Is India a Socialist State?

March 4, 2021

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India gained its freedom back in 1947. At the time this article is being written that is 75 years of freedom. How did we cope in terms of economic structures? Let us traceback.

At the time when India gained Independence, countries all over the world were ideologically supposed to choose their sides, either the Soviet Union kind Communism or intense capitalism like the United States. For a country that was just rid of the clutches of colonization of the British, it was only fair they picked a path that did not mean the complete authority of communism, nor the profit-based capitalism.

Even though the term socialism was added in its preamble of the constitution in the 42nd Amendment of the controversial Emergency period in 1976, India practiced socialism before that as well.

The Indian economy was divided soon into two sectors when it gained Independence. One was the private sector that was ruled by revenue-generating, tax-paying profiters. The second was the public sector or the government-protected, health and infrastructure-based arena.

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Once the five-year plans started with their implementation, it was decided that centrally planned would be the solution to the economic challenges they face. This would be the beginning of economic development that would put health and infrastructure or the cruxes of socialism in the spotlight.

Soon, Indian politics would gain momentum based on the social policies Indian parties would have on the agenda. The Indian National Congress under Indira Gandhi would prove to be the phase where the term ‘socialism’ would finally be involved with the country.

The words in the preamble changed from a “sovereign democratic republic” to a “sovereign, socialist, secular, democratic republic”.

Mrs. Gandhi had soon become a national hero who not only saved herself in the Parliament with the strategic moves she made, she also saved a socialist ideology. While nationalizing banks is an aspect of socialism, Mrs. Gandhi nationalized insurance, coal mines, and oil industry; severely restricted investments by large firms under the Monopolies and Restrictive Trade Practices Act, 1969; reserved many labor-intensive products for exclusive manufacture by small-scale enterprises; tightened controls on exports and imports; nearly banned foreign investment under the Foreign Exchange Regulation Act, 1973; effectively denied the firms with 100 or more workers the right to lay off workers; and severely limited the ownership of urban land under the Urban Land Ceilings Act, 1976.

This socialist agenda, however, proved to be a challenge for private sectors. For starting a business they would have to obtain several kinds of licenses. This would often mix with red-tapism in bureaucracy, also known as “License Raj”. This along with the troubles it had with the World Bank and IMF in terms of loan default led to the Liberalization, Privatization, and Globalization also known as LPG of 1991 was when India gave up its hypocrisy over private enterprise and embraced capitalism. Socialism today stands for the welfare state that must uplift its citizens from poverty, enable them to enjoy the fruits of capitalism.

This did not mean that the parties that contest for election whether central or state elections don’t have socialist policies on their political agenda. Several national and state parties are based on the socialism idealogy. This only proves that as long as the term ‘socialism’ is in the constitution, India would prove to be a welfare state. For a population of over a billion people with an estimated 21% of the population being below the poverty line, maybe a welfare state is not a terrible idea.