On the face of it, bank nationalisation and abolition of privy purses as well as other privileges of princes would appear to be Siamese twins, especially in the context of Indira Gandhi’s surge towards populism as a shortcut to supremacy. But the reality is rather different. The demand for the state takeover of major commercial banks, though ignored until the late sixties, had reverberated across the country almost since Independence. That for the abolition of privy purses guaranteed to 280 of the 562 former rulers of princely states in perpetuity erupted suddenly only towards the end of 1967. But once this controversial and somewhat emotive demand was made, it became irresistible. Let the sequence of events speak for itself.

As narrated in this column last fortnight (IE, July 10), the sharp setback suffered by the ruling Congress party in the 1967 general election encouraged its Young Turks, left-leaning and staunch supporters of Indira Gandhi, to demand a shift to radical policies from “pragmatic” ones, followed until then by her and her predecessor, Lal Bahadur Shastri. Bank nationalisation was their sheet anchor. At the same time, however, the party’s self-preservation instinct dictated a compromise between the warring factions, led respectively by Indira Gandhi and Morarji Desai. Thus it was that instead of challenging her leadership, as he had announced he would, Desai agreed to become deputy prime minister and finance minister in her cabinet.

The advocates of bank nationalisation also had to compromise and agree to try out “social control” of banks for two years. This became the first item in a ten-point programme adopted by the All India Congress Committee (AICC). However, as rivalry between the prime minister and deputy prime minister, instead of abating, escalated, the Young Turks, at a subsequent AICC meeting, pressed hard for immediate nationalisation of banks. To their dismay, Indira closed ranks with Morarji and declared that social control would prevail for a minimum of two years.

... contd.