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The relevance of Gandhian Economics to Modern India

By Krishnan Nandela*


The economic philosophy of Gandhi is written about, discussed and talked about. However, when it comes to implementation, it is criticized for being impractical and imaginary. For instance, the concept of trusteeship as enunciated by Gandhi demands non-possession. It seeks individual to dispossess his wealth and income beyond his requirements so that the economic welfare of the less capable is realized. The principle of non-possession and trusteeship is not realized practically because individuals are immensely attached to their wealth in the ordinary course of life. Gandhi and even later day Gandhians have not been able to find the root cause of attachment to wealth and its accumulation overtime.

The family according to me the basic unit of a capitalist system in which wealth and property is personally owned by individuals and families. The family not only owns and accumulates material wealth but also owns progeny. The ownership of progeny is established through sexual relations between husband and wife (the union of sperm and the egg). It is in fact the ownership of the sperm and the egg that leads to the ownership of progeny. However, sperms and eggs are autonomously produced inside the body of human beings irrespective of the desire or command of the person. What is therefore autonomously produced and the man or the woman has no contribution in the production of sperm and egg, cannot therefore be owned by man or woman and hence husband and wife cannot claim ownership over the progeny. Parenthood (motherhood and fatherhood) is social and not biological. The bodies of men and women are only apparatuses used by nature to procreate in an endless series of generations. Once the realization of the non-ownership of progeny is dawned on human beings, the principle of non-possession and trusteeship as enunciated by Gandhi will complete its loop and the Idea will assume pragmatism. Sarvodaya or the rising of one and all will not only become possible but also become a fact of life once the root cause of possession and accumulation is exposed to the satisfaction of one and all. Gandhi was perhaps not been able to look at non-possession of sperms and eggs because of his pre-occupation with celibacy or brahmacharya.

The towering presence of Gandhi in Indian society and the world at large need no further emphasis or restatement. A millennium of democracy in Great Britain, roughly three centuries of democracy and capitalism (post Adam Smith) in the United States and France and other countries of Europe, America, Africa, Asia and the continent of Australia is yet to create a society free from the worries of bread and free from the fears of penury. Wide income inequalities both within and between the nations of the world, widespread poverty in Asia and Africa and the countries of Central America point to the fact that the Western Model of capitalism that was adopted by the countries of the world (save exceptions) and that which survives along with its flip side to this day has not really delivered the people to light, wisdom and happiness. Economic growth without social justice and equity, destructive technological development and mindless consumerism that has engulfed the spirit of modern men and women is creating a dysfunctional society that is on the brink of disaster and destruction.

The synthesis of the ideas of Mahatma Gandhi with the ideas of the modern world will create a more holistic and integrated society. It will deliver more happiness, generate more altruistic economic surplus and bring about a more egalitarian society than what is now available to us.

Mahatma Gandhi never created a body of literature known by the name ‘Gandhian Economics’. He neither claimed to be an economist nor was trained in Economics. He was not a voracious reader of economic literature. Nevertheless, he expressed his views on economics at various points of time in his life. His reflections on Economics found expression in his writings and thoughts. Students of Gandhian thought and writings collated his reflections on economics and created a body of literature known as ‘Gandhian Economics’. The literature thus created is known to be enormous enough to be unparalleled in the history of modern Indian economic thought.

Synthesis of Economics and Ethics

Thomas Weber says that Gandhi was deeply influenced by Ruskin’s book ‘Unto This Last’ and that it would not be out of place to say that Ruskin was the father of Gandhian economic thought. Gandhi summarized the teachings of ‘Unto This Last’ under three basic truths:

1. The good of the individual is contained in the good of all (Sarvodaya).

2. Each person has the right to earn livelihood from his work and there is dignity of labor, meaning thereby that there is nothing called high and low labor (Bread labor).

