Column: Mrs G and the licence permit raj

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: The most striking move by Indira Gandhi, before the declaration of the emergency, was a mid-night ordinance in July 1969. At one stroke, the ordinance gave the government control over a big chunk of the savings of the Indian people. On July 19, 1969, India woke up to headlines that India’s major private sector banks had been nationalised. That stroke of midnight brought a loss of freedom, economic freedom. Like much of the economic policy of the 1969-1976 period, this was one more instance of power being usurped by the state. From 1969, Indira Gandhi turned left, seeking political support, and India witnessed an unprecedented increase in control raj. Through the seventies, till the end of the emergency, economic enterprise and private initiative were severely restricted.

Nationalised banks had social objectives such as lending to the priority sector such as the small-scale industry. But small-scale industry was not industry that happened to be small. Many sectors of industry were not allowed to grow large by deliberately keeping them small. Bank nationalisation was followed by small-scale industry reservation. The policy of explicitly reserving certain items for production by small companies was created. Indian industry has lost out for years because of being unable to harness economies of scale. While the list of reserved items has become shorter, it has not been before China has thundered ahead building large scale industry, while Indian industry has helplessly stood by and watched.

But then the logic of control raj can be strange. While on one hand there was a policy that industries should be small, if there was a large industry that wished to become small, the Industrial Disputes Act (IDA) was passed to prevent it. Until then factories with over 1,000 workers used to require government permission for lay-offs. The size threshold was amended in 1976 to 300. In 1982, when Indira Gandhi was back in power, this was further reduced to 100. Even today many industrial establishments require prior permission of the appropriate government before lay-offs, retrenchment and closure. Most problems connected with the IDA arise from this since the government becomes a third party to the dispute even if the employee is satisfied with the severance package. These sections of the Act need to be considered along with other elements of the act which makes any dispute between an employer and an individual workman an industrial dispute.