CDS Foundation day lecture by Prof. Arvind Panagaria

Topic: The Nehru Development Model: History and Its Lasting Impact

Prof. Arvind Panagariya is Chairman 16th Finance Commission and Professor of Economics and Jagdish Bhagwati Professor of Indian Political Economy at Columbia University since January 2004. From January 2015 to August 2017, he served as the first Vice Chairman of the NITI Aayog, Government of India, in the rank of a Cabinet Minister. During these years, he also served as India’s G20 Sherpa and led the Indian teams that negotiated the G20 Leaders’ Communiqués during the presidencies of Turkey (2015), China (2016) and Germany (2017). He is a former Chief Economist of the Asian Development Bank and was on the faculty of the Department of Economics at the University of Maryland at College Park from 1978 to 2003. During these years, he also worked with the World Bank, IMF, and UNCTAD in various capacities. He holds a PhD degree in Economics from Princeton University and a Master’s in Economics from the University of Rajasthan, Jaipur.

He has authored or edited 20 books. The latest among them are The Nehru-Era Economic History and Thought & Their Lasting Impact (OUP), India’s Trade Policy: The 1990s and Beyond (HarperCollins, India), Free Trade and Prosperity (OUP, USA) and India Unlimited (HarperCollins, India). His book India: The Emerging Giant (2008, OUP, New York) was listed as a top pick of 2008 by The Economist and described as the “definitive book on the Indian economy” by Fareed Zakaria of the CNN. The Economist has described his book, Why Growth Matters, (with Jagdish Bhagwati) as “a manifesto for policymakers and analysts.” Scientific papers by him have appeared in the top economics journals such as the American Economic Review, Quarterly Journal of Economics, Review of Economic Studies and International Economic Review while policy papers by him have appeared in the Foreign Affairs and Foreign Policy. He writes for various publications including The Times of India, Financial Times, Wall Street Journal and India Today. He was awarded the Padma Bhushan by the Government of India in 2012.

Abstract

At Independence in 1947, Prime Minister Jawaharlal Nehru embarked upon two foundational projects: a political project to establish democracy and an economic one to end poverty. Three-quarters of a century later, his political project is a resounding success, and his economic project an equally resounding failure.

This lecture, based on extensive archival research, carefully examines the evolution of Nehru’s economic philosophy with socialism, self-sufficiency, and heavy-industry development at its core. The first part discusses his evolution from radical to a more moderate socialist and describes the historical circumstances and contemporary thought that led to near unanimity on a development model that was so deeply flawed. The second part describes the Orwellian policy regime in graphic detail, with all-around bureaucratic control of economic activity. It explains how the model excluded all but a small elite from the mainstream growth process and, thus, ruled out effective use of the country’s most abundant resource, labor. The third part argues that the entrenchment of socialist thought within the country’s democratic polity effectively precluded a change of course for decades. The bequest of socialist thought from one generation to the next led to its perpetuation for many decades, greatly delaying the change for the better.