RECESSION IN INDIAN ECONOMY

By DR. R. C. COOPER

Summary

Dr. R. C. Cooper — then President of the Indian Merchants’ Chamber and a past-President of the Institute of Chartered Accountants of India — delivers this booklet as a diagnosis of the industrial recession that had visibly settled over India by mid-1967. He sketches the slide in the index of industrial production from 200 in December 1966 to 186 by April, links it to a collapse in purchasing power produced by two consecutive drought years and persistent inflation, and warns that ‘a crisis of vast magnitude is threatening to take over the economy’. His central analytic move is to deny that recession is a discrete short-term problem soluble by ad hoc stimulus: it is, he argues, a symptom of the deeper inflationary malaise produced by chronic over-licensing, an over-built heavy-industry programme, ruinously high indirect taxation, and the Reserve Bank’s progressive credit tightening.

Cooper’s policy prescription is recognisably classical-liberal in its sympathies, though phrased as practical reform rather than ideology. He criticises the Planning Commission’s continued licensing of new capacity in already over-built industries, the Government’s preference for Public Sector suppliers over the unutilised capacity of private units, and the build-up of non-plan, non-developmental expenditure, which he reports has risen from Rs. 953 crores in 1960-61 to Rs. 3,623 crores. He calls for selective reductions in excise duty and corporate taxation to revive demand, a meaningful pivot to export markets, and a hard look at the over-licensing of capacity. He notes the Union Minister of Works and Housing Mr. Jagannatha Rao’s estimate that economies of 10 to 20 per cent in construction outlays alone could yield Rs. 600 to Rs. 1,200 crores in savings, and quotes the Union Minister for Steel Mr. Chenna Reddy on the neglect of production costs in the early development push.

The closing pages widen the lens from cures-for-recession into a broader plea: ‘shall we not learn by experience to free ourselves from dogmas and ideological considerations and fashion our policies on a realistic and pragmatic approach to problems of economic development?’ Cooper urges a fresh look at the Government’s whole approach to planning and import policy — a more genuine import-substitution drive, lower indirect taxes, attention to cost-consciousness, and reduced reliance on Government help and guidance. Issued by the Forum of Free Enterprise on 10 August 1967, the booklet sits squarely in the Forum’s tradition of using practitioner authority to argue that recession is the bill arriving for two decades of dirigiste planning.

Key points

• Industrial production index fell from 200 in December 1966 to 186 in April 1967, after a sharp 1965-66 deceleration; the recession had been visible long before it was acknowledged.

• Root cause is identified as the inflationary collapse of purchasing power after two drought years, compounded by Reserve Bank credit tightening that closed normal avenues of working-capital finance.

• Cooper blames over-licensing by the Planning Commission for the surplus capacity now sitting idle in steel castings, railway wagons, heavy structurals, welding electrodes and machine tools.

• Indirect taxation is singled out as the inbuilt cost-inflator: excise revenue rose from Rs. 67 crores in 1950-51 to Rs. 1,030 crores in 1966-67, and indirect levies make up nearly 30 to 40 per cent of an industrial product’s price.

• He attacks the Government’s preference for Public Sector suppliers (citing planned steel-foundry expansion while private capacity lies idle) and the practice of denying private units a share of departmental purchase programmes.

• Non-plan, non-development expenditure has grown from Rs. 953 crores in 1960-61 to Rs. 3,623 crores — he treats this as the engine of the inflation that has ‘made the position still worse’.

• Export promotion is offered as a long-term outlet, conditional on labour productivity, scientific management, quality, and fiscal/taxation reform — not as a short-term escape.

• The booklet closes with a generalised plea for pragmatism over ideology and for a fundamental reconsideration of the Government’s approach to planning and development.

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