Indira Gandhi Era - 2 | Post Independence History for UPSC Mains PDF Download

Economic Developments: Initiating Post-Independence Reforms

PL-480 Program: A Catalyst for Change
One of the significant triggers for India's first-ever economic reforms after independence occurred during Indira Gandhi's era. A multitude of factors necessitated these reforms, including recession, unemployment, inflation, corruption, food scarcity, and a shortage of foreign exchange. To address these challenges, the Indian government under Indira Gandhi embarked on a series of major reforms.

PL-480 Program and the 'Food for Peace' Initiative
The PL-480 Program, officially known as Public Law 480 and colloquially referred to as the 'Food for Peace' program, was a pivotal US-funded initiative for providing food aid to countries in need. Initially signed into law by President Dwight D. Eisenhower as the Agricultural Trade Development and Assistance Act of 1954, this program allowed poor nations to make payments in their own currencies. However, for India, the PL-480 Program bore a sense of humiliation due to its reliance on foreign-supplied food, thereby accentuating the necessity for food security.

In the aftermath of World War II, the world faced severe challenges, prompting the United States to provide economic assistance to numerous nations, especially those in the developing world. President Lyndon B. Johnson underscored the importance of the 'Food for Peace' program as a cornerstone of US foreign assistance. He recognized that food aid served diplomatic purposes and advanced US strategic interests. Johnson leveraged PL-480 agreements to secure support for US foreign policy objectives, even using critical famine aid to India as a bargaining tool until he received assurances that the Indian government would implement agricultural reforms.

India faced the severe consequences of two successive droughts during 1966-67, which wreaked havoc on its farmlands. The nation urgently needed wheat, and it needed it at a low cost. To address this crisis, Indira Gandhi took the controversial step of devaluing the Indian currency by 36.5%, consequently increasing the value of the US dollar by 57.4%. This decision was met with widespread criticism and public backlash. However, the move had been in contemplation for some time. Since gaining independence, India had maintained a constant exchange rate of Rs 4.76 to the dollar, despite mounting trade deficits and a reliance on foreign aid to maintain this fixed valuation. The breaking point came with India's conflicts with China and Pakistan and the shock of a major drought in 1965-1966, which led to a surge in deficit spending and intensified inflation. The World Bank, significantly funded by the US, fell short of its promised aid to India.

Devaluation had far-reaching consequences not only within India but also abroad. Countries such as Oman, Qatar, and the UAE, which used the Gulf Rupee issued by the Reserve Bank of India, were compelled to introduce their own currencies. In the prevailing economic climate of 1966, devaluation seemed inevitable. It ultimately helped India avert famine and bankruptcy. Moreover, India learned from its PL-480 blunder and its neglect of agriculture. Subsequently, the nation imported 18,000 high-yielding variety (HYV) seeds from Mexico, marking the inception of the Green Revolution. Today, India is not only self-sufficient in agriculture but also a net exporter of agricultural produce. The precarious economic situation forced India to undertake comprehensive reforms in various sectors, including the economy.

Nationalization: Banks and General Insurance

Nationalizing Commercial Banks
On July 19, 1969, the Congress government led by Indira Gandhi announced a historic decision: the nationalization of 14 commercial banks. This was executed through an ordinance known as the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, which was later ratified by an act, formalizing the nationalization process.

At the time of nationalization, the 14 banks controlled a substantial 70 percent of the country's deposits. Until 1969, the State Bank of India (SBI) stood as the sole nationalized bank, while the remaining 361 banks operated as private entities. Unfortunately, these privately-owned banks had performed poorly from 1947 to 1955, and their performance continued to deteriorate. Two significant factors contributed to the decision to nationalize these banks. The first was the erratic and unpredictable nature of their functioning, and the second was their focus on serving large industries and businesses while neglecting the crucial agriculture sector.

Nationalization also held political significance for Mrs. Gandhi at this juncture. The Congress party was experiencing internal turmoil, and the move to nationalize banks further deepened the rift between the two factions within the party. This proved to be a political masterstroke for Indira Gandhi, rallying public support behind her. Morarji Desai, who was serving as the finance minister at the time, staunchly opposed the nationalization proposal. However, despite his opposition, the nationalization process was carried out. This made Desai's position in the cabinet untenable, and although Indira Gandhi offered him the role of deputy prime minister, Desai declined, a decision later recognized as a political masterstroke.

