Mains Practice Questions

Introduction:

When India achieved independence in 1947, it inherited a deeply impoverished, agrarian economy marked by low industrial capacity and social inequality. To address these structural weaknesses, India adopted a model of state-led industrialisation and centralised economic planning, drawing intellectual inspiration from global socialist experiments, notably Lenin’s New Economic Policy (NEP) of 1921.

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Lenin’s New Economic Policy (1921)

• In 1921, Lenin introduced the New Economic Policy to rescue the Soviet economy from post-revolutionary collapse. The NEP represented a strategic retreat from war communism, blending socialist control with limited capitalist practices.
• Its key features included:
  • State control over commanding heights such as heavy industry, banking, and foreign trade.
  • Private enterprise and markets allowed in small-scale agriculture, trade, and crafts.
  • Establishment of centralised planning mechanisms to guide long-term industrialisation.
  • Emphasis on modernisation through state direction, not coercion.
• The NEP thus balanced ideology with pragmatism, aiming for gradual economic transformation — a philosophy that resonated with post-colonial India’s planners.

Influence on India’s Economic Development and State Intervention

• State-Led Industrialisation:Independent India’s Industrial Policy Resolutions (1948, 1956) reflected NEP principles by placing heavy industries, infrastructure, and defence production under state control.
  • The phrase “commanding heights of the economy,” drawn from Marxist-Leninist vocabulary, became central to India’s vision of development.
  • Public Sector Enterprises like Bhilai and Bokaro Steel Plants symbolised the state’s leadership in building industrial capability.
• Centralised Planning : India’s Planning Commission (1950) closely resembled the Soviet Gosplan, institutionalising a framework for Five-Year Plans to direct national priorities.
  • The Second Five-Year Plan (1956–61), guided by P.C. Mahalanobis, emphasised heavy industrialisation and capital goods, mirroring Lenin’s stress on state-guided industrial growth to build self-reliant economic capacity.
• Mixed Economy and Pragmatism : Like Lenin’s NEP, India’s planners recognised the limits of pure socialism. Hence, they adopted a mixed economy — allowing private sector participation under state regulation.
  • The coexistence of public and private enterprise, and cautious acceptance of foreign capital, reflected Leninist pragmatism adapted to Indian realities.
• Agriculture and Cooperatives: India’s rural strategy also drew from NEP’s flexibility. Instead of forced collectivisation, India promoted cooperative farming, land reforms, and community development programmes, preserving private property while strengthening state-supported agriculture.

Critical Evaluation

• While India embraced NEP’s spirit of state intervention with flexibility, it remained democratic and non-authoritarian.
• However, over time, excessive centralisation bred bureaucratic inefficiencies, the License-Permit-Quota Raj, and low productivity.
• By the 1980s, the limits of this model became evident, leading to economic liberalisation in 1991, which marked a gradual departure from NEP-inspired state dominance.

Conclusion

Lenin’s New Economic Policy significantly influenced India’s early economic philosophy by inspiring a planned, state-led, and mixed economic model. Yet, India adapted these principles within its own democratic, pluralistic, and welfare-oriented context. While this approach laid the foundations of industrial self-reliance and economic sovereignty, its rigidities eventually necessitated reforms — reaffirming that pragmatic adaptation, rather than ideological rigidity, is the true legacy of both Lenin’s NEP and India’s early planning experience.