Gujarat model is antidote to failed Bengal model of Nehru and Mahalanobis

Whenever someone talks of the Gujarat model of development, experts on both sides of the political divide pounce on statistics to appreciate or condemn the state's performance. But the issue goes beyond some statistics about power production or enrollment in government schools. It goes beyond mere growth or social indicators.

After independence, and particularly after the Avadi Congress (1955), the Congress party decided to adopt the "socialistic pattern of society" as our development mantra. The country opted for economic planning under the tutelage of PC Mahalanobis and Prime Minister Jawaharlal Nehru. We essentially opted for the Soviet model in Devnagari script.

The entire planning process and the role of the state was hijacked by different shades of Left-wing thinkers, with some criticising the others for not being adequately red. From Mahalanobis downwards, Bengali intellectuals played a very large role in this leftward tilt for more than 40 years and, during the entire period, economists from the other side were denied space or official patronage.

If you go back in history, the theoreticians of this failed model - which we can call the Bengal model for simplicity and also because most of its proponents were (and still are) from that province - dominated national discourse. Even today, we can say that Amartya Sen is the ultimate guru of this idea of development where the state plays a domineering role.

In simple terms, the Bengal model suggested that the state owed every individual something - from womb to tomb. Family responsibility was nationalised and everyone, from children to senior citizens, had a right to expect something from the state.

The word 'duty' was abolished from the dictionary and a rights-based society evolved. Some sections of the middle class lapped it up, since the Soviet Union gave legitimacy to this draconian idea and the public sector provided job opportunities to the educated. Nehru called public sector units the temples of modern India. The system was built on layers of regulations and a solid licence-permit-quota raj was created to administer it all. It accentuated corruption and government employees and middlemen became extortionists. Politicians became experts at stealing public funds.

Entrepreneurship was frowned upon and profit became a dirty word. Businessmen were derided as "banias" and metaphorically threatened with hanging from the nearest lamp-post. For example, price increases have always been blamed on hoarding by banias - the solution to inflation is thus to go after the banias. However, the system began to crumble once it failed to produce results and the country went near bankrupt in 1991. Once the economy was opened up, people began to demand products and services, which was beyond the comprehension of the government system. Newer opportunities sent public sector units scurrying for subsidies, and the collapse of the Soviet Union in the late 1980s destroyed the theoretical underpinnings of the socialist system.

If, in the sixties and seventies, the dream of every new engineer was to join one of the public sector units like BEL, Bhel or HMT, in the 1980s and 1990s, their preferences underwent a sea change.

But the massively corrupt system refused to die and the Frankenstein state, created over 60 years, found new ways to extend itself by conferring new rights on the people: right to information; right to work (MNREGA), right to food; right to education and now right to health. This is nothing but the state seeking new ways to retain the system of loot based on public resources.

The moth-eaten state structure has been unable to cater to these rights, and people, anyway, found ways to buy their way into the system. With huge resources now being devoted to sustaining these rights, klepto capitalists have found ways to manipulate the free market and the state to fatten themselves.

It is in this bleak and degenerate scenario that we have seen the emergence of the Gujarat model with an alternate vision of a new polity, enabled by a minimal state. The idea has always been around - with the late C Rajagopalachari being one of its backers - but in essence the Gujarat model is about having the state play a lesser role, and the people a larger one.

The model is simple. Entrepreneurship is encouraged and celebrated. People should have huge opportunities for employment, but not necessarily in government jobs. Individuals and families should work/earn/eat and live on their own efforts instead of depending on a benevolent state. Individuals are responsible for their actions.

The concept of a small state means having fewer regulations and more self-regulation. A self-regulatory framework policed by an effective law enforcement machinery which guarantees swift and severe punishment for violations can be the best form of governance.

The Gujarat model, for example, is to charge for power but provide it 24 hours. The Bengal model is to provide power free or with heavy subsidies - with the people getting more power cuts rather than power. Unfortunately, the Bengal model has become the norm all over India. It is the Gujarat model, whatever its shortcomings, that offers a different paradigm and different set of possibilities.

The battle between Nehruvian socialism and Rajaji's self-restrained market economy has just been joined. It is a tectonic shift and it need not be trivialised by looking only at growth numbers or indicators based on one's ideological preferences. The fact is Nehru's vision has failed completely and it is Rajaji's that needs to be given a chance now. The Gujarat model is an antidote to the flawed Bengal model.

The author is professor of finance at IIM, Bangalore. The views are personal

Published Date: Apr 14, 2014 08:20 pm | Updated Date: Apr 14, 2014 08:20 pm