Economic policy of the Indira Gandhi government

There is considerable debate regarding whether Gandhi was a socialist on principle or out of political expediency. Sunanda K. Datta-Ray described her as "a master of rhetoric...often more posture than policy", while The Times journalist, Peter Hazelhurst, famously quipped that Gandhi's socialism was "slightly left of self-interest." Critics have focused on the contradictions in the evolution of her stance towards communism; Gandhi being known for her anti-communist stance in the 1950s with Meghnad Desai even describing her as "the scourge of [India's] Communist Party." Yet, she later forged close relations with Indian communists even while using the army to break the Naxalites. In this context, Gandhi was accused of formulating populist policies to suit her political needs; being seemingly against the rich and big business while preserving the status quo in order to manipulate the support of the left at times of political insecurity, such as the late 1960s. Although Gandhi came to be viewed in time as the scourge of the right-wing and reactionary political elements of India, leftist opposition to her policies emerged. As early as 1969, critics had begun accusing her of insincerity and machiavellianism. The Indian Libertarian wrote that: "it would be difficult to find a more machiavellian leftist than Mrs Indira Gandhi...for here is Machiavelli at its best in the person of a suave, charming and astute politician." Rosser wrote that "some have even seen the declaration of emergency rule in 1975 as a move to suppress [leftist] dissent against Gandhi's policy shift to the right." In the 1980s, Gandhi was accused of "betraying socialism" after the beginning of Operation Forward, an attempt at economic reform. Nevertheless, others were more convinced of Gandhi's sincerity and devotion to socialism. Pankaj Vohra noted that "even the late prime minister's critics would concede that the maximum number of legislations of social significance was brought about during her tenure...[and that] she lives in the hearts of millions of Indians who shared her concern for the poor and weaker sections and who supported her politics."

In summarizing the biographical works on Gandhi, Blema S. Steinberg concluded she was decidedly non-ideological. Only 7.4% (24) of the total 330 biographical extractions posit ideology as a reason for her policy choices. Steinberg noted Gandhi's association with socialism was superficial; only having a general and traditional commitment to the ideology, by way of her political and family ties. Gandhi personally had a fuzzy concept of socialism. In one of the early interviews she had given as Prime Minister, Gandhi had ruminated: "I suppose you could call me a socialist, but you have understand what we mean by that term...we used the word [socialism] because it came closest to what we wanted to do here – which is to eradicate poverty. You can call it socialism; but if by using that word we arouse controversy, I don't see why we should use it. I don't believe in words at all." Regardless of the debate over her ideology or lack of thereof, Gandhi remains a left-wing icon. She has been described by Hindustan Times columnist, Pankaj Vohra as "arguably the greatest mass leader of the last century." Her campaign slogan, Garibi Hatao ('Remove Poverty'), has become the iconic motto of the Indian National Congress. To the rural and urban poor, untouchables, minorities and women in India, Gandhi was "Indira Amma or Mother Indira."

Green Revolution and the Fourth Five-Year Plan

Gandhi inherited a weak and troubled economy. Fiscal problems associated with the war with Pakistan in 1965, along with a drought-induced food crisis that spawned famines, had plunged India into the sharpest recession since independence. The government responded by taking steps to liberalize the economy, and by agreeing to the devaluation of the currency in return for the restoration of foreign aid. The economy managed to recover in 1966 and ended up growing at 4.1% over 1966–1969. But, much of that growth was offset by the fact that the external aid promised by the United States government and the International Bank for Reconstruction and Development (IBRD), meant to ease the short-run costs of adjustment to a liberalized economy, never materialized. American policy makers had complained of continued restrictions imposed on the economy. At the same time, Indo-US relations were straining due to Gandhi's criticism of the American bombing campaign in Vietnam. While it was thought, at the time, and for decades after, that President Johnson's policy of withholding food grain shipments was to coerce Indian support for the war, in fact, it was to offer India rainmaking technology that he wanted to use as a counterweight to China's possession of the atomic bomb. In light of the circumstances, liberalization became politically suspect and was soon abandoned. Grain diplomacy and currency devaluation became matters of intense national pride in India. After the bitter experience with Johnson, Gandhi decided not to request food aid in the future. Moreover, Gandhi's government resolved never again to become "so vulnerably dependent" on aid, and painstakingly began building up substantial foreign exchange reserves. When food stocks slumped after poor harvests in 1972, the government made it a point to use foreign exchange to buy US wheat commercially rather than seek resumption of food aid.

The period of 1967–75 was characterized by socialist ascendency in India which culminated in 1976 with the official declaration of state socialism. Gandhi not only abandoned the short lived liberalization programme but also aggressively expanded the public sector with new licensing requirements and other restrictions for industry. She began a new course by launching the Fourth Five-Year Plan in 1969. The government targeted growth at 5.7% while stating as its goals, "growth with stability and progressive achievement of self-reliance." The rationale behind the overall plan was Gandhi's Ten Point Programme of 1967. This had been her first economic policy formulation, six months after coming to office. The programme emphasized greater state control of the economy with the understanding that government control assured greater welfare than private control. Related to this point were a set of policies which were meant to regulate the private sector. By the end of the 1960s, the reversal of the liberalization process was complete, and India's policies were characterised as "protectionist as ever."

To deal with India's food problems, Gandhi expanded the emphasis on production of inputs to agriculture that had already been initiated by her father, Jawaharlal Nehru. The Green Revolution in India subsequently culminated under her government in the 1970s and transformed the country from a nation heavily reliant on imported grains and prone to famine to being largely able to feed itself, and become successful in achieving its goal of food security. Gandhi had a personal motive in pursuing agricultural self-sufficiency, having found India's dependency on the U.S. for shipments of grains humiliating.

The economic period of 1967–75 became significant for its major wave of nationalisations amidst the increased regulation of the private sector.

Some of the other objectives of the economic plan for the period was to provide for the minimum needs of the community through a rural works program and the removal of the privy purses of the nobility. Both these, and many other goals of the 1967 program were accomplished by 1974–75. Nevertheless, the success of the overall economic plan was tempered by the fact that annual growth at 3.3–3.4% over 1969–74 fell short of the targeted figure.