THE EMERGENCY HIGHLIGHTS NEED FOR A NEW ECONOMIC POLICY

By A. D. Shroff

Summary

Delivered as A. D. Shroff’s Presidential address at the Sixth Annual General Meeting of the Forum of Free Enterprise on 12 December 1962 — weeks after the Chinese invasion — this pamphlet uses the national emergency to argue that India’s defence, prosperity and freedom require a wholesale abandonment of what Shroff calls the “communist model” of planning adopted in the Second and Third Five-Year Plans. Shroff acknowledges that planning itself is necessary, but locates the present malaise in five concrete errors: neglect of agriculture and consumer industries, an obsession with heavy industry, the spread of state ownership, the suppression of incentives and profit, and the smothering of private enterprise.

The argument’s polemical heart is a long comparative survey of the communist bloc’s own retreat from doctrinaire centralism. Shroff marshals citations from Pravda, the Russian Economic Gazette, the Soviet Audit Report, China’s grain-import dependency, and statements by Liebermann, Yuryev, Khrushchev and Italy’s Palmiro Togliatti to show that even communist regimes are rehabilitating profit, incentives and the freeing of state enterprises from the clutches of central planners. He then turns the same lens on Indian public-sector performance — Madhya Pradesh PAC reports, an Orissa bicycle factory running at one ten-thousandth capacity, a Mysore espresso scheme producing zero machines after years of effort, LIC’s litigation against shareholders of Punjab Financial Corporation, multi-year delays in P.W.D. construction at Andhra Pradesh — to demonstrate that statism in India “has failed to achieve the declared objectives of the country.”

Shroff broadens the indictment to “infrastructure” — administration, communications, power, roads, education, postal services — documenting bureaucratic paralysis through Krishnamachari’s red-tape complaints, telegram disruptions in Bombay, jute industry stoppages in Calcutta, postal stationery shortages, and citing Peter Drucker on the “capital” of educated people. He closes with the constructive case: a quotation from Prof. B. R. Shenoy on deficit financing, Nehru’s grudging acknowledgement of free enterprise’s role in a mixed economy, the late Dr. B. C. Roy’s call to use the private sector in promoting national welfare, and President Rajendra Prasad’s farewell address invoking Mahatma Gandhi on the virtue of self-dependence — to conclude that “the time for collectivist ideologies is past” and that a new vision rooted in private enterprise is now the only realistic path to a strong, free India.

Key points

• Framed by the Chinese aggression of 1962, the address argues that a strong economy is a precondition for defence and political independence — and that India’s current path of communist-model planning cannot deliver it.

• Shroff identifies the Second and Third Plans’ defining errors as neglect of agriculture and consumer goods, heavy-industry obsession, state ownership, hostility to incentives and profit, and denigration of private enterprise.

• A long survey of Pravda, the Russian Economic Gazette, the People’s Daily, and Soviet/Italian/Chinese practice argues that even communist regimes are reintroducing material incentives, profit, and managerial autonomy.

• An extended audit of Indian state enterprises — Hindustan Machine Tool-cum-Prototype factory, Mysore espresso project, Madhya Pradesh PAC findings, an Orissa bicycle factory at 1/10,000 capacity, LIC’s litigation against Punjab Financial Corporation — exposes systemic inefficiency and bureaucratic accountability gaps.

• Shroff makes “infrastructure” — administration, P.W.D. construction, telegrams and postal stationery, power, roads, and education — central to the critique, citing Krishnamachari on red tape and Drucker on educated people as a nation’s “capital”.

• The proposed alternative is “planning for free enterprise of the people”: social and political direction by the state, but ownership and large-scale development left to private initiative under regulation.

• Shroff invokes Shenoy on deficit financing, Nehru’s concession of free enterprise in a mixed economy, B. C. Roy on the private sector, and Rajendra Prasad’s farewell address quoting Gandhi on self-dependence to anchor the argument in indigenous liberal authority.

• The address ends with a programmatic call: “a new vision and a new economic policy are required” and free enterprise is declared “the harbinger of this new society”.

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