The unimaginable trillions India lost to Nehruvian socialism


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27 Sep 2012

 
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Scams amounting to lakhs of crores of rupees seem to be the defining feature of the Sonia Gandhi-led UPA government. The theft of public assets is nothing new, however. It is a structural problem endemic to the system of governance imposed on the Indian people. The mind simply boggles at the sheer size of the loot. Estimates regarding money stashed away in offshore banks amount to $1 trillion and more. And that’s just one part of the wealth stolen from India.

We speak rather glibly about large numbers such as a trillion. But we actually don’t have the capacity to comprehend such quantities. Since we are creatures limited in space and time, only small numbers are meaningful to us. A thousand we can understand. For example, a thousand seconds is just about 17 minutes, a time span we can appreciate.

Moving up the scale, even a million seconds is still fine since intuitively we understand how long 11 and a half days are. It gets harder to fully understand a billion second — nearly 32 years. Our lives are usually less than three billion seconds. But a trillion seconds is frankly impossible: no one has a real understanding of what 317 centuries feels like. The human species — homo sapiens — have only existed for about three trillion seconds. That’s how large a trillion is.

So back to that stolen wealth sitting in foreign banks — around 1 trillion dollars. That’s an unimaginably large amount of money. But there are larger numbers still, compared to which a trillion dollars is a trivially small number. That is the invisible theft that we are totally unaware of, leave alone being worried about it.

Let’s do a little bit of arithmetic. At the time of India’s political independence from Britain, India’s population was around 350 million. The per capita GDP was around $250 (in constant 2010 dollars). Over the last 65 years, India has grown at an average GDP growth rate of close to 2.1 per cent. We call that the “Nehru Rate of Growth,” (the rate at which the time to double the GDP is 35 years).

If you add up the GDP of India for the years 1950 to 2010, you get a figure of approximately $25 trillion. In other words, the Indian economy produced an aggregate amount of goods and services that are valued at $25 trillion. During that time, the population went up from 350 million to around 1.2 billion.

Now consider a counterfactual. What if instead of the 2.1 per cent annual Nehru rate of growth, the Indian economy had grown at a reasonable 6 per cent per year? What would have been the aggregate GDP then? The answer is a staggering $145 trillion. That means that Nehruvian socialism has cost India around $120 trillion so far — and counting.

The question that naturally arises is this. Is it possible for a large economy to grow at 6 per cent a year for many decades? Yes. China has grown at an average rate of around 8 per cent a year for over 30 years since 1978. India could have started at least four decades before China did. If India had, it would have occupied the space that China occupies today in the world of manufacturing. China has India’s failed Nehruvian socialist policies to thank for at least a part of its success.

What would India have been like had its leaders such as Jawaharlal Nehru and his daughter Indira Gandhi chosen to make India economically free? India would have been at least a middle-income country with a per capita income of around $10,000 per year.

Hundreds of millions of Indians would have had a shot at living decent lives and contributed to global welfare. The loss India has suffered hardly bears imagining.

It is high time India chose a different path — one that leads to prosperity instead of poverty. But for that, Indians will have to first fully understand how needless and futile socialism is for economic well-being.

Photo Courtesy: Phil Whitehouse


Atanu Dey is an economist. He blogs on India's Development at deeshaa.org.

(c) NiTi Digital. Reproduction and/or reposting of this content is strictly prohibited under copyright laws.


 
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  • CC

    Where’s the rest of the article? Seems like it stopped half-way.

    • http://www.deeshaa.org Atanu Dey

      The article is complete. But of course I will write a follow up one of these days.

  • http://twitter.com/HRBhat Ramesh Bhat

    Consider the collateral benefits of better education, better health & lower population growth, per-capita income/GDP could have been even higher. may be even $15,000/ per year?

    • http://www.deeshaa.org Atanu Dey

      Thanks. Actually, the calculations are of the type that “compound interests” are — meaning they include the effect of previous improvements.

      Regards,
      Atanu

  • Jitendra Desai

    Very well and very dramatically presented Atanu! Compliments for these crries in the wilderness though.All to the Left of the center and to the Right of center are now opposed to any kind of reforms.So we could have more of the same for more time now.

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  • Ghanshyam Sharma

    Brilliant piece! Atanu, I would like to bring to your attention that last week, I checked BJP’s website and it clearly mentioned that it supports a free market policy. But today when I saw the website it says that BJP’s philosophy is one of integral Humanism defined by some Deen dayal Upadhyay! What crap! I am not sure what happened in the space of a week!

