Toward a Freer Economy

When World War II ended, most non-Communist nations began dismantling the intricate economic controls that had been necessary to cope with the military emergency. India was a major excep tion, for tight regulation of the economy fitted neatly into Jawaharlal Nehru's doc trinaire socialist blueprint for his newly independent nation. Many of the con trols on business survive to this day, and they are charged with retarding In dia's growth in the past two decades.

Of late, however, things have begun to change. In his last months as Prime Minister, Lai Bahadur Shastri took a few steps toward a freer economy. The trend has built up steam under Prime Minister Indira Gandhi.

Her first move was to encourage pri vate foreign investment in India's des perately inadequate fertilizer industry (TIME, May 27). Then the government removed controls on eleven basic indus tries, including cement, iron and steel forging, and timber products. Two weeks ago, the rupee was devalued,* to combat inflation, shelter domestic manufactures against foreign competition, and make exports more salable in world markets. The Finance Ministry an nounced that it was working on an import-liberalization plan.

The cautious move away from the rigidity of the past has produced some violent outcries. Last week the Prime Minister was grilled mercilessly at a press conference by hostile Indian newsmen who seemed determined to prove that she was, in effect, deserting her father's sacrosanct doctrines. "We have liberalized private investment for some things which we consider essen tial," she snapped. "Mostly to do with the production of food. We are not going to give in on any other point."

Washington observers were inclined to agree that the changes so far were relatively minor, though hopeful. Full-scale U.S. aid to India is being resumed after a halt caused by the Kashmir war, and an aid-India consortium, organized by the World Bank, will soon announce a $900 million loan to finance imports. Mrs. Gandhi makes it clear that the fact that Western bankers approve of her economics does not rob her of in dependence in foreign affairs. Last week she also announced plans for a visit to the Soviet Union in July.

-- From 4.76 to the dollar to 7.5.

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