Evolution of Liberalism in India

Monday, 29 April 2002
Parth J Shah
Liberal Times

Liberalism is distinguished by its focus on the primacy of the individual in all spheres of human life—political, economic, and social. Individual well being is the standard to assess suitability of norms, customs, policies, and institutions. As Adam Smith’s invisible hand or Friedrich Hayek’s spontaneous order theory demonstrates there is no conflict between pursuit of self-interest and social good. Liberalism helps identify the rules necessary to achieve the harmony between self-interest and social good: limited government, rule of law, private property, free competition, and voluntary interactions.

India’s liberalism has evolved through stages that first emphasised earthly life and materialism, then social reforms and political independence, and now economic and social freedom. I shall briefly sketch this evolution and then discuss the role of individuals and organisations in the latest phase of economic and social liberalism.

Ancient Liberalism of Materialism

The culture as old as India’s would obviously have a strand of thought that is labelled today as liberalism or libertarianism. Liberalism is a philosophy for living life on this earth; it does not directly concern itself or rather leaves individuals free to choose their beliefs about after-life. The major focus of much of Indian philosophy has been on the life before and after the one on earth and their interconnections: To explain the status in the current life by considering what was done in the previous lives and to predict the future life by evaluating the conduct in this life. Nevertheless, many thinkers brought in earthly enjoyments and material aspects to articulate a philosophy of living this life, Charvak being the most prominent of these thinkers. Their focus on the good and virtuous life to be lived on this earth could be seen as the first stage of liberalism in India.

Modern liberalism in India took roots during the social reform movements of the middle and late nineteenth century. Raja Ram Mohan Roy, Gopal Krishna Gokhle and others launched a systemic attack on anti-life social practices like sati and ban on widow remarriage through Arya Samaj and Brahmo Samaj movements. These movements influenced a large section of the population, particularly in eastern and western parts of India, where they still have a following. Despite the early start much remains to be done in this area of social reforms.

With the rise of demands for independence from the British, the social reform liberalism gave way to the liberalism of political independence.

Liberalism of Political Freedom

Intense discussions and debates engaged all activists not only about strategies and tactics to get the British to quit India. They also focused on the type of political and economic system that India should adopt post-independence. Social reformers as well as freedom fighters all worked under the banner of the Congress Party.

The exposure to and attraction of Fabian socialism for many leading freedom fighters shaped the debates about India’s future political and economic institutions. Socialists formed a separate Congress Socialist Party and the liberals formed a liberal group, but they all worked under the Congress Party umbrella. The Congress Party was the sole arbiter of the freedom struggle, whether of social reforms or political independence.

Pandit Nehru’s affection for Fabian socialism as well as Soviet communism was the most critical factor in determining India’s path towards democratic socialism. Nehru shaped political institutions so that democracy could take root despite a very large illiterate and poor population, and an inexperienced political leadership. India was the shining star of democracy among the countries that achieved independence from the colonisers in the first of half of the twentieth century. India’s democracy, however much chaotic and dynastic, is widely viewed as her singular achievement.

Soviet-style five-year plans come to rule the economic life of independent India. Rapid, large-scale industrialisation was deemed to be impossible without the state dominance of the ‘commanding heights of the economy.’ Indian people were seen lacking in resources, capital, and entrepreneurial and managerial talents. The Indian government therefore took over the responsibilities of economic development. No one asked if the people of India did not have the capital and talents, where from the government of India would acquire them. Existence of private airline, railroads, automobile factories, steel mills, power plants failed to give any confidence in India’s private sector. Many of these companies had successfully competed in international markets. India’s share of trade in manufactured goods and machinery was higher at the time of independence than it has been any time since. Nonetheless the state became the sole source of succour.

Despite the all-powerful planning commission and all-pervasive five-year plans, Nehru left alone whatever remained of the private trade and industry. He did however tried to collectivise agriculture in line with the Soviet model. This attempt united all the disparate liberal groups in the country, leading to the formation of a new political party, the Swatantra Party. This party of farmers, small traders, and liberal intellectuals became the main opposition party in the Parliament after the 1967 general elections.

With the successful war against Pakistan resulting in the formation of Bangladesh and the campaign slogan of ‘Garibi Hatao’ (Eliminate Poverty), the daughter of Nehru, Indira Gandhi, decimated the Swantantra Party in 1971 election, from which it never recovered. The first political challenge to central planning was summarily squashed, but it proved successful in convincing the political establishment not to try again collectivisation of agriculture. Lessons of this failure though remain to be systematically analysed and understood.

Indira Gandhi changed the focus of planning from state-led growth to state-directed redistribution. The lack of certainty of electoral victory, unlike her farther, induced Indira Gandhi to use the machinery of the state for electoral politics. Redistributive populist policies became the norm: nationalisation of banking and insurance industries, subsidies to vote banks defined by caste, class, or religion, licensing of firms and industries, heavy import tariffs and restrictions.