    • arjun

      and you didn’t even care to study Deendayal Upadhyay and his Integral Humanism

  • http://www.facebook.com/profile.php?id=576357054 Munish Kumar Raizada

    Excellent article. in 1947, JL Nehru could have adopted an economic model based upon the concept of free markets, but his affinity for Russian socialist (communist) model led him to adopt the same model for India too, where things were state-controlled. And we all continue to see the ill-effects of that until now.
    Indians have grown up believing that markets work by controls, license-Raj, Inspector-Raj and subsidies. So much so that the whole nation went into a turmoil when Man Mohan Singh announced 51 % FDI in retail sector. All this is symptomatic of the disease Nehruvian Socilaism that has crept into our bones.
    On a different note, Freedom Team of India is a political base camp that espouses liberty and free markets. Do visit the website http://www.freedomteam.in

  • http://www.facebook.com/profile.php?id=576357054 Munish Kumar Raizada

    The book “Breaking Free of Nehru” by Sanjeev Sabhlok wonderfully details the wrong economic policies Nehru unleashed on India and how can we fix the mess now. http://bfn.sabhlokcity.com/

  • Bong

    My late uncle used to say that the word “socialist” was not there in the original preamble of the Indian Constitution. I remember once (when he had had a peg too many) he opened the Constitution and pointing to the word in the preamble, said, “Look, this is where that b**** Indira Gandhi wiped her dirty a** on the constitution. What you’re seeing the smear of her s*** on the page!”

    Not sure if other people have similar strong views on the subj. But that word has no business in the Constitution. A document loses any respect otherwise.

    • srikanth

      Haven’t seen anybody describe it this well!

  • maskedguy

    I think the author has made a concerted effort to not use the word: Capitalism :)

  • http://www.deeshaa.org Atanu Dey

    Munish, Ghanshyam, Jitendra:

    Thahks for the comments. We have to continue to work on changing minds. It’s an uphill task but if we don’t, who will do it?

    Regards,
    Atanu

  • http://www.deeshaa.org Atanu Dey

    Bong,

    Your late uncle certainly put it very aptly. I approve heartily and I am going to quote your late uncle on how the constitution was used as toilet paper.

    Atanu

  • k

    Bong, are you sure it was the word ‘socialist’? Coz, IG definitely added the word Secular to our preamble.

    • Bong

      The Preamble at present (copy-pasted from Wikipedia) reads as follows:

      WE, THE PEOPLE OF INDIA, having solemnly resolved to constitute India into a SOVEREIGN SOCIALIST SECULAR DEMOCRATIC REPUBLIC and to secure to all its citizens:
      JUSTICE, social, economic and political;
      LIBERTY, of thought, expression, belief, faith and worship;
      EQUALITY of status and of opportunity;
      and to promote among them all
      FRATERNITY assuring the dignity of the individual and the unity and integrity of the Nation;
      IN OUR CONSTITUENT ASSEMBLY this twenty-sixth day of November, 1949, DO HEREBY ADOPT, ENACT AND GIVE TO OURSELVES THIS CONSTITUTION.

      I borrowed an original 1949 Constitution from a lawyer friend whose father was also a lawyer. Here is the original preamble:

      WE THE PEOPLE OF INDIA, having solemnly resolved to constitute India into a SOVEREIGN DEMOCRATIC REPUBLIC and to secure to all its citizens:
      JUSTICE, social, economic and political;
      LIBERTY of thought, expression, belief, faith and worship;
      EQUALITY of status and opportunity;
      and to promote among them all
      FRATERNITY assuring the dignity of the individual and the unity of the Nation;
      IN OUR CONSTITUENT ASSEMBLY this twenty-sixth day of November, 1949, do HEREBY ADOPT, ENACT AND GIVE TO OURSELVES THIS CONSTITUTION.

      Secularism, as we take the meaning in India, gets covered pretty well in the second point which goes “…LIBERTY of thought, expression, belief, faith and worship;” So why was there a need to put it in again, in the first line? Was it to piggyback the word “SOCIALIST” into the document?

      And isn’t the new preamble a lie, when read in the context of the last line “IN OUR CONSTITUENT ASSEMBLY this twenty-sixth day of November, 1949, do HEREBY ADOPT, ENACT…. etc etc” since the 1949 members of the Assembly had never put in those words?

  • http://twitter.com/anupknair anup nair

    Nehru Rate of Growth (ROG). ROG is illness in Hindi. India badly sufferred a case of Nehru Rog!

