Chakravarti Rajagopalachari (Born 9 Decem-ber 1878; Died 25 December 1972) was a man who is today more remembered for his elegant and simple rendering in English of the Mahabharata (1951) and Ramayana (1957). He also served as general secretary of the Congress Party in 1921, was elected as the premier of the Madras Presidency in 1937, governor of West Bengal (1947-48), succeeded Sardar Vallabhbhai Patel as home minister in December 1950, and once again became the chief minister of Madras in 1952. There were two sides to him. We remember him mostly for the negatives attributed to him, but his foresight went largely forgotten.
During his tenure as Madras premier in 1937 he made Hindi compulsory in all schools, a move that led to the first anti-Hindi agitation. This also established the anti-Brahmanism of the Justice Party and the Dravida Kazhagam (DK), the forerunner of the DMK and AIADMK. The governor, Lord Erskine, withdrew this unpopular law in 1940.
The long shadow of this was felt when it came to the adoption of an official language for the Indian Republic. Hindi was adopted as the official language of India with English continuing as an associate official language for a period of 15 years, after which Hindi would be the sole official language. Efforts by the Indian government to make Hindi the sole official language after 1965 were not acceptable to many non-Hindi Indian states, who wanted the continued use of English. To allay their fears, Prime Minister Jawaharlal Nehru enacted the Official Languages Act in 1963 to ensure the continuing use of English beyond 1965. It was only after this the DMK dropped its demand for separation. It was during Rajagopalachari’s tenure as Union home minister that he first differed with Nehru.
While Nehru perceived the Hindu Mahasabha as the greatest threat to the nascent republic, Rajagopalachari held the opinion that the Communists posed the greatest danger. Their differences came to the fore and after being persistently overruled by Nehru on critical matters, Rajagopalachari submitted his resignation on the “grounds of ill-health” and returned to Madras.
As things would have it, the Congress Party’s poor performance in the 1952 elections opened another opportunity for him. The Communists were in a position to form a government but Nehru played his Rajaji card and got Kamaraj to propose him for CM. The party cobbled together a majority. During this tenure he introduced two measures that made him hugely unpopular with the public and the party.
On June 7, 1952, Rajagopalachari ended the procurement policy and food rationing in the state, abolishing all price and quota controls. This was a rejection of a planned economy in favour of a free market economy.
In July 1953, he introduced a new education scheme known as the “Modified Scheme of Elementary Education 1953”, which reduced schooling for elementary school students from five hours to three hours per day and suggested that boys should learn the family crafts from their father and girls housekeeping from their mothers. It cemented his image as anti-poor, pro-Hindi, pro-Brahmin leader.
Yet the Congress government awarded him the Bharat Ratna in 1954.
The 70th session of the Indian National Congress held in February 1955 was an historic session as it charted a philosophical and economic course for India. The Avadi session represented the Congress’ distinct shift towards socialism. The Congress declared the “socialist pattern of society” to be its goal. The party resolution also stated that planning must take place with a view towards the establishment of such a society.
Rajaji differed from this, and he parted ways with the Congress. In his short essay “Our Democracy”, Rajagopalachari explained the necessity for a right-wing alternative to the Congress, saying: “Since the Congress Party has swung to the Left, what is wanted is not an ultra or outer-Left [such as CPI or Praja Socialist Party], but a strong and articulate Right.” He went on in 1957 to found the Swatantra Party with a ragtag bunch of Congress malcontents, former maharajas and openly pro-American lobbies. Nevertheless, he should be known today as the first one to sound the warning against a state-controlled and centrally planned economy, and naïve notions of Fabian socialism.
The Swatantra Party stood opposed to government control over the private sector. Rajagopalachari sharply criticised the bureaucracy and coined the term “licence-permit raj” to the bureaucratic labyrinth that often involved approval by as many as 80 agencies, before a licence could be granted to produce; with the state deciding what to produce, how to produce and how much to produce using state prescribed sources of capital and often even the selling price. Profits leading to capital formation and investment were never a consideration.
The “licence-permit raj”, rather than creating a more equitable society, actually created a hugely corrupt and inefficient system that created oligarchies and huge inequalities, not just between people but also between regions.
Prime Minister P.V. Narasimha Rao took the first steps to dismantle the “licence-permit raj” in 1991 when his government effectively dustbinned the Industrial Licensing Policy 1956 and ushered in what has generally come to be known as “economic reforms”. This is still a work in progress.
All major economies that have grown rapidly have a high level of fixed investment. Only 21 countries have achieved eight per cent growth a year sustained over a 20-year period since the Second World War. The first eight are Asian economies — China, Japan, Singapore, South Korea, North Korea, Taiwan, Thailand and Hong Kong. Their systems varied, but they had one essential commonality. All of them had, during their periods of rapid growth, very high percentages of Gross Domestic Fixed Capital Formation in GDP, between 30-50 per cent.
India’s capital formation languished in the lower two-digit numbers for the first three decades after Independence. It began to increase from 17.9 per cent of GDP in 1991 to 22.7 per cent of GDP in 2000, and to peak at 37.6 per cent of GDP in 2008, due to the loosening of constricting state controls. India’s GDP growth kept pace with this and rose from 5.2 per cent in the decade 1980-90, to over 6.0 per cent during 1990-2000 and to 7.8 per cent during 2000-10.
If Rajaji’s rejection of Fabian socialist notions of economic and social development had been the policy in the late 1950s, it would have given India a head start in capital formation, industrialisation and faster economic growth. But better late than never....