Air India’s privatisation is underway, albeit belatedly. Amidst conversations on the subject, many have blamed State control of the economy, which began under Jawaharlal Nehru, for the airline’s later failures. This is dangerous since it reflects a limited understanding of the country’s political economy at the time. It is worth noting that at the time of independence, India’s economic and political situation demanded the State’s involvement in the economy. The Bombay Plan, a memorandum written by eight of India’s leading businessmen in 1944, was a virtual plea for a State-led mixed economy. There was support across the political and business worlds for a Socialist economy. Calling the nationalisation of Air India detrimental to the Indian economy disregards the condition India was in at the time: a poor and highly unequal country desperately in need of resources and economic growth. Global economics debates at the time were in favour of State intervention across the world -- from the New Deal in the US to the emergence of the British Welfare State and the dominance of Keynesian economics to overcome economic slumps.
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In 1944, towards the end of WWII, on the heels of the Bengal Famine, the Quit India movement, and the inevitability of independence, JRD Tata and seven other leading industrialists and executives of the era – G D Birla, Purshottamdas Thakurdas, Ardeshir Shroff, Kasturbhai Lalbhai, Ardeshir Dalal, John Matthai, Lala Shri Ram came together to write a manifesto for the Indian economy post-independence. It was dubbed The Bombay Plan, or more formally A Plan of Economic Development for India. Its authors helped set up the Reserve Bank of India (RBI), Federation of Indian Chambers of Commerce and Industry (FICCI), supported the Congress during the freedom struggle, and even sat on the Viceroy’s executive council during WWII.
The Bombay Plan was a two-part statement written by Indian businessmen and academics as they navigated the struggles and constraints imposed on them by the British Raj during WWII, and a way for them to indicate to future governments how they envisioned India’s political economy after independence. The plan aimed to triple India’s GDP in 15 years, and significantly increase India’s per-capita income to improve overall living standards. It planned to achieve these aims through three ‘leaps’, each spread out over five years, analogous to the five-year plans developed by the Nehru government after independence, which prioritised agriculture, industrialisation and then a transition to a services economy. In essence, India’s businessmen were in favour of a State-dominated economy, in line with previous actions. For example, they had sat on the Congress’ National Planning Committee in 1937 to help plan resources across the provinces under Congress rule. Some of the writers sat on committees created by the British Raj to share their views on the economy. For example, Ardeshir Shroff told the British Raj government’s Reconstruction Committee that:
“The business community was convinced it would be necessary for the Government to exercise far reaching control in all fields of business activity, and that business would cooperate in the interests of economic development.”
This stance was adopted for multiple reasons. One was to secure business interests by showing solidarity with the government, but also to engage in policymaking to support modern India. It was also a statement showing that the business sector was unable to be the sole provider of jobs in the economy or shore up development and growth.
The planners argued for a ‘mixed-economy’ model, where the government would take control of ‘basic industries’, and the private sector would take charge of ‘consumer industries’. Basic industries, transportation, including by air, rail and shipping, chemicals, power generation, and engineering were considered integral. Moreover, they argued that nationalisation of basic industries could reduce income inequalities, “Control by the State, accompanied in appropriate cases by State ownership or management of public utilities, basic industries, etc., will also tend to diminish inequalities of income (The Bombay Plan, Section 8).” This shows that there were two factors that shaped the businessmen’s logic: nation building and the protection of business interests in ‘consumer industries,’ such as textiles, glass, cotton, tobacco and paper -- sectors where they had business interests.
They further argued that the government had to prioritise its basic industries over consumer industries, which would anyway be small given India’s poverty, in order to support other businesses. The planners conclude this section by saying, “for the success of our economic plan that the basic industries, on which ultimately the whole economic development of the country depends, should be developed as rapidly as possible,” emphasising that the government needed to take a leading role in the economy to ensure their provision. This reflects the relevance of the State in managing crucial sectors of the Indian economy such as airlines and railways.
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If anything, The Bombay Plan was a signal from the business community that instead of debating whether India should have a planned economy or not, the focus should be on determining the extent to which the State should be involved in the economy, a tussle that the Planning Commission faced after its creation. The Plan’s influence on Indian economic planning is clearly seen in the First and Second Five-Year Plans, which also prioritised agricultural development and industrial growth, respectively. It also paved the way for India to adopt a ‘third way’ in structuring its political economy by providing an opportunity for the country to combine aspects of Western capitalism, Soviet planning, and Western Socialism, allowing India to chart its own independent course.
Given the complexities facing the global economy with WWII and the centralisation and mobilisation of resources, the plan offered a remedy that would balance the aims of business and government. The Bombay Plan was a moment for India’s businesses to partake in nation-building and it endorsed aspects of the Congress’ and Nehru’s vision of modern India, while also tempering more extreme tendencies of the Left to protect their interests and receive government support in the name of self-sufficiency and independence from foreign influence.
Air India’s decline did not begin at or because of nationalisation — Nehru requested JRD to remain its chairman and he remained so until 1977 and Air India remained one of the prestigious airlines in the world in this period, until he was unceremoniously removed by the Janata Party government — but because of poor management following JRD’s ouster. Blaming Nehruvian Socialism for Air India’s ills without acknowledging the political and economic contexts of post-independence India reflects an incomplete understanding of India’s formative years after independence.
(The writer is a student at Stanford University)