After a country attains independence, it begins the long road to stability. Economic stability is a very important aspect of a nation’s independence. New countries are very vulnerable to the greedy hands of the more developed industrialized nations, so their leaders must devise means to strengthen their nation’s economy and keep the money within its own borders. India is such a developing country that has needed to protect its economy from the imperialism of other nations.
This protection was generally attempted with the implementation of government-sponsored programs, which altered certain taxes and tariffs, regulated private businesses, and also created government owned businesses. One project that attempted to strengthen India’s economy was started by P. C. Mahalanobis. His idea was the second five-year plan. Lasting from 1956 to 1961, this plan implemented British socialism combined with Mahatma Gandhi’s tenets. The second five-year plan tried to eliminate the importation of consumer goods with high tariffs and low quotas. This caused seventeen industries to become nationalized.
Licenses were also required for starting new businesses or producing new products. Bureaucratic control was tightened with these licenses, which were also required for shutting down or canceling workings. If a business would begin shutting down, the government would intervene and provide subsidies and assistance for as long as possible. Containing India’s consumer market within the country’s borders protected against Imperialist powers by making products produced locally much less expensive than imports, appealing to local citizens and encouraging internal growth.
Another leader who formed plans to strengthen India’s market was Indira Gandhi. Attempting to capitalize on Mahalanobis’ relative success, Indira began a program to promote small businesses by funding them with money formerly used for agriculture. This would lead to the loss of India’s agricultural market, but the plan included programs that would help agriculture, and small labor intensive businesses of the countryside. India’s output began to grow, but slower than other countries.
The programs were created with the intent of creating enough output to eliminate poverty, and become stable enough to generate revenue from exports. Government programs do not always work, however, and these programs turned out to have more of a negative impact on India’s potential growth, as over-regulation soon followed. In addition to the over-regulation of private industries, India created direct socialist enterprises. The government of India nationalized its heavy industry and created new SOE’s, or state-owned enterprises.
These SOE’s were more expensive to build and operate than private industries, and their inefficiencies quickly became apparent. Over-staffed, poorly managed and reliant on obsolete technologies, the creation of SOE’s was one government program that cost the economy more than it contributed to it. Although India had begun to implement successful programs protecting the economy from dependency on imperialist nations, reforms were needed should India become stronger. Rajiv Gandhi became Prime Minister in 1984. He would be the one to bring the necessary reforms India required for a stronger economy.
Disappointed with the current bureaucratic overload, Rajiv implemented a complete tax reform. This reform cut taxes on corporations and income tax rates. Lower taxes reduced tax evasion, which in turn resulted in an increase of revenue from taxes. He also loosened the tight restrictions on businesses by lessening limitations imposed by the previous “small company” policy and created the licensing policy called “broadbanding. ” Broadbanding means that a license for a product would allow production of a related version of the same product rather than requiring a new license for every version.
This new policy cut out much unnecessary and counterproductive bureaucratic red tape, and soon India saw a boom in production. India’s economy became very self-sufficient, and by 1988, it had the lowest ratio of imports to GDP of any nation in Asia. Rajiv Gandhi’s policies clearly protected India from interference by foreign powers. (Watkins) The many systems of regulation and industry support that the government of India implemented caused their national economy to gain strength and self-reliance. As a result of their close watch, India’s industries grew and became powerful enough to support a fully independent nation.
It took many tries and many failures for the leaders of India to guide their country into economic independence. Much more work must still be done if India is to become a major world power, but their successes show the difficulties facing a developing nation as it stabilizes its own economy. Forces within the country often prove to counteract its own progress, and a government must take careful steps to ensure its economy becomes efficient and not bogged down by bureaucracy or politics. The defense against Imperialism takes a dedicated government and a hardworking people.
