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Incompatible institutions: socialism versus constitutionalism in India


There has been a decline in rule of law in India, reflected in the frequent amendments to the Indian Constitution. This paper analyzes the historical, ideological, and economic context for constitutional amendments to understand the reason for the deterioration of constitutionalism in India. I argue that the formal institutions of socialist planning were fundamentally incompatible with the constraints imposed by the Indian Constitution. This incompatibility led to frequent amendments to the Constitution, especially in the area of Fundamental Rights. Consequently, pursuit of socialist policies gradually undermined the Constitution. The contradictory mixture of socialism and constitutionalism led to economic and political deprivations that were never intended by the framers. I demonstrate this incompatibility using evidence from five-year-plans and constitutional amendments in India.

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  1. India ranks 87th on the corruption index and is rated 3.3 on a scale of 10 on the Corruption Perception Index where 1 is most corrupt and 10 is most transparent. “In the World Bank’s ‘Ease of Doing Business” index, India ranks 134th out of 183 countries, scoring particularly badly on enforcing contracts (182nd). Another index, on “Entrepreneurship and Opportunity,” produced by the Legatum Institute, a think tank, puts India 93rd out of 110 countries”

  2. Even when Austin concedes that these goals are in conflict at times, he believes the conflict is temporary and there is no long-term incompatibility between the two. “The goals of unity–integrity, democracy, and social revolution were not always in perfect harmony and on occasion seemed in competition. These difficulties had to be surmounted, circumvented or accommodated in the conditions prevailing in the country” (Austin 1999: 636). “Conflict between the web’s democracy and social revolution strands is inevitable. … efforts toward long-term harmony between the strands make the short-term conflict inevitable” (Austin 1999: 668).

  3. Dhavan provides a list of requirements for socialism and constitutionalism to work harmoniously; and his formula hinges on selfless political participants. According to Dhavan, four ingredients are necessary for Nehru’s Plan (which espoused socialist planning within a constitutional democracy) to work: First, Parliament must be determined to enact radical legislation. Second, such legislation must be supported by large ideological consensus, even those adversely affected. Third, bureaucrats must be dedicated and incorruptible. Fourth, Indians must not abuse public power.

  4. “The national revolution focused on democracy and liberty—which the colonial rule had denied to all Indians—whereas the social revolution focused on emancipation and equality, which tradition and scripture had withheld from women and low castes” (Guha 2007: 107).

  5. “The central wrong of the Capitalist system is neither the poverty of the poor nor the riches of the rich: it is the power which the mere ownership of the instruments of production gives to a relatively small section of the community over the actions of their fellow-citizens and over the mental and physical environment of successive generations. Under such a system personal freedom becomes, for large masses of the people, little better than a mockery… What the Socialist aims at is the substitution, for this Dictatorship of the Capitalist, of government of the people by the people and for the people, in all the industries and services by which the people live" (Webb and Webb 1920: xiii ff).

  6. Gandhi was opposed to socialism in theory since for him the means did not justify the ends. Golwalkar (2010 [1964]) believed socialism was not an ideal goal for India since it was not part of Indian tradition but an alien idea imposed from a foreign intellectual movement. Specifically, he viewed it as a movement born out of the hatred and envy of rich capitalists and not out of a higher spiritual need. The real dissent to socialism in an organized manner came much later in the late 1950s from C. Rajagopalachari and the Swatantra Party. The only Indian economist to dissent against central planning was B. R. Shenoy (1969).

  7. Opposition to the idea of a Constituent Assembly came from two quarters. While the first was Gandhi, once it was clear that the Constituent Assembly would be completely Indian and with sufficient representation from the provinces, Gandhi also supported the idea. The second criticism came from Communists and Marxists, who believed in a social revolution to bring change and were opposed to English-educated lawyers in the Congress leadership claiming to represent all of India.

  8. The Assembly was formed as following: (1) 292 members were elected through the Provincial Legislative Assemblies; (2) 93 members represented the Indian Princely States; and (3) 4 members represented the Chief Commissioners' Provinces. After the decision to partition the sub-continent into India and Pakistan, a separate Constituent Assembly was set up for Pakistan and representatives of some Provinces ceased to be members of the Assembly, reducing the membership of the Indian Assembly to 299.

