The book under review examines the economic ideas and policies associated with Jawaharlal Nehru, as well as their long-term consequences. It begins with a remark, ‘Three-quarters of a century later, his political project is a resounding success, but the opposite is true of the economic one.’ The contrast that Nehru’s political project—centred on democracy, secularism, and institutional continuity—has endured, but not his economic project, forms the foundation of the book’s inquiry. The author seeks to explain why Nehru’s economic vision, widely accepted at the time, failed to deliver on its promises.
The book is divided into three parts. It starts by detailing Nehru’s economic thoughts and the policy discourse of the time, and then discusses ‘Implementation and Outcomes’ by analysing how Nehru’s ideas were translated into policy and their effects on economic performance. It concludes by evaluating ‘Long-term Consequences and Legacy’ and their influence on future generations. The book is based on research on archival records, official policy documents, and Nehru’s speeches, which he notes are plentifully available online. It includes Planning Commission reports, Industrial Policy Resolutions, and Congress proceedings, as well as critiques from the period, such as BR Shenoy’s dissent to the Second Five-Year Plan. The author brings out that he has tried to avoid duplicating the analysis presented in Jagdish Bhagwati and Padma Desai’s 1968 book, India: Planning for Industrialisation, which offered a detailed evaluation of India’s planning system and has instead focused on the broader intellectual and policy legacy of Nehru’s development strategy.
Panagariya earned a Ph.D. in Economics from Princeton University and taught at the University of Maryland from 1978 to 2003, where he co-directed the Centre for International Economics. He served as Chief Economist at the Asian Development Bank in the early 2000s. During the 1980s and 1990s, he worked with the World Bank, IMF, UNCTAD and WTO in advisory and consulting roles. His contributions included work on trade liberalization, poverty reduction, and institutional reform. He has written and edited over 20 books, including India: The Emerging Giant (2008) and Why Growth Matters (2013, co-authored with Jagdish Bhagwati). In 2012, he received the Padma Bhushan for his work in economics and public policy. He was the first Vice-Chairman of NITI Aayog during 2015/17.
Panagariya starts by describing the ‘Nehru Development Model’, and identifies its core elements, which he defines as a framework comprising objectives (poverty eradication), strategies (industrialization), and instruments (planning, public sector dominance and import substitution). He elaborately discusses the range of challenges that were sought to be overcome and critiques the conflation of strategy and objective, noting that ‘socialism, heavy industry, and growth could appear as objectives, strategies, or instruments’… depending on the context. He notes that while Nehru did not articulate a formal model, his speeches and decisions reveal a consistent pattern of thought. He traces Nehru’s ideological evolution and disputes the conventional thought that Nehru had converted to socialism while studying in the UK. He establishes that, initially on return, he had no ideological leanings and had started law practice along with his father, but was converted after his visit to Europe and the Soviet Union in the mid-1920s, which gave rise to a conviction that imperialism and capitalism were closely connected and the only way to fight imperial use was by promoting an alternate philosophy.
Panagariya brings out that Nehru’s admiration for Soviet planning was tempered by democratic commitments. As such, while his economic vision remained statist, the initial radicalism gave way to Fabian socialism when confronted by the Indian reality. Nehru recognized that the income levels were so low and poverty so widespread that simplistic attempts at redistribution would merely redistribute poverty, and wrote, ‘We calculated that a really progressive standard of living would require increasing national wealth by 500-600%. That was too big a jump for us, so we aimed at a 200-300% increase within 10 years.’ The Plan, based on the Mahalanobis model, prioritized investment in capital goods industries over consumer goods and thus generate self-sufficiency over the long run, assuming that capital goods would drive long-term growth. Heavy Industry was also justified, citing Defence needs, ‘Defence does not consist of people marching up and down the road with guns and other weapons. Defence consists today of a country being industrially prepared to produce the goods and equipment for Defence’ (Nehru). The Plan had also recommended that industries be located in ‘well-planned new industrial towns with adequate housing, schools, medical clinics, hospitals and facilities for sports and cultural activities.’ Panagariya, however, points out that excessive focus on heavy industry militated against increased availability of consumer goods in the short run and thus ran counter to the poverty alleviation ambitions.
