The politics of bank nationalization in India

Abstract

This study of the politics of bank nationalization critically explores the political change in India in the post-Nehru era. Indira Gandhi announced nationalization of 14 banks in 1969. At the same time, there was also another radical social policy: abolition of the privy purses. Between 1967 and 1969, there were prolonged battles about nationalization in India which had Morarji Desai, the then finance minister, opposing it on one hand, and the radical socialist wing within the Congress Party itself supporting it on the other. Meanwhile, the ex-communist elements in Congress had embarked upon an infiltrationist policy. The entire political situation was coming to a critical point where Indira Gandhi with the help of the younger crowd got into a fierce power struggle with the Syndicate who after Nehru’s regime established control over the party organization. Against this background, bank nationalization of 1969 became a focus of attention. With a detailed history of that period, the author asks and explores a series of important questions that have played an important role in construction of the post-colonial Indian economy. The issues range from the actual achievement of bank nationalization-marginal increase in lending to the priority sectors, small-scale industry, agriculture, and export and marginal decrease in lending to large-scale industry and medium-scale industry-to its failure to stop unmitigated lending to the private sector and misuse of credit.