Nehru's utopia takes a final tumble: A revolution against 40 years of state economic control has had mixed results, Tim McGirk writes from New Delhi

IN INDIA, past and present, myth and reality, flow into one. The god Krishna is emblazoned on bottles of hair tonic, Kama Sutra is a brand name for condoms of a most vile colour and the Brahmin priests now accept donations by credit card.

For once, India is trying to break with its immediate past. A revolution against 40 years of state economic control has begun. The same fate that overtook Lenin and Mao in other lands is now befalling one of this century's other great leaders, Jawaharlal Nehru, the founder of modern India. His interventionist ideals have guided this teeming, complex country for the past 45 years. No statues of Nehru were toppled, no coins were melted down. And in Bombay, New Delhi and Madras, slow white oxen still drag mowers across parks that still bear his name. But Nehru's influence over India is now vanishing.

Increasingly, his philosophy and the often dynastic manner in which it was interpreted by his daughter, Indira, and his grandson, Rajiv, are becoming targets of harsh revisionism. The mutiny against Nehru broke out in his own Congress party, led by an unlikely rebel: the Prime Minister, Narasimha Rao, a wan, ailing scholar and party bureaucrat with all the charisma of a boiled potato.

Yet in his 1992 budget Mr Rao boldly removed many of the chains binding India's pounds 116bn economy.

He devalued the rupee by more than 20 per cent, cut many state subsidies and lifted the Kafkaesque licensing laws. Import and export restrictions were eased and the economy was opened up to once-hated multinationals such as IBM, Ford and Coca-Cola.

Seven months on, there are signs that Mr Rao's nerve may have failed. He needs to close down the state's many useless factories, but he has balked at doing so, fearing a revolt by trade unions and opposition parties. So far, his measures have failed to reduce India's 11 per cent inflation or stir the stagnant 1.5 per cent growth rate. Foreign companies also remain wary. Mr Rao's reforms so far have netted only pounds 250m in overseas investment this year. Also, foreign confidence has been rattled by a pounds 800m banking and stock-market scandal involving two of Mr Rao's top financial experts.

But these reforms go deeper than allowing Indians to drink real Coke. India has long been ready for Nehruism's finale. The question is whether it comes too late and whether the upheavals of this revolution will snap India into shape or speed its decline. To meet the challenge, Mr Rao must break Nehru's long and dozy spell over the country.

Since independence, India has been following what it called Nehruvian socialism, which sounds as homespun as Gandhi's cotton cloth, but it was really a weave of Fabianism and anti-colonialism. The idea was to uplift India's starving millions by distributing the wealth more evenly. But according to Nehru's detractors, India could have developed into a Japan or at least a South Korea if it had embraced the free-market capitalism in which the Indians of Britain and the US excel.

Asked to describe India's industry over the past 40 years, businessmen and professors used the Keynesian example of a worker who is paid to dig a hole and then fill it up. In the steel industry, it takes 25 Indians to match, in productivity, one Japanese factory worker.

A Bombay textile manufacturer, Naozer Aga, said bluntly: 'What we've had is not distribution of wealth. It was distribution of poverty, except for a protected few.' Indian socialism, in many ways, was a perfect capitalist state for a few billionaire family dynasties. Over 40 per cent of the gross domestic product remains in the hands of the top 5 per cent earners.

'Nobody ever believed in Gandhi's utopia except Gandhi. Nehru never did,' said Dipanker Gupta, a Delhi sociology professor. 'Gandhi exalted manual labour but Nehru's people wanted to sit at desks and control things from the centre.' And control the bureaucrats they did. Mohan Guruswamy, a Harvard-trained industrialist, explained bluntly: 'Politicians run the bureaucracy like a protection racket. You paid them money so they didn't break your windows.'

The bureaucracy also proved an unscalable wall for foreign competitors trying to slip into the huge home market. The best symbol of this is the Ambassador car, which even today has not altered its original 1950s Morris Oxford design. Major Jai Gopal, a car dealer, said: 'Until now, the government used to think that design changes were an unnecessary luxury. Even the president and the prime minister still use Ambassadors.' Soon, they may be the only two Indians left who willingly ride in Ambassadors.

Not all aspects of Nehruvian socialism were a disaster. India is no longer starving and a 240 million-strong middle class has burgeoned, fed largely by the government's whopping payrolls. Delhi has 4 million civil servants out of a 10 million population. It is their payrolls that Mr Rao must dare to cut.

When Mr Rao took office in June 1991, the compromise choice in the Congress party after Rajiv Gandhi's assassination, India had reached a dead-end. The country was on the verge of defaulting on its foreign debts and the World Bank and the International Monetary Fund were in no mood to provide emergency standby loans unless India liberalised its economy. The huge trade deficit had nearly cleaned out foreign-exchange reserves. It was then that Mr Rao and his finance minister began the most radical, sweeping reforms that India has seen since independence.

The promise of a better life, according to one sociologist at Delhi's Jawaharlal Nehru University, is shaking up the caste divisions that have bound Indian society together for well over a thousand years. It is no longer enough to hope that good karma in this life will make you a dentist or an accountant in your next spin on the wheel of reincarnation. Mr Gupta, said: 'There's a greater fluidity between the classes. The lower castes now feel that they don't have to accept their fate.'

Having promised the country's 600 million impoverished people a better life, Mr Rao must now deliver the goods, swiftly. For now, the poor don't seethe with envy of the rich, as they do in more socially aware countries.

Recently a wealthy princess invited 70 friends for a three-day rail jaunt through Rajasthan. Their first-class coaches were harnessed to a dingy, crammed passenger train. The princess's coaches were draped with jasmine. Waiters rushed champagne and platters of hors- d'oeuvres along the platform, weaving between beggars, porters and thousands of people who suddenly appeared, gaping at this fairy-tale wealth. In a country where so many go hungry, one would imagine that this brazen display of affluence would spark a riot, but not in India, not yet.

(Photograph omitted)