The concluding chapter of this part examines the various perspectives which were then being discussed. The Bombay Plan (1944), which supported state intervention but emphasized private enterprise, the Mahalanobis model, as well as its detailed assessment submitted in a memorandum by the DR Gagdil-headed panel and BR Shenoy’s dissenting note to the Second Plan, which warned against inflation, inefficiency, and overreach, are all discussed in a crisp and yet encyclopaedic manner.
The next section discusses implementation and outcomes and has six chapters. The first of these, ‘Industrial and Labour Policies’, discusses how the Industrial Policy Resolution of 1956, which reserved key sectors for the public sector and introduced licensing for private investment, as well as Labour laws, such as the Industrial Disputes Act, made it difficult to adjust workforce levels, contributing to informal employment and low productivity. The next chapter, ‘Implementation: Target Setting and Industrial Licensing’, details the planning apparatus, showing how targets were set for output, investment, and employment, and licenses were issued accordingly. Panagariya provides examples of mismatches between supply and demand, delays in project execution, and bureaucratic discretion. Firms often received licenses for obsolete technologies or were denied expansion due to arbitrary quotas.
The subsequent chapter, ‘A Liberal Import Regime’, documents the relatively open trade regime in the early years, noting that imports of machinery and consumer goods were permitted and foreign exchange was available. This period saw modest industrial growth and technological absorption. The book goes on, in ‘A Highly Restrictive Import Regime’, to describe how foreign exchange strains led to the shift to a restrictive import regime from 1957 onward, with import licensing, high tariffs, and quantitative restrictions designed to conserve foreign exchange and promote domestic industry. Panagariya argues that these measures reduced efficiency, limited access to technology, and isolated India from global markets. The ninth chapter, ‘Export and Foreign Investment Policies’, examines export and foreign investment policies, noting that exports were not prioritized and foreign investment was discouraged through equity caps, profit repatriation limits, and regulatory uncertainty. The cases of IBM and Coca-Cola, which exited India in the mid-1970s post a regime change due to restrictive policies are cited. The tenth chapter, ‘Growth, Industrialisation and Poverty’, presents data showing that India’s growth rate during the Nehru era averaged around 3.5% annually. Industrial output grew, but was concentrated in a few sectors. Poverty reduction was slow and uneven. ‘Removal of poverty as the objective and growth and redistribution as joint instruments to achieve it remained integral to Nehru’s thinking throughout his tenure’, Panagariya writes.
The final section delves into the enduring legacy of Nehru’s economic vision. It brings out how Nehru’s dual role as Prime Minister and Chairman of the Planning Commission allowed him to institutionalize his ideas, and that politicians, bureaucrats, and economists internalized the logic of planning and state control. These thus got embedded into India’s policy framework for decades. This section also discusses how the industrial licensing regime, designed to regulate private enterprise, instead fostered inefficiency, corruption, and stagnation, giving rise to the notorious ‘License Raj’ and how Nehru’s inward-looking trade policies, marked by import substitution and scepticism toward foreign capital, isolated India from global technological and market advancements. The governance styles and track record of the succeeding Prime Ministers, Lal Bahadur Shastri, Indira Gandhi, and Rajiv Gandhi, are then discussed, albeit in lesser detail, before concluding that ‘even after India had switched course and embraced pro-market reforms, his ideas continued influencing the thinking of many… slowing the movement away from socialism.’
Panagariya holds that although Nehru’s intentions were idealistic, the economic model he championed proved unsustainable and hindered India’s broader development for decades. He argues that development policy must be adaptive and evidence-based, rather than ideologically rigid. While the focus on heavy industry aimed to accelerate growth and reduce poverty, it largely benefited urban elites and neglected agriculture, which employed the majority of the population. This exclusionary model led to modest growth and persistent poverty. The entrenchment of socialist thought across political, bureaucratic, and intellectual circles stifled alternative economic ideas, delaying reform until the 1991 crisis forced liberalization.
