Editor’s Note: This is the second article in a two-part series highlighting the contributions of GK Sundaram as a Rajya Sabha member. Read the first part here.
During India’s freedom movement, most leaders were united towards the goal of achieving peaceful political freedom from the British rather than socio-economic freedoms. It was thought that the later suitable internal arrangements would be made for socio-economic freedoms. It was thought that the external control over the nation posed far more threats to India’s wealth and natural resources. Few leaders seemed sympathetic to with the ideas of communism, Fabian socialism, and statist control regime, along with the freedom struggles. They clearly explained that it would be devastating to experiment with those ideas in Indian society because it would not be compatible with the traditions of shared wealth creation pursued for hundreds of years.
However, the entire discourse changed soon after the adoption of the Indian Constitution. Jawaharlal Nehru became supercilious and failed to listen to senior leaders like Sardar Vallabhai Patel, C Rajagopalachari, Ambedkar, CV Raman, Syama Prasad Mookerjee, among others on the matters of national security, science, social and economic policies.
In 2003, GK Sundaram (1914-2009) had chaired the Minoo Masani Memorial Lecture organised in Chennai by the Indian Liberal Group. N Vittal, a retired bureaucrat delivered the lecture titled “Corruption Mocking Liberalisation“. In his presidential address, GK Sundaram interestingly mentioned scandals and corrupt practices by Motilal Nehru and Jawaharlal Nehru in both pre and post-Independent India with clear evidence.
GK Sundaram emerged as a strong leader of the Swatantra Party from Coimbatore in Tamil Nadu. He was also a visionary entrepreneur and was professionally affected by the government policies which dictated the entire means of productions. Thus, he believed that government policies perpetuated the scarcity in India with hunger and poverty. According to him, the policies of the 60s and 70s did not address “the maladies of the economy such as increasing agricultural and industrial production, maintaining price stability and curbing inflationary pressures in the economy.” Sundaram had strongly warned the potential crisis of balance of payments which was mounting increasingly, and eventually, the crisis came in 1990, forcing the government to undertake significant economic reforms.
Sundaram was nominated to Rajya Sabha from Swatantra Party from 1966 to 1972. He gave persuasive, stimulating and constructive speeches with alternative ideas and suggestions on finance bills, banking reforms, centralised planning, nationalisation of banks and insurance companies, international trade, economic development, infrastructure, controls on gold, import-export of capital goods, devaluation of the rupee, manufacturing, price controls on medicine, and black money, among other issues. He believed that an efficient way to improve productivity would be to increase prosperity in the country by fostering individual freedom, liberty, and free enterprises through the protection of private property rights.
Sundaram opposed bank-nationalisation on the ground that there was “already enough experience in the country about the nationalised trade and also the nationalised life insurance business. These two are enough examples to show the inefficiency and the manner in which it has been functioning in our country for the past several years.” He raised several pertinent objections and argued that the provisions of the Banking Law (Amendment) Act 1969 were not followed when 14 banks were nationalised eight-months later. The government hastily took control and even failed to fully abide by the judgment of the Supreme Court of India.
He further noted that “at the end of 1969, twenty leading commercial banks accounted for 86 per cent of the banking business and they sanctioned additional credit limits to agriculture and other small-scale industries to the tune of Rs. 130 crores and Rs. 84 crores respectively. This is an indication of their earnestness in carrying out the directives of the Reserve Bank. We should also not forget that these commercial banks were forbidden from giving any loan to agriculturists all these years because it was considered to be risk lending.”
On the allegation of profiteering by banks, Sundaram argued that “Unwarranted charges have been levelled against the banking industry like the concentration of money, monopoly and these things. We should not forget that immediately after independence in 1949, the Banking Regulation Act was introduced. Ever since that no new bank has been licensed so far. We have created a monopoly as early as 1949. Is it their fault if consciously we have allowed them to monopolise?”
He further highlighted that “In the case of the fourteen banks that have now been nationalised, at the end of 1968, their total profits were only Rs. 6.64 crores. How did they make this profit? They had a total deposit of Rs. 2,741 crores on 31st December 1968, of which current deposits accounted for 25 per cent, savings bank 26 per cent and fixed deposits 49 per cent. They had only 9 per cent of the total advances in liquid cash. Whether the nationalised banks will do the work so economically and make the maximum use of the funds available with them and show such results is very doubtful.” He was particularly prescient in this case. For many years now, the central government recapitalises nationalised banks with thousands of crores of taxpayers’ hard-earned money.