Nationalizing Insurance
The Life Insurance Corporation (LIC) came into existence on January 19, 1956, through the issuance of an ordinance, marking the initial step toward the nationalization of the insurance sector. Subsequently, in 1972, the General Insurance Business (Nationalization) Act was enacted during Indira Gandhi's government. This act led to the nationalization of the general insurance business, effective from January 1, 1973. Up until the late 1990s, the state-owned LIC and the General Insurance Corporation (GIC) enjoyed a virtual monopoly in the insurance sector.

However, in the late 1990s, the insurance sector was opened up to private players. GIC, which previously had four subsidiary companies, was delinked in 2000, and these subsidiaries were established as independent insurance companies. These four companies are the Oriental Insurance Company Limited, New India Assurance Company Limited, National Insurance Company Limited, and United India Insurance Company.

Public Distribution System (PDS)

The Public Distribution System (PDS) is a food security program that was initiated in India in June 1947. It currently falls under the purview of the Ministry of Consumer Affairs, Food and Public Distribution and operates in collaboration with state governments. The program's primary objective is to distribute subsidized food and non-food items. Subsidized food items, such as wheat, rice, and sugar, are distributed through Fair Price Shops or Ration Shops, while non-food items, like kerosene, are also part of the distribution network. The Food Corporation of India (FCI) is responsible for managing the PDS.

The establishment of the Food Corporation of India (FCI) in 1964 was a response to the critical shortages of food grains faced by India during periods of war. Its main purpose was to mitigate shortages and prevent the black marketing of food grains. The PDS network expanded in the 1970s and 1980s following the Green Revolution. Initially, the program focused on urban consumers, drawing criticism for its urban bias. However, during the 1980s, the PDS was extended to rural areas, with efforts made to reach tribal regions by 1985.

Until 1992, the PDS was untargeted, but in June 1992, it underwent transformation into the Revamped PDS (RPDS), implemented in 1,775 blocks across the country. Five years later, in June 1997, the Targeted PDS (TPDS) was introduced. The PDS played a significant role in stabilizing food prices and ensuring the ready availability of food grains. Nevertheless, inefficiencies in the system have led to spoilage of food grains due to adverse weather conditions and inadequate monitoring. In the current context, the PDS has been incorporated into the Right to Food Act of 2013, granting it the status of a legal right.

Abolition of Privy Purse

The Privy Purse was a financial grant provided to the royal families of princely states in India. At the time of India's independence in 1947, there were 565 princely states. Most of these states had signed Instruments of Accession with India or Pakistan, ceding control over communication, foreign relations, and defense. In 1949, these princely states were formally integrated, and new states were established. In that year, the Indian government decided to offer Privy Purses to the former rulers of these states and their families. The amounts of these Privy Purses were determined by various factors, including the history of the ruling dynasty, the number of gun salutes, and the revenues of the princely state.

However, the privileges granted to these rulers contradicted the principles of equality and social and economic justice enshrined in the Indian Constitution. On multiple occasions, even Pandit Nehru expressed his dissatisfaction with the Privy Purses.

In 1971, Prime Minister Indira Gandhi proposed the abolition of Privy Purses. The Constitutional (Twenty-Sixth Amendment) Act of 1971 was successfully passed, leading to the abolition of Privy Purses. This abolition has been documented in Article 361B of the Indian Constitution. The rationale behind this move was to reduce the revenue deficit of the government and ensure equal rights for all citizens.

Garibi Hatao

"Garibi Hatao Desh Bachao" (Abolish Poverty, Save the Nation!) was the central theme and slogan of Indira Gandhi during the 1971 elections. This slogan, along with various other anti-poverty messages, was meticulously crafted to directly connect with the poor and marginalized segments of society, particularly those who were underprivileged.

Indira's political opponents campaigned under the slogan "Indira Hatao" (Remove Indira), but she ingeniously transformed it into "Garibi Hatao" (Remove Poverty). This slogan had a profound impact, portraying Indira as India's potential savior in the eyes of many. However, Indira Gandhi encountered significant resistance from the upper and more privileged classes, as these groups had been benefiting from government policies for an extended period, and her message threatened the status quo.

Other Major Developments

The Naxalites

Throughout the 1950s, 1960s, and 1970s, secessionist movements were on the rise in various North Eastern states, posing significant challenges to the Indian government. Among these challenges was the growing threat of Naxalism, driven by socioeconomic and administrative issues.

Indian agriculture had long suffered due to exploitative British policies, and farmers continued to face hardship as they were exploited by zamindars and landlords. Peasants often had their lands taken away and handed over to these powerful intermediaries. Unfortunately, the situation saw little improvement even after India gained independence, with limited land reforms, entrenched zamindars, and governance issues.

