No Licence Raj - India as an earlier China?

[Southpaw]

The Licence Raj was a system of bureaucratic regulation in India established after independence and lasting until 1991. The pseudo-centrally planned economy it established is widely blamed for India's low growth rates throughout this period.

Had the system never been introduced, and a more pro-market approach adopted, could India have become an Asian Tiger right from the start, a sort of China thirty years before its time? Would such a powerful India have been a far greater factor in the Cold War, or even the leader of a potential "Third Block"?

 

[Parterre]

I'm no expert, but India still has tremendous hurdles to overcome. The large disparities in language and literacy, and the native language policies don't help ameliorate that. The local movements and political cliques, particularly in the South, will have to be curbed.

Infrastructure is not a problem so much, but the allocation of power resources.

The fact that western and Labour-affiliated economists recommended recommended such policies to begin with. In order to avoid the licence Raj they will have to be removed or ignored. From the 1940s until perhaps the mid 1970s laissez faire policies were in the minority.

 

[Ganesha]

Part of the fundamental problem was that most Indian nationalists were socialists, because they viewed capitalism as the system which had destroyed India's economy. In 1650 certainly, and in 1750 probably, India had the largest economy in the world, and several parts were proto-industrialized.

But Britain systematically dismantled the advanced sectors of the Indian economy to turn the nation into an agricultural consumer of British manufactures - the truth is, capitalism as Nehru knew it was in fact responsible for huge amounts of economic damage to India.

I don't know how we can change that, but it's not like India just became socialist randomly - there was a broader historical pattern driving that outcome.

Cheers,
Ganesha

 

[Hollis Hurlbut]

I don't understand the OP's premise. We're taking two completely different countries, placing them under diametrically opposed systems, and expecting them to converge on a similar outcome? If we want a PRC-type result, the first step is surely to make India more centralized and regimented, not less. If India somehow achieves independence as a liberal free-market democracy, it will not develop into anything even vaguely resembling the modern PRC.

 

[Plumber]

I don't know how we can change that, but it's not like India just became socialist randomly - there was a broader historical pattern driving that outcome.

Other threads of this nature have focused on a United India lessening Nehru and Congress dominance of India, butterflying away the socialism involved.

But I think that China provides a very useful example here. China ultimately became as capitalist as it did as a reaction to the unchecked Maoism that destroyed the country. Had there been no Cultural Revolution, there is a greater chance that China would have plodded along in stagnant socialism. Like China, India probably needs some short-term pain to get a long-term gain. Otherwise, I don't see a paradigm shift happening as early as it did. The seeds in such a thing probably lie in The Emergency. If Indira Gandhi had died during the Emergency and Sanjay took over, I'm sure that India would veer towards capitalism similar to China.

Another way would be to increase the US-India relationship. To do this, we would need to butterfly away the Eisenhower Administration. A continued Truman or Stevenson Administration would have had a more nuanced view of the Cold War, and would not have alienated India. However, the US does have a need to keep Pakistan friendly, in order to deny the Soviets a direct route to the Indian Ocean. So I see a careful relationship with both, rather than the pro-Pakistan direction that the US took after Eisenhower. It's worth noting that India appealed to the US for help in the Sino-Indian War, but Kennedy ignored them. India then got arms from the Soviets. This is a similar tale to many other developing nations at the time.
Oh, and avoid Nixon as President at all costs. The man was rabidly anti-Indian, to the point where it sharply undermined his reputation as a foreign policy genius.

 

[Southpaw]

I don't understand the OP's premise. We're taking two completely different countries, placing them under diametrically opposed systems, and expecting them to converge on a similar outcome? If we want a PRC-type result, the first step is surely to make India more centralized and regimented, not less. If India somehow achieves independence as a liberal free-market democracy, it will not develop into anything even vaguely resembling the modern PRC.

I mean resembling China in an economic sense rather than a political one - the prospect of a democratic India becoming a major power is what really appeals to me.

 

[Plumber]

I mean resembling China in an economic sense rather than a political one - the prospect of a democratic India becoming a major power is what really appeals to me.

While I've outlined ways this can happen, I can't see the Licence Raj never coming into being. I can see it being abolished earlier, though.

