The Political Economics of Development India

Document Type:Case Study

Subject Area:Economics

Document 1

The economic reform of 1991 in the country has seen the country undergo systematic transition from a closed door economy to an open economy. These reforms have had great effects to the country and helped the country to unleash its growth potential. Currently, the economy of the country is characterized by a trade policy and foreign investment that is liberalized (Ahluwalia & Little, 2012). The country now has a trillion dollar economy with a largely efficient agricultural sector, a stable financial and service sector and a diversified industrial base. India’s growth began to grow steady and became more like china’s in 2003 (DeVotta & Ganguly, 2010). Between the years 156 and 1974, India’s Gross Domestic Product (GDP) grew between three percent and four percent per annum at the time when the country had a closed and much regulated economy (DeVotta & Ganguly, 2010). This increase to five percent between the years 1975 and 1990 when the country’s domestic private sector was allowed to compete with the public sector. In this period, the country’s engagement with the global economy saw a significant paradigm shift in the country’s private sector and in trade orientation past the year 1991 and associated with increased growth rates of more than six percent between the years of 1991 and 2004 and further to more than 8. percent between the years 2003 and 2007 (Roy, 2011). This figure of 8. percent drew the world’s attention and made India one of the fastest growing economies after china. As Ahluwalia & Little (2012) state, India now has an economic freedom score of 54. which effectively makes it the 130th freest economy according to the 2018 index.

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This score has grown overall by 1. points resulting from the judicial effectiveness, government integrity, business freedom, and fiscal health (DeVotta & Ganguly, 2010). The country is now ranked at position 30 out of 43 countries in the Asia pacific region, with an overall score. India is now on the path becoming a world leader but the current turbulence faced by economies has not excluded India and this has called for new waves of reform that aim to reverse the negative climate of the country (Ahluwalia & Little, 2012). After the country achieved independence in 1947, there was an array of social economic challenges that resulted from the fact that the British had reduced the county’s copious reserves and had exploited India’s wealth to their advantage. Despite infrastructure and education development under the British rule, there was also a deeper and corrosive meaning hidden from the masses.

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The British coolly used the establishment to textile mills, stall pants and rail routes connections, and educational institutions as a scheme to make the country a British colony (DeVotta & Ganguly, 2010). The only two industries in existence then were the cotton and jute but faced tough competition from Pakistan. Economic reforms The economic policies that favored the growth and development of china were dependent on a path. From the year of independence to 1945, there was a policy consensus in India that favored the importance of the state in a relatively closed economy. In this period, there was a decline in India’s trade but the private enterprise survived. Changes began to appear in mid 1970s on policy consensus that favored economic deregulation that prepared the ground for powerful policy shifts that goes beyond 1991.

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This convinced the policy elites that they could also become part of the growth in Asia through implementation of substantial trade, industry and infrastructure reforms. Financial crises were therefore very important in the informing major policy shifts in India. They helped convince the technocracy and the executive to overcome their opposition to policy change (Sibal, 2012). It became clear to the policy makers that it was critical to promote Indian agriculture and also the private sector as a critical aspect in the context of the constraints in 1966 and 1991 budgetary constraints (Arjun, 2013). Thus, the financial crises that India faced in 1966 and also that of 1991 are critical for explaining the green revolution in the country in the 1970s and in globalization in the 1990s. As such the debate is not really about whether the country will grow at six or four percent per night but whether the country will grow at about ten, eight or a minimum of six percent.

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According to (DeVotta & Ganguly (2010), This is a substantial achievement for the country and has been achieved in the context of democratic politics where changing political orientations has been slow due to the fact that it is difficult to produce new economical winners without injuring some social classes or groups. In this regard, rich farmers, industrialists, unions and a large part of the government have for a long time favored the status quo which advocate and protected the economy and the public sector Ahluwalia & Little (2012). This coalition has however begun to experience change to favor competition and growth. In addition, the middle class has continuously begun to learn that the game of competition is becoming a more rewarding one (DeVotta & Ganguly, 2010). Roy, T. Economic History of India, 1857-1947.  OUP Catalogue. Arjun, K.

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M. Goyal, K. Impact of Globalization on Transforming India's Economy: A Post Reforms Analysis.  Indian Journal of Economics and Development, 14(1a), 234-240. Siddiqui, K. India's economy: promise and challenge.

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