April, Indira, and Nationalisation of Grain: The Failure of 'Hard Socialism'

Her least talked about blunder is the decision to “nationalise” the wholesale trade in food grains in April 1973.

(This is part two of a four-part 'April' series that revisited significant historical events or policies and how the lessons learned from them continue to be of relevance in present-day politics and society. Read the part one here, part three here, and part four here.

The transformation of the late Indira Gandhi from a Goddess Durga-like figure in 1971 to an unpopular autocrat who imposed the Emergency in 1975 is a case study of historical blunders. In hindsight, contemporary historians and pundits talk more about her political missteps that led to mass protests against her regime. But the real blunders she committed after her famous election victory in 1971 were in the arena of economic policy making.

Arguably, her least talked about historical blunder is the decision to “nationalise” the wholesale trade in food grains in April 1973. The reverberations of that decision are still felt in India after 50 years. There are three aspects here.

The first is the perception that traders and hoarders habitually fleece and loot farmers of their legitimate dues. The second is the stubborn belief of many Indians that market forces are not good for farmers and consumers. The third is the persistence of a crisis-like situation in Indian agriculture.

The withdrawal of the three farm laws by the Narendra Modi government in November 2021 is a powerful symbol of all the above-mentioned legacy hangovers.

The Food Grain 'Supply' Problem

What really happened in April 1973? It is well known that Indira Gandhi adopted “hard socialism” in the economic policy-making arena. The mistrust of the private sector that was cultivated since independence in 1947 became a credo under her. Her advisors believed that the state had the answer to all economic problems. So, when repeated failure of monsoons triggered a massive “supply” problem of food grains, Indira Gandhi and her advisers blamed private sector “hoarders” for shortages of wheat and rice, and thought the “state” could fix the problem.

The crisis was genuine. Food grains output in India was 108.4 million tonnes in 1970-71. It plummeted to 97 million tonnes in 1972-73; recovered somewhat to 104 million tonnes in 1973-74 and crashed again to 99.8 million tonnes in 1974-75.

One vividly recalls standing for hours outside a ration shop in unruly queues for wheat and rice. Those less fortunate than the authors often had to skip meals because they couldn’t access wheat or rice; like the hapless citizens of Pakistan today. Shortages triggered double-digit inflation. The sky-high popularity of Indira Gandhi that had soared after the 1971 war against Pakistan and the creation of Bangladesh started to plummet in 1973.

The legendary journalist cum author Khushwant Singh wrote for The New York Times in 1973: “Soon the buffer stock was almost exhausted, but the Government was loath to take around the begging bowl to affluent nations, particularly to the United States, which had supported Pakistan against India in the Bangladesh affair. Once again this spring, the dream of India's becoming self‐sufficient in food seemed to be turning to a nightmare; drought and famine stalked the land and the old lament was heard: India's prosperity is a gamble with the rains.”

Emulating Stalin and Mao

The prime minister's response was to “nationalise” the wholesale trade in food grains; an extreme example of her “garibi hatao” chant that led to her sweeping victory in the 1971 Lok Sabha elections. The logic appeared simple: private traders cheated and exploited poor farmers leading to a shortage of food grains. The “state” would not only pay more remunerative prices to farmers but also eliminate the scourge of hoarding that resulted in shortages and high prices of food grains, particularly those of wheat.

Jospeh Stalin in the Soviet Union and Mao Zedong in China had done the same. No wonder, the Marxists applauded the “revolutionary” decision. Mind you, there was popular support for the move as traders were a hated community as displayed so evocatively by Bollywood movies of that era. But Indira Gandhi perhaps forgot that the road to hell is paved with noble intentions. The food grains crisis actually worsened after nationalisation and shortages became even more acute.

Within one month of her nationalising the food grains trade, food inflation soared as the Rabi harvest of wheat was far lower than expected. One of the worst four months of inflation seen in independent India was seen from April to July 1973, immediately after the “revolutionary” decision.

The Arab-Israeli war and the decision by OPEC (Organization of the Petroleum Exporting Countries) to raise crude oil prices in late 1973 delivered a knockout punch, as inflation in December 1973 was 26 percent higher than in December 1972. There is a growing tribe of analysts that argue now that the events leading to mass protests by students in Gujarat and Bihar culminated in the “Total Revolution” called by Jayaprakash Narayan, and that the imposition of Emergency were triggered more by economic hardships than political factors. The authors think the analysts have a compelling case to make as the data does back them up.

The Mindset of the Past Still Perists

Within a year, a chastened Indira Gandhi realised the folly of her “revolutionary” decision, and the policy was abandoned. Private traders went back to their traditional task of “cheating and looting” poor farmers. Fifty years down the road, the aftermath of the Green Revolution has ensured that food shortages in India are a thing of the past. But attitudes and prejudices prevalent fifty years ago still persist.

Too many Indians are still convinced that Indian farmers cannot survive and thrive without the clutches offered by a “Mai Baap” Sarkar. It is a mystery why this perception still persists.

There is no doubt that private sector players are not angels or dripping with generosity. Yet, there is ample evidence since 1991 to show they have created near miracles in many sectors.

We have all been asking a question since the early 1980s without getting an answer: if Bajaj can sell two-wheelers anywhere it wants in India, why can’t the Indian farmer do the same with their produce? 

(Yashwant Deshmukh & Sutanu Guru work with CVoter Foundation. This is an opinion piece and the views expressed are the authors' own. The Quint neither endorses nor is responsible for them.)