From Public to Private Investment Based Development Strategy: Understanding the Process, Policies and Effects of the Paradigm Shift

Abstract

This paper analyses India’s Industrial transition from a protectionist to a liberalised regime. As such, the analysis is for two time periods, namely, the Pre and the Post Reform periods. Given the broad development objectives, the focus of the analysis is on examining the policy framework and its effect on the industrialisation process. At the sectoral level, the relative roles of the public and the private sectors have been analysed in terms of their investment behaviour and performance. Even though there has been evidence of positive efficiency gains in the post reform period, this paper argues that economic liberalisation in India has been primarily reactionary in nature, without any long term development agenda. Contrary to the general belief that economic liberalism would diminish the role of the State, the paper argues that the role of the State needs to be redefined. Considering our development needs, the State should concentrate on designing appropriate policies for regulating private sector instead of actively participating in commercial activities, develop rural infrastructure for greater employment opportunities; and strengthen the social security systems.