Reason for Indias Development


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What are the policies and economic factor behind indias growth

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Reason for Indias Development

  1. 1. By: Jignesh Komal Palak Shashank
  2. 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. 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. 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. 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. 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. 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
  8. 8. IIPM PGP FW 08-10 6/11/2009 8
  9. 9. IIPM PGP FW 08-10 6/11/2009 9
  10. 10. IIPM PGP FW 08-10 6/11/2009 10
  11. 11. IIPM PGP FW 08-10 6/11/2009 11
  12. 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. IIPM PGP FW 08-10 6/11/2009 12
  13. 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. 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 IIPM PGP FW 08-10 6/11/2009 14
  15. 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. 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. 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. 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 IIPM PGP FW 08-10 6/11/2009 18
  19. 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. 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. 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. 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
  23. 23. IIPM PGP FW 08-10 6/11/2009 23