The only way to do that it possibly if India stays united, but that would affect a lot more than just the Licence Raj.

 

[snerfuplz]

Hypothetically if India moved early into Capitalism instead of Socialism would that exasperate income disparity feeding Communist/Maoist rebels? I sadly do not know much besides the basics of post independence India

 

[eliphas8]

The problem I see here is that in effect the license raj was the compromise and largely a consequence of them trying to have both their capitalism and their planned economy at the same time. They may go a different route in their socialist practices but honestly I could kind of see that going better for them. But really it's a matter of implementation.

 

[Don]

Democracy has never led to a economic boom like China.

NEVER.

As a result a democratic India will not be possible for a China like economic boom.

Additionally, India is in no position for such, it is a very divided nation that is plagued by ethnic and religious violence. Unless that is overcome, India will remain a poor, backwards, and divided nation.

Though if somehow India experiences an economic boom after dealing with internal issues followed by a democratic movement like in South Korea, than it could be possible for it to be successful.

 

[b0ned0me]

The Licence Raj was a system of bureaucratic regulation in India established after independence and lasting until 1991. The pseudo-centrally planned economy it established is widely blamed for India's low growth rates throughout this period.

It has certainly been widely blamed. Whether it has been correctly blamed is another matter.
The licence raj was allegedly largely dismantled in 1990- twenty-three years later have we seen anything like the results achieved in China by 2001, a similar period after Deng decided to re-open for business? Personally, I'm not 100% convinced. The way they caught the economic cycles is of course different, and China has many many rough spots, just as India has achieved many many successes. But still - I'm not sure India has what it takes to ever emerge as a major power, it just seems to lack unity and direction (unsurprisingly).

 

[Southpaw]

It has certainly been widely blamed. Whether it has been correctly blamed is another matter.
The licence raj was allegedly largely dismantled in 1990- twenty-three years later have we seen anything like the results achieved in China by 2001, a similar period after Deng decided to re-open for business? Personally, I'm not 100% convinced. The way they caught the economic cycles is of course different, and China has many many rough spots, just as India has achieved many many successes. But still - I'm not sure India has what it takes to ever emerge as a major power, it just seems to lack unity and direction (unsurprisingly).

I'm not sure - for such a plurinational and religiously diverse country India seems to have held together astoundingly well, maintaining its democratic system (excluding the Emergency) throughout.

India's slower growth after 1990 might be due to its lack of export-driven industrialization, something which might change without China as a competing outsourcing destination.

 

[b0ned0me]

I'm not sure - for such a plurinational and religiously diverse country India seems to have held together astoundingly well, maintaining its democratic system (excluding the Emergency) throughout.

India's slower growth after 1990 might be due to its lack of export-driven industrialization, something which might change without China as a competing outsourcing destination.

Holding together is different from actively making its way in the world. Even the DR Congo has managed to hold together (kinda, sorta).

And the slower growth might also have something to do with the awful infrastructure/education, chronic malnutrition and poverty, corruption and dog-in-manger politics. China is afflicted with all the same woes, but many of them are lesser in extent and are being visibly reduced.
Whereas in India it seems that the single biggest influence on the well-being of the populace is whether the monsoon is good, just as it was about three thousand years ago.

 

[Plumber]

Democracy has never led to a economic boom like China.
NEVER.
As a result a democratic India will not be possible for a China like economic boom.

May I present the United States of America? Or Japan?

More seriously, an analysis of economic growth corresponding to democracy finds that:

• Economic growth is the same in democracies and dictatorships. There is no significant statistical difference.
• However, that's just in general. In resource-rich states, growth occurs slightly faster in dictatorships, which adds up over the years
• But this growth is distributed unevenly in a dictatorship in a multiethnic country, as the dictator's ruling sect gets a disproportionate amount of money, exacerbating sectarian tensions
• This means that the only time a dictatorship can actually grow slightly faster than a democracy without risking sectarian civil war in the process is if it is both a) resource-rich and b) homogenous. China is one of very few states to fit this criteria, so the "China model" of dictatorship = growth just doesn't hold up. In fact, replicating that in India could sow the seeds for civil war, as it has in so many other states.