  9. In many debates in the Constituent Assembly, socialism was used, often interchangeably, to mean two different things. The first was socialist ideals or goals, which was mainly economic egalitarianism. The second was socialist means towards those goals, which was centralized state planning of the economy. “Broadly, it was used synonymously with “social revolution,” meaning national social-economic reform with an equitable society as its goal. In essence, it meant social egalitarianism and political equality. Narrowly, it had a more classical meaning: central government planning, the dominance of the state sector in the economy, and so on” (Austin 1999: 634). During the debates, despite these differences of opinion, a great effort was made to find common ground and reach consensus within a constitutional framework.

  10. The Constituent Assembly discussed the Objectives Resolution from December 13–19, 1946 and on December 21, 1946 its consideration was postponed. The matter was discussed again on January 20–22, 1947. On the last day, all members standing adopted it unanimously.

  11. It is important to note that the India constitution has a weaker form of separation of powers relative to the US constitution. On the other hand, compared to Britain, where the Parliament is sovereign; the Indian Parliament’s powers are subject to both the constitution and judicial review. Since judicial review extends to all aspects of the constitution including the separation of powers, in recent years, there has been much controversy with different branches of government attempting to extend their scope and power.

  12. Separation of powers for the federal government is enumerated in Part V (Articles 52–151) of the Constitution. Separation of powers for the state governments is enumerated in Part VI (Articles 152–242) of the Constitution. Independent state and federal judiciary is enumerated in Articles 13, 32, 139 and 226.

  13. The Seventh Schedule of the Constitution provided a list of subjects on which the Parliament and state legislatures could legislate.

  14. There is a debate among economists on exactly when socialism ended and liberalization began in India. Contrary to Rodrik and Subramaniam (2005), Srinivasan (2005) and Arvind Panagariya (2004) persuasively argue that the growth of the 1980s was itself caused by a “liberalization by stealth” that took place through this decade. These were unsystematic moves toward opening markets in a few sectors. Further, the aggressive command and control style socialism pursued during the 1970s did not find favor in the 1980s. Therefore this paper only deals with explicit socialist policies conflicting with the constitution and therefore we end the discussion in 1980.

  15. The First, Third, Fourth, Seventh, Seventeenth, Twenty-Fourth, Twenty-Fifth, Twenty-Ninth, Thirty-Fourth, Thirty-Ninth, Fortieth, Forty-Second and Forty-Fourth Amendments to the Constitution were passed by the Parliament to directly give effect to unconstitutional legislation enacted to execute planning.

  16. However, not all Courts ruled like the Patna High Court. In Surya Pal Singh v State of UP (AIR 1951 All 674) the Allahabad High Court upheld the validity of the United Province land reform legislation. These decisions were challenged and pending appeal to the Supreme Court.

  17. Members of the Provisional Parliament in 1951 were members of the Constituent Assembly that drafted the constitution. With the exception of a handful of members, these framers believed in socialist planning. With a clever legal innovation, they by-passed judicial review for legislation concerning agrarian reform and enabled legislation previously declared invalid by the Courts to become valid retrospectively. The First Amendment created the Ninth Schedule, a list of legislation not subject to judicial review, and the Amendment passed in Parliament with a majority of 228 to 20. The constitution framers viewed the Ninth Schedule as a necessary trade-off between constitutionalism and execution of the land redistribution agenda essential for prosperity in India.

  18. In 1951, the First Amendment was challenged in the Supreme Court in Shankari Prasad Singh v Union of India (AIR 1951 SC 458). The Court held that Parliament was empowered to amend the Constitution without any restrictions as long as it followed the procedure laid down for amendment in the Constitution.

  19. The proviso read that the right was subject to reasonable restrictions that the State may impose in the interests of the general public.

  20. Article 245 and 246 describe the sharing of legislative power between the centre and the states. Specifically Article 246 recognizes two law-making bodies, the Parliament and, the state legislatures, and distributes legislative power through three lists in the Seventh Schedule of the Constitution. The matters listed in List I—the Union list are within the exclusive legislative power of the Parliament. List II—the State List, has matters exclusive to the legislative power of the states. And List III, the Concurrent List, has matters that the Parliament and States may concurrently legislate.