    Btw, I was surprised to come across an article that mentioned that uptil 2 years before its collapse, the economist Paul Samuelson was rooting for socialist policies of the Soviet Union.

    “The Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.”

    http://www.rediff.com/getahead/slide-show/slide-show-1-money-8-financial-forecasts-that-went-wrong/20120927.htm

  • p.v.thosar

    well said , truth !!!!!this loot is going on since 1947 by nehru & his ministers!!!!!!started from krishna menon till sonia & congress company !!!!! these shameless people are eating one thali @ rs. 8,000/- each costing rs. 30,00,000/-for one time khana while asking poor people of bharat to spend only rs. 26/- per day !!!!!!!! is this socialism ?

  • http://www.facebook.com/profile.php?id=1515223366 Hindustanorg India

    Congress party is like the big reptile that eats 90% of Indians lunch each day. This party and its corrupt bastards have destroyed India and force its people to live hand to mouth.

  • indervir singh kang

    its high time that india get rid of this clan , and throw them out of power in the forth coming elections,it is still very much doubted the upa pushes all the issues related to us even at the cost of loosing power,the person is so cool to all the scams involved directly or indirectily suddenly collects enough courage and pushes nuclear deal,FDI taking such risk and one the allies leaves and (IN KEY SIR PAR JOON NAHIN SRKI)

  • Gujju By Heart

    Very good article.

  • http://www.3mik.com Rajeev

    This article really highlights where you land if you stop thinking. I also hear this a lot, how well we would have been if we had let the markets run its course without any state intervention. True, the control of state led to excesses later but blaming that model for all ills of India is just naive.

    The alternatives should also be factored in. At the time of independence we were a complex reality. If we had left it to market forces alone then we could have also end up like a united fruits controlled banana republic. Why the author never considers that as a viable alternative of what could have happened? India really had a mass of downtodden people who could have only become slaves in that market economy.

    There are countries who embraced the american system and never became “America”. How about them? I would recommend reading “open veins of Latin america”.

  • Venkat

    Excellent piece of objective analysis, with numbers! I’ve often wondered what could have been the per capita etc had we grown faster in the 50s and 60s. Even if we assume a conservative 4 to 5% annual growth (compared to 2.1% of NEHRUVIAN growth) we would have been far better… Many Indians could have had a better lifestyle… Alas… that didn’t happen and that is why we are discussing this here :(((
    And thanks for calling it Nehruvian Rate of Growth, instead of “Hindu rate of growth” as the spinmasters call it..

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  • http://twitter.com/bharatjohnson Johnson Thomas K

    In my legal notice to the European Union for the repatriation of all looted heritage from India including the Kohinoor Diamond and all religious properties governed by the scriptures I call this phenomenon British Post Colonial Duress on India. Look the BBC, the Guardian all want the Congress to win so they want to demonize Modiji. The spiritual home of the socialists and Nehruvites in India is indeed Britain. The first Communist Republic was the Communist Republic of Battersea in London from were Marx, Lenin, Engels roamed like intellectual dinosaurs before communism was exported to Russia, China and all developing countries. The British based Oxfam is distributing books on secularism to vulnerable children in India whilst the British Queen is the Supreme Governor of the Church of England and the British Parliament has 30 church commissioners is to ensure India is kept corrupt and poor so that the British Tax Havens can sponge of India’s corruption. JAI HIND

    Please see paragraph 1.7 of the following link as below;

    http://indianheritageprotection.wordpress.com/

  • vasanth

    People always go blah blah over some issues for example gujrat riots,but I believe the far greater crime is keeping millions of people under poverty when they could have a decent life,millions die of hunger,the state can’t provide basic education,etc…the list goes on…as the author pointed out we wasted not only the could have been trillions but many died just trying to live a decent life,wasted the life time of many youths.

  • http://twitter.com/mp256 ManBearPig

    Going by the history of the politicians that India has elected at Central level, it seems that people prefer the Nehru clan over the opposition. We brought the b**** back to power after she imposed the emergency and lost the election. We bought her son back to power just because of sympathy. Then 10 years of puppet and now maybe the next generation in 2014. So who is to blame? We the people

  • jawaharuddin nehru

    nehruddin/s and gandhiuddin/s don’t get elected, they play with votes by all means (EVM, money, terror, blackmail, use of govt power etc) and stay in the chair. these arseholes must be wiped out, these are leeches. they live on public money, besharam, makkar. can be sent for Haj.

  • D.Bose

    The author does not know any economics; he is comparing apples with banana.

    Growth rate of a country is determined by two factors: how much the can save to invest not in gold but in industry and how much foreign aid or investment or foreign borrowings one can can get.

