107.

The Economic Outlook for India

We must now consider [the questions] referring to the present and the future, of which the first is whether or not the way has been prepared for a great forward movement that will bring India into economic line with the industrialized countries of the West.

My own conclusion is that from the purely material, technical point of view there is no reason why rapid advance should not be made. India has at least her fair share of natural advantages, and there is no evidence to show that under favourable conditions Indian workers—supervisory, technical, and manual—are not capable of becoming as efficient as the inhabitants of other countries who work under similar conditions. The climate itself has advantages as well as disadvantages, and scientific research has already done much, and should do more, to reduce the latter and increase the former. But I am convinced that no such rapid advance can take place in the absence of fundamental social reorganization. No amount of protection, no efforts of Government to promote scientific research and propaganda, to assist new industries, or improve communications and public works, will effect any radical improvement in the economic condition of the people, unless certain obstacles are removed that affect economic progress fundamentally. Three classes of obstacles may be distinguished.

First and foremost, it must be definitely recognized that general prosperity in India can never be rapidly or substantially increased so long as any increase in the income of individuals is absorbed not by a rise in the standard of life, but by an increase in the population. The population problem lies at the root of the whole question of India’s economic future, and it is useless to try to bilk the fact. It is difficult to avoid the conclusion that no matter how productivity is increased, economic organization is improved, public health is promoted or industrialization progresses, the standard of life of the masses will not and cannot be raised to a satisfactory level until changes have been introduced which will enable the size of the population to be better adjusted to economic resources. At present, on account of the strength and universality of certain customs and institutions, no satisfactory adjustment is secured. The requisite reforms fall within the social rather than the economic sphere, and belong to a domain from which the present Government is excluded both by popular desire and deliberate policy. It is a curious paradox that nothing would end British rule in India more quickly than any attempt to introduce just those reforms which would do most to improve the well-being of the masses. A well-proportioned decrease in the birth-rate would unquestionably result in an increase in income per head, which would enable each individual to procure and utilize more knowledge and capital, and would enable the State to raise a larger revenue which it could expend in spreading economic, as well as general education, and in initiating and assisting new economic projects.

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The second fundamental obstacle to economic progress in India is the present uneconomic outlook of the people. The results of particular economic tendencies and measures depend upon the milieu within which they work. In discussing the working of economic laws in India the same assumptions cannot at present be made as in America or Western Europe. Failure to recognize this fact can only cause disappointment by leading to the adoption of measures which have proved efficacious in the West, but which are not appropriate to Indian conditions. Even the laws of supply and demand depend upon certain assumptions with regard to social conditions and the economic nature of man, which, as a matter of fact, are not always justified. For instance, it cannot be assumed in India (nor everywhere else for that matter) that an increase in the price of labour will necessarily lead to an increase in the supply of labour. New industries can only be a success if they attract a supply of labour suitable in quantity and quality to the requirements. To the extent that labour is not mobile and is not attracted by higher wages, it will be impossible, or at least extremely difficult, to extend large-scale modern industries on a commercial basis in India. "One cannot help feeling that, until you can push ahead with primary education and get the workers to find useful ways of spending their money, they are not going to have any incentive to earn more."

Again, in India it cannot be assumed that if the Government stands on one side private individuals will seize the most promising openings and initiate enterprises that are likely to prove remunerative. Neither capital nor labour is mobile, and competition does not tend to produce an equality of returns from the marginal doses of labour and capital. The truth is that an economic outlook does not prevail, and that, as long as the economic motive cannot be relied upon, it is extraordinarily difficult to predict the results of economic measures or in any way to influence or to guide economic development. If there is to be economic achievement, there must be economic effort, and economic effort can only result from the adoption of an economic outlook and from a readiness to modify social customs and institutions in the interests of material development. A static social ideal cannot coexist with a progressive economic ideal. The ascetic hermit cannot expect his cell to be lit with electricity and warmed by central heating. Modern methods of production depend upon division of labour, large-scale production, and the application of science to production, and these presuppose a certain level of education, regular disciplined work and, above all, economic ambition. An increase in prosperity can only be expected from the co-operative efforts of the members of a community in which the economic motive prevails. It need not, however, be assumed that the economic motive must prevail to the exclusion of all others.

The conclusion is that a change in the outlook of the people, whereby they may become willing to change their social customs and institutions in the interests of economic progress, is a fundamental condition of such progress in India. The chief social reforms that are relevant to the problem of economic development have already been considered at some length in previous chapters, and include the removal of religious and caste hindrances to efficient production, to the mobility and efficiency of labour, and to economic expenditure and consumption; reforms with regard to the social ideals of the people, which will engender a more widespread and intense desire to render social service; and reforms with regard to the social and economic position of women.

The third fundamental obstacle to economic progress in India is the lack of co-operation between the Government and the governed. Apart from fundamental constitutional changes the Government can facilitate such co-operation only by adhering most strictly to a policy which definitely aims not only at good government, but also at the elimination of any possible causes of suspicion of its motives. Insufficient attention has often been paid in the past to the necessity of conciliating public opinion in economic matters, but a change in policy in this respect has recently appeared; for instance, in the adoption of "discriminating protection," the repeal of the cotton excise, the purchase of stores in India, the institution of rupee tenders, the limitation of direct financial aid to companies registered in India, and in the establishment of a Reserve Bank. The new Constitution [1935], particularly by the grant of Provincial Autonomy, should do much to stimulate public interest and co-operation in economic and social development. . . . A great forward step would be taken if it was realized how limited is the power of the Government over economic development, and what great need there is for voluntary economic effort on the part of individuals. To imagine, for instance, that all that is necessary in order to induce industrialization in India is to adopt protective tariffs, or grant bounties on production, is entirely to misunderstand the factors at work, and grossly to overrate the powers of Government and the potentialities of Governmental economic policy.

Although the power of the Government has been overrated, it is none the less true that the part played by the Government in the economic life of the country must necessarily be greater in India than in most other countries, owing partly to the scarcity of natural leaders in economic matters, and partly to the attitude and position deliberately assumed by the Government in India. After all, it has been the political connection with England that has brought about intimate economic contact between India and the West, been responsible for the "opening-up" of India, the establishment of large-scale factory and plantation industries, and for the existence of economic anachronisms within the country. Many of India’s most pressing present-day economic problems are due to this connection, and the Government ought, therefore, to assume at least part responsibility for finding a solution. The difficulty is that no solution can be found without the whole-hearted co-operation of the people, and that it is particularly difficult for a "foreign" Government to obtain that co-operation, and to raise the revenue necessary for the performance of extensive economic and social functions. It can be concluded that until fully responsible government is conceded it is to be expected, on the one hand, that Government policy will be subject to drastic criticism, and, on the other, that too much reliance will tend to be placed upon it.

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In conclusion it can be said that India’s economic future depends, in the main, not upon the inauguration of particular schemes of development, or the adoption of particular lines of policy, but upon more fundamental social reforms and reorganization, directed towards controlling the size of the population, breaking up the existing over-rigid social stratification, stimulating social enterprise and energy, promoting education, and replacing the forms by the spirit of religion. . . .

⁴³ V. Anstey, The Economic Development of India, 3rd ed., Longmans, Green and Company, London, 1936, pp. 473–478, 487. Reprinted by permission of the publishers.