From The Bottom Billion.

 

[Southpaw]

Holding together is different from actively making its way in the world. Even the DR Congo has managed to hold together (kinda, sorta).

And the slower growth might also have something to do with the awful infrastructure/education, chronic malnutrition and poverty, corruption and dog-in-manger politics. China is afflicted with all the same woes, but many of them are lesser in extent and are being visibly reduced.
Whereas in India it seems that the single biggest influence on the well-being of the populace is whether the monsoon is good, just as it was about three thousand years ago.

Infrastructural, economic and educational development is a consequence as well as a cause of economic development. China under Mao was not much better off than India is today, and it's not unreasonable to expect that India could have developed such as explosively in all these areas.

 

[Southpaw]

May I present the United States of America? Or Japan?

More seriously, an analysis of economic growth corresponding to democracy finds that:

• Economic growth is the same in democracies and dictatorships. There is no significant statistical difference.
• However, that's just in general. In resource-rich states, growth occurs slightly faster in dictatorships, which adds up over the years
• But this growth is distributed unevenly in a dictatorship in a multiethnic country, as the dictator's ruling sect gets a disproportionate amount of money, exacerbating sectarian tensions
• This means that the only time a dictatorship can actually grow slightly faster than a democracy without risking sectarian civil war in the process is if it is both a) resource-rich and b) homogenous. China is one of very few states to fit this criteria, so the "China model" of dictatorship = growth just doesn't hold up. In fact, replicating that in India could sow the seeds for civil war, as it has in so many other states.

From The Bottom Billion.

Yes, I can't see any other way a country like India can be governed other than federally. A centralised dictatorship would very likely have catastrophic consequences.

 

[SlideAway]

The fundamental problem India faces - and something it faces alongside all the other South Asian states - is relatively weak administration. For most of its history, India has decentralized. Even when a single empire gained dominance, it typically ruled much of the country through local clients. This pattern remained throughout the British Empire, which means when India emerged from independence, it had a relatively weak state.

This lack of state capacity, not democracy, is to a large extent what hobbles India. As a result, India would have had a harder time making major development fundamentals like basic public health access, education, literacy, and infrastructure improvements that could set the foundation for wider growth. That Nehru and Indira Gandhi's governments focused on state-led industrial development rather than primary education only compounded this problem. But even had they prioritized basic development issues, the same issues of state capacity would have held India back.

In comparison, the East Asian states all have long traditions of centralized bureaucracies. Whether democratic or undemocratic, China, S. Korea, and Japan have all been able to install major development projects with efficiency and penetration that India simply couldn't match.

 

[Faeelin]

Democracy has never led to a economic boom like China.

NEVER.

Off base what if: Japan, an economic power!

 

[Jape]

Really spit balling here (I'm terribly ignorant of the subcontinent). In the lead up to independence see Nehru's fabian socialism dominate utterly over Gandhian rural socialism that seemed mostly focused on keeping traditional Indian society in place over economic growth. The License Raj always struck me as a weak compromise between the two ideas. So give Indian a 'white heat' under Nehru and the Congress that pushes for modernisation.

It will no doubt have its problems but if an industrial, centralising, technocratic approach dominates, it might lead to easier capitalisation down the road having already (quite brutally) blown away the restrictions to India's prospective Tiger economy.

 

[SlideAway]

Actually, while I want to reiterate my point about India's relatively weak state capacity compared to the E. Asian Tigers, there's also a relatively easy POD here: avoid Indira Gandhi.

For all the negative press Nehru gets, his industrialization efforts did have some success. He fostered the IIT system, and economic growth under Nehru was 3-4% per year. Not great, but a lot better than the 1-2% under British rule, and basically in line with most developing countries of the time.

The big problems came with Indira Gandhi, without whom you wouldn't have the wave of socializations of industry. Nehru had cooperated closely with large industrial conglomerates, who could have provided the basis for export-oriented growth.

If India liberalizes earlier, say, in the 1960s, it would have never boomed the way the East Asian countries did. But faster, steadier, more capitalistic growth would have made the country an upper-middle income country today rather than the low-middle-income country it is OTL.