Edited by Oliver Morrissey and Michael Tribe
Chapter 7: Liberalisation and the manufacturing sector: the Indian experience during the 1990s
T.G. Arun and Fred I. Nixson 1 INTRODUCTION India’s development experience since independence has been rooted in the presumption that industrialisation was a means to achieve rapid economic growth. The strategy was characterised by an inward orientation through import substitution by policies of extensive import licensing, high tariffs and a large public sector. Although many developing countries adapted their policies to take advantage of the growing opportunities for trade in the 1970s and 1980s, India persisted with its heavily protectionist policies and combined these with strong domestic regulation in an effort to inﬂuence the pattern of growth. Since 1991 however, successive Indian governments have been committed to policies of economic reform and liberalisation with greater openness to trade and foreign direct investment (FDI) and limited privatisation (usually referred to as disinvestment). The objectives of this chapter are to consider the reforms in the industrial sector and in particular, the manufacturing sector. The structure of the chapter is as follows. After the introduction, Section 2 summarises the major industrial policies and their implications for development until 1991. In the third section, the industrial situation since 1991 is examined. Both the public sector and direct foreign investment have witnessed rapid and dramatic changes under the new policies, but even after a decade of reforms, the experiences of these two areas argue for a stronger commitment to reform on the part of policy makers, particularly at the regional level. Section 3.3 on industrial growth reveals that post-1991 growth rates are lower than...
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