Understanding the origins of Modi government’s economic philosophy ahead of Budget 2024-25

State policies are based on a mixture of political, social, economic and military considerations.

(Sanghnomics is a weekly column that tracks down and demystifies the economic world view of Rashtriya Swayamsevak Sangh (RSS) and organisations inspired by its ideology.)

As we get ready for the Union budget 2024-25 that is scheduled to be presented on 23 July, we can expect a continuity in keeping ‘Aatmanirbhar Bharat’ as the guiding principle of the Modi government’s economic policy. Aatmanirbhar Bharat implies India needs to be self-reliant. This has been the foundation of Prime Minister Narendra Modi’s governance model since he assumed the charge in 2014.

Thengadi and his ‘Third Way’

Aatmanirbhara Bharat is an outcome of an economic philosophy laid down by Dattopant Thengadi, an ideological stalwart of Rashtriya Swayamsevak Sangh (RSS), an ideological mentor of the Bharatiya Janata Party(BJP). Thengadi called it ‘Third Way’. He started talking extensively about it from the 1950s. Thengadi was the founder of Bharatiya Mazdoor Sangh BMS), India’s largest labour organisation. He also founded Bharatiya Kisan Sangh(BKS), the largest farmers’ organisation of India and Swadeshi Jagaran Manch(SJM), a policy advocacy group with strong impact. All these organisations have been working in their respective field for promotion of ‘Atmanirbhar Bharat’ much before the BJP even came to power at the Centre. Thengadi and his philosophy of ‘Third Way’ guides their policies, perspectives and on ground actions.

What is ‘Third Way’

To put it simply, neither capitalism, nor socialism/Marxism can provide solutions to India and the world’s social and economic problems. There has to be a ‘Third Way’ based on ‘Dharma’ and the central Hindu paradigm of ‘Vasudhaiva Kutumbakam’ (the whole world is one family).

Thengadi outlined in his seminal work ‘Third Way’ (Sahitya Sindhu Prakashan; second edition;1998) how Bharatiya perspective is fundamentally different from the Western framework of economics and why we need an indigenous economic philosophy.

“In the materialist West, it was believed that matter is basic and the mind is only a superstructure. Consequently, socio-economic order was basic. Once an appropriate order is established corresponding psychological changes in the popular mind would follow automatically. That this belief was not correct has been proved now beyond doubt,” says Thengadi.

He further explains the contours of a new global order based on ‘Third Way’: “Defining the proposed new global order according to 'Third Way', Thengadi says, “Dharma envisages autonomy of each human group to seek its social-fulfilment through its own unique paradigm, and psychological integration of all such groups in a common framework of harmonious and mutually complementary interrelationships of One World - Vasudhaiva Kutumbakam - each group enriching the common, human understanding by making its own characteristic contribution to the collective wisdom of humanity.”

Here it is important to understand that Dharma shouldn’t be equated with religion. The former is a set of eternal values that promote co-existence of all living and even non-living beings in the universe while the latter denotes a particular way of worship.

Thengadi interestingly quotes Pandit Jawaharlal Nehru in ‘Third Way’(pp21) referring to a foreword he had written (dated 25 May 1964) for a book by Shriman Narayan. Thengadi writes, “Even Pt. Nehru wrote just two days before his sad demise: ‘In India, it is important for us to profit by modern technological processes and increase our production both in agriculture and industry. But in doing so, we must not forget that the essential objective to be aimed at is the quality of the individual and the concept of Dharma underlying it.’ "

Thengadi forecasted the disastrous consequences of following foreign models of development as he wrote that for more than a century we followed the western pattern of industrialisation. For more than a century we followed the western pattern of industrialisation. Like in the West, in our country too, people are flooding to the urban areas. This has given rise to social situations unprecedented in our history, viz., disintegration of family and villages' wealth under the pressure of urbanisation; absence of wholesome community life in industrial areas; bad and inadequate housing; slums; paucity of clean drinking-water, industrial accidents, illiteracy; self-alienation of individuals who have shifted from the rural to the urban areas; individualisation of industrial life; lack of social and moral values on the part of villagers psychologically uprooted from their natural social environment; inability to adjust the strains of new life-style under the impact of western civilisation; imbalance in sex ratio; lack of balance between the material and nonmaterial advancement.

Swadeshi is manifestation of patriotism

According to ‘Third Way’ philosophy, ‘Swadeshi’ which forms the core of the concept of ‘Aatmanirbhara Bharat’ is a manifestation of patriotism.

Proponents of Swadeshi are not prepared to endorse the view that the western paradigm is the universal model of progress and development worthy of being followed by all the peoples of the world. While they recognise the fact of cultural intercourse, they insist that every people have their own distinct culture, and the model of progress and development for each country should be consistent with its own cultural ethos. Westernisation is not modernisation.

Modernisation should be in keeping with the spirit of national culture. The proponents of ‘Swadesh’ and ‘Third Way’ oppose the move for steam-rolling all the various cultures and national identities in the world in favour of the West. The ‘Third Way’ model also believes that the principle of ‘Free Trade’ has failed and the world needs to have a relook at the modern economic theories of comparative advantage in international trade.

Thengadi has quoted several experts including Paul Krugman and Winfried Ruigrok who have pointed out the failure of free trade doctrine that is at the foundation of the western economic models. Ruigrok poses an interesting question. Why do governments sometimes choose not to comply with the free trade norms? The answer to this question reveals, according to him, a fundamental flaw in the postulates of the free trade doctrine. Contrary to its fundamental premise, the efficient allocation of scarce resources has never been, and will never be, the sole consideration in the choice of state policies.

State policies are based on a mixture of political, social, economic and military considerations. National security and preservation of the internal order have been, and will remain, more important concerns than maximising efficiency.

Earlier Sanghnomics columns can be read here.