| Abstract: |
In the post-World War II period India was probably the first non-communist
developing country to have instituted a full-fledged industrial policy. The
purpose of the policy was to co-ordinate investment decisions both in the
public and the private sectors and to seize the 'commanding heights' of the
economy by bringing certain strategic industries and firms under public
ownership. This classical state-directed industrialisation model held sway for
three decades, from 1950-1980. The model began to erode in the 1980s.
Following a serious external liquidity crisis in 1991 the model was
fundamentally changed. Indian industrial policy in the period 1950 to 1980, as
embodied in its five-year plans, has long been the subject of intense
criticism from the powerful neo-liberal critics of the country's development.
In their view it was the change away from India's traditional industrial
policy in 1991 towards liberalisation, de-regulation, and market orientation
that ushered in a new era of faster economic growth. This paper takes a wide
view of industrial policy, emphasising the government's continuing
co-ordinating role in various spheres. It regards the institution of the
Planning Commission as a major benefit for the country particularly as its
role in formulating industrial policy in the narrow sense and in guiding
India's ongoing industrial revolution in the broader sense is still widely
accepted by the mainstream political parties of the left and the right (for
example, Bhartiya Janata Party, Indian People's Party). The paper suggests
that industrial policy and planned economic development did not come to an end
with the deregulation of India's traditional investment regime in the 1980s
and 1990s. Industrial policy has continued in a different form during the
period, facing an agenda of new issues and an updating of older ones. The
analysis of this paper suggests that today a central challenge for the
Planning Commission is to exploit India's lead in ICT and its `institutional
surplus' (democracy, common law legal heritage) to raise the current 8 per
cent trend rate of growth to double-digit numbers while maintaining equitable
distribution of the fruits of economic progress. To do so, India requires a
somewhat different industrial policy than that pursued in the
Nehru-Mahalanobis era, or that has been followed since then. |