The report captures India’s growth from the time of Independence, through the reforms in 1980s and 1991 until the post-reform period. The dominant feature of India’s reform program is that it has been gradual, also termed as “a Hindu rate of reform”. Is it a bad thing?
As per the analysis, India’s gradual reforms have enabled it to give attention to planning reforms more carefully than has sometimes happened elsewhere. Also, the avoidance of premature liberalization of the capital account prevented India being exposed to contagion in the Asian crisis. The journey of this gradual reform goes as follows:
An Industrial Policy Resolution adopted in 1948 created state monopolies in “core sectors” of the economy, from which the private sector was excluded. Since then, for about three decades, the share of the country’s GDP generated in the public sector increased persistently. Firms in the formal economy became ever more dependent on government approvals for the most basic business decisions. A few of the most stringent regulations of this period which required government approval were related to investments (public or private), foreign exchange(imports, high tariff rates).
The financial system suffered from four serious problems, viz., Government ownership and lack of competition,Control of interest rates and terms at which to access capital markets, Regulation of the direction of credit and other forms of financial savings, emphasis on direct controls
Agriculture: Regulations in the agriculture sector helped in preventing anti-competitive practices and hoarding, but it also provided central and state governments with sweeping powers to issue notifications, to control and regulate the production, supply, distribution, and prices of virtually all agricultural commodities.
Highlighst of Reforms in 1980s: Relaxation of controls over capacity utilization and over imports of capital goods and spare parts, enabled much better utilization of installed capacity....