Bank Nationalization
To cut their popularity and appease the growing communist rebels mushrooming all over India, Haksar steered Indira towards nationalizing all the banks. On July 19, 1969, Indira Gandhi nationalized 14 of India's biggest banks with over 75% of the deposits. This populist move was cheered by commoners all over India (commoners in all parts of the world hate bankers) and stunned the market. Although her father, Nehru, had nationalized the Imperial Bank in 1955 (becoming the State Bank of India) even he never dreamt of enmasse nationalization of all the major banks.
The move was made without consulting the then Finance Minister and Deputy Prime Minister, Morarji Desai. Without any option, Desai resigned from the government. The nationalization was made through an ordinance prepared by a dismayed head of the Reserve Bank of India, LK Jha, and the secretary in the Ministry of Finance, IG Patel.
The various banks were held by India's business houses and private shareholders. The Tatas owned the Central Bank, the Birlas the UCO bank, and the Thapar group the Oriental Bank of Commerce. In the next two years, all the key industries - steel, copper, insurance, textiles, and oil refining - were nationalized.
The bank nationalization was a part of the dark chapter in Indian economy. Although the nationalization might have helped in spreading India's bank into rural heartlands, it also weakened the professionalism within the banks and made capital allocation much more political.
Indian businessmen were very afraid to grow or show successes in that period as they feared that the government would take away their property. This fear plagued the nation's market for decades and stunted growth.
The government was taken to the court by a member of the Swatantra party, Minoo Masani, and on February 9, 1970, the Supreme Court of India ruled that the nationalization was invalid. Indira Gandhi countered the court by passing a law in the Parliament, and thus begun the long saga of Indira's war with the courts, culminating in the Emergency. In 1970, Indira also abolished the Privy Purses - the annual payment to the royal houses who gave up their states in 1947. The Supreme Court again overruled Indira's law.
Congress Split
With the exit of Morarji Desai, the core of Congress became unstable. Then the Syndicate tried to push through its candidate - Sanjiva Reddy - for the Presidential elections of 1969. However, Indira persisted with VV Giri (who then became the President in August 1969). Haksar had started to take Indira away from the old leadership and there was a panic in the ranks. On November 11, 1969, S. Nijalingappa would take a brave stand to expel Indira Gandhi from the party citing indiscipline.
However, her wave of nationalization already made her very popular among the public. Indira was able to retain her post of Prime Minister and took all the attention to the new Congress - first called the Congress (R) and later the Congress (I) - the "I" standing for Indira.
Two hundred and twenty of the 283 Congress MPs joined Indira with a slogan:
A new light has dawned—Indira has come.
The communists provided some external support so that the government didn't fall due to the lack of majority (261 MPs were needed).
After winning her party, Indira surprised everyone by calling for a dissolution of the Parliament in December 1970 - more than a year before the term of the Parliament ended. Indira wanted to capitalize on the bank nationalization and the bountiful monsoon of 1970 to push out her opponents. Indira also showed her political genius with the slogan Garibi Hatao (remove poverty) by turning around the opposition slogan (Indira Hatao). The fledgling Green Revolution (covered in a later chapter) would also help her cause by substantially reducing hunger before the elections of 1971.
Court vs. the Government
We have already seen that the Supreme Court struck down Indira's move to nationalize the banks and cut the privy purses. The court also threw cold water on her move to take private property. In the landmark Golaknath case, the courts ruled that the government could not take away fundamental rights - rights to property and the right to practice any profession.
In the fifth national elections held in March 1971, Indira Gandhi won with a thumping two-thirds majority. Her populist moves helped her win the socialists in droves. This gave her the sufficient majority to deal with India's courts. She took the route of constitutional amendments.
Through the 24th Amendment, Indira enabled the Parliament's rights to dilute fundamental rights. Through the 25th Amendment, she allowed the state to restrict property rights and take over private property (bank nationalization). Through the 26th Amendment, the Privy Purse was abolished.
Although a few items like the abolishing the “Privy Purse” was a part of legitimate policy, the blatant misuse of constitutional amendments to push policies shocked the courts and the observers of democracy. Indira saw the courts not as a critical pillar of democracy, but as a nuisance in her path. The Supreme Court was kept further in check by the politically motivated nomination of Justice A.N. Ray to the post of Chief Justice of India.
Worsening Economy and Overall Order
While Indira came on the back of a good monsoon, the period of 1973-75 saw a huge crisis all over the world. During the 1973 war in the Middle East, the Arab nations imposed an oil embargo that shot up the price of oil from $10 to about $60 in a period of months. This was a spectacular shock that sent economies around the world reeling. For a poor country relying on imports for the most part, this was especially a disaster.
Opposition parties were also getting increasingly strong as the old timers were vexed with the growing corruption and nepotism within Indira's Congress. With no one to check her, Indira hand-appointed all the key posts in India.