The Naxalite movement, marked by violent social activism, originated in the village of Naxalbari in West Bengal. This revolutionary peasant uprising, led by groups associated with the Communist Party of India (Marxist and Leninist), particularly under the leadership of Charu Mazumdar, took root in 1967. The birth of the Communist Party of India (Marxist-Leninist) was declared by Kanu Sanyal, making it the third Communist Party in India. This movement aimed to address the concerns of peasants and marginalized communities but also involved violent confrontations with the state.

The Naxalite movement emerged as a response to a host of pressing social and economic issues, including the failure of land reforms, exploitative actions by tea garden owners and landowners, and alarming levels of poverty in the regions where Naxal activities were prevalent. Additionally, the commercialization of agriculture exacerbated economic disparities within these areas.

The Naxals, also known as Naxalites, are committed to far-left radical ideology rooted in Maoism. They seek to wage a violent struggle on behalf of landless laborers and tribal communities against landlords and those in power. The term "Naxal" is derived from the village of Naxalbari in West Bengal, where the movement had its origins. Naxals are adherents of Communist and Maoist ideologies and are members of the Communist Party of India. Their core vision is to establish a classless society where everyone is treated equally, free from exploitation or resource deprivation.

The heartland of India, particularly regions with abundant forests and mineral resources in states like Jharkhand, Chhattisgarh, Madhya Pradesh, eastern Maharashtra, Telangana, and Western Odisha, serves as the prominent areas of Naxalite operations. These regions have long suffered from neglect, exploitative colonial policies, failed land reforms, and governance negligence. Landlords often used legal means to delay the implementation of land reforms, exacerbating the economic disparity.

An important characteristic of these areas is their predominantly primary sector-based economies. The economy is primarily reliant on agriculture, sometimes supplemented by mining or forestry, but it often struggles to support rapid population growth. These regions also exhibit a social structure marked by caste and feudal divisions. Much of the population in these states comprises indigenous tribal communities with complex caste and tribal hierarchies, leading to social tensions and conflicts among these groups.

The Naxalites primarily operate in rural and tribal areas, representing what they consider the most oppressed classes in India, including Adivasis, Dalits, and the poorest of the poor, who have not reaped the benefits of India's economic development. Many of these individuals work as landless laborers. The Naxalites assert that India has yet to rid itself of hunger and poverty, blaming the wealthy classes for controlling the means of production. Their ultimate goal is to overthrow the existing democratic political system.

During the late 1960s and early 1970s, the Naxalite movement gained significant popularity due to its principles of equality and its dedication to serving marginalized sections of society. Many intellectual and activist groups also joined the movement to champion the rights of farmers. However, over time, the movement began to compromise on its principles and lose its original vision. It gradually spread to urban areas as well, adopting an urban perspective to revive the movement and garner support. Today, many individuals continue to join the Naxalite movement due to their unwavering belief in its cause. This led to the formation of the Communist Party of India (Maoist) in 2004, through the merger of the People's War Group (PWG) and the Maoist Communist Center of India (MCCI). This organization has been designated as a terrorist organization in India under the Unlawful Activities (Prevention) Act, 1967.

Naxalite Peasant Movement

The Naxalite Peasant Movement, initially a mass movement, underwent a transformation as Naxalites organized into smaller groups with a new focus on military strategy and guerrilla warfare. Emerging from the ranks of peasants, these revolutionaries were trained for armed struggle against powerful landowners. Their original goal was to forcibly occupy illegally held lands by the rich landowners, but it evolved into a more radical program aiming for the elimination of their class enemies. The CPI (M-L) leaders provided political support to these Naxalite revolutionaries.

Government Response
At the outset, the government viewed the Naxalite movement as a law and order problem and attempted to suppress it through the use of force. Charu Mazumdar characterized the 1970s as the 'Decade of Liberation,' while the central government's perspective was quite the opposite, labeling it the 'Decade of Repression.' Despite the government's forceful measures and stringent laws, the Naxalites managed to expand their influence into different states, particularly resource-rich regions. This area, known as the Red Corridor, encompasses the eastern, central, and southern parts of India and has witnessed a significant Naxalite-Maoist insurgency.

Evolution of Naxalism
Naxalism remains prevalent in several states of India, encompassing approximately 75 districts across nine states. The Naxalite movement has evolved significantly since its inception, extending its reach, intensifying violence, militarizing its operations, and striving to garner mass support. It has shifted from being primarily agrarian-driven to a more complex movement. While land reform remains a concern, Naxalites have enhanced their training and increasingly utilize advanced technology. Their tactics have grown more aggressive, including attacks on economic infrastructure, and they rely on stealth, speed, and surprise. Often, they target unprepared police establishments by overwhelming them with large numbers.