  21. Party President K. Kamaraj discussed potential successors with Congress cabinet ministers and powerful party members (collectively known as the Syndicate). The Syndicate preferred Lal Bahadur Shastri, Nehru’s Deputy Prime Minister whose policy agenda was a continuation of Nehru’s plan.

  22. Some suggest that it was her timid and quiet nature that led to her approval. The Syndicate thought she would be easy to control and hers would be a “collective” leadership. Morarji Desai, the frontrunner, was considered too headstrong and controversial to be controlled by the Syndicate (Guha 2007: 404).

  23. Haksar was a socialist polymath, who was educated at the London School of Economics. He was unabashedly pro-state and anti-market in his leanings. Particularly pro-Soviet, he was considered one of Harold Laski’s best students of his generation and wanted to carry out Laski’s vision in India.

  24. Pre-1967, Indira Gandhi had never identified herself as a socialist. The generous interpretation of this move by historians is that she wanted to identify herself with the electorate, which favored socialist policies, in order to get elected. An alternate is that she embraced socialism to increase the public sector and create a position for concentration of power. Historians place her ideological leaning at a different and lower level than Nehru’s (see Austin 1999: 290; Das 2000: 174; Guha 2007: 518).

  25. All programs other than abolishing privy purses were detailed in the Fourth and Fifth Five Year Plan. Privy purses were payments made to the royal families of erstwhile Indian princely states as part of their initial agreements to integrate with independent India.

  26. Subsequently, the Syndicate split away and created a new Party called Congress (O).

  27. On grounds that (1) the Act makes hostile discrimination, preventing the 14 banks from carrying on their business whereas other Indian and foreign banks may continue to carry on business (2) the Act restricts banks from carrying on business under Article 19, and (3) the Act violates the guarantee of compensation guaranteed under Article 31(2) because the compensation is not according to relevant principles.

  28. Though the Keshavananda Bharati decision was in 1973, it has become a strong precedent and it still holds on the issue of amendment to the Constitution. The Supreme Court’s post-Emergency rulings in Minerva Mills v Union of India (AIR 1980 SC 1789) and Waman Rao v Union of India (AIR 1981 SC 271), the Court held that the basic structure of the Constitution could not be amended. The Court did not provide an exhaustive list of articles that formed the basic structure and therefore rendered un-amendable. The Court had also ruled that the question of whether an amendment violated the basic structure was to be judicially determined. All amendments post 1973 are now subject to the Basic Structure Test. In IR Coelho v State of Tamil Nadu (AIR 2007 SC 861) the Court clarified that the basic Structure test applied to constitutional amendments post-1973 also applies to the Ninth Schedule. If a law is deemed to have violated Fundamental Rights, and was included in the Ninth Schedule after April 24, 1973, it may be challenged in court on the grounds that it destroys or damages the basic structure of the Constitution.

  29. The nationalization was done in two phases, the first with the coking coalmines in 1971–1972 (The Coking Coal Mines (Nationalisation) Act, 1972) and then with the non-coking coalmines in 1973 (The Coal Mines (Taking Over of Management) Act, 1973 and The Coal Mines (Nationalisation) Act, 1973).

  30. Life insurance had already been nationalized in 1956.


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For comments and suggestions on this chapter, I am grateful to the editors, referees, Simon Bilo, Peter Boettke, Chris Coyne, Harry David, Peter Leeson, Arvind Panagariya, Nandakumar Rajagopalan, Mario Rizzo, Virgil Storr, Richard Wagner, Larry White and participants of the Colloquium on Market Institutions & Economic Processes at the Department of Economics, New York University, and GSP Workshop at George Mason University.

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Rajagopalan, S. Incompatible institutions: socialism versus constitutionalism in India. Const Polit Econ 26, 328–355 (2015).

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  • Indian Constitution
  • Property rights
  • Constitutional amendments
  • Socialist planning
  • Rule of law

JEL Classification

  • B25
  • K100
  • K11
  • P37