On the 18th of March 1974, a bunch of student groups under the banner of Chhatra Sangharsh Samiti rioted in the state of Bihar. This brought in the veteran leader Jayaprakash (JP) Narayan to the center of the struggle. He was hugely respected and was a supporter of Indira Gandhi during the 1969 struggle. JP usually stayed out of governance, but was always an activist at heart - modeling himself after Mahatma Gandhi. He now called for a "total revolution".
In May 1974, India exploded its first nuclear weapon in the deserts of Pokhran in Rajasthan [we will see this in detail in a later chapter]. This helped India buy some time and distract her opponents. While the middle class came behind her, the opposition party under JP was not easily distracted.
On November 4, 1974, JP was manhandled by a group of charging policemen in Patna. A picture of a veteran Gandhian thrown around by lathi-wielding policemen reminded many Indians of the freedom struggle. This caused further unrest all around India. In January 1975, a key aide of Indira, LN Mishra, was assassinated in JP's home state of Bihar, and Indira put the blame on the opposition. This caused further acrimony and distrust between the parties.
In April 1975, Indira’s old foe, Morarji Desai, took a Gandhian fast to end the President's rule in the state of Gujarat. Indira relented and elections were announced in Gujarat.
Allahabad Court Drops the Bombshell
On June 22, 1975, the Allahabad High Court gave the final blow. It ruled that the election of Indira Gandhi from the Rae Bareilly constituency in Uttar Pradesh, was invalid based on the case filed by the losing candidate Raj Narain. Justice Sinha found the Prime Minister guilty of misconduct, and this was a shock for a country used to principle politics at the top.
The verdict was made on somewhat flimsy grounds - such as the use of a slightly elevated podium and a couple of government servants. More serious charges of corruption and misuse of state machinery were dismissed by the court. The opposition hailed the victory despite the circumstances. Indira was also now ineligible to contest in elections for six years, although the court allowed her to be the Prime Minister in the interim.
On June 23, Justice V.R. Iyer of the Supreme Court issued a stay on the High Court's order, but didn't allow the Prime Minister to cast a vote in the Parliament. Senior party members and reputed journalists urged the Prime Minister to step down until
the Supreme Court could deliver its ruling. There were plenty in the party who could run the government in her absence. Senior lawyers also opined that the two minor charges that the Allahabad Court indicted were unlikely to hold water in the highest court.
Indira was confused and felt besieged on all sides. There was chaos all over the nation that threatened her legitimacy. The Opposition was getting stronger by the day. The economic situation had dramatically worsened. Then, the courts were breathing fire for much of the previous decade.
This time she listened to the counsel of her tweenage son, Sanjay Gandhi. Sanjay had very little world experience and little respect for democracy. However, Indira had a strong respect for her young son. In a period of complete confusion, she would give up and let her son get the best of her. Sanjay, joined by the West Bengal Chief Minister, S.S. Ray, and a weak President in Fakhruddin Ali Ahmed, helped Indira take the extreme step.
Emergency Declared
On the 26th of June, four days from the deliverance of the Allahabad verdict, Indira Gandhi declared a national emergency. The Constitution provides this extreme step in case of huge external troubles like wars. However, Indira Gandhi invoked it in the name of internal disturbance.
Within a year, JP and 110,000 other leaders and journalists were arrested without trial. Democracy was suspended and there was censorship everywhere. To keep the news from spreading fast, electricity to all major presses were cut.
Governments of all major states ruled by the Opposition parties were dismissed [Indian Parliament has the power to dismiss any state government through a simple majority]. Amendment 39 of 1975 allowed an Indian Prime Minister to ignore the courts. Thus, the Allahabad High Court order was rendered invalid.
However, the most controversial element of the emergency was the 42nd Amendment of the Constitution.
42nd Amendment
This Amendment provided the government with the following powers:
The Parliament could amend any part of the Constitution without restriction.
The Supreme Court could be approached only for the rarest issues.
The Central Government could use the military for curbing internal violence.
The Prime Minister and her office were above the court.
It also altered the Preamble to include the words secular and socialist. Thus, India officially became a "SOVEREIGN SOCIALIST SECULAR DEMOCRATIC REPUBLIC," and this is a legacy of Indira that India continues to carry as of 2014.
Initial Reaction
While Indira caused a massive alarm among the Opposition and the press, the rest of India carried on as if nothing happened. In fact, when I talk to my grandfather about the episode, he mentions more positives than negatives. He is not alone. Many famed writers like Khushwant Singh were openly in support of the emergency.
India's middle class had a secret love for dictatorship, and Indira's sudden takeover pleased many managers, executives, and other members of the middle class. Amidst the initial shock and the massive arrests, chaos lessened and even inflation was brought down. Attendance in government offices shot up and punctuality was achieved.
TIME Magazine came out with a highly supportive headline:
INDIA: The Emergency: A Needed Shock
Indians will long debate whether Mrs. Gandhi was justified in proclaiming the emergency, but the Prime Minister has won widespread support for seizing a rare opportunity to ram through a score of social reforms.
-- TIME (Oct 27, 1975)
However, the Indian press and bureaucrats were much angrier. They were unnecessarily hindered and feared for the future of India.
