economic growth

Is it true India’s income growth beat the world average only when Nehru-Gandhis were not in power?

Not really.

Over the last few days, an exchange between Congress president Rahul Gandhi and an author in Singapore has gone viral. In typical internet fashion, the video has been edited and interpreted to mean different things to different people. To supporters of Rahul Gandhi, it is proof that he is willing to face tough questions from ordinary people, unlike Prime Minister Narendra Modi. To detractors, it is evidence that the Congress leader has no answers for difficult queries and simply attempts to deflect from them. A look at the top YouTube videos covering this exchange gives a sense of this division.

For many others, the content of the question, by Prasenjit K Basu, an author, has become a talking point. Basu, who has recently published an economic and political history of Asia, asked Rahul Gandhi why India’s per capita income had grown above the global average only in the years when a member of his family – referring to Jawaharlal Nehru, Indira Gandhi and Rajiv Gandhi – was not prime minister.

Here is a transcript of the somewhat testy exchange:

Basu: “My name is PK Basu. I’m the author of a book called Asia Reborn. The first comprehensive economic and political history of the whole of Asia. And, my question is this. I also teach economic history to students in Business School. My question is this: why is it that during the years that your family ruled India, India’s per capita income was growing less than the world average. And yet, in the years since your family reliniquished the prime ministership of India, India’s per capita income has grown substantially faster than the world.”

Rahul Gandhi: What is your hypothesis?

Basu: I asked you a question, my hypothesis is in my book, please read the book. It’s called Asia Reborn.

Rahul Gandhi: You are giving a hell of a lot of power to one family.

Basu: Since you asked me a counter question, let me just elaborate the question a bit. At the point of Independence, India’s per capita income was one of the lowest in the world. India’s life expectancy at birth was 32 years, the lowest in the world. Africa’s average was 38. So when you are the poorest country in the world, you should be growing faster than the world average in order to close the gap. Unfortunately, during the period of your family rule, India did not achieve that. That’s my question, why?

Rahul Gandhi: Do you agree that India is a success today?

Basu: Of course. A relative success, since your family has relinquished the prime ministership. Since then, not before.

Rahul Gandhi: So you’re saying, for example, that I had absolutely no role in Indian politics from 2004 to today. You’re saying that? Make up your mind. Either I have a role or don’t have a role. You can’t give me both options.

Rahul Gandhi does not engage with the basic part of the question and instead only picks up on one of the inferences, that he and his family had nothing to do with the tremendous economic success of India between 2004 and 2014, when it was ruled by the Congress under Manmohan Singh. That may almost seem to be a concession.

But is the premise of the question itself correct? Was India’s per capita income higher than the global average only when someone other than a Nehru-Gandhi was in power?

The World Bank has maintained such data for both India and the world since 1961, so it is easy to do a comparison. This does not cover the first 13 years of independent India, when Rahul Gandhi’s great grandfather, Jawaharlal Nehru, was in power. But it does include the Indira Gandhi years, from 1966 to 1977 and from 1980 to 1984. It also covers Rajiv Gandhi’s prime ministership, from 1984 to 1989.

As these two charts show, Nehru’s last few years and Indira Gandhi’s first term saw India’s GDP growth per capita suffer, although it is important to remember that those years included three wars – with China in 1962, and Pakistan in 1965 and 1971.

But starting 1980, India has almost always beaten the global average of GDP per capita growth – and this includes years when Indira Gandhi and Rajiv Gandhi were at the helm.

Meanwhile, on twitter, some users pointed out that even for the early Nehru years, any assessment of GDP growth has to take into account a country emerging from centuries of exploitative colonial rule and the horrors of Partition. Others, of course, disagreed.

Simplistic premise

Again, it appears that during the first few years after Indira Gandhi became prime minister in 1965 growth did stagnate. But Basu has stuck to his guns, insisting on looking at the average of income growth between 1950 and 1980 and saying this was anemic. The family-focused question that Basu asked in Singapore is not one he sticks to even in his own book, in which he points out that during the Emergency under Indira Gandhi,

“not only did real GDP grow 9 per cent in FY 1975-76 (the fastest growth for any year until that time), but India also had a current account surplus, the trains and planes ran on time, and the cities were notably cleaner”.

— "Asia Reborn", Prasenjit K Basu

A genuine engagement with this issue, of course, involves not pinning things on simplistic suggestions such as that “income growth only did better than the world average when Nehru-Gandhis were out of power”.

This is because such arguments obscure other questions that economists have validly engaged with over the years. For example, even if he can be credited with stabilising India in the first years after independence, could Nehru have done more to put India on a growth path like other emerging nations were able to following World War II?

Similarly, Basu’s simplistic premise falls apart entirely in the 1980s, when Indira Gandhi and Rajiv Gandhi were in power and the income growth was higher than the world average. But the actual growth in those years was still less than that of Southeast Asian nations, which were booming. Moreover, the policies of those years led to the balance of payments crisis that forced liberalisation to speed up by the end of the decade.

By turning his question into a simplistic barb at Rahul Gandhi and his family, Basu sought to promote a reductionist idea of something that his book actually engages with in a more nuanced manner, pointing out that the problem was not necessarily what measures Nehru took, but in what order he took them. He writes:

“Starting with trying to address dismally low literacy rates and negligible rates of enrolment in tertiary education, Nehru attempted land reforms (which did not entirely succeed across the country) and extension programmes to boost agricultural output, but also sought to import substitute both consumer and capital goods production – while ignoring how he was going to overcome the foreign exchange constraint that would limit the ability to import essential intermediate goods and raw materials that India did not produce. Japan had done all this, but sequentially...

By attempting to do it all at once (and with a bias towards government rather than private ownership), Nehru achieved mediocre results everywhere, with agriculture suffering both from an overvalued exchange rate (that made imports cheap and exports uncompetitive) and the meagre response to land reform, while consumer goods remained inefficient because of excessive protection, and heavy industry’s ability to expand was constrained by the dearth of imported capital goods and technology.” 

— "Asia Reborn", Prasenjit K Basu
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