The Flip Side | ‘Licence Raj’ versus ‘License Raj’ | india | Hindustan Times
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The Flip Side | ‘Licence Raj’ versus ‘License Raj’

I do believe that viewing the “licence raj” with a differently spelt “license raj” is symbolic of the way we suffer optical illusions in analysing history, reports N Madhavan.

india Updated: Aug 17, 2007 03:20 IST
Narayanan Madhavan

Sometimes, the smallest of things can generate insights that could well run deep. Sometimes, these things are symbolic. While the nation celebrated 60 years of Independence on Wednesday, a lot was recalled in newspaper articles, many of them on economic achievements and the recent emergence of India as a promising global economy.

One thing in our own columns caught my attention. Among the milestones mentioned was the end of the “license raj” that happened in 1991 when Dr Manmohan Singh substantially abolished industrial licensing for most industries.

What caught my attention here was that I saw an American spelling (license raj) whereas the copy should have said “licence raj” in British English style. The younger generation at the news desk is usually lax on spellings in general, and American spellings in particular. Can’t blame them. You see, most of them went to college after economic reforms began, and many things are alien to them. These include waiting lists for telephone connections, high interest rates for home loans and grueling procedures to get foreign exchange. American spellings are part of the baggage that comes with economic liberalisation, call centre jobs and easy credit cards.

Chakravarthi Rajagopalachari, founder of the Swatantra Party, coined the term “licence raj” to make an evocative play on the term “British Raj” that people disliked and turned the negative branding effect on Nehru’s economic policies that emphasised on state controls, socialism and industrial permits and quotas.

But I ask myself a simple question: Had India followed its liberalisation policies in the 1950s instead of the 1990s, what would have happened? I have no easy answers, but it is clear that India would have had to export agricultural commodities in exchange for modern industries and foreign capital, or done something approximating to that. However, there was not much to export from here. Maybe a bit more of garments would have been exported. With foreign capital, India could have stolen some of the Chinese and Taiwanese thunder in electronics or labour-intensive manufacturing. On the other hand, there might have been no IITs (Indian Institute of Technology), no Steel Authority of India Ltd, no Indian Oil Corp. Dozens of public sector undertakings may not have come into being.

Now for the next big question: If there were no controls on industries, what would we have liberalised in the first place? Actually, a force has to be created before it is unleashed. The creation of a Nehruvian public sector, and subsequent neo-Nehruvian policies like Indira Gandhi’s nationalisation of banks, laid the ground for an industrial and financial structure. This structure, for all its shortcomings, had the potential to generate both human resources, knowledge base and the domestic economy that eventual liberalisation make use of.

I do believe that viewing the “licence raj” with a differently spelt “license raj” is symbolic of the way we suffer optical illusions in analysing history. Socialism, viewed through the rear-view mirror of liberalisation, appears different. Nehruvian policies also look dismal in many ways, but perhaps it would be fair to say that while many of his policies were flawed, they also laid the groundwork for the forces that gained from liberalisation and free market opportunities.

At least 25 Nasdaq-listed technology companies today owe their origins to people nurtured by Nehru’s policies that subsidized their education at the cost of primary schools or farmers. It is an irony that many of the biggest beneficiaries of Nehruvian largesse are among the most fashionable critics of socialist policies. As we raise a toast to their achievements and 60 years of Independent India, I only wish Nehru had created centres of excellence called Indian Institutes of History (IIHs) the way he had created the IITs. That might have helped us get a better sense of history.