.0), or Latin America (5.5) but even Africa (0.8). The number of telephone connections in the whole country was slightly over only 1,00,000 telephones.
In a move away from the import substitution strategy, an electronic switching technology transfer was concluded with Alcatel in 1982. In August 1984, the Centre for Development of Telematics (C-DOT), under the autonomous Telecom Technology Development Centre of the Government of India, was set up to develop state-of-the-art telecommunication technology to meet the country’s telecommunication needs.
In 1983, the government moved telecommunications from the list of “luxury” industries to “core” industries and increased the scope for plan finance.
The cement industry’s path from February 1982 onwards provides another illustration of the difference between Indira Gandhi in the 1980s and Indira of the earlier period. From the Second World War, stringent controls on the cement industry across distribution channels, purchase
prices and quotas for open market sales had continued. Imports of cement were canalised through the STC ever since it was set up in 1956. STC also had the distribution monopoly. Purchase prices, based on plant age, technology and incentives for capacity addition, were of three kinds in 1958. Because of a lack of incentive, capacity in the cement industry had expanded from around 3 million tonnes in 1950–51 to only 22.8 million tonnes in 1978–79.
There was a severe shortage of cement and a great deal of so-called “black marketing.” The shortage, we will see, would even lead to scandals embarrassing the government. In February 1982, the government introduced partial decontrol through a dual price policy for cement – a levy price for government supplies and an open market price.
The levy quota was roughly two-thirds of installed capacity. The balance could be disposed of in the free market. The states could work out their own distribution machinery for quota cement. The levy price was raised, first in February 1982 and again in July 1984, to allow for cost escalations. Capacity expanded and cement output, which was 21.1 million tonnes in 1981–82, went up to 30.2 million tonnes in 1984–85.
Excerpted with permission from India In Search Of Glory: Political Calculus and Economy, Ashok K Lahiri, Penguin.