Chapter 5: India
Since Independence from Britain in 1947 India has achieved an order of economic and social progress that sets it well on the way to becoming one of the world’s major economies. Its post-Independence economic history, however, provides a case study in comparison and contrast between the inward-oriented and the outward-oriented strategies of development. India began the period with a strategy of forced industrialization emphasizing heavy industry, public ownership and import substitution, dominated as it was by the Soviet Union model of centrally planned growth and development (Ahluwalia and Little, 1998). While this inward-focused development strategy created a foundation for Indian industrialization, it failed to ignite the sustained growth of output necessary for economic transformation and poverty alleviation. Indeed, the economy performed poorly. There was no major change in Indian industrialization policy until after the beginning of the Soviet Union breakdown in the late 1980s. Joshi and Little (1996) have pointed out that the Indian overall development strategy proceeded on such self-defeating, impoverishing ideas as contempt for the price mechanism, the belief that competition was harmful, a phobia against foreign investment and a keen desire for self-sufficiency in all respects. This ‘Fabian socialism’, when processed through the Indian cultural and political machine, came out as a kind of ‘permit raj’ economic regime with complex rules, regulations and bureaucratic regulatory controls over the factor and product markets (Bhagwati, 1992, 1993).
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