The book adopts a reflective style, but while the early planning decades are covered in exhaustive detail, the post-Nehru period (after 1964) receives comparatively less attention. Illustratively, though the narrative discusses bank nationalizations, the establishment of the Monopolies and Restrictive Trade Practices Commission, and the persistent dependence on agriculture for employment, it overlooks the transformative Green, White, and Blue agrarian revolutions of the 1970s and 1980s. These revolutions propelled a famine-racked country to become the largest or second-largest global producer of wheat, rice, milk, fruits, vegetables, poultry, and fish, grappling with challenges of agrarian distress created by excessive production. Equally absent is a deeper exploration of why non-agricultural employment has developed so slowly—a structural issue that continues to afflict the country—beyond attributing it broadly to socialism. Also, we need to note what important analytical data are omitted in arriving at its conclusions. These omissions are striking, considering the author’s extensive experience with multilateral financial institutions.
The book also omits discussing why, in the period between World War II and the onset of globalization of the nineties, stories of genuine economic transformation (apart from Western Europe’s postwar recovery) were rare and modest in scale. Japan, South Korea, and Taiwan did achieve sustained industrial growth through export-oriented policies, and Greece, with its infrastructure-tourism model, might also qualify. But these were the only exceptions, and these economies were moreover of small homogeneous countries.
The South Asian region, as well discussed in David Bergman’s book, Apostles of Development, had experienced that simplistic growth strategies can also produce adverse outcomes in heterogeneous societies: Pakistan’s aggressive private sector led growth push of the 1960s not only caused a domestic uproar about ‘the 22 Families’ but also exacerbated regional disparities between West and East Pakistan, contributing to its break-up in 1971, while Sri Lanka’s premature liberalization in the late 1970s undermined its long-term growth prospects. Perceptions often are, if not more, important than reality in social systems.
Additionally, given the centrality of socialism in the book’s thesis, a more sustained engagement with China’s trajectory would have been warranted, especially since the contrast between China’s and India’s manufacturing progress appears to be a motivating logic for the book itself. At the very least, the remarkable decentralization of economic authority in China—where over 50% of government spending is controlled by local bodies with sweeping powers over land, labour, and investment—and its focused development of over 600 internationally benchmarked cities deserved mention. Further, while the book does discuss China’s success under Deng Xiaoping, it stops short of unpacking the underlying drivers. While he had started empowering local governments soon after he took over in 1978, the early results were uneven. This had prompted his landmark southern tour in 1992—fourteen years into reform—where he reignited momentum and encouraged deeper market experimentation. Crucially, this occurred in a newly unipolar world on the cusp of the internet era, where, in the Western intellectual imagination, ‘geography became history’. Entering globalization with decentralized institutional readiness, China’s gradual, pragmatic, and yet unified approach made its SEZs resilient and transformative. The present lack of manufacturing successes in India cannot thus be blamed on socialism or democracy alone, and instead may well be stemming from a lack of similar economic decentralization and widespread urban development.
In sum, while The Nehru Era Economic History and Thought offers a detailed and reflective account of India’s early planning years, its analytical lens narrows at crucial junctures. The absence of deeper engagement with post-Nehru developments, comparative trajectories like China’s, and with broader regional and global patterns of transformation limits the book’s explanatory power. A more expansive treatment—one that interrogates not just ideological frameworks but also institutional dynamics, decentralization, and the evolving global context—would have enriched its narrative and strengthened its conclusions. The book, however, well merits detailed study because as India continues to navigate complex structural challenges, such historical critiques have the potential to illuminate not only what was but also what might have been, and also what still could be attempted.
TCA Ranganathan, former CMD of Export Import Bank of India and former Non-Executive Chairman of Indian Overseas Bank, is the co-author of All the Wrong Turns: Perspectives on the Indian
Economy (Westland, 2019).