RESET: Regaining India’s Economic Legacy

by Subramanian Swamy

investment through incentives, and based on innovation, and through employment generation.

growth, social justice and creating room for spiritual values.

Indian culture, which venerates sacrifice and simple living. Hence,

this book, I have, for the period of 150 years from 1870 to 2019, focused not so much on the historical narrative of India’s economic development—or the lack of it—but on distilling out the consequences of the economic ideology adopted in three main phases. First, British imperialism (1870–1947), during which period, according to me, $71 trillion worth of resources was drained off to Britain. Thereafter, the Soviet command economy model took root (1950–90), which ended with the collapse of the Union of Soviet Socialist Republics (USSR) in 1991. Thus, liberation from state commandism came through the economic reforms (1991–2019) initiated by me in 1990–91, and during 1992–96 by assisting P.V. Narasimha Rao while holding a Cabinet rank in his government.

domestic entrepreneurship, blocking innovations and extracting resources from agriculture through land-revenue collectors called zamindars.

wreck all the inter-sectoral balances in the economy and thus destabilize and impoverish the nation.

first important to reverse the regression and move people from negativity to an optimistic outlook.

dissipated.

neglecting agriculture, to

capital-intensive industries in a labour-surplus country.

fascination for foreign investment

Hence, we have witnessed the folly of demonetization and the inanity of the Goods and Services Tax (GST), both of which have accelerated the tailspin of the economy.

alternative ideological thrust to economic policy rather than trying to

Now is the time for a structural overhaul to purge the remnants of the command economy, and usher in an incentive-driven, innovation-structured and market-determined competitive economy.

India stands at the cusp of a major transformation caused by unprecedented economic development through out-of-the-box thinking, using everything from primitive tools to electronic software, and from entrepreneurship to hard work and self-confidence.

India thus needs to achieve and sustain a GDP growth rate of over 10 per cent per year for the next two decades (2020–40). This sustained GDP growth will be accompanied by an increase in per capita income growth from $1,500 to over $7,000 per year at 2019 prices, and thus make the third angle of the global triangle of India, China and the US.

This needs the fostering of new innovations and the upskilling of labour, modernization of agriculture, water resource management, finding new fuel sources (such as thorium), and strong research and development (R&D), and physical infrastructure.

Finally, our growth strategy must minimize the gap between public- and private-sector performance. This calls for efficient, transparent and accountable state governance, which will require developing rational risk-taking and merit-rewarding governance.

denial and blocking by British imperialists of science-based innovations such as locomotives and the Bessemer steel blast furnace, which were the engines of Industrial Revolution in Britain and later in Europe, till the late nineteenth century.

The constant bleeding of resources by British imperialists was first documented by Dadabhai Naoroji in 1869 in Poverty and Un-British Rule in India

India. Drawing on nearly two centuries of detailed data on tax and trade, the Patnaiks calculate that Britain drained nearly $45 trillion from India during the period 1765 to 1938.

This systematic loot happened through the rigged trade system, the zamindari revenue extraction mandate, and the collection made from taxes and levies imposed on Indians for British expenses incurred during World War I and II.

East India Company took control of the subcontinent after the Battle of Plassey in 1757,

The East India Company began collecting taxes in India, and then shrewdly used a portion of those revenues (about a third) to fund the purchase of Indian goods for British use. And then later, ‘buying’ from peasants and weavers, using money that had just been taken from them as land revenue by criminals appointed as ‘zamindars’ by the British Queen.

To add to this, the British were able to sell the stolen goods to other countries at prices that were far higher than the cost at which these goods were ‘bought’ in the first place, pocketing not only 100 per cent of the original value of the goods but also the markup.

