2. Identifying variations in how states are
organized and in the institutionalized
relationship of the state to the private sector
is the key to understanding the relative
effectiveness of state intervention in the
economy. This relationship varies along a
continuum stretching from considerable
convergence in goals to mutual hostility
between the state and the private sector.
IIPM PGP FW 08-10 6/11/2009 2
3. It is interventionist state, especially of a close
collaboration between the state and business
groups aimed at promoting growth
A pro business strategy mainly supports
established producers
IIPM PGP FW 08-10 6/11/2009 3
4. Abandonment of left-leaning, anti capitalist
rhetoric and policies.
Prioritizing economic growth, and a slow but
steady embrace of Indian capital as the main
ruling ally.
pro-indigenous business policies adopted
IIPM PGP FW 08-10 6/11/2009 4
5. New industrial policy statement that
put“maximizing production” as its top priority
The emphasis has shifted from distributive
justice to growth”
Established powerful committees—staffing
them with well-known probusiness
bureaucrats—to study how this major
transformation was to be implemented
IIPM PGP FW 08-10 6/11/2009 5
6. Government withdrew important constraints on big
business to expand and then encouraged them to
enter areas hitherto reserved for the public sector
The Monopoly and Trade Restrictions Act (the MRTP
act) effectively limited the growth of big business. It
was diluted, thereby removing licensing restrictions
and allowing big business to expand in such core
industries as chemicals,drugs, ceramics, and cement.
The government granted some tax relief to big
business to encourage investment
Special legislation was passed to discourage strikes
and labor, and businesses were increasingly
supposed to cooperate.
IIPM PGP FW 08-10 6/11/2009 6
7. Dropped the pretense of socialism altogether
and openly committed his government to a
new “liberal” beginning
Government’s commitment was primarily to
economic growth, and only secondarily to
some abstract notions of “openness”.
The policy pattern was more pro-business,
especially big Indian business, rather than
anything else.
IIPM PGP FW 08-10 6/11/2009 7
12. Prioritization of economic growth as a state
goal
Supporting big business to achieve this goal
Taming labor as a necessary aspect of this
strategy.
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13. High growth resulted from the state’s
strategy namely, a move toward limited state
intervention and an open economy
Liberalized its internal regulatory framework
Reduced tariffs
Adopted appropriate exchange rate policies
Allowed foreign investors to play a significant
role in the economy.
The animal urges of Indian entrepreneurs
were “uncaged”
IIPM PGP FW 08-10 6/11/2009 13
14. A pro-market strategy rests on the idea that
free play of markets will lead to efficient
allocation of resources, as well as promote
competitiveness, hence boosting production
and growth
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15. Import quotas were removed (only fully in
2001
Tariffs fell gradually,
Currency was devalued,
Foreign investment regime was liberalized
Various restrictions on external financial
transactions were eased
IIPM PGP FW 08-10 6/11/2009 15
16. Economic growth in India started accelerating
a full decade before liberalization of 1991
Industrial production in India—a key object of
reforms—did not accelerate after the
liberalizing reforms
IIPM PGP FW 08-10 6/11/2009 16
17. Decline of the Soviet Union
The need to establish closer ties with the
United States
The availability of new foreign resources for
investment in the form of portfolio
investment
The anticipation that India will soon join the
WTO.
Indian business groups were more ready to
deal with foreign competition in the 1990s
than in the 1980s
IIPM PGP FW 08-10 6/11/2009 17
18. Modernization and restructuring of CII and
FICCI
“Modern” industries—especially engineering
firms, often located in the south of India—
that were more interested in exports
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19. The labor intensity of Indian industry
decreased steadily during the 1990’s
The unregistered sector of Indian industry—
which one presumes to be more export-
oriented and less capital intensive—did not
attract much new investment in the post-
reform period
No clear evidence that exports of labor
intensive goods grew sharply
The level of concentration in private
industry has increased since 1991
IIPM PGP FW 08-10 6/11/2009 19
20. Market capitalization of the top 10 private
companies increased from 2.2% of the GDP in
1990 to 12.9% in 2004, and sales of the top
10 companies during the same period grew
from 2.3 to 9.3% of the GDP.
IIPM PGP FW 08-10 6/11/2009 20
21. Growing regional and class inequalities
Political ramifications
The utilization of ethnic nationalism—instead
of the less volatile
Interest oriented appeals—as a tool of
political mobilization
Rapid turnover in ruling governments.
IIPM PGP FW 08-10 6/11/2009 21
22. Economic growth in India was more a function of
the pro-business tilt of the Indian state and less
a result of the post-1991 economic liberalization
The real debate about national choices is
increasingly about “varieties of capitalism.” With
advanced industrial economies providing three
alternatives—the neoliberal model of Anglo-
America, the social democratic model of
Scandinavia, and the statist model of Japan and
South Korea
Socio Democratic model is Best for India
Stuck with a two track democracy
IIPM PGP FW 08-10 6/11/2009 22