Jawaharlal Nehru never could bring himself to forgive India’s business community, despite the generous help that it had given to the freedom movement. That most businesspersons appeared to prefer Vallabhai Patel over him rankled. Consequently, Nehru saw to it that the business community in India got marginalised not merely in overseas markets but also within India, a policy continued by daughter Indira, who was firm that only state control would ensure that “garibi” got “hataoed“. Although Rajiv Gandhi showed a few glimmerings of backing for Indian business, since 2004, a combination of tighter restrictions and high interest rates has ensured that companies in Europe in particular no longer have to fear competition from India. Even in his earlier avatar as economic reformer (1992-96), Manmohan Singh reserved his largesse for foreign companies wishing to crack the Indian market rather than helping Indian enterprises expand overseas, a quirk in policy which has continued throughout the nearly nine years that he has been Prime Minister. Taking a cue from the top, institutions such as the RBI have put in place a policy regime that penalises domestic investors and industry while helping those from outside to make profits, usually through arbitrage and speculation.
However, this is not justification enough to adopt the reverse policy tack, that of banning foreign companies altogether. Granted, that a few steps may have some immediate health benefits, such as the banning in 1977 of a prominent international soft drink manufacturer whose products are not ordinarily known to improve overall physical fitness, although it must be admitted that this columnist is an addict of Diet Coke, and has been for quite a while. However, were they to be gifted a policy regime which helps local enterprise, India’s businesspersons have the verve and the capacity to compete in any market. Hence, what is needed is for steps that promote domestic industry to get taken simultaneously with measures designed to assist foreign companies in their quest for profits from India. This country is an easy mark for a variety of outflows, some designed as “royalties” and “fees”, or in the form of excessive loading of international overheads on the Indian operation. Sadly, a warm welcome at the Finance Ministry, the Planning Commission and even the PMO is given to the same international financial cartels which caused the 2008 crash and are responsible for much of the commodity speculation which boosts prices up to levels which hurt entire economies. Not a surprise. In the 1950s, Nehru himself relied on quacks from overseas such as Nicholas Kaldor to formulate policy which ensured that the country’s growth rate remained in the region of 2% at a time when the rest of Asia was growing at twice or thrice that speed.
What is a surprise is the fact that Nehruvian economics — state control and keeping the economy closed — seems to have been adopted across the political spectrum. Looking at the statements being made by that party’s leaders, it is obvious that the BJP has decided that the best economic policy to follow is that favoured by Comrade Prakash Karat. A party that was once seen as pragmatic has developed a mindset in economic policy that is close to both the CPM as well as Mamata Banerjee, who succeeded in driving away investors from West Bengal even before becoming Chief Minister of that under-performing state. Barring the influence of commercial interests nervous at the prospect of competition from international chains, there is little justification for the BJP’s adoption of a Marxist economic platform, and banning its own Chief Ministers from allowing FDI in retail, even though at least a couple of them may be wishing that they could. Gujarat, for example, is on course to become a magnet for huge volumes of FDI, once the Delhi-Mumbai industrial corridor goes online in a few years’ time, with the help of $100 billion from Japan, which is anxious to find an alternative home for the 36,000 Japanese enterprises that were set up in China since the 1980s.
The BJP has travelled this way before, of repeating Nehru’s insistence on “the government way or the highway”. An example is the HRD Ministry’s insistence during the NDA period that all donations to the IITs and IIMs ought to be routed through it, rather than be given directly. As a consequence, several wealthy NRIs offloaded their largesse on foreign universities rather than on their alma mater. Nehru believed, as did Churchill, that Indians were incapable of functioning without the state to guide them. He believed that a closed economy worked best. He was wrong on both counts. So is the BJP when it opposes FDI in retail when Manmohan Singh breaks to an extent with Nehruvian dogma by seeking to open up the economy, of course inwards rather than also outwards.