The Elephant Turns Frisky

Indian Prime Minister Indira Gandhi startled the world last month by relaxing the iron rule she had maintained under a state of emergency declared in mid-1975: she ended press censorship, freed political prisoners and scheduled parliamentary elections for next month. Whatever her political motives, her timing in one respect was sound. The Indian economy, described by a U.S. expert as "a great lumbering elephant," has turned so frisky that Mrs. Gandhi need have no fear of the economy becoming an issue in a free election. As she said in announcing the vote, "Anyone can see that today the nation is more healthy, efficient and dynamic than it has been for a long time."

That is more than campaign oratory. Indian industrial production in 1976 rose about 11 % over the previous year. Exports are at record levels. Foreign exchange reserves have mounted so high --three times their level of just over a year ago--as to embarrass Indian diplomats who continue to ask international lending agencies for aid. The inflation rate, which hit 26% in 1974, has been tamed. For a while in late 1975 and early 1976, India was one of the few countries where prices, on average, went down; they are rising again now, at an estimated--and manageable--9% a year. Most important, more food is available for India's masses--although the majority will have to wait until the new prosperity trickles down to them before they can afford to buy much of it. For the first time since it won independence from Britain three decades ago, India last year made no new deals for imported foodstuffs. A record harvest of 118 million metric tons of food grains --mainly wheat and rice--has overflowed government granaries and is piled in the fields in polyethylene bags.

Not all of this prosperity is the government's doing. The rise in food production is primarily the result of sheer luck: two seasons in a row of magnificent monsoons. At least part of the gains can be attributed to draconian but pragmatic policies that Mrs. Gandhi adopted while democratic liberties were suspended. The state of emergency was indeed partly proclaimed because opponents would not let the Prime Minister forget that her 1971 election slogan--AN END TO POVERTY--had been turned into a mockery by the war with Pakistan, the absorption of 10 million refugees from Bangladesh, two successive drought years and the oil-price boosts of 1973-74.

Freed from the necessity of wooing voters or answering opponents, Mrs. Gandhi was able to sidestep her socialistic promises of welfare programs and land reform. To contain inflation, the government in effect banned strikes and required employers to withhold and deposit in banks money awarded to workers in wage increases. Production quotas on private industry were lifted. (Businesses had not been allowed to produce as much as they could, out of socialistic concern that their owners might get too rich.) The dominant state-owned sector of industry, which deals in such key goods as steel, coal and iron ore, was enabled to cut through the red tape that has strangled its growth.

Birth Control. The government also set out to abolish the illegal "parallel economy" that had flourished alongside the official one. About 1,300 smugglers were thrown in jail. Mrs. Gandhi, on the other hand, declared an amnesty from criminal charges for people who had failed to pay sufficient taxes--often on wealth accumulated from undeclared remittances sent home by Indians living abroad--provided they declared their holdings and paid taxes and a penalty on them. Large sums that would otherwise have been spent on such luxury items as cars and air conditioners flowed into the treasury, adding to foreign exchange reserves that can be devoted to more mundane but needed imports.

Many problems remain. Bad weather over the next few years could wipe out food-production gains. Businessmen generally support Mrs. Gandhi's programs, but complain that investment is restricted by monetary and credit controls imposed to hold down inflation.

Vastly more important, the population keeps growing. The government is pushing birth control programs: 6 million people underwent vasectomies or tubectomies in six months last year. Nonetheless, population growth averages 2.3% a year. That means that India each year must feed, clothe and house an additional 14 million people, more than the entire population of Australia. Consequently, the economic growth rate, which is projected at 4.4% a year, and the rises in food output are less impressive than they would seem to a Westerner. Some 40% of the country's 620 million people are still poor even by Indian standards: the Indian government sets the poverty line at an income of $8 per person per month.

Still, the government is pressing ahead with expansion programs. Under the newest five-year plan, approved in September, India will allot $22 billion in public money to increase production in "core" industries, including oil and fertilizers. Liberalization of import controls is bringing in raw materials for export industries and supplies of scarce commodities such as cotton and cooking oil. And, assuming her Congress Party wins the March elections--which it almost surely will--Mrs. Gandhi will have to deal with an unaccustomed problem of plenty: how to distribute surplus food before it rots in the fields.

This file is automatically generated by a robot program, so viewer discretion is required.