Swarajya, June 15, 1963
If we desire to replace the present failures of the Government of India’s economic policy by fuller employment, greater economic growth, and a greater and more real stability of our currency, we must direct all policies towards better capital formation. It is capital formation that decisively determines the progress of national economy.
The solution does not lie in State economic planning or in any planification, but only in an economic policy based on the principles of free enterprise and competition. To accept inflation as a necessary evil accompanying economic growth would amount to capitulation to the difficulties of the task, and not a solution. The policies now pursued in India prevent capital formation. They are policies which may be described as eating up the seed-grain. They push up inflation, the exact opposite of what the German Chambers of Commerce so emphatically advise. The misery of the middle classes, caused by these policies, is mistaken for penance and austerity, whereas it is just fruitless suffering.
Whoever it be that told the Finance Minister that it would help the stability of our rupee if he attacked the smuggling of gold into India and pushed him into the entanglements of the Gold Control Order, it is the Finance Minister that must bear the blame for all the anarchy, unemployment and damage to the rural economy that have ensued. Again, whoever it was who had breezily told him that inflation could be blocked by a big compulsory savings scheme and led him to launch this sweeping scheme of harassment and distress up to the lowest levels of our none too happy population, it is the Finance Minister that must be blamed for it. These two schemes of intolerable harassment must immediately go and should take the Finance Minister away with them.
The way in which budgets are made and got ready for presentation leave no room for the whole or a material section of the Cabinet to examine and advise upon it, or even to go through it. In order to safeguard secrecy, all consultation is avoided. The budget is hatched by the officials working under the nominal guidance of the Finance Minister. If both the Prime Minister and the Finance Minister happen to be persons blissfully ignorant of the business of budget-making, when all the economy of the country comes under the direct or indirect influence of the budget, the consequences are, what we see now, disastrous. The nation requires a Finance Minister who can understand the meaning and effect of the proposals given by the arithmeticians of the department. The human and political effect of what the figures stand for, is the responsibility of the Finance Minister, and he must be one who has imagination and is fit to bear that responsibility. Keeping mum and preventing leakage of proposals are not the only things required to make a good Finance Minister.
If we desire to replace the present failures of the Government of India’s economic policy by fuller employment, greater economic growth, and a greater and more real stability of our currency, we must direct all policies towards better capital formation. It is capital formation that decisively determines the progress of national economy. Sri Morarji Desai’s ill-considered taxation measures, and schemes of mopping up all the earnings of the people, go contrary to this essential basis for progress. Instead of creating the climate for capital formation and for good competitive conditions, he has done everything to create frustration and despair among the honest, and evasion and a black money mentality among those of easy conscience.
Dr. Ernst Schneider, the President of the Association of the German Chambers of Commerce, and Mr. Schmuecker, the Deputy Chairman of the CDU Parliamentary Party of Germany, both dealt with the problems of economic growth at a recent meeting of the Association. The solution does not lie, according to the verdict of the Association, in State economic planning or in any planification, but only in an economic policy based on the principles of free enterprise and competition. The Association rejects the view that economic growth could be assured only with easy money. To accept inflation as a necessary evil accompanying economic growth would amount to capitulation to the difficulties of the task, and not a solution. The policies now pursued in India prevent capital formation. That is the verdict of all those who know the subject and have experience of the difficult process of industrial production. They are policies which may be described as eating up the seed-grain. They push up inflation, the exact opposite of what the German Chambers of Commerce so emphatically advise. The misery of the middle classes, caused by these policies, is mistaken for penance and austerity, whereas it is just fruitless suffering. Economic growth calls for capital formation and the voluntary forms of various austerities which lead to capital formation, not austerities which are just barren pain.