3. The life of the tiller of the soil and the handicraftsmen is the life worth living (Village industries and Swadeshi).

Gandhi admitted that he was clearly aware of the first truth with little awareness about the second and clearly he was unaware about the third truth. However, Gandhi realized that the second and third truths contained in the first. Gandhi revealed that Ruskin’s book transformed him overnight from a lawyer and city dweller into a rustic living away from Durban on a farm called the Phoenix Settlement (ashram). Another writer who deeply influenced Gandhi was Leo Tolstoy. Tolstoy’s work ‘The Kingdom of God is within you’ left an indelible impression on Gandhi. Gandhi admitted that the profound morality, independent thinking and truthfulness of Tolstoy’s work had overwhelmed him and everything else paled into insignificance. Gandhi realized that the best way to help the poor was to get off their backs and practice ‘bread labor’ – that man must earn his bread by laboring with his own hands. The principle of ‘bread labor’ is central to the economic philosophy of Gandhi.

Gandhi claimed that “True economics never militates against the highest ethical standard just as all true ethics must also be good economics…. True economics stands for social justice; it promotes the good of all including the weakest and is indispensable for decent life”. Subhash Mehta writing on Gandhi’s economic philosophy says that, Khaddar economics was based on ethics and self sufficiency. That the ideal of man is spiritual progress first and last and no economic progress can violate this principle. Gandhian economics lay emphasis on spiritual satisfaction. Spiritualism holds sway over consumerism. Gandhi emphasized on minimizing wants and keeping away from luxuries. (A handbook of Sarvodaya, Part-2, compiled by Subhash Mehta, pp 69-72).

Gandhi never advocated the destruction of factories and machines but sought regulation of their excesses. He felt that production and consumption must be decentralized and both these functions must take place near the source of production. Gandhi had explained that his small scale rural based economic system was not based on the rejection of machinery but on objection to the craze for machinery. “The craze is for what they call labor-saving machinery. Men go on ‘saving labor’ till thousands are without work and thrown on the open streets to die of starvation. I want to save time and labor not for a fraction of mankind but for all. I want the concentration of wealth not in the hands of few but in the hands of all. Today machinery merely helps a few to ride on the backs of millions. The impetus behind it all is not the philanthropy to save labor but greed”.

Gandhi says that greed leads to parasitism. Both greed and parasitism are unsustainable. He says that “earth provides enough to satisfy every man’s need but not for every man’s greed”. Gandhian economics was thus normative and highly ethical.

Diwan and Lutz while pointing out the essentials of Gandhian economics says that Gandhian economics boils down to a simple injunction that “never advocate actions or policies that lead to material advancement at the cost of social, moral or spiritual impoverishment”. (Diwan & Lutz, ‘Essays in Gandhian Economics’, p-13). The seven social sins of Gandhi constituted the key elements of Gandhi’s political and economic thought. They are: politics without principles, wealth without work, pleasure without conscience, knowledge without character, commerce without morality, science without humanity and worship without sacrifice.

Swadeshi and Bread Labor

During his Salt March to Dandi in 1930, in his speech at village Bhatgam, Gandhi said, “to live above the means befitting a poor country is to live on stolen food”. Bread labor became central to the economic philosophy of Gandhi. Bread labor means, each person should labor to earn his bread. Gandhi quotes Gita to emphasize bread labor, “one who eats without labor eats stolen food”. Gandhi saw humility inherent in labor. If you labor for others, it becomes Yajna or sacrifice. If you labor in a spirit of service, it will lead to self realization (talks with ashram women, 1926 CWMG Vol.32, p-491).

Gandhi wanted people to consume locally produced goods and particularly village industry produced goods instead of imported or factory goods. Diwan and Lutz point out that Swadeshi demands the sacrifice of utility for the sake of loyalty. The trade-off between utility and loyalty is exemplified in Gandhi’s explanation of the principle of neighborliness. He said, “I refuse to buy from anybody anything however nice or beautiful if it interferes with my growth or injures those whom nature has made my first care” (Swadeshi and Nationalism, Young India, 12 March, 1925). At a women’s meeting in 1919, he pointed out that “Swadeshi is that spirit in them which required them to serve their immediate neighbors before others and to use things produced in their neighborhoods in preference to those more remote. So doing they served humanity to the best of their capacity. They could not serve humanity neglecting their neighbors” (Diwan and Lutz, “Essays in Gandhian Economics”, p-14).

Trusteeship and Non-possession

Gandhi believed that when we take more than what we need, it amounts to stealing. He says, “We are not always aware of our needs and most of us improperly multiply our wants and thus unconsciously make thieves of ourselves. Today we only desire possession of a thing; tomorrow we shall begin to adopt measures, straight if possible, crooked when thought necessary, to acquire its possession” (Gandhi from Yeravada Mandir, pp 14-15). Gandhi thus believed that ownership was a form of violence. He felt that there is enough in nature for everyone and therefore there is no need for exploitation. Accumulation of wealth is a sin and non-possession will end inequalities of wealth.

