Political Structure and India's Economic Reforms of the 1990s

Abstract

HE ECONOMIC POLICY REFORMS launched 1991 constitute a watershed India's economic history. Until then, despite the liberalization pushed forward during the 1980s under Prime Ministers Indira Gandhi and Rajiv Gandhi, remained a comprehensively and stringently controlled economy, both internally and externally. Indeed,Joshi and Little maintain that in June 1991 was the most autarkic non-communist country the world, while the IMF notes that was one of the most heavily regulated economies the world. I thus represented a strong case of economic nationalism, combining high levels of external protection and internal regulation, as illustrated by Box Al figure 1, which conceptualizes different possible balances between economic globalization and economic nationalism.2 It is into this scene that reforms were dramatically introduced 1991. There was, no doubt, continuity with the reforms of the 1980s, but there was also a marked acceleration, indeed a clear break with the pattern of what had been done until then. With little evident embarrassment, the top leadership now made a shift what critics called a U-turn from the state to the market, openly and enthusiastically embracing globalization and integration of the Indian economy into the world economy and initiating the dismantlement of physical controls along a broad front of the Indian economy. Although not all that was intended was achieved, a substantial movement took place the direction of globalization and liberalization. As Raja Chelliah noted, These reforms taken together constitute a comprehensive and thoroughgoing overhaul of the economic policy regime. Similarly, the World Bank declared that India has fundamentally altered its development paradigm and that the reforms ended four decades of planning and have initiated a quiet economic revolution.3