Sundaram had warned that “So far the finances followed development. Now the government wants finance to lead the development. They have to take a much greater risk”. He also warned the potential negative impacts on the economy, “If the nationalised bank is going to deal with the small trader, small agriculturist, small merchant, small industrialist, has it got sufficient machinery to go into this and find out exactly their profitability and their repaying capacity before it will advance money? I doubt very much.” Again, his warnings came true. Today, the MSMEs sector faces a severe lack of credit from banks.
Sundaram had also opposed the devaluation of rupee and gold control policies of the central government, which not only undermined the Indian economy internationally but also gave the wrong signal to the world. He opined in the Parliament, “…we are equating India for devaluation to the U.K., Japan, Italy, France, and Czechoslovakia. It is all erroneous; they are not identical. The conditions were different. The people are different. Their economic structure is different. Therefore, the remedies also will be different. It is absolutely erroneous to say that since these countries did it, we are doing it. Any country not producing enough, not cheaper enough, not saving; enough, borrowing more and spending more in relation to other countries, will meet with the same fate. Planning is not merely borrowing and spending. We are planning for more and more troubles only.”
Speaking on Cotton Textiles Companies Bill, 1967, Sundaram argued that “When Japan, France, Germany and Italy could supply us machines, you did not allow textile machines to be imported from them. There you had absolutely no control whatsoever. You could not have allowed any imports even if the industry wanted to renovate their machinery. What about the indigenous capacity? You have licensed it. There was not even 15 per cent” of capacity utilisation.
Sundaram had criticised The Monopolies and Restrictive Trade Practices Bill, 1967 on the ground that “The development of big installations and their economic production is very well known all over the country and even in our country in some of the public sector undertakings we are going in for bigger and bigger installations so as to be economic. All other countries the world over are going in for that whereas we are going in the other direction.” He was prophetic in warning that while countries all over were promoting free enterprise to foster competition and efficiency, the Indian government was doing the opposite and binding the economy in bureaucratic shackles.
According to Sundaram, the MRTP Bill was “very premature and untimely as this is the time when the economy of the country needs more incentives and not any impediments. It is a retrograde step and under the present circumstances it will hinder even the very revival of the economy, which is most urgent and necessary.” He further stated that “The existing Company Law, the licensing procedure, the capital structure, and capital control, the Factories Act, all these measures are sufficient to prevent the growth of any monopoly in the country, leave an alone concentration of it. Therefore, there is absolutely no need for such a Bill”.
Moreover, instead of the MRTP Bill, Sundaram argued that what was needed was “streamlining of the administration to free it from official corruption. That is also absolutely necessary and that is one of the prerequisites that the same Commission has recommended before taking any step like this. Therefore, the government takes only such of the recommendations which are very convenient for it and very conveniently omits all the rest of the recommendations.” The central government had set up the Monopolies Inquiry Commission which recommended the government to deregulate and reduce bureaucratic corruption, but these suggestions were ignored.
The central government increasingly made policies which were against its own finance bills and sometimes contradicting each other. While discussing the MRTP Bill in the Parliament, Sundaram noted that “The Commerce Ministry has taken several steps, either total or partial price decontrols, distribution decontrols in the matter of cement, sugar, iron and steel and coal. Why have they done it? They want to provide incentives in order to increase production. Therefore, if the expansion of industries is prevented, there won’t be any development”.
Furthermore, according to Sundaram, the MRTP Bill was “against the very spirit of the Industrial Policy Resolution of the Government of India which was passed by both the Houses providing for mixed economy and co-existence of private and public sectors with clear demarcations of their fields of operation.” He urged the government to study and follow the “policies adopted by countries which have developed fast like Japan, Malaysia, Thailand, ‘Taiwan, and Iran. They have set examples! already. We should not follow the policies of Cuba, Egypt, Ghana, and Indonesia, but we are going!” Alas, Sundaram’s warnings were ignored, and India is still paying a dear price for it.
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