Naxalism continues to extend its influence nationwide, marked by a highly structured and well-defined strategy for anti-state activities across various states. Naxal cadres now include individuals from diverse social classes and castes, even attracting educated but unemployed youth. Their financial resources primarily come from the local extortion economy, and their support base is situated in remote interior regions. Factors such as mismanagement, a weak socio-economic profile, and inadequate, centralized state responses contribute to their persistence. Additionally, connections with politicians further fuel the Naxal movement. 

Recent reports from the Union Home Ministry show a decline in the number of attacks and fatalities targeting the security establishment. This shift can be attributed to a three-pronged approach that focuses on development, police measures, and the reinforcement of grassroots politics. These strategies have yielded positive outcomes in curbing Naxal activities. 

The Communist Party of India (Marxist-Leninist)

Communist groups began to surface in various regions of India in the early 1920s, taking inspiration from the Bolshevik Revolution in Russia. They advocated socialism as a solution to the nation's pressing issues. By the mid-1930s, these communists aligned themselves with the Indian National Congress and functioned as the Congress Socialist Party. However, they were dissatisfied with India's political independence achieved on August 15, 1947, arguing that it did not constitute true independence. This led to their endorsement of violent uprisings, most notably the Telangana Movement. Despite their efforts, armed forces successfully quelled their influence, failing to garner significant support from the masses.

In the 1951 general elections, the communists transitioned to a non-violent political approach and emerged as the largest opposition party, winning 16 seats. Their strongest support bases were in key regions like Andhra Pradesh, West Bengal, Bihar, and Kerala. After 14 years of political involvement, internal ideological divisions within the party surfaced due to differing views on the USSR and China. The followers of the Soviet Union's ideology remained within the Communist Party of India (CPI), while those aligned with Maoist principles unified as the Communist Party of India (Marxist) or CPI (M). Both of these parties continue to exist in the present-day political landscape.

The CPI (Marxist-Leninist), co-founded by Charu Mazumdar and Kanu Sanyal on April 22, 1969, in Calcutta, adhered to the ideology of Marxism-Leninism, emphasizing the establishment of a 'socialist state' through revolutionary means.

The genesis of the CPI (ML) can be traced back to the events of May 25, 1967, in Naxalbari village, Darjeeling district, West Bengal. Disillusioned with the government, the CPI (ML) rejected electoral processes and instead advocated armed rebellion. They received moral support and encouragement from China.

In 1971, ideological differences led to a split within the CPI (ML), with one faction led by Satyanarayan Singh and the other by the co-founder, Charu Mazumdar. Charu Mazumdar's death in police custody in 1972 marked the beginning of a series of further divisions. Nevertheless, Naxal movements continue to affect over 75 districts in approximately nine states.

The Bangladeshi Refugee Crisis

The Bangladeshi Refugee Crisis unfolded in the wake of the Bangladesh Genocide, commencing on March 26, 1971. During this period, India experienced an unprecedented influx of refugees from East Pakistan. Official records estimate that approximately 8-9 million migrants sought refuge in 829 refugee camps. India, right from the outset, adopted an Open Door Policy, allowing entry to anyone in need. The responsibility for managing these camps rested with the central government rather than the individual states.

This crisis was a direct result of the brutal crackdown by the Pakistan Army, with orders to commit acts of violence, including killings and rapes. This led to massive massacres, prompting the people of East Pakistan to flee to India. The states of West Bengal, Tripura, Assam, Meghalaya, Madhya Pradesh, Uttar Pradesh, and Bihar were inundated with refugees. The overcrowded camps suffered from issues of sickness and death. India was grappling with its food crisis at the time, and providing food and shelter to nearly 10 million refugees presented a substantial challenge.

By the middle of 1971, India had become the host to millions of refugees, simultaneously training them as Bengali guerrillas. The heinous acts committed by the Pakistan army gave rise to the formation of the Mukti Bahini, a formidable guerrilla force and the face of Bengali resistance. The Indian army provided training to approximately 20,000 volunteers in the use of light weaponry. This eventually culminated in a full-scale war between India and Pakistan with the aim of liberating East Pakistan, resulting in the birth of Bangladesh. The conflict began on December 3, 1971, and concluded on December 16, 1971, a date commemorated as 'Vijay Diwas' (Victory Day). Throughout this crisis, Indira Gandhi exhibited immense courage and prudence. Atal Bihari Vajpayee even referred to Indira as 'Durga,' signifying her strength and leadership. This period marked one of the finest chapters in Indira Gandhi's political journey, transforming her from the 'Silent Doll' to 'Durga' and the popularly acclaimed 'Empress of India.'