Swarajya, August 10, 1963
We have now the beginning of a fresh series of harassments, hampering the people’s economy. All gur and khandsari merchants, retail as well as wholesale, are ordered to take out annual licences to conduct their normal business. This is supposed to be a measure for controlling prices.
It is the deficit financing and the taxes of Government that make the prices go up. The rupee has gone down in value. The result is that both the consumer and the trader must suffer misery, the one by reason of the soaring prices and the other by reason of the remedy adopted, namely, harassment by officials.
The gap between Plan outlay and the sum of domestic savings and anticipated foreign aid is, according to realistic calculations, Rs. 3,500 crores. Money creation to cover this great gap will cause runaway inflation. Sri Morarji Desai’s advisers have therefore told him to decree “compulsory savings”. Saving is a natural and voluntary act. Compulsory saving is a contradiction in terms and amounts to torture on the rack—like trying to make a man taller than he is by sheer pulling. He will be pulled apart, not made taller.
The legitimate way to increase domestic resources would be not the compelling of the poorer sections to ‘save’ and ‘desit’, but to levy taxes on those who could be subjected to that procedure. But, unfortunately, there the limit has been already overstepped and is operating as a deterrent of good production.
We have now the beginning of a fresh series of harassments hampering the people’s economy. All gur and khandsari merchants, retail as well as wholesale, are ordered to take out annual licences to conduct their normal business. This is supposed to be a measure for controlling prices.
As long as the Chinese remain in the land north of Hindustan, are we to live in a garrison state moving within barbed wire entanglements like citizens under siege? Foreign policy must be altered to free us from this misery. An intelligent non-dogmatic policy can do this.
It is the deficit financing and the taxes of Government that make the prices go up. The rupee has gone down in value. The result is that both the consumer and the trader must suffer misery, the one by reason of the soaring prices and the other by reason of the remedy adopted, namely, harassment by officials. Instead of tackling the cause as to why the prices go up, the Government indulges in sadism. Once upon a time many human ailments were treated by branding and other forms of torture. We have a like situation now.
"Notwithstanding the great damage which the prevailing policies have caused and are causing to the Indian economy at its roots, it is a forlorn hope that they will be replaced by sounder policies voluntarily. Statist planning, together with its by-product of inflation, have become the proverbial pagoda tree to the Plan barons and the other powerful vested interests which have drifted around Statism, to ever expect its abandonment except under overwhelming pressures. Statism operates through licences, permits, contracts, quotas and concessions. The recipients of these obtain large and easy gains—including the unmerited gains from inflation, they amount to an order of Ps. 750 crores annually—to which they have neither ethical nor economic title. Add to this the enormous patronage which Statism provides to the Plan barons over senior executive positions and other employment in the public sector and, to a certain extent, also in the private sector.” Thus writes Prof. B. B. Shenoy in his latest book Indian Planning and Economic Development. Prof. Shenoy makes a powerful plea in this book for monetary reform reducing the rupee to its real value and for a basic shift of policy from State capitalism to economic freedom, from ‘political socialism’ as he calls the ruling party’s creed to ‘Gandhian ethical socialism’. Prof. Shenoy demonstrates how the present unreal exchange rate of the Indian rupee is a mechanism for subsidizing imports both when they come through the customs office and when they are smuggled in, and is causing increasing balance of payment difficulties. Statism and the fixed unreal foreign value of the rupee give to the privileged recipients of import licences an annual free gift of about Rs. 460 crores, according to Prof. Shenoy’s calculation.
The gap between Plan outlay and the sum of domestic savings and anticipated foreign aid is, according to realistic calculations, Rs. 3,500 crores. Money creation to cover this great gap will cause runaway inflation. Sri Morarji Desai’s advisers have therefore told him to decree “compulsory savings”. Saving is a natural and voluntary act. It is factual, not a mere mathematical percentage. Compulsory saving is a contradiction in terms and amounts to torture on the rack—like trying to make a man taller than he is by sheer pulling. He will be pulled apart, not made taller.
The legitimate way to increase domestic resources would be not the compelling of the poorer sections to ‘save’ and ‘desit’, but to levy taxes on those who could be subjected to that procedure. But, unfortunately, there the limit has been already overstepped and is operating as a deterrent of good production.
The Congress Party’s present creed of national economic development is based on distrust of the honesty of all the people engaged in the production of wealth and, on the other hand, on excessive faith in the efficiency and honesty of administrative employees serving, not for business-profits but for fixed wages paid by the State. On this double basis, of wrong distrust and wrong confidence, the entire economy of the country is being turned topsy-turvy, from historic success and stability to continued failure, wrong explanations and half-hearted apologies, and an unending proliferation of white collar jobs which increases State expenditure and overloads the people’s backs with fresh taxes.
Even more vicious than what has been done to industrial production is the chaos that has been inflicted on agricultural production. The Minister in charge of ‘Planning’ deplores his disappointment in the field of agricultural production. What we sow, we must reap. The planners sowed discord and discouragement in this, the most important section of national life. In the name of ‘reform’ and against their own creed of collectivization, large-scale traditional producers of food grains for the urban markets were whipped out of their rural homes and their fields were confiscated under so-called ceiling laws. Under Central direction, the policies of all State Governments threw into utter confusion the control and management of landed property and the relationship between the owner and persons who had been admitted by contracts into tenancy. The cultivable field, if one can be permitted to personify in order to make the situation vivid, did not know who was her master. How could anything happen as a result of this chaos but utter disappointment in food production? Mr. Nanda must trace the cause of failure to policies for which he and his eminent colleagues are alone responsible. We cannot get production out of chaos. We may get votes out of it but not grain for the market. “The banner of ideology is only a cover for ambitions,” De Gaulle said recently; and he added that it has always been so. Socialism is such a banner. It costs the nation a great deal of avoidable distress, besides being a cover for ambitions of all sorts through an uneducated and credulous electorate.