The course for the Prime Minister, until the Supreme Court pronounces its final verdict, admits of no ambiguity. She must resign forthwith in the nation's and her own interest.
--- Indian Express
I am angry. Mrs. Gandhi has used a hammer to kill a fly.
-- An Indian Foreign Officer speaks to TIME (July 7, 1975)
Indian Express ran a blank editorial on June 26, 1975 in defiance.
Times of India ran an obituary to bypass censorship.
D.E.M. O'Cracy beloved husband of T.Ruth, father of L.I.Bertie, brother of Faith, Hope and Justica expired on 26 June
Overall, people didn't rise up as much as the opposition expected. A good monsoon meant that even the poorest were relatively happy, and Indira might have felt that things were under control.
Euphoria Fades to Face Reality
Sanjay Gandhi started his five-point plan that he believed would take India to the next stage. He was impressed by Malthusian writings (on how overpopulation was going to spell doom for India) and put out his key agenda on five pillars:
Forcible family planning
Fighting dowry
Forcible clearing of slums
Afforestation
Literacy
If you remove the forced part, all his moves were laudable ones. However, as he began to force things through a corrupt and nepotistic administration, things started exploding.
Bulldozers recklessly moved into slums and smashed away the houses of the poor. Muslims (among others) in various parts of Uttar Pradesh were forcibly sterilized. TIME issue of April 4, 1977, reported that between April 1976 and January 1977 an alarming 7.8 million people were "sterilized", or deprived of their reproductive potency with an intrusive surgery. Several young, unmarried men were victims of this.
All key positions around the nation were handpicked by Sanjay. All key media - radio, television, and newspapers - carried Sanjay Gandhi's praises every day.
As all kinds of opposition were silenced, people took to violent means. The government did whatever it could to violate human rights and fill up the prisons. Both the public and international media's mood drastically changed from the spring of 1976.
Fading Hope in India
...The submission of an independent judiciary to an absolutist government is virtually the last step in the destruction of a democratic society....
-- New York Times (April 30, 1976)
As the Emergency dragged on, Indira's friends - both in India and abroad - deserted her. Her loyalists like the respected veteran Jagjivan Ram were forced to defect. Other daughters of freedom fighters, like Maniben Patel, daughter of Sardar Vallabhai Patel, took the route of Satyagraha. Indira's own aunt, Ms. Vijayalakshmi Pandit, who had once served as the President of the UN General Assembly, opposed Indira's policies. Indira was deserted by her own friends.
Ian Jack of Sunday Times wrote a powerful headline:
With Friend Like Son Sanjay, Gandhi Doesn't Need Enemies.
-- Montreal Gazette (March 10, 1977)
Ending the Emergency
On January 18, 1977, Indira had a change of heart and called for new elections. No one really knows what exactly triggered this change. It might be a combination of losing friends in India and abroad, getting chastised by people she loved, or craving for love from the common people. There was also intense pressure by Quakers and other mediators who served as India's bridges to the West for a long time.
On March 23, 1977, all political leaders were freed and the darkest chapter in Indian history came to an end. Many believe that the quick end (in 21 months) proved that India couldn't be ruled without a democracy. Indira had unlimited power, but in that two year period, she was not able to improve the country in a substantial way. It might have dawned on her that what prevented India from growing was not the opposition or various institutions. Finally, it was also likely that Indira underestimated the common people's yearning for a change. By silencing all media and opposition, she got out of touch with her subjects.
Elections were held in March, and expectedly, Ms. Indira Gandhi was voted out. For the first time, India would elect a party other than the Congress. Congress was completely wiped out of north and central India, although the south (where Sanjay Gandhi's effects weren't felt that much) gave some solace to the Congress.
Legacy:
It was a testimony to the strength o
f Indian democracy that this dark episode ended in 21 months. Indira's inability to rule without Indian democratic institutions is a strong sign that democracy is indispensable for a highly multi-cultural nation like India.
The "second freedom movement" generated a new round of principled leaders (like Atal Bihari Vajpayee) who would then lead India. Without the Emergency, it might have been hard to identify many of the leaders. As an unintended consequence, the Emergency paved way for a more active opposition.
The fact that both Indira Gandhi and her son Sanjay Gandhi lost their own parliamentary elections is a reminder of the power of the ballot. Even the poorest had no hesitation in pulling the rug under the most powerful Indians. Contrary to what many outsiders believed, the poor in India were very comfortable with the democratic processes.
The fact that the public didn't raise up for the constitutional violation but only for forced family planning is a sobering realization for any lover of democratic India. Had Sanjay Gandhi avoided his controversial move, people might not have hated him this much. This might inspire a future dictator who could be more careful with these elements while destroying the core institutions of democracy.
People's memories are short and Indians are too quick to forgive. Indira's excesses were forgotten in two years and she was back to power in 1980.
Indian democracy worked—and with a vengeance.
-- A US State Department Official talking to TIME (Apr 4, 1977)
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Book of Dreams
From Tryst to Tendulkar: The History of Independent India Page 15