    The saving rate during the 1950s was very low about 6-7 percent, and as a result the growth rate was very low. The saving rate today is about 30 percent; thus the growth rate is higher.

    However, during Rajib Gandhi period India had achieved very high growth rate of 10 percent due to excessibe foreign borrowings.

    Thus, a high growth rate stimulated by foreign borrowing or foreign money ( as it is today) does not mean the country will go on growing at the same rate. In 1991 after the demise of the Soviet Union, who used to give almost everything free, India went bankrupt as there was no money to import those what India used to get free from the Soviet Union.

    Similar sudden collapse can always happen, when today India survives only because of the NRIs who are sending home at least $ 30 billion every year.

    One cannot project backward the growth rate and say I have lost so much. One needs to see the history as well.

    Nehru had to cope with millions of refugees from Pakistan, annual flood, Chinese invasion.
    Sastri had to cope with Pakistani invasion and Bihar famine.
    Indira Gandhi had to cope with 10 million Refugees from East Pakistan, War with Pakistan, famine in 1974, 400 percent increase in petroleum price, war in Afghanistan, war in Sri Lanka.
    They have no advantages from the NRIs.

    Today, there is no famine or war or refugees, but NRIs growing wealth. Thus, today’s growth rate is not comparable to yesterdays growth rate.

    It is as if you are saying if I would just as tall as I am today, when I was 6 years old, I could beat up all the other boys who used to take away my pen in the primary school.

    It makes no sense.

  • Bapty.s

    I APPLAUD. THE AUTHOR. FOR ANALYSING THE PRIME. CAUSE. MAY I ADD. WITHOUT. GOING INTO ECONOMICS, SOCIALISM. ETC ETC. CONGRESS. SHLD HAVE BEEN DISBANDED. AS GANDHIJI. WANTED, BUT NEHRU. WANTED POWER. AND ABSOLUTE POWER. ,AND HIS FAMILY. HAS BROUGHT US TO THIS. STATE.

    IF THE TOP WAS CLEAN. AND THE COUNTRY. ALWAYS HAD GREAT PEOPLE. IN EVERY WALK OF LIFE, BUT. THE NEHRU PARIVAR. POLLUTED DELHI. ,CHANGED INDIA. FROM DEMOCRACY TO SINGLE PARIVAR RAJ. ,AND THE REST IS HISTORY. WE HAVE. ALSO TAUGHT THE WORLD. HOW NOT TO RUN. A SO CALLED. DEMOCRACY. WHICH. IT REALLY IS NOT.
    MERELY HOLDING ELECTIONS. AND THEN. SITTING. IN THE GADDI FOR. 5 YRS. ,IN THE MEANWHILE. DO EVERY THING AND ANYTHING. ,BY COMPLETE MISUSE OF OFFICE, THE ENTIRE. SYSTEM BEING SUBORDINATED, INCLUDING JUDICIARY. ALLIES BEING CONTROLLED IN. EVER SO MANY WAYS, AND. WITHOUT A MAJORITY. BY SHOW OF HANDS RUN. THE GOVT LIKE A PRIVATE. COMPANY..

    THIS CONGRESS. UNDER ONE. NEHRU PARIVAR. HAD MASTERED. THAT. WITH. ENTIRE. SO CALLED ELECTED. MINISTERS. AND. M.Ps ETC. BECOMING GHULAMS. WELL TAKEN CARE OF.

    BJP. HAS. SHIFTED THE GOAL POST. AND SHOWN GOOD GOVERNANCE IN THEIR STATES. IF. YOUNG INDIA OF. 850 MILLION. ARE NOW. WELL AWARE. OF WHAT’S GOOD. AND WHAT’S BAD, AND SEEING STATES LIKE GUJARAT. PROGRESS FAST IN ALL ROUND MANNER, AND. IF THEY VOTE. SHRI MODIJI TO BE THEIR. HONEST ,PERFORMING. LEADER. TO NOW BECOME P.M. ,THAT ALONE WILL ENSURE. A GOOD FUTURE AND SAFETY OF INDIA. IN EVERY SENSE OF THE TERM.

    SHRI. MODIJI IS. A INCORRUPTIBLE. LEADER. WHO CAN BE FULLY TRUSTED. AND WILL. TAKE THE COUNTRY FORWARD, IN. THE SHORTEST POSSIBLE. TIME. IF WE MISS THIS OPPURTUNITY. ,YOUNG INDIA WILL REGRET FOR EVER. THANK YOU.




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