According to Gandhi’s theory of trusteeship, the rich will be free to possess their wealth but will use only that part of their wealth which is required to satisfy their needs and hold the rest in trust for the use of the society. Non-violence was subsumed in the principle of trusteeship and if the rich did not come forward to help the poor by holding their surplus wealth in trust, Gandhi had the weapon of non-cooperation for he believed that the rich cannot accumulate wealth without the cooperation of the poor. Gandhi wanted to delegitimize gross accumulation of wealth and follow trusteeship as a principle of economic conscience. Gandhi felt that the rich could be persuaded through moral pressure to become trustees. And if the capitalists still refuse to act as trustees, ownership of wealth can be regulated through legislation (Practical trusteeship formula, Harijan, 25th October, 1952). The legislative measure quoted here was approved by Gandhi during his lifetime. Gandhi’s belief in trusteeship came from his belief in non-violence and non-possession (aparigraha). Possession necessarily implies storage of wealth and violence is inevitable in defending the stored wealth. Hence, non-possession or trusteeship becomes complementary to non-violence.

Gandhi was against capitalism but not the capitalists. He was against the destruction of the capitalist class and wanted to use them as managers of industries. He said, “In reality, the toiler is the owner of what he produces. If the toilers intelligently combine, they will become an irresistible power. That is how I do not see the necessity of class conflict. If I thought it inevitable, I shall not hesitate to preach it and teach it”. (A Handbook of Sarvodaya, Part-2 by Subhash Mehta, pp 69-72, Ch.10 Economic Philosophy).

While answering a question at a Round Table Conference in England on the mechanism to bring about trusteeship, Gandhi replied, “…..My means are non-cooperation. No person can amass wealth without the co-operation, willing or forced of the people concerned”. Further, he advised the workers to unite for a non-violent struggle and aimed at a stateless society through non-violent revolution because anything secured through violence will fail in the end.

The problem of economic inequality and equitable distribution of income and wealth was sought to be addressed through the principle of trusteeship. The principle of non-violence was at the center of Gandhian thought. The modern world sought to address the problem of economic inequality through violent means. For instance, Marx prescribed class conflict and the annihilation of the capitalist class and the modern welfare State sought to achieve equitable distribution of income by imposing heavy income and corporate taxes on the rich and redistributing it in favor of the poor. While class conflict was essentially and actively violent and inhuman, the policy of heavy taxation created a feeling of grudge amongst the tax payers against the poor and perpetrated the classes of haves and have-nots. By propagating the principle of trusteeship, Gandhi also sought to create a single class of workers with the class of entrepreneurs as specialized workers who would hold capital in trust and function as the trustees of the society. A trustee is a person who holds public wealth in trust. He or she manages wealth to bring about economic welfare of the people. In order to ensure equity, Gandhi said that a person should only use that part of his wealth which is required for his personal well being and give away or use the rest for the economic welfare of the society. In this way, every person should become a trustee.

Gandhi wanted capitalism to be replaced by trusteeship where in no person will accumulate wealth beyond his needs and part the balance of his wealth to the trust and production will not be guided by desire but by need. Mr. Jamnalal Bajaj was greatly inspired by the Gandhian idea of trusteeship and went on to set up the Jamnalal Seva Trust at Wardha in Maharashtra.

Sarvodaya or the rising of all

Sarvodaya means the rising of all in the society. In the economic context, it means the economic welfare of all. Gandhi believed that the followers of non-violence will not stop at the utilitarian principle ‘greatest good of the greatest number’ but move ahead and achieve the greatest good of all. The rich could uplift their moral statue and walk the ethical path by giving up their privileges and become trustees by dispossessing their wealth for the welfare of all. Gandhi paraphrased John Ruskin’s book ‘Unto This Last’ into Gujarati with the title ‘Sarvodaya’. Literally, sarvodaya means the rise of all human beings. The society should function as an organic whole rather than being disjointed into economic classes or social castes. In order to maintain purity in personal life, Gandhi wanted the people to follow vegetarianism and be teetotalers. The practice of non-violence, respect for others religion, serving neighbors and eradicating untouchability were at the core of the principle of Sarvodaya. Gandhi felt, if justice and right wages were given to all, no person will be able to accumulate wealth beyond his requirements. According to Gandhi, women epitomized non-violence. She must enjoy equal rights with men. There should be no illiteracy and disease in the society. Poverty and cowardice shall be banished from the society following Sarvodaya. A Sarvodaya State shall be a secular State. The Sarvodaya program as charted out by Gandhi and supplemented by Dr. Rajendra Prasad, the first President of independent India has the following features:

