Do you think that the post-1991 reforms in India mark a significant shift from the Nehruvian model of economic development? Justify your answer. (2010)
The Nehruvian model had four main parts: P. C. Mahalanobis’s heavy-industry plan, public ownership of the commanding heights (Industrial Policy Resolution, 1956), import substitution, and a licensing system that controlled private capital. Its goal was the “socialistic pattern of society” adopted at Avadi in 1955. Yes, 1991 marks a significant shift, decisive in the instruments of development, but not a clean break: the state’s developmental ambition carried over.
Where the break is real
| Dimension | Nehruvian model | After 1991 |
|---|---|---|
| Who invests | State directs through licences and plans | Market entry largely free; licensing kept for a handful of sectors |
| Commanding heights | 17 industries reserved for the state | Private sector leads; PSE Policy 2021 keeps a “bare minimum” in four strategic sectors |
| Trade | Import substitution, peak tariffs above 300% | Export orientation, current-account convertibility (1994), FTAs with the UAE, UK and EFTA |
| Foreign capital | FERA (1973) capped foreign equity at 40% | FEMA (1999), automatic route |
| Planning | Five-year plans run by the Planning Commission | NITI Aayog (2015), advisory; no allocation |
The justification changed too, towards Narendra Modi’s claim (2021) that government has no business to be in business. Atul Kohli describes the change as a move from a state that spoke of redistribution to a pro-business state.
Where the Nehruvian state persists
- The welfare state. Free grain under the NFSA reaches about 81.35 crore people. Rural work guarantees continue under the VB–G RAM G Act, 2025 (125 days), which replaced MGNREGA. Dr Balram Singh v. Union of India (2024) read the Preamble’s “socialist” as a welfare state.
- Public investment. Growth is again driven by public capital spending: the Union budgeted ₹11.21 lakh crore of capital spending for 2025-26, mainly on roads, railways and defence.
- Strategic sectors. Atomic energy, space and defence remain state-led, and public-sector banks still dominate deposit-taking.
- Industrial policy is back. Make in India (2014), the PLI schemes (2020) across 14 sectors and the semiconductor mission let the state pick sectors again, now through subsidies instead of licences; tariffs have risen since 2018.
- Digital Public Infrastructure. Aadhaar, UPI and ONDC are state-built public rails on which private firms compete, updating the Nehruvian idea that the state lays the foundations.
- Self-reliance. Baldev Raj Nayar reads the reforms as economic nationalism. The capital account stayed closed, and Atmanirbhar Bharat repeats the old aim of reducing dependence on imports.
Weighing the two
Partha Chatterjee (“Democracy and Economic Transformation in India”, EPW, 2008) sees 1991 as a shift of dominance within the same passive revolution. Corporate capital replaced the old coalition of industrialists, landlords and bureaucrats at the top, while welfare programmes manage the poor who remain outside the corporate economy. The state’s form continued while its class alliance changed. Since Jawaharlal Nehru’s model was itself a mixed economy, 1991 altered the balance between state and market, not the principle of mixing them.
Conclusion
The shift is significant but not total. In economic management it is a change of regime: licensing, public monopoly and import substitution gave way to markets, foreign investment and private enterprise. In aims it shows continuity: a welfare state, public investment, strategic autonomy and a state that still decides where development should go. The instruments are no longer Nehruvian; many of the aims still are.