Dr Patnaik points out, ‘[The] cost of all Britain’s wars of conquest outside Indian borders was charged always wholly or mainly to Indian revenues

The average life expectancy of Indians dropped by one-fifth from 1870 to 1920. Tens of millions died needlessly due to seventeen policy-induced famines of the so-called British India government, whose direct rule excluded the princely states numbering then at 600

Quite the contrary, it was India that developed Britain by financing the Industrial Revolution, the British administration and Britain’s major wars.

This period is also significant because the internal rebellion and resistance in India to British imperial forces, which continued from 1757 to 1857, when the so-called ‘Sepoy Mutiny’ (known amongst Indians today as the ‘Great Uprising’ or the ‘First War of Independence’), was crushed by British-led forces.

So grand was this support that Veer Savarkar wrote about it in his book The Indian War of Independence 1857. But sadly, this book is yet to be made required reading in schools and colleges.

The East India Company deliberately designed policies that bled agriculture of all its resources. In order to strengthen their political control on India, keeping the pressure on the peasants through an oppressive land revenue system seemed necessary to the colonial administration.

The colonial government’s decision to build such a feudal system for collecting land revenue was motivated by the political need to secure collaborators for imperial rule.

crop

Indian colonial agricultural system thus was really feudal, not bureaucratic. Thus, the amounts that were collected as well as the machinery for realization were such that the indebtedness of the farmer, especially in grain cultivation, grew in an unprecedented way. The same view

lands were

The aggregate land revenue collected by the government

‘It was the revenue measure of the government that proved the greatest depressor in the rural economy. Even the pervasive disaster (famines) did not make the government relent in the matter of revenue collection.’

period, it remained a country ruled by the Qing dynasty till 1911, after which the Chinese Revolution, in the same year, also called the Xinhai Revolution, led to the fall of the dynasty. Thereafter, Sun Yat-sen, leader of the Chinese Nationalist Party (Kuomintang), served as the first provisional president of the Republic of China (1911–12). He was succeeded by Chiang Kai-shek in 1925. Of course, the Chinese government was under constant threat of destabilization and under siege from imperialist powers. India, on the other hand, had been defeated and subjugated by the British and administratively governed by men sent from Britain to rule India. The Indian government was thus a captive of foreigners in policymaking, with disastrous consequences.

Taiping Rebellion),

enacted the Punjab Land Alienation Act of 1900 and the Rent Act to safeguard the rights of the peasant.

The need for cash crops by the British was influenced by certain international events. The American Civil War in 1864–65 led to the cessation of cotton supply to Britain, and hence the textile industry in Lancashire was in urgent need of cotton. India provided the alternative source, access to which became easier after the opening of the Suez Canal. This led to the switching of fertile lands to cotton cultivation. This aspect of the colonial policy hit the fertile rice areas, which were progressively switched to cash crops right up to the end of World War II. The then government’s statistician, Mr S. Subramanian, states the following in his study:

By 1950, when India and China founded their new republics and commenced development through economic planning, China had a comfortable food surplus, which enabled it to finance rapid industrial growth. India, which had suffered a two-century-long decline in foodgrain yield, had no such cushion or surplus. Therefore, the unthinking imposition of the Soviet Union’s model of planning led to a near-famine condition caused by a rain deficit in the 1960s. India was compelled to slow down its industrialization programme in the 1960s to provide resources for improvements in agriculture, after the realization dawned on free India’s planners that the sector could not be squeezed any more without serious consequences for the economy as a whole.

Li Hsi-hung wrote to the Chinese emperor, stating ‘eight reasons’ why railroads in China would be ‘infeasible

‘eight reasons’ why they would be ‘unprofitable’

‘nine reasons’ why they would be ‘harmful’

But with the rising pressure exerted on London by English traders, especially those who wanted to export cotton and opium (for sale in China) from India, the British government finally agreed to enter into negotiations with officials of the East India Company to form the East Indian Railway (EIR). The terms offered were most attractive in the then prevailing conditions of depression of 1848–49 in England. The colonial Indian government agreed in 1848 to ensure, for a period of ninety-nine

impetus

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