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Lal Bahadur Shastri the Greatest Economic reformer, the nation forgot

Oct 2, 2021
Lal Bahadur Shastri in Tashkent. Image AFP

Well In fact Lal Bahadur Shastri was the first Economic reformer but our generation don’t even know it!!!! Read ahead to know what was Shastri plan to reform India

Shastri was a simple man. One of the most charming stories I have read about him has been recounted by journalist Kuldip Nayar in his autobiography, Beyond the Lines. Nayar was press secretary to Shastri when the latter was home minister. The two were travelling by car. The car halted at a railway crossing. It was a hot day, and Shastri spotted a man selling sugar-cane juice. He got out, walked over to the shop, bought two glasses of juice and paid the man, who had no idea that the little man he had just served was perhaps the second most important person in Indian politics.

This simplicity was matched by steely resolve, which was on display during the war with Pakistan in 1965. Shastri galvanized the country with his tough stance against the invaders. One of the great unknowns of modern Indian history is what would have happened if Shastri, who died of a heart attack at the age of 61, had lived for another 10 years. For example, would dynastic politics have never taken root in India?

One little-known aspect of Shastri is that he could have become India’s first economic reformer.

Jawaharlal Nehru quite rightly believed that rapid industrialization was the best way to roll back mass poverty, as did some of his contemporaries, such as B.R. AmbedkarV.D. Savarkar and Subhas Chandra Bose. Nehru thought the state could lead economic development; that planning was a better way to allocate resources than prices; and that foreign trade was unimportant. The Nehru model had some initial success before it began to unravel.

Shastri saw that clearly when he took charge of the country after Nehru. Nayar says Shastri was never a big votary of planning. P.N. Dhar, one of the best policy minds of his generation and later a close adviser to Indira Gandhi, pointed out in Indira Gandhi, the ‘Emergency’ And Indian Democracy, his memoir: “Lal Bahadur Shastri, the unassuming prime minister who had succeeded the charismatic Nehru, seemed an unlikely person to face up to the (economic) situation. But in his own quiet way he did initiate a series of steps which would have not only brought the economy out of the existing crisis but possibly put it on a high-growth path in the long run. He wore no ideological blinkers; he saw facts as they were in all their starkness. Chronic food shortages made him shift investment from basic industries to agriculture. Roaring black markets persuaded him to make a relative shift from controls to incentives, and the glaring inefficiency of the public sector made him accept a larger role for the private sector and foreign investment. He also took measures to shift the locus of economic decision-making from the Planning Commission to the ministries and from the Centre to the states. These measures reduced the influence of the Planning Commission—which had developed a rigid, almost doctrinaire outlook on economic policies—and at the same time decentralized decision-making.

Shastri had to face strident opposition, not the least from a Congress party that was quite naturally in awe of Nehru, and found the idea of changing policy direction sacrilegious. Dhar believes things would have been different if Shastri had lived longer. “The victory in the 1965 war had made him very popular in his own right. During the brief period of his stewardship he had acquired his own popular political support that would, I believe, have given him added confidence to pursue an agenda of economic reform of the kind that was taken up only twenty-five years later, in 1991,” writes DharDhar

Shastri was trying to generate fresh thinking on our development strategy at around the same time that many other Asian countries were fundamentally reorienting their development strategy, embracing export promotion rather than import substitution. For example, India and South Korea had around the same level of average incomes in 1964; then South Korea pulled ahead and there is now a yawning gap between the two countries. There is thus good reason to speculate whether things would have turned out differently had Shastri been blessed with a longer life.

What happened subsequently is well known. Indira Gandhi responded to the economic crisis with a sharp turn to the Left, choosing populism over economic reform. She oversaw a sluggish economy riddled with high inflation during her first tenure as prime minister. She seemed to have learnt from her mistakes when she came to power for her second innings, by making the first tentative moves towards a less controlled economy after 1980. The process picked up pace during the first two years of the Rajiv Gandhi administration, but it was the economic crisis of 1991 that finally gave Rao and Manmohan Singh the opportunity to bury the old economic model.

Shastri was way ahead of his times as far as economic policy goes. His pragmatism would have helped put us on the path of high growth at least two decades earlier. Much would have depended on his political stature. My friend Sharad Panse, with whom I have discussed this issue for a long time, also wonders whether Indira Gandhi would eventually have challenged Shastri, and perhaps split the Congress. It is a valid question.

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