The killing of entrepreneurial India and the story of the white economy

                           A tortous journey from socialism to FDI in retail

This white-paper is dedicated to one of the finest alternate economic philosophers of our time, Swaminathan Gurumurthy

Those were the pre-historic times, roughly around 6th century BC, when the cattle count in the Gangetic belt of present day eastern UP and Bihar had gone down tremendously due to slaughter – Goyajna (cow-sacrifice) & Govikarta (cow-slaughter) had become the order of the day. The tipping point came when king Prasenajit of Koshala decided to perform a great Yajna which would require the sacrifice of 2000 animals. This is where the Buddha’s practical economics come into play, for a self-realized Atman is also capable of internalizing common sense for the common good of the society.

Buddha had already realized the fatal trajectory of unbridled cow slaughter and its adverse impact on the rural agronomy. Thus Gotama (Pali for Gautama) preached to the king of Koshala about the needlessness of an Asvamedha or a Vajpeya in order to elevate oneself and instead suggested charity as the true Yajna. Then, just like that, the slaughters stopped. Of course, it took a few decades to restore the balance of the agrarian cattle economy, but eventually, it was once again the proverbial land of milk and honey.

Indian rural socio-economy has always had a central theme, the milk. The lyrical beauty of Lord Krishna’s childhood in Nanda Gokula also gives us glimpses of a milk-based economy. When the excesses of sacrifice & dietary habits threatened to debase this economy, Jainisim & Buddhism were born as reactions to societal delinquencies. For many millennia now, cattle farming and milk economics have sustained India’s rural fabric. One of modern India’s greatest innovations has been community dairy farming; one can unequivocally state that community dairy farming is possibly independent India’s greatest economic intervention that has transformed the lives of millions and millions of Indians.

Nehru was the greatest Tughlaq India had seen

A milkman has been one of the central personalities of community life in India for many millennia, but attempts to organize dairy farming were essentially a British vestige. The defence department established military dairy farms to ensure supply of milk and butter to the colonial army; first in Allahabad in 1913, then followed by Bangalore, Ooty and Karnal. With increased urbanization of India, many cattle-sheds started cropping up in various cities and towns to meet increased demand for milk & milk based products.

In order to meet the ever increasing demand, milk vendors started to use focus systems to increase the lactation period, which in turn resulted in high yielding cattle developing sterility problems, thereby considerably reducing the number of calvings. Once the cattle became unproductive, they were sold to slaughterhouses. This practice systematically drained the country of its genetically superior breeds.

In the 1940’s private dairies sprung up in big cities like Delhi, Bombay, Calcutta and Madras. Polsons, Keventers and Express dairies were some of the well-known brands of that era which had modernized dairy processing units. But there was one catch though, these early attempts at modernized & urbanized dairy businesses were only interested in profit margins and contracted the actual milk supply through middlemen. Thus both milk producers as well as consumers were exploited. These businesses did not improve the breed of the milch animals and thus also did not bring about any significant shifts in milk production. Thus despite modernized processing facilities, dairying remained, essentially an unorganized, low-profit endeavour.

After independence, Pandit Jawaharlal Nehru, a quintessential socialist and a complete Brit at heart, continued the same policies of the British with a socialist twist. In the first five year plan, the same “modernization of dairy processing” path was followed (as had been practised by the English). Two namesake government implemented projects were announced with much fanfare; Integrated Cattle Development Project (ICDP) and Key Village Scheme (KVS). Both of these projects were utter flops, just like all the centralized schemes of the Nehruvian socialist era.

The reason for the failure of these schemes was pretty simple; the absence of a stable remunerative market for milk producers. Sadly, Nehru never had the capacity to understand such complexities and was obsessed with being a central ruler who gave away the goods to the unwashed masses. In subsequent years, the Nehruvian establishment continued to announce many such fancy schemes with no tangible results whatsoever. As a result, between 1950 and 1965, the growth rate of milk production was an abysmal 0.7% per annum! Worse still, per capita milk consumption was growing at a negative rate every year.

Nehruvian sham economics had such debilitating impact on India, that a nation of cows and cattle was a net importer of milk for close to 2 decades after independence. In the 1950’s and 60’s, India used to import an average of 55000 tonnes of milk powder every year. This was a classic socialist crime that Nehru got away with, for no intellectual/economist/thinker has ever questioned our first prime minister on this account. History has been extremely kind to Nehru.

In the 1960’s, in order to solve the milk import problems of India, the Nehruvian establishment came up with another hilarious idea. State governments were asked to set up separate dairy departments, which essentially set up huge processing plants in big cities like Bombay & Madras, instead of setting them up close by to villages where the cattle actually existed – these great government babus totally forgot that milk is a perishable product! In order to solve the problem of supplying raw material to these processing plants, large cattle colonies were then set up as an afterthought in the urban areas.

None of these planning commission idiots ever thought of organizing milk procurement in the rural areas. The urban orientation of milk production created large numbers of middlemen and contractors who took advantage of the prevailing system and leveraged huge profits in supplying milk to the urban processing facilities created by the government. Furthermore, these middlemen set up their own cattle farms in the rural hinterland to procure cheap milk from the village folk. This establishment of rural cattle colonies by middlemen resulted in a major genetic drain in the rural milch animal population – due to organized focus on increasing lactation which made them sterile. On the other hand, the urban cattle colonies created big environment issues.

By mid-60’s, these huge urban processing plants had become white elephants, because milk procured through middlemen was too expensive, they had to import cheaper milk powder from abroad to keep these units running. Thus instead of solving the problem of milk imports, Nehru had managed to aggravate it further!

The problem became so acute that the per capita availability of milk dropped to 107g per day. The white elephant government dairies were able to meet only 1/3rd of the urban demand, thus the queues of consumers wanting to procure milk grew longer every day, while the actual milk producer in the village was left to die in the control of middlemen and money lenders.

It was a strange situation, the milk was there, the cattle were there, yet we had to drain our scarce resources in trying to import milk powder! For two decades the Nehruvian planning commission mandarins couldn’t fathom how to connect just the two dots of a milk producer and a milk consumer.

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Praveen Patil

Praveen Patil

Analyst of Indian electoral politics and associated economics with a right-of-centre perspective.