[For Favour of Publication]

Summary

This two-page press statement reports M. R. Masani’s address to a Progressive Group in Bombay on whether India could escape impending bankruptcy. Masani attributes the danger to the Congress government’s economic and planning policies, arguing that indiscriminate foreign aid, an overvalued rupee, inflation, excessive emphasis on heavy industry, and the proposed Fourth Plan were worsening India’s position. He calls for economic discipline, agricultural priority, a more realistic exchange rate, and greater reliance on private foreign-equity capital.

Key points

• Masani argues that India’s economic crisis is the result of government policy rather than an unavoidable shortage of foreign exchange.
• He cites a fall in sterling balances, rising foreign indebtedness, large repayment obligations, dependence on foreign aid, and the rupee’s declining international value.
• He calls for abandoning inflationary policies, scrapping the proposed Fourth Plan, reducing the bias toward heavy industry, and giving agriculture priority.
• He welcomes Western economic pressure, including restrictions on government loans, as a possible means of forcing policy reform.
• He criticises trade and import-licensing practices, including alleged abuses of the Import Entitlement Scheme and restrictions on diesel-oil imports.
• He portrays Soviet trade arrangements as concealing indirect subsidies and argues that imports must ultimately be paid for through corresponding exports.
• He attributes the crisis to a nexus of politicians, officials, and businessmen who benefit from state controls, while also criticising much of Indian business for tolerating the status quo.