One example of hurdles and reasons for India's slow pace of development in the first four decades was the hardline Socialism, that is the so-called 'Government control'.
There was a time when a dozen - if not more - inspectors could actually shut down any factor in India. It was the era of jungle of laws and so-called regulations those sprang up in the name of socialism as a matter of policy. One reason or one person responsible for all these could be - was - Jawaharlal Nehru. India's first Prime Minister was no dogmatic about 'religion' but his economic approach was highly hardliner.
One is not sure whether Nehru could realise that the socialistic approach actually harmed India more in 'social' sense. The system spawned Corruption. However, an argument also goes that there was no alternatives before Nehru or even governments after him to impose controls.
This was largely because there were 'serious shortages' to everything.
It goes without stating liberalism and socialism has been the most formative influences on him during young days while studying in England. These created other problems in him. Nehru essentially had a tentative approach to decision making.
The paradox of everything was that he could 'see both sides' of every argument; and this often boomeranged. He believed and this is partly true that --- unbridled free enterprise was not a realistic option for India. His critics have argued in the past that Nehru would have done better for the country to 'encourage' private initiatives.
Perhaps his stress on Secularism and that created an habit of Muslim appeasement started with that paradox element in his ability to grasp things. In the mid-eighties Atal Bihari Vajpayee, then leader of BJP but also a former foreign minister under Morarji Desai, said - "We do feel that Hindus should not be discriminated in this country simply because they are in the majority".
Vajpayee had attributed this to the fact that "just because political parties are more interested in getting votes from the minorities".
Indira Gandhi pursued a pro-Muslim politics for long. But things changed after a while. Syed Shahbuddin, a diplomat turned politician, had said many years back that it was the Emergency and at times the excesses that marked the break between Indira and the Muslims in India.
Coming back to economy and governance, it is essential to note that that the system created multiple controls; but that also meant multiple 'controllers'. In that system, the room for corruption increased easily.
In his book 'Raj to Rajiv', Mark Tully wrote -- "For all his idealism, Nehru accepted the fact that there was no simple answer to corruption".
In the 1970s, the controlled economy—exemplified in India by the peak of the License-Permit-Quota Raj—directly fueled widespread systemic corruption, black markets, and cronyism.
When governments monopolize economic permissions, artificially restrict supply, and impose heavy taxation, discretionary power becomes concentrated in the hands of politicians and bureaucrats, turning state approvals into tradable commodities.
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Punitive Taxation and Tax Evasion:
During the early 1970s, India's top marginal income tax rate climbed as high as 97.75% (including surcharges). Rather than generating revenue, confiscatory tax rates incentivized businesses and individuals to hide wealth, accelerating the growth of an untaxed "black economy" and money laundering.
Strict import quotas, foreign exchange controls, and price caps created severe shortages of basic consumer goods, industrial raw materials, and public utilities like telephone connections. Whenever official supplies dried up, parallel black markets emerged where goods were sold illegally at inflated prices.
"Briefcase Politics" and Cronyism :::
In 1969, India banned corporate donations to political parties without providing state funding for elections.
To fund campaigns, politicians increasingly traded import licenses, export subsidies, and favorable price controls in exchange for off-the-books cash donations—a practice widely referred to as "briefcase politics".
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