Mistakes of the Past

A few days back, I was reading a book which unraveled some startling facts about India.

• The income tax prevalent in India post Independence was as high as 97%! This was mainly during the Nehru - Indira Gandhi era.
• A one point of time in India, and honest businessman like J.R.D. Tata was being taxed greater than 100% of his income. He paid for them and his everyday expenses by selling off some part of his property every year.
• The Government of India had the sole right to decide what the quantity of goods that could be produced by a particular private sector company
• Not just that, the Government of India had the supreme authority in deciding what the produce would be, where it would be produced, and at what price it would be produced & sold.
• The Government Of India had the sole right to decide (on parameters which they were not liable to discuss with the public) to what extent a businessman could expand his business. This was widely incorporated under the MRTP (Monopoly Restricted Trade Practice).

Is this a joke or what? How incredulous could policy making get?

It all started with Jawaharlal Nehru's idealogy that India would be a socialist democracy. He believed in the Utopian idea that the industry existed only for the welfare of people. It existed only so that it could provide a means of employment. Nowhere in that idealogical process did he feel that industry also existed to make a profit. In fact, it has been on record, that Nehru was not eager to see the Indian industry make profit. He felt that profit making was akin to bilking the commoner.

I cannot understand this point at all. Let us for the moment assume that the whole point in industry is to generate employment. It is plain common sense, that in order to improve the employee's life, the industry would need to make money. In order to generate employment, the industry would need to grow. But how could that happen when the policies within the public service utilities (PSUs) were not designed to ensure effciency.In many PSUs, the policies were made by people who were in no way qualified to make decisions for that particular industry, but only did so because they belonged to the "experts committee" appointed by the Government. How could the private industry grow, when the government policies were tailored to stifle it? And then what quality of employment did one generate?

Today though, the picture is different. At least no one decides for you what, when, where and how much of material (or ideas) you should generate. And the results are there for everyone to see.

The irony of this whole thing is, the very government which freed us from this economic bondage, didn't get re-elected, while we still speak of Jawharlal Nehru, and his daughter with great pride.

Disclaimer: I'm a politically neutral (they're all thieves anyway attitude) person. The above references to Nehru and Indira Gandhi are not politically motivated. In fact I appreciated their very political party for having freed us of the economic gravedigging that was prevalent till then, and that stands evidence to my statement - this post has nothing to do with politics, rather with economics and economic policy making.