A few of these policies, it must be noted, were necessitated by the inherent contradictions of the state-led growth. The state dominance of the economy had stifled private initiative and the resources required to fulfil grandiose plan targets were forever short. The state had to engage not in just sectoral but even firm-level planning and allocate each ounce of capital very carefully, balancing all the time necessities and luxuries so as not to squander any amount of resource. Nehru’s democratic socialism metamorphosed into Indira Gandhi’s license-permit-quota socialism. She produced the unique brand of Indian socialism. The slippery slope of planning—the logic of more and more intensive and extensive government interventions and controls - just could not be escaped.

Liberalism of Economic Freedom

Professor B R Shenoy’s famous Note of Dissent on the Second Five-Year Plan can be seen as the foundation from which the challenge to planning and the loss of economic freedom began. Until his death in 1978, he tirelessly argued for abolition of planning, denationalisation, privatisation of public sector enterprises, responsible monetary policy, rejection of foreign aid, open competition, and free trade. A D Shroff, a Bombay businessman, started the Forum of Free Enterprise to educate the public about the vices of planning and virtues of private markets. M R Pai has ably carried forward the mission of the Forum. Minoo Masani, one of the founders of the Swatantra Party, launched several freedom organisations. His journal, Freedom First, continues to beacon liberal principles and policies.

A new farmer organisation took shape under the leadership of Sharad Joshi. He had resigned from the Indian administrative service to become a farmer, but the plight of agriculture under the policy of forced industrialisation turned him into a political activist. He founded Shetkari Sangathana, the only farmer organisation that demands removal of all subsidies in exchange for freedom to trade. Its political arm, the Swatantra Bharat Party, has played a noteworthy role in the politics of Maharashtra state. Professor Madhu Kishwar’s magazine Manushi provides uniquely gendered liberal analysis of the economic and social problems.

All these sustained liberal attempts were inadequate given the scale of the problem. Nonetheless, India did begin on the path of liberalisation in 1991 when faced with a severe foreign-exchange crisis by opening up international trade and abolishing the license-permit raj. Rules of international trade are now set largely by WTO. India, however grudgingly, will continue to lower tariffs and liberalise the trade. The WTO provides an alibi to reluctant politicians to walk on this front what they are unwilling to talk. The real challenge then lies in further liberalisation of the domestic sector—the agenda set out by Professor Shenoy decades ago. The little progress on this second phase of reforms is clear indicator of the lack of understanding on the part of political and intellectual leadership of the broader framework of policies and institutions that can harmonise personal interest with public interest.

Two men politically responsible for the 1991 liberalisation are the then Prime Minister Narasimha Rao and Finance Minister Manmohan Singh. Mr Rao has publicly repudiated his own policies and has proclaimed that they were a mistake. Dr Singh has stood by the liberal policies but has shown little enthusiasm in explaining and defending them with the general public. Reforms are seen as the domain of technocrats. Without the public support, the harder reforms of denationalisation of banking and insurance, privatisation of PSUs, liberalisation of agriculture and labour markets, abolition of the reservation for the small-scale sector, rationalisation of subsidies would be impossible to implement. And without these reforms, India would not be able to achieve the high growth rates of the early and mid-1990s.

New liberal organisations have come up in the 1990s to bolster the efforts of the earlier ones. The Association of Youth for a Better India (AYBI), Mumbai, Loksatta in Hyderabad, Liberty Institute, New Delhi, Indian Liberal Group (ILG), Mumbai, and my Centre for Civil Society (CCS), New Delhi. Friedrich Naumann Foundation has played an important role in the formation and working of most of these groups. At the very beginning, for example, the Centre received support from the Foundation under the directorship of Dr Rainer Adam. Since then the Foundation has been a continued source of encouragement for the Centre. It provided critical financial support to sponsor South Asian Delegates to the Asia regional meeting of the prestigious Mont Pelerin Society that the Centre co-hosted in Goa during January 27-31, 2002. It was the very first meeting of this historic Society in India.

I can speak for the Centre for Civil Society and not for the other liberal groups. The Centre conducts regular, structured seminars to take liberal principles and policies from school and college students to IAS officers to the general public: Liberty & Society Seminar, Economics in One Lesson, Law & Economics Seminar. It has a standing invitation to train each incoming batch of students at the Indian Institute of Management, Lucknow and Symbiosis Centre for Management and HRD in Pune. Many of the Liberty & Society Seminars for college students were organised with AYBI, a formal partner of the Foundation. We plan to launch a Masters in Public Policy program and seminars for members of the Parliament and state legislatures. Response to the Centre’s educational work has been tremendous and it gives hope for the future of liberalism in India.

The Foundation moreover publishes a magazine, Liberal Times: A Forum for Liberal Policy in South Asia. It is the only liberal magazine that regularly has authors from all the countries of South Asia. It is indeed a genuine representative of the liberals of South Asia! I am proud to have had opportunities to write for the magazine. I offer my hearty congratulations on it 10th anniversary! Now it should strive to be the magazine that the parliamentarians of South Asia eagerly read. That would be the intellectual triumph of liberalism in South Asia.

In conclusion, India’s first freedom struggle gained political independence from the British in 1947. Successful flourishing of the democracy since then has fulfilled the political part of the liberal project. However the Indian state has continued to dominate the economic and social life of its citizens. The Second Freedom Struggle shall then deliver economic and social freedom to the people of India. This will complete the liberal project. To the Second Freedom Struggle!