INFA Column

 Self-Supporting Economic growth

By
Prof. M. L. Sondhi
Jawaharlal Nehru University
March 1, 1979

The crucial aspect of Mr Charan Singh’s budget is the altered psychological climate that has been created in the country, in the North as in the South in favour of aligning the majority of our people with social control over-economic development. Long before Mr Charan Singh arrived on the national scene a certain mechanical application of Soviet experience had come to be accepted as a prime necessity in Indian planning, and the model of economic growth which was used to stimulate industrial development in practical terms accepted the price of “rural impoverishment”.  This point was highlighted in the massive kisan rally where Mr Charan Sigh’s followers presented the kisan manifesto which demanded a movement towards parity between industrial and agrarian prices.

Mr Charan Singh has kept in view the objective requirements of long term economic growth in the specific Indian conditions and his budget must be acknowledged as a daringly fresh approach to break the impasse produced by the lowering of living standards of millions of our countrymen in the course of acceleration of industrialisation.  This is a goal of truly historic proportions and those who criticise him for presenting a budget which bears the stamp of “simplistic thinking” must be honest enough to recognise their own intellectual kinship with Stalin who frankly admitted that his task was to exploit the peasants by depressing rural prices and incomes.  

The lowering of excise duty on fertilisers, light diesel oil and the abolition of the duty on un-manufactured tobacco are the first steps to climb out of a highly discriminatory situation in which the rural sector finds itself.  This is incorrectly viewed as a question of the political leverage of the kisan lobby.  Our analysis must be demystified from the communist jargon and we should welcome the emergence of a harmonious balance between the rural and urban sectors leading to a steadily increasing supply of farm products to the market.  

Mr. Charan Singh’s developmental approach has scope for all round encouragement to investments in power generation, steel, coal and fertilisers.  But the real policy reorientation lies in moving away from centralised command planning in which the development of the home market was given a low priority.  An optimum economic policy for India cannot ignore the overriding importance of increasing purchasing power among the masses and thereby removing the built-in handicaps which result from an inadequate home market for industry.  In solving the problem of the domestic market lagging behind the increase in industrial output, the present budget has taken a decisive step forward. Those who claim today that it does not provide a realistic budgeting scheme because it reverses the policies of the previous Finance Minister have yet to shed the yoke of the one-track programme of industrialisation with an ever widening gulf between production and market demand.

Mr Charan Sigh has embarked on the first stage of a programme in which banks will increase their motivation to provide adequate credit to farmers. Despite all the tall talk of eliminating starvation and poverty in the past, the previous Finance Ministers had little time or inclination to come to grips with the challenge of investment in the small scale rural sector.  The theory behind Mr Charan Singh’s employment potential planning will however require him to push the reform further in the direction of providing a new type of banking system for millions engaged in agriculture as farmers or as landless labour.  For the time being it can be hoped that the employment generating effects of the steps taken in the budget will win over the sceptics who are prisoners of prevailing politics.

It is most unfortunate that a hue and cry was raised against Mr Charan Singh for his alleged antipathy to modern industry.  The budget clearly shows that the Finance Minister is against statist planning and inhuman growthmanship.  He has accepted the reality of Indian big enterprises and modern technology and nobody dare accuse him of presenting a “Liaquat Ali Khan budget” which would undermine business confidence.  It is the linkages of agriculture and industry which Mr Charan Singh has examined very carefully from the point of view of social and economic benefits and it is difficult to find fault with his correct and coherent conclusions.

I would now like to consider the somewhat explosive relationship between Mr Charan Singh and the urban consumer which has been shown in its myriad dimensions in the short time that has elapsed since he presented his kisan budget.  It think it would have been possible to reduce many of the pressures that the urban consumer feels in the upward revision of many items in the lower and middle class sections.  If the fiscal bureaucracy were more sensitive to the complexities of urban budgets, Mr Charan Singh’s task would be easier.  The lesser deduction for provident fund for example need not have been put in package at all.  An effective tax structure does not require some of the imposts which are seen as particularly hard by the urban population.

A fertile area for strong action by Mr Charan Singh should be the generation of pressures within Government and the Janata Party for reducing government expenditure and curbing the proliferation of bureaucracy.  The clamour against the heavy dose of taxation should not be ignored by Mr Charan Singh with the Churchillian answer that economic prospects can only be improved for the mass of the people through blood, sweat and tears.  It is in the area of human motivation and creativity that there is a deep seated malaise in the Indian economic system.  Mr Charan Singh will gain the necessary credibility in proportion to his rationalisation of the tax structure along with the efforts he has launched to improve the standard of living of the widest masses of the Indian population.  He must also respond creatively to the most urgent needs of the fixed income groups in towns and cities by making concessions where necessary.  As India’s chief economic decision maker he can even afford to overcome some of the prejudices of the fiscal establishment. –INFA

                                                                                                  New Delhi    March 3, 1979