1. Farmers and workers will be at the center of a Sarvodaya State. There will be no exploitation of the farmers and the workers. To this end, the farmers and the workers should organize themselves.

2. Children will be given basic education and adults will be given basic as well as technical education.

3. Village industries, health and hygiene will be emphasized.

4. The villages to become self sufficient republics.

5. Every household will spin yarn in the village.

6. There shall be social justice and communal harmony.

Industrialization or Khadi and Village Industries

Reflecting on the problems of industrialization, Gandhi observed that “any machinery which does not deprive masses of men of the opportunity to labor but which helps the individual and adds to his efficiency and which a man can handle at will without being its slave was a good thing” (A discussion, Harijan, 22nd June, 1935). In fact, he would prize every invention of science made for the benefit of all…the heavy machinery for work of public utility which cannot be undertaken by human labor has its inevitable place but all that would be owned by the State and used entirely for the welfare of the people. I can have no consideration for machinery which is meant either to enrich the few at the expense of the many or without cause to displace the useful labor of many. Gandhi was therefore against labor displacing machinery and conceded the use of labor displacing machinery only when enterprises using such machinery were State owned because the profits made by State enterprises were used for the welfare of all. Any private use of such machinery would lead to concentration of economic power and wealth. Further, the workers working for the State enterprises will be working under ideal conditions unlike private enterprises where there is little concern for the working conditions of the laborers.

Gandhi believed that human beings cannot become the slave of the machines and in fact the machine must help the man in his work. The workers must have the freedom and control over the machines. Gandhi wanted the decentralization of all economic functions and industries. In 1928, Gandhi said, “According to me, the economic constitution of India and for that matter the world should be such that no one under it should suffer from wants of food and clothing. In other words, everybody should be able to get sufficient work to enable him to make the two ends meet. And this ideal can be universally realized only if the means of production of the elementary necessaries of life remain the control of the masses. These should be freely available to all as God’s air and water are or ought to be, they should not be made a vehicle of traffic for the exploitation of others. This monopolization by any country, nation or group of persons would be unjust. The neglect of this simple principle is the cause of destitution that we witness today not only in this unhappy land but other parts of the world too”. (A Hand Book of Sarvodaya, Part-2, compiled by Subhash Mehta, P.No.70, Ch.10: Economic philosophy).

India lives in her villages and hence the village economy must be revived. In order to create village swaraj, Khadi and village industries must be established. Gandhi considered the spinning wheel as a symbol of non-violence and akin to the sun in the solar system with the village industries as the planets within it. A person wearing khadi will abjure violence and hypocrisy. In 1920, Gandhi estimated that each person would require 13 vars (measure of cloth) of cloth. The textile mills in India are incapable of taking care of the clothing requirements of Indian people. Hence, Khadi industries should be promoted to make villages self-sufficient. Khadi industry was sought to be promoted to make value addition to make the final product within the villages so that the villagers become the beneficiaries of the value addition/final product. Gandhi proposed that every villager must have one spinning wheel/charkha and every village must have one or more looms to make Indian villages self sufficient in terms of khadi. When each villager produces his own cloth/khadi, the economic and moral life of the people will be revived.

The khadi industry needs less capital and only elementary training is required to be given to the people. It ensures certainty of employment income to the villagers because Gandhi felt that there is a ready and unlimited market for khadi. Khadi unlike agriculture is not a seasonal industry but a yearly industry. In order to promote Khadi and village industry, Gandhi suggested the following measures:

1. Spinning yarn be made an essential and compulsory subject in all primary and secondary schools in the country and cotton may be cultivated in non-cotton growing areas also. The weaving industry may be organized through cooperative institutions.

2. Employees from the departments of education, cooperation, municipality, zilla parishads and gram panchayats must pass the spinning yarn examination.

3. Cloth produced by mechanized looms be banned in areas where hand spun cotton clothe is abundantly available.

4. Government employees must use handloom clothes.

5. Old textile mills should not be permitted to expand capacity and new mills should not be set up and textile imports should be banned.

Other village industries such as jiggery making, handicrafts, rope making, oil pressing, soap making, flour making, match box making, paper making, leather making, toy making, mat making and honey extraction be promoted. These industries will provide gainful employment to the villages and the surplus can be sold to the cities. These industries need only rudimentary capital and basic skills which can be easily arranged and cultivated or imparted. The village industries will also play an important role in providing nutritious food for the villages. He emphasized on the consumption of hand milled coarse wheat flour which is more nutritious than the powdered machine milled wheat flour. Similarly, jiggery is more nutritious than sugar which is artificially manufactured in the sugar mills. The oil extracted by the village oil presser is again free from adulteration than the factory made refined oil. Coarse rice is more nutritious than the polished rice of the rice mills. Thus the village industries will not only provide employment and alleviate rural poverty but also provide healthy and nutritious food the rural population.


Six decades down the line, India today faces all kinds of problems across the segments of the population and across the length and breadth of the country. In his times, there were seven lakh plus villages and today we have six lakh plus villages. More than one lakh villages have got transformed into urban areas. There are overcrowded villages and overcrowded cities. Unemployment is widespread both in the cities and in the villages. Poverty is widespread across the country. There is mal-nutrition, disease and early death amongst a large number of poor. Then organic farming and organic food was the order of the day. Today, the affluent is willing to pay double the price for what is called organic food which is sold through the modern retains food chains. What is what was consumed by the ordinary person until the early 20th century and even today, in the villages, has become fashionable amongst the urban-elite.

It is true that India cannot be isolated from the comity of nation States which are rapidly industrializing and growing and some of these have already become developed and powerful nation States. India must compete and run along with other to find her place in the sun and to do that India has no alternative but to go along with rapid industrialization and economic growth which means increasing the pace of urbanization or transformation of villages into cities. However, the problem confronted by Gandhi during his times continues to confound us to this day. In the name of modernization, we neither have modern cities nor have we modern villages. What we have today in the name of cities and villages are both moth eaten.

The heavy industry city centric model of development paid lip service to rural development leading to massive rural to urban migration. Today the so called great metropolises of India do not provide any comfort to the ordinary man. The village swaraj model of development could have been implemented in select villages of the country by ensuring sufficient flexibility in the techniques of production so that these villages not only attain self sufficiency but also generates sufficient agricultural and village industry surplus for the growing urban population of the country. More and more villages could have come under the village swaraj model under various five year plans and over the years the village swaraj model could have evolved to be in sync with the changing times without losing sight of the basic objectives. Industrialization, urbanization and village swaraj could have simultaneously taken place and perhaps the growth of overgrown villages and cities with their attendant evils could have been avoided.


1. India of My Dreams, M. K. Gandhi, Compiled by R. K. Prabhu, Navajivan Publishing House, 1947.

2. A Handbook of Sarvodaya, Part One, Compiled by Subhash Mehta, Geeta Prakashan, 2004.

3. A Handbook of Sarvodaya, Part Two, Compiled by Subhash Mehta, Geeta Prakashan, 2004.

4. Mahatma Gandhi - His Life and Times, Louis Fischer, Bhartiya Vidya Bhavan, 2003.

5. The Story of My Experiments With Truth, M. K. Gandhi,  Translated by Mahadev Desai, NPB, 2008.

6. Gandhi A Life, Krishna Kripalani, NBT, India.

7. Village Swaraj, M. K. Gandhi, Compiled by H. M. Vyas, Navajivan Publishing House, 1962.

8. Studies in Gandhism, Nirmal Kumar Bose, Navajivan Publishing House.

9. The Cambridge Companion to Gandhi, Judith Brown and Anthony Parel, Cambridge University Press

* Krishnan Nandela is working as Associate Professor & Head, Dept of Economics, Dr. T. K. Tope Arts & Commerce Senior College, Parel, Mumbai